The IRS uses two computer functions to review and score tax returns. Individual returns are selected for audits based on the scores from these two programs. Someone with a high score with one program or the other is likely to be selected for an audit.The first program is the Discriminant Function System (DIF). This reads the returns and scores them based on an indication for the change in the tax due.
The second program, the Unreported Income DIF (UIDIF), scores the potential for unreported income.
The exact details of how the DIF and UIDIF work are not made public. If a return receives a high score from either the DIF or UIDIF, the return is flagged and an individual screener will review it and identify specific parts that may need to be reviewed., There are certain kinds of deductions that are likely to catch the attention of the IRS and lead to an audit. You may want to consider whether the amount of the deduction is great enough to make the claim and risk the audit. Certainly, if you are entitled to the deduction, you should feel free to claim it. However, if your deduction falls in any of the following categories, you should be sure to keep very detailed records and receipts. (Note that having the receipts will not stop the audit, but you will need to be able to produce them if the audit happens.)Bad debt expenses
Casualty losses
Home office deductions
Medical expenses
Business travel, meal and entertainment expenses

, Thought there is no real proof for this, many experts suggest that filing close to the April 15 due date, or even requesting an extension for late filing, may reduce your chances of getting audited. The rationale is that the IRS selects returns for auditing before then. Therefore, filing later will get you past the audit window.Understand that if you do file for an extension, you are still responsible for paying your tax on time. If you think you owe a tax, you should estimate the amount and submit a payment with your extension request. Failure to do so can result in penalties.
 If you believe that your tax return may trigger an audit based on some of the information that it contains, you may want to include some explanatory information. You can, first, limit your chance of being audited by completing all the appropriate worksheets or schedules for whatever deduction you may be claiming. In addition, including a note about some change in circumstances can help avoid the audit.For example, if your charitable deductions were significantly higher this year than in prior years, you should first complete the schedules and worksheets for charitable deductions. You may also provide a typed explanation for the increase.
Your return may still receive a high DIF score, which will target you for an audit. However, the written explanation may tell the human screener all they need to know to keep you from getting audited.
Understand how audits are chosen.
Know the red flags for audit selection.
File later to avoid audits.
Provide explanations of questionable information.
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