Updated August 2026.
There is no published checklist that guarantees a tax return will—or will not—be examined. The IRS uses several selection methods, including computer screening, information matching and, in some cases, random selection. Being selected does not by itself mean that a return is incorrect.
How the IRS Selects Returns
The IRS compares return information with data received from employers, financial institutions and other third parties. It also uses computerized screening to identify returns that may warrant further review. A return may therefore receive attention because information does not match, an item needs substantiation, or the return was selected under another compliance program.
The more useful question is not whether an item looks unusual in isolation. It is whether the return is complete, the tax treatment is supportable, and the records are sufficient if the IRS asks about it.
1. Information-Reporting Mismatches
Forms W-2, 1099 and other information returns are generally provided both to the taxpayer and to the government. If a form is omitted, reported in a different amount or entered under the wrong taxpayer, the mismatch may generate an automated notice or additional review.
Before filing, taxpayers should reconcile the tax documents they received to the income reported on the return. A missing or incorrect form should be investigated rather than ignored.
2. Deductions and Credits Without Adequate Support
A large deduction is not automatically improper. The issue is whether the deduction is allowed under the applicable rules and whether the taxpayer can substantiate the amount and business or charitable purpose.
Receipts, invoices, canceled checks, bank records, contribution acknowledgments and other supporting documents should be retained in an orderly manner. Estimates should not replace records when the law requires specific substantiation.
3. Business Expenses Mixed With Personal Spending
Closely held businesses and self-employed taxpayers should distinguish business expenditures from personal costs. Separate bank and credit-card accounts, current bookkeeping and a clear record of owner payments make the tax reporting easier to support.
Expenses should also be categorized according to what was actually purchased. A payment from a business account is not necessarily deductible merely because the business paid it.
4. Vehicle and Home-Office Deductions With Weak Records
Vehicle and home-office deductions are fact-specific and have their own requirements. Business vehicle use should be supported by mileage or other contemporaneous records. A home office generally must satisfy the applicable business-use rules, and the deductible amount may be limited.
Taxpayers should document these items during the year rather than attempting to recreate the records after receiving a notice.
5. Digital Assets and Foreign Accounts
Digital-asset transactions may produce taxable income, gain or loss even when a taxpayer does not receive a complete tax statement. Beginning with certain 2025 transactions, some taxpayers may also receive Form 1099-DA, but the taxpayer remains responsible for accurate basis and transaction reporting.
Foreign financial accounts and assets can create income-tax and separate information-reporting obligations, including possible FBAR or Form 8938 filings. These rules are highly dependent on account type, ownership, balance and taxpayer status, so they should be reviewed before the return is filed.
What Taxpayers Should Do Before Filing
- Reconcile Forms W-2, 1099, K-1 and brokerage statements to the return.
- Maintain supporting records for income, deductions, credits and basis.
- Keep business and personal transactions separate.
- Maintain mileage, home-office and other required substantiation during the year.
- Discuss major transactions with the tax advisor before the transaction is complete.
- Review the completed return and resolve items that do not match the underlying records.
If the IRS Sends a Notice
An IRS notice is not necessarily an audit, and it should not be answered before the requested change is understood. Compare the notice to the filed return, identify the response deadline, gather the supporting records and determine whether the proposed adjustment is correct.
For help preparing a complete return before filing, see Tax Preparation & Compliance. If the IRS or California Franchise Tax Board has already sent a notice, review IRS & FTB Notice Assistance or contact James S. Wang, CPA with the agency, tax year, notice date and response deadline.
Official IRS Resources
- IRS Audits
- What Kind of Records Should I Keep?
- Publication 463, Travel, Gift and Car Expenses
- Publication 587, Business Use of Your Home
- Digital Assets
- Foreign Bank and Financial Accounts
This article provides general information and is not tax or legal advice for a particular taxpayer. The appropriate treatment depends on the facts and law applicable to the specific matter.