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"Does finding a data entry error on a tax return make it more likely that the return will be more thoroughly audited?"
With the caveat that IRS doesn't publish their methodology for selecting returns for audit, in my experience -34 years now:

It depends on what kind of a "data entry error". For example, if a wrong number is entered for estimated tax payments, the IRS will catch that quickly, and send a bill or a refund. Nothing to audit about that.

Errors in income numbers are something else.

If it's a "matching notice" - where they reconcile the 1099s filed for a taxpayer with the income reported on the return - it might depend on just what the "communication" your friend received looks like. Right now they're sending out those notices for the 2007 returns. If they just tally up the unreported income - as they see it, which might be wrong - and do an assessment based on that, and your friend pays it, they'll be done.

I THINK that if a return catches their attention, whether for a 1099 matchup, or their regular audit selection process, or both, they don't do a down-and-dirty assessment based on 1099s AND then later do a regular audit. I've had agents show up for an audit, with one of the things they have to pursue being a 1099 mismatch.

You won't know more until looking at that letter.

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