Will my chance of being audited increase if I added an asset worth 6 figures , to be depreciated, in a side business that earns low 4 figures ?

[JohnW15 · Accepted solution]

It's possible, but that shouldn't deter you from reporting this item as long as you can substantiate that it's ordinary and necessary to your business.

Some returns are selected for examination on the basis of computer scoring.  The IRS' computer programs assign a numeric score to each return that's filed. The Discriminant Function System (DIF), a top-secret IRS formula, rates the potential for change, based on past IRS experience with returns similar to yours.  See IRS Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund for more information on the DIF scoring function.