People assume audit selection is random, or worse, that it’s driven by an anonymous tip or a disgruntled ex-employee. In thirty years on both sides of the table, I’ve seen those things happen exactly a handful of times. The truth is far less dramatic and far more systematic.
Florida DOR doesn’t wake up one morning and decide to audit your business. It runs a selection process, and that process is built almost entirely around data. If you understand how the selection actually works, a lot of what feels arbitrary about getting a notice starts to make a lot more sense.
Here’s what’s really happening behind the scenes before a Florida DOR audit notice ever reaches your mailbox.
- Computer-Generated Selection Comes First
The overwhelming majority of audits start with a computerized selection process, not a human decision. The Department runs statistical models against filed returns, comparing a business’s reported figures against industry norms, prior filings, and known risk indicators. If a return falls outside the expected range for a business of its size and type, it gets flagged for review.
This is why two businesses that look identical from the outside can have very different audit odds. The selection model is reacting to the numbers on the return, not to anything visible from the street.
- Industry Targeting Runs in Cycles
FDOR periodically focuses audit resources on specific industries where noncompliance tends to run higher — restaurants, bars, construction, auto dealers, convenience stores, and vacation rentals show up in these cycles regularly. If your industry is in an active enforcement cycle, your odds of selection go up even if your own compliance is solid.
This is one of the reasons I ask new clients about their industry before almost anything else. Some industries simply carry more baseline audit risk than others, cycle after cycle.
- Return Anomalies and Inconsistencies
Sudden swings in reported sales, exempt sales that spike relative to prior periods, or discretionary surtax amounts that don’t match the county rate for the filing period are the kind of red flags a selection algorithm is specifically built to catch. None of these anomalies mean anything is wrong. They just mean the return looks different than what the Department expects, and different gets a second look.
- Information Sharing With Other Agencies
Florida DOR doesn’t operate in a vacuum. Information gets shared with the IRS, with other state revenue agencies, and internally between DOR’s own tax types. A federal audit adjustment can trigger a state referral. A reemployment tax issue can prompt a look at sales tax compliance on the same business, and vice versa. I saw this cross-referencing happen constantly on the audit side, and it still happens today.
- Prior Audit History
If your business was audited before and the audit produced findings, that history doesn’t disappear. Businesses with a prior assessment are statistically more likely to be selected again, particularly within two to three years of the original audit closing. The Department is checking whether the underlying issue actually got fixed or just got paid.
- Referrals and Cross-Audits
Sometimes a business gets pulled into an audit because one of its customers or vendors is already being audited. If an auditor is reviewing a company’s exemption certificates and finds a certificate on file from your business, that can generate a referral even if nothing about your own filings looked unusual on its own.
- Registration and Filing Behavior
Late filings, amended returns, gaps in filing history, or a business that registered for one tax type but never filed for a related one it’s clearly liable for — these behavioral patterns feed into the selection process just as much as the numbers themselves. Consistency matters almost as much as accuracy.
Why Understanding Selection Actually Helps
None of this is meant to suggest an audit is unavoidable if your business fits one of these patterns. It’s meant to do the opposite — to show that selection is largely mechanical, which means a lot of the risk factors that feed into it are things a business can see and address before a notice ever arrives.
That’s the entire logic behind a Pre-Compliance Readiness Review. Instead of waiting to find out how your business looks to a selection algorithm, we run the same categories of review the Department would, on your schedule, while there’s still time to fix what turns up.
This post is part of an ongoing series on Florida Department of Revenue audits, drawing on my experience as a former auditor for the IRS, the Florida Department of Revenue, and Deloitte & Touche.
About the Author
Orlando Monteagudo is a former CPA and compliance auditor with more than three decades of experience at Deloitte & Touche, the Florida Department of Revenue, and the Internal Revenue Service, where he audited businesses ranging from small family-owned operations to large organizations and high-net-worth individuals. Today, he represents Florida business owners before the Florida Department of Revenue — guiding them through pre-audit readiness reviews, active sales/use and reemployment tax audits, and post-audit follow-up.
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