- Front Loaded Programs
- Front Loaded programs are those tax audits that IRS DC headquarters has determined are particularly important and a considerable amount of focus and time is expended on these programs and activities. Each area has discussions within management as to what the programs should be for each region, district, and office.
- Some of the programs are:
- Special enforcement programs – An example of this may be compliance of all flee market vendors, a program I was involved with
- High Income non-filers – The IRS would get their information from a match program of w-2’s and 1099’s and match up social security numbers against filed returns
- Abusive Tax Avoidance – This could be in the area of offshore activities
- Offshore credit card program
- National Research programs – Those set forth by management after doing a trends project
- FBAR filing – IRS is currently targeting those with overseas bank accounts
- Non- filers – IRS is presently forming a task force to seek non-filers though aggressive means.
- The IRS makes sure there is balanced coverage.
- The National Office makes sure there is a balanced approach for audit return delivery and tax compliance. Resources and inventory and the size of personnel all go into this formula. The focus is blended into these areas:
- Individual returns less than $100,000.
- Individual returns greater than $100,000 but less than $200,000.
- Individual returns greater than $ 200,000.
- Small Business Corporations.
- Small Business Flow-Through Entities – S Corporations, Fiduciaries and Partnerships.
- The National Office makes sure there is a balanced approach for audit return delivery and tax compliance. Resources and inventory and the size of personnel all go into this formula. The focus is blended into these areas:
- Classification Plan
- The IRS will prepare a plan, which is classified. A National DIF score indicator is placed on all Federal Income tax returns that are filed. Each tax return has certain factors that contribute to its score such as Gross Income, Adjusted Gross Income and line item expense.
- There are several classified secrets that go into the DIF score.
- Each tax return is processed through the IRS computer line item by line item.
- A DIF score label is placed on every tax return with its DIF number. A tax examiner or Revenue Agent manually eyeballs each and every tax return with a high DIF score. The examiner then determine which return has the highest probability of tax audit success.
- DIF Cutoff Score
- The IRS will calculate the Area DIF cutoff score for each activity code, giving consideration to the selection rate. This is the lowest DIF score necessary to secure the number of returns required for audit. For example, if the return plan shows 225 returns for an activity code and the selection rate is 70%, the IRS will need to order 321 returns (225/70%).
- The DIF Cut off Score is 500. The number of returns with DIF scores greater than 550 is 280, which is less than the number of returns required, so the lowest DIF score on an ordered return will be in the range of 500 to 550 and the DIF cutoff score is 500. This is the IRS example as found in the IRS IRM section 4.
- Where your case is worked
- Examination inventory is assigned to IRS offices based on ZIP codes, using the Look up Tables at Martinsburg Computing Center.
- High Assault Risk Areas
- Certain ZIP code areas are identified as High Assault Risk Areas. There are special instructions the IRS has regarding these audits. These returns will be audited.