Audits of the rich continue to drop while audits of the poor have stayed the same. When ProPublica mapped out the audit rates for every county in the U.S., it found that the counties with the highest audit rates were the poorest.
Even taxpayers with total positive income from $200,000 to $1,000,000 had only one- third the odds of audit compared with these lowest income wage earners. A total of nearly 9 million taxpayers reported these high-income levels.
On the poorest households in America. The relevant statistics come to us via TRAC, a nonprofit research data center at Syracuse University. TRAC recently mined IRS statistics and determined that the agency audits households with less than $25,000 in income at five times the rate for anyone else.
Audit trends vary by taxpayer income. In recent years, IRS audited taxpayers with incomes below $25,000 and those with incomes of $500,000 or more at higher-than-average rates. But, audit rates have dropped for all income levels—with audit rates decreasing the most for taxpayers with incomes of $200,000 or more.
Fewer than two out of every 100 taxpayers reporting over $1 million in income were audited by the Internal Revenue Service in fiscal year 2020, according to a new report.
Audits of Millionaires
While the ranks of millionaires have nearly doubled since FY 2012[5], the number of millionaire returns that were audited has actually fallen 72 percent - down from 40,965 millionaire audits in FY 2012 to just 11,331 in FY 2020.
Returns with extremely large deductions in relation to income are more likely to be audited. For example, if your tax return shows that you earn $25,000, you are more likely to be audited if you claim $20,000 in deductions than if you claim $2,000.
Middle-class Americans, listen up: the I.R.S. is much more likely to audit you this year. Those caught cheating can expect to pay about $4,100 more on average in income taxes.
IRS audits on millionaires recouped $1.2 billion in 2020, down from $4.8 billion in 2012, the TRAC Research Center report said, adding that the agency “is letting billions of dollars in tax revenue slip through its fingers because budget and staffing cuts have left the agency incapable of fairly and effectively ...
What are the chances of being audited by the IRS? The answer may surprise you. On average, the chances a taxpayer will get audited are just 1 in 333. In other words, the IRS only audits 0.3% of tax returns.
This is most easily observed by looking at Tax Year 2019 which is presented in the FY 2021 Data Book with audit results as of September 30, 2021. Tax returns for 2019 are filed in 2020 and may be filed on extension as late as October 15, 2020.
Less than 1% of all tax returns get audited, and your odds may be even smaller than average. Now that the tax deadline has passed, many Americans are hoping that they don't get selected for an IRS tax audit this year.
While the chances of an audit are slim, there are several reasons why your return may get flagged, triggering an IRS notice, tax experts say. Red flags may include excessive write-offs compared with income, unreported earnings, refundable tax credits and more.
If you get audited and don't have receipts or additional proofs? Well, the Internal Revenue Service may disallow your deductions for the expenses. This often leads to gross income deductions from the IRS before calculating your tax bracket.
What Are the Chances of Being Audited? Americans filed just over 157 million individual tax returns in fiscal 2020. In the same year, the IRS completed 509,917 audits, making your overall odds of being audited roughly 0.3% or 3 in 1,000. IRS audits are conducted by mail and in person.
Remember that the IRS will catch many errors itself
For example, if the mistake you realize you've made has to do with math, it's no big deal: The IRS will catch and automatically fix simple addition or subtraction errors. And if you forgot to send in a document, the IRS will usually reach out in writing to request it.
Fortunately, you don't need to worry about that happening. According to the IRS, most tax audits are regarding returns filed within the last three years. If they find a substantial error, they may add more years. But even then, they seldom go back more than six years.
Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.
Can the IRS audit you 2 years in a row? Yes. There is no rule preventing the IRS from auditing you two years in a row.
Sometimes an IRS audit is random, but the IRS often selects taxpayers based on suspicious activity. We're against subterfuge. But we're also against paying more than you owe.
Walter Anderson
He was convicted of the largest tax evasion scam in U.S. history for evading more than $200 million in taxes.