Robert J. Fedor, Esq., L.L.C.

Is an IRS audit in your future?

Shrouded in secrecy and feared by many, the Internal Revenue Service is often vilified. While most Americans will never encounter the dreaded IRS audit, most don't fully understand the audit selection process. For fairly obvious reasons, IRS officials do not share exactly how the agency selects taxpayers for an audit. There is, however, data available related to who is at risk for being audited as well as how the typical audit process proceeds.

In short, the more money an individuals makes, the more likely he or she will be audited. While the IRS contends income alone does not dictate who will be audited, taxpayers with reported incomes in excess of $10 million are nearly 30 percent more likely to be audited.

You don't, however, need to be a multimillionaire to be audited. Even individuals who report incomes between $500,000 and $1 million are roughly 4 percent more likely to be audited than those with annual incomes of less than $500,000. There is little question that individuals with high incomes and those that deal in cash are most readily selected by the IRS to undergo an audit.

In addition to annual reported income, IRS officials also use a process called "document matching" as part of their audit selection process. In essence, "document matching" looks at an individual's reported earnings against those reported by employers and financial institutions. Discrepancies in the amounts reported are noted and, if substantial, often trigger an IRS audit.

Ohio residents selected for an IRS audit should remain calm. In most cases, such audits are wholly carried out via correspondence and resolved fairly quickly. In more complex audits, taxpayers may be required to meet in person with an assigned IRS audit case worker.

Source: The Wall Street Journal, "Chances of a Tax Audit Grow With Income," Tom Herman, May 12, 2013