Question

how does the irs use the document matching to select returns for audit

Answer 1

The IRS Matches all the tax forms issued to the business with the tax return filled using the computerized Process. If Something is omitted or Figures not matched then the tax return will be sent for the Review by the Officials.  If the tax return intentionally differs from any of the tax forms, including a clear explanation with the tax return may be enough to satisfy the reviewer without a formal audit being initiated. The IRS will often “coordinate” one’s tax return with corresponding returns and documents and look for discrepancies. If one is found, the matter may be selected for audit. For example, a taxpayer’s return may be audited after the IRS notices that one’s reported income does not match his employer’s Form W-2 or his bank’s Form 1099 for interest statements.