Personal Finance

The worst states for IRS audits

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Residents of North Dakota can breath a little easier: They're the least likely to be audited by either the Internal Revenue Service or state tax officials, according to an analysis of more than 6,300 actual IRS and state audits by TaxAudit.com.

The Peace Garden State's budget surpluses from the energy boom and its small population tend to help residents keep tax auditors at bay, according to TaxAudit.com, which provides audit defense services for TurboTax users and handled and resolved more than 24,000 audits last year. TaxAudit.com ranked states on the likelihood of a tax audit based on user data from their 2013 tax returns.

The number of IRS personnel in a state, how a state's tax laws differ from the federal tax code and what activities federal and state officials want to target in a given year—for example, the IRS frequently audits horse breeders to see if they are accurately tracking their expenses—affect the volume of audits in each state.

The one thing you can do to avoid being audited by the tax man: "Never leave off income from your tax return," said Dave Du Val, vice president of customer advocacy at TaxAudit.com.

Check out CNBC's Kelli Grant's latest tips on avoiding a tax audit.

By Tom Anderson

Missouri, 5th worst state for IRS audits

St. Louis, Missouri
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Many residents of the Show-Me State have to cough up their returns to federal auditors because a large number of IRS staff are based in the state and it's home to many horse breeders, according to TaxAudit.com.

Vermont, 4th worst state for IRS audits

Burlington, Vermont
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A lot of high-income earners work in New York and live in Vermont. "Higher the income, better the chance you will be audited," TaxAudit.com's Dave Du Val said.

Nevada, 3rd worst state for IRS audits

The Strip at dusk in Las Vegas.
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What happens in Vegas doesn't always stay in Vegas. Professional gamblers increase the IRS audit numbers for Nevada, as do the state's large number of businesses that incorporate there for tax advantages, according to TaxAudit.com.

Colorado, 2nd worst state for IRS audits

Denver, Colorado.
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TaxAudit.com found that second-home rentals in Colorado make residents a target for IRS audits.

California, worst state for IRS audits

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The Golden State has the largest number of IRS offices of any state and that makes residents more likely to be targeted by federal auditors, according to TaxAudit.com.

Michigan, state with the 5th most state audits

Skyline of Detroit
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TaxAudit.com found that Michigan has a large number of people who live in-state and work elsewhere, which complicates tax returns and leads to more state tax audits.

Delaware, state with the 4th most state audits

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The First State is a top destination for businesses that incorporate, which contributes to a high number of state tax audits, according to TaxAudit.com.

Alabama, state with the 3rd most state audits

Mobile, Alabama
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Alabama's state government faces a state tax revenue crunch."One of the quickest ways to get tax revenue is to audit the people who live there," TaxAudit.com's Dave Du Val said.

Massachusetts, state with the 2nd most state audits

Boston, Massachusetts
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Massachusetts treats employee business expenses differently than the federal tax code, which means state tax auditors are kept busy making sure residents comply with the rules, according to TaxAudit.com

New York, state with the most state audits

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Scores of bad tax return preparers and tax returns complicated by New Yorkers working across the tri-state area means New York state auditors are a busy bunch, said TaxAudit.com's Dave Du Val.