How the IRS selects returns for audit, part 4

IRS audits happen. They can be annoying, even nerve-wracking, but understanding how IRS selects returns for audit can help relieve some of that stress.

The IRS has four reasons for selecting returns for audit:

1. Statistical analysis
2. Missing information from third-party reporting
   
3. Taking a questionable tax position
   
4. Reliable reports raising suspicion
   

This part discusses the fourth cause, reliable reports raising suspicion.

The IRS can and will use any credible information it receives to determine whether to start an audit or investigation. This includes reports in newspapers and public records, along with information supplied by individuals,

The IRS Whistleblower Office offers monetary rewards for reports of tax noncompliance. Section 7263 of the Internal Revenue Code (the "tax code") permits awards to whistleblowers of 15 to 30 percent of the proceeds collected directly resulting from a report.

To apply for an award, fill out and submit Form 211, Application for Award for Original Information.