Do Mailed Tax Returns Increase the Chances of an IRS Audit?

Many taxpayers wonder if mailing their tax returns increases the likelihood of an IRS audit. In reality, mailing returns should not change the chance of an audit as compared to electronically filing. However, it can cause additional problems, such as delayed refunds and checks that might go bad before the IRS can process them.

Understanding Correspondece Audits

Correspondence audits, which account for the vast majority of audits, are typically initiated when there are significant discrepancies in the data provided. The IRS uses a computerized system to generate these audits based on missing income matches, significant expense variations, and unusual income and expense mismatches. Other audits are often triggered by information supplied by business partners, ex-spouses, disgruntled employees, or unusual payments observed during the course of another audit.

The Importance of Filing, Period

Simply put, not filing can be more detrimental than mailing the return. Even if you do not owe any taxes, not filing can result in penalties and interest. If you have withholdings, you should file to potentially get a refund. Additionally, the IRS has mechanisms in place to work with you to resolve any issues that may arise, whether you file electronically or by mail.

How Returns Are Evaluated

The IRS does not give preferential treatment to mailed returns. When you file by mail, the information is still keyed into the computer system. All returns are stored on the same system, regardless of the filing method. Therefore, the selection process for audits is identical for both mailed and electronically filed returns. Your return is 'weighted' based on certain averages and flags that may indicate discredibility, such as over or under-deducted contributions or mismatches in filing status. Computers are programmed to identify abnormalities in the information provided, whether the return is filed electronically or by mail.

Conclusion

Ultimately, focusing on the accuracy of your tax returns is the most important factor in avoiding an audit. Whether you file by mail or electronically, the chance of an audit is determined by the consistency and accuracy of your information. Mailing your return, however, can lead to additional inconveniences such as delayed refunds and checks that may not be processed in a timely manner. It is always best to file electronically to avoid these potential issues and to ensure the smoothest process for any necessary audits.