Mistakes happen. Maybe you chose the wrong filing status, forgot to include income, or need to change deductions claimed in your original filing. Whatever the reason for the error, those who catch a mistake on a tax return can file an amended return. Taxpayers who are considering filing an amended return often have questions about the process and whether or not they should move forward. One of the most common is a concern that filing an amended return could trigger an audit.
Does filing an amended tax return make me a target for an audit?
The IRS states that an amended return will have no impact on the selection process. The agency clarifies that the amended return goes through the same screening process as any other return. This means it still could get flagged for an audit but that the odds are supposed to be the same as any other return.
What is the screening process?
The agency uses many different methods to flag a tax filing for an audit. These include random selection and computer screening. Computer screening involves a review of data to see if your filings fall outside of accepted norms. This can include a review of similar returns and comparison of deductions and income. If they do not line up, the agency may take a closer look.
The IRS is also more likely to move forward with an audit if your filings are connected to other current audits. This could include audits of business partners.
What else should I know about this process?
It is important to note that the reverse is true. Although filing an amended return will not increase the risk of an audit, failing to file can increase the risk of an audit. An example is that of taxpayers who receive an Employee Retention Credit (ERC) refund. Taxpayers who get this credit generally experience a reduction in payroll expenses that the taxpayer may deduct from their federal income tax return. This could increase their taxable income — a change that likely warrants an amended filing. The IRS may check to see if taxpayers who received this credit went back and filed an amended return. If not, the agency will likely take a closer look and may move forward with an audit.
This is just one of many examples of methods the IRS uses to target taxpayers for a federal tax audit. The attorneys at Goldburd McCone are familiar not just with these methods but also with strategies to help taxpayers navigate federal tax audits. They can use this experience to help guide you through the process.