Financial Planner

Answer: A - Your client has barter income, deductions for office-in-the-home expenses, and substantial business losses. At tax time you inform the client that the IRS may audit due to their use of the Discriminate Functions System (DIF). The DIF scores tax returns to detect fraud; the method screens all returns based on a precomputed set of weighted norms used in selecting returns to audit. Based on the weighted score, the program ranks the returns from most audit-worthy to least audit-worthy; the higher the score, the greater the chance of audit. The norms of the DIF are computed by the Taxpayer Compliance Measurement Program (TCMP) to determine where taxpayers are most likely to fail in complying with the law.