For example, everybody dreads the IRS audit, but nobody can tell for sure how to avoid them. Sure, there are risk factors. For example, high income taxpayers are more likely to be audited, self-employed’s are more likely to be audited than w-2 employees, and returns that have been amended are more likely to be closely examined than other returns. However, IRS audit risk analysis is an imperfect science. Even though it is very common for taxpayers to ask their tax attorney about their individual chances of being audited, tax professionals are understandably reluctant to give a straight answer . . . because they just don’t know.
Robert Wood is a prominent San Francisco tax attorney — one of the leading authorities in his field. He writes a tax column for Forbes. In one of his recent articles, he talks about whether or not the risk of audit increases when a taxpayer files an extension. He thinks it does not, although he points out that other tax professionals disagree. Interestingly, Mr. Wood does not cite any Revenue Code section, IRM section, or anything. This is just his opinion based on his 30+ years of experience.
Even if there is a secret IRS audit formula, I’m sure it’s updated regularly to keep people on their toes.