How the IRS Uses AI for Audit Selection Quiz

Answers and explanations appear as you take the quiz.

1. What does a high Discriminant Function (DIF) score on a return indicate?
   • The return has already been confirmed as fraudulent
   • An audit of the return is more likely to produce a change in tax
   • The taxpayer owes a penalty for late filing
   • The return was selected at random for the National Research Program
2. After a return receives a high DIF score, what normally happens next?
   • The IRS sends an automatic bill
   • The refund is permanently denied
   • A human classifier reviews it and decides whether to open an exam
   • The return is sent to the Department of Justice
3. A freelancer omitted a 1099-NEC and later received a CP2000 notice. Which system most likely produced it?
   • The Automated Underreporter program matching information returns
   • The National Research Program's random audits
   • The DIF score's charitable deduction model
   • A field audit by a revenue agent
4. According to the guide, why is a CP2000 notice technically different from an audit?
   • It can only be issued to businesses
   • It is a proposed adjustment based on a data mismatch rather than an examination
   • It never results in additional tax
   • It is sent only after a court order
5. What did the guide say a 2023 study using imputed race data found about EITC-related audit selection?
   • Black taxpayers were audited less often than non-Black taxpayers
   • Audit rates were identical across racial groups
   • Black taxpayers were audited several times as often as non-Black taxpayers, largely traced to EITC selection
   • Race was used directly as a scoring input
6. How could the audit selection process produce a racial disparity when race was not an input?
   • Examiners were told to target specific neighborhoods
   • Design choices, such as focusing on overclaimed refundable credits and on cheap mail audits, acted through features correlated with race
   • The IRS records race on every return
   • The DIF formulas were published and gamed by some taxpayers
7. What is the selective labels problem in audit models?
   • Taxpayers choose which labels appear on their forms
   • The IRS labels returns by state instead of by income
   • Labels are removed to protect privacy
   • Models only learn outcomes for returns that were audited, which skews the training data
8. According to the guide, which step is most useful for a taxpayer who wants to reduce audit and notice risk?
   • Rounding every number to the nearest hundred dollars
   • Filing on the last possible day
   • Reporting every information return and keeping records that support credits and deductions
   • Avoiding the Earned Income Tax Credit even when eligible