Do All Tax Returns Get Checked by the IRS?

The Internal Revenue Service (IRS) handles a vast number of tax returns annually, and with the addition of around 30,000 new employees in the coming years, the workload will undoubtedly increase. Despite the heavy demand, not every tax return receives a detailed scrutiny. Instead, the IRS utilizes a sophisticated combination of automated systems and human review processes to manage this massive volume effectively.

Automated and Manual Processes

The IRS has established robust systems to process and review tax returns efficiently. However, the approach is not a blanket examination of every return. Instead, the process primarily relies on a series of automated checks followed by a thorough manual review for those flagged as suspicious or discrepant.

Automatic Checks and Initial Flags

Once a tax return is submitted, it is invariably entered into a computing system for initial processing. This computer system performs several crucial checks:

It looks for arithmetic errors, such as miscalculations in sums or differences. It cross-references reported information against the W2s and 1099s. It verifies that the reported information matches what employers or businesses have reported. It uses algorithms to identify patterns that may indicate fraudulent activity, focusing particularly on claims like the Earned Income Credit.

If the system detects any issues that do not align with standardized norms, a red or yellow flag is raised, and the return is assigned to a human agent for further review.

Human Review and the Beginning of an Audit

The flagged returns are thoroughly examined by a human agentthis is essentially the first step in what might become a formal audit. The human agent assesses the potential discrepancies, errors, or deliberate omissions and tries to determine the root cause of any delays in processing.

Even with manual scrutiny, the IRS does not audit every return. Due to staffing constraints, the agency can only conduct a small percentage of audits each year. This selective approach ensures that resources are allocated where they can have the greatest impact.

Common Discrepancies and Triggers for Audits

Several common issues can trigger further review by the IRS, including:

Arithmetic errors: Simple mistakes in addition or subtraction. Misreporting of income: Forgetting to report income from employers or financial institutions. Deliberate or unintentional omissions: Reporting less income than was actually earned. Claims of credits: Erroneous claims, such as overstating the Earned Income Credit.

The Human Element

Evidence of human error is also a factor. For instance, one person reported accidentally signing the wrong section of their return. Such oversights flagged the return and prompted further review.

It’s important to note that these processes are designed to catch potential fraud, ensure compliance, and promote fair and accurate tax reporting across the board.

Conclusion

While not every tax return undergoes a detailed examination, the IRS employs a combination of automated checks and human intervention to identify areas of potential concern. This method ensures that the agency can efficiently manage its workload while maintaining rigorous standards of compliance and fairness. Whether through minor clerical errors or more serious discrepancies, the IRS is vigilant in its efforts to ensure accurate and complete tax filings.