" You've just joined an elite club, one whose initiation ritual is an IRS audit. Unfortunately, you can't refuse membership -- and the dues could be astronomical."

"When the IRS Reform and Restructuring Act was enacted in 1998, lawmakers ordered the agency to focus more on taxpayer rights instead of collection activities. Not surprisingly, the number of audits -- or examinations, as the agency prefers to call them -- dropped dramatically."

"The first year of the kinder, gentler IRS, about one of every 79 tax returns were audited. By 2003, it was even easier for tax scofflaws; that year, according to IRS data, only one of every 150 individual taxpayers were audited."

" The number of audits in 2005 was the highest since 1998, just before the agency's operational structure was realigned. The trend is continuing. During fiscal year 2006 (from Oct. 1, 2005, through Sept. 30, 2006) IRS figures show that the agency completed more than 1.28 million audits of individuals, up slightly from the 1.25 million scrutinized the year before."

"That sounds like a lot and the IRS is pleased that its agents are catching more incorrect returns. But overall, the examination rate of individual returns in 2006 was just under 1 percent, statistically the same as in fiscal year 2005."

"Don't breathe easy just yet. If your tax return included a Schedule C detailing any self-employment income, you are three times more likely to face IRS questioning. And the IRS says it will be stepping up audits of filers who run their own unincorporated businesses."

"Since this type of income has no verification mechanism (i.e., the IRS can't double check much of it in the way it can verify wage income via an employer-issued W-2), tax officials believe that many self-employed individuals underreport their income. The IRS also is keeping an eye out for potential scams that show up on returns."

"Washington, D.C., lawmakers, who once demanded the IRS give taxpayers the benefit of the doubt, are applauding the new aggressive approach. The reason? Members of Congress are hoping that enhanced enforcement efforts will help close the $345 billion tax gap. That amount, based on 2001 figures, represents the difference between what taxpayers should have paid and what they actually paid. Without some help from additional IRS collections, Capitol Hill faces the prospect of raising taxes."

"In March, IRS Commissioner Mark Everson reassured Congress about enforcement efforts. He told the Ways and Means Oversight Subcommittee, during its annual look into IRS operations, that the agency is committed to continued audits. In particular, Everson said, the IRS will continue to look closely at returns from wealthier taxpayers, particularly filers with incomes of more than $1 million."

"Viewed against the total number of returns filed each year (the IRS is expecting around 136 million individual returns this filing season), the nominal increase in recent audits still means that most of us will likely escape extra IRS scrutiny."

"You can make sure your examination chances are even more statistically remote by ensuring that, in your zeal to cut your tax bill, your 1040 doesn't send the wrong message."

" "Don't draw any more attention to your return than you need to," says Robert G. Nath, author of "The Unofficial Guide to Dealing with the IRS." "Simple, plain-vanilla returns are fairly safe.""

"Most returns chosen for audit are flagged by an IRS computer program known as the Discriminant Function System, or DIF, in tax parlance. The actual scoring formula to determine which tax returns are most likely to be in error is a closely guarded secret. But Nath, a Washington, D.C.-area tax attorney, says it's no mystery that the system is designed to screen for returns that could put more money in the government Treasury."

" Tax experts believe one discriminate function component looks at average deduction amounts. This allows IRS examiners to spot inconsistencies, such as a high mortgage interest deduction and low income. Tax specialists at "

" examined 2004 return statistics and came up with the following itemized deduction averages. These are for illustrative purposes only. CCH experts note that the IRS takes a dim view of taxpayers who base their claimed deductions on these figures. The numbers can be useful, however, in giving you a general idea as to whether certain deductions on your return might seem out of line."

"Allison Einbinder, owner of Dollars & Sense, a tax and accounting firm in Oakland, Calif., recommends that all filers review the differential comparisons. How you stack up against a national standard, she says, will give you an idea of whether the IRS might take a closer look at your return."

"Returns claiming the earned income tax credit, designed as a tax break for lower-income wage earners, also catch IRS eyes. The credit's complexity often results in legitimate mistakes on returns. Some filers, however, have been caught making false claims to increase the payment the credit provides."

" Don't let fear of a potential audit discourage you from filing for credits or taking legitimate deductions."

"Although some tax return actions are likely to flag your return, Nath says that doesn't necessarily mean you'll be audited."

"Even if your return is questioned, it's not a foregone conclusion that you'll end up owing the IRS. As long as your deductions and expenses are legitimate and you have documentation, Nath says, they will be allowed."

"The groundwork you put into preparing your return will pay off in an audit situation. "Be confident in what you entered," says Einbinder. "That's easy when you have good records to support your
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