IRS Computers vs TurboTax

[lcgundo]

I assume that when an IRS computer analyzes a filing generated by TurboTax, it checks your input data against fiducial sources such as 1099s filed by the organizations that generated the income, and makes other sanity and consistency checks.

Then if all the input data passes those validations, it uses its own algorithms to determine how much tax is due and whether you have overpaid or underpaid.

In other words, if TurboTax has made an inaccurate intermediate calculation, the IRS computer is oblivious to it. I think that the IRS computers extract only a few items from the filed form, and draw conclusions from those.

Any disagreements?

[MaxA1 · Accepted solution]

No disagreements, for the most part.  Here's a breakdown of how the IRS reviews a tax return:

• Initial Automated Checks: The Discriminant Function System (DIF) assigns a score to returns based on how they compare to statistical norms of similar taxpayers.
• Information Matching: The IRS matches your return against data from employers, banks, and other third parties (Forms W-2, 1099) to identify unreported income.
• Manual Review: If errors are flagged, IRS personnel may conduct a manual review to determine if an audit is necessary.
• Audit Selection: Returns may be chosen for audit through random sampling, special compliance programs (like TCMP), or, most commonly, anomalies detected by the computer.