What sets off an IRS audit flag?

February 20th, 2019 → 12:20 pm @



What can set off an IRS audit flag?

Years ago, I met Gary, a former IRS field agent at a writers conference. Gary had  so much information about how the IRS works and he had some interesting tidbits to share.

Gary explained the IRS audit procedures:

The IRS uses a computer score called a DIF (Discriminate Function Indicator) score to determine what tax returns to audit. The higher your DIF score, the more likely your chances at being audited. IRS employees examine high DIF score returns for potential audit. Some are audited, many are not.

One factor that raises a DIF score is co-mingling multiple businesses together on one Schedule C. Schedule C is the tax schedule most writers use to report income and expenses from their writing business. It is attached to the Form 1040. Partnerships and corporations use different tax forms.

If you run several businesses, you should file separate Schedule C’s for each.

If you are confused about whether your separate businesses can be co-mingeld onto the same tax schedule, drop me an email  or schedule a consultation by telephone to discuss your particular situation.

My book also has a lot of helpful information for authors and is cheaper than a personal consultation with me!


Carol Topp, CPA is the author of Business Tips and Taxes for Writers.

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