When a person's net cash flow exceeds his or her reported taxable income,the IRS:

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When a person's net cash flow exceeds his or her reported taxable income, the IRS may presume that the taxpayer is underreporting their income upon an examination. The agency uses statistical tests to identify taxpayers whose reported income does not match their observed expenses and cash flow. However, this does not necessarily mean that the taxpayer is intentionally cheating on their taxes. They may have made errors or omissions in their tax returns that need to be corrected.

When a Person's Net Cash Flow Exceeds His or Her