I was doing some business tax research today and ran across this interesting tip for avoiding an audit – don’t E-file. Here’s why. The way the IRS determines if you are to be audited is through a computer algorithm that churns through your numbers for certain red flags, like too many deductions or a difference between what you typed in and what they have on their W-2s and 1099s. Now, 100% of all E-filers are analyzed since it’s all ready to go. But for physical mailed-in returns, the IRS has to hire tons of data-entry people to manually type in each one. This is expensive, so reportedly less than half are actually transcribed. No computer = no audit.
Now, I don’t know if this is true, but it makes a certain amount of sense to me. Of course, this may delay your tax refund. But I’d trade that for a smaller chance at an audit anytime.