Registered Tax Return Preparer RTRP Practice Exam

Large inconsistencies in claimed income or deductions is a common trigger for an IRS audit because the IRS uses sophisticated algorithms to detect discrepancies in tax returns. If a taxpayer reports income or deductions that do not align with their previous filings or the information available to the IRS, it raises red flags. For example, if a taxpayer claims significantly higher deductions compared to their income, or if the deductions are disproportionate to industry standards, the IRS may see this as a reason to investigate further.

The IRS aims to ensure compliance with tax laws, and inconsistencies can indicate either unintentional errors or potential tax fraud. Thus, when there are large discrepancies, taxpayers may find themselves subjected to additional scrutiny, prompting an audit. Addressing these inconsistencies is crucial for maintaining tax compliance and minimizing the risk of an audit.