Got IRS Refund – Won’t be Audited

Today TaxMama hears from Linda in Denver, with this wonderful question, “Is it safe to assume that you will not be audited if you receive the refund that due you?”

Dear Linda,

What an interesting perspective?

IRS sends you a refund. And there will never be an audit of that year.
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I like it!

If only that were so.

The refunds are generated by IRS’s computers after they run the following kinds of routine tests on your tax return:

  • 1) Routine math checks to catch math errors.
  • 2) Social Security number cross-references to ensure that no one else is claiming an exemption for your dependents.
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  • 3) A computer scan of the return to make sure that all fields that are mandatory (like Social Security numbers on the Dependent Care Credit form) are filled in.
  • 4) A special criminal examination unit check to ensure that, if there is a very large refund, it’s not generated by fraudulent a earned income credit. This sometimes delays refunds a few extra days.
  • 5) A cross-reference to a collections database to ensure that you don’t owe IRS any money from previous years AND that you aren’t on the collections list for any state agency, or student loan program or child support program or certain other programs for whom IRS grabs refunds.

    Once those automated tests are run on your tax return, your refund is issued.
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    Now, about audit? There’s another test generated when your tax return is processed.
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    It generates a DIF score. That’s the Discriminate Information Function. Each line of your tax return generates a value based on an IRS algorithm that’s kept very, very secret.

    If your DIF score throws off anomalies for your profession, or income level, or ZIP code, or some other criteria, your Social Security Number drops into a pool of potential audit candidates. IRS will run a search of that pool at some time during the 18 months or so after your tax return is filed in order to select taxpayers to audit.

    Just because your return ends up in that population doesn’t guarantee that you’ll be audited.
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    It just increases your chances.

    Oh yes, and for returns filed in 2007, you may be randomly selected for the National Research Program, perhaps for no reason whatsoever.

    And remember, you can find answers to all kinds of questions about IRS Audits, and other tax issues, free. Where? Where else? At TaxMama.com

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