Question

A ""DIF"" score is a type of:

a. Fraud definition used by the Service.
b. Discriminate analysis used to identify questionable returns.
c. Negligent penalty score.
d. Score used for an information purpose in collateral agreements.

Answer 1

A "DIF" score is a discriminate analysis used by the IRS to flag potentially questionable tax returns for review or audit. It assigns a numerical value to tax returns to rank them based on the probability of inaccuracy.

Step-by-step explanation:

A "DIF" score stands for Discriminant Information Function, which is a discriminate analysis used by the United States Internal Revenue Service (IRS) to identify potentially questionable tax returns. The DIF score is a number assigned to a tax return after it is processed, and it is used to rank returns in terms of the probability of inaccurate reporting. Returns with high DIF scores are more likely to be examined in an audit, as these are considered more likely to contain discrepancies that could lead to an adjustment in the tax owed.