Everybody’s #1 concern with the IRS is getting hit with an audit. But we’re told that the chance of being audited is less than 1-percent. However, that might change very soon because the IRS was recently granted about $40-billion to increase its enforcement operations of the tax laws. Part of that $40-billion will pay for the hiring of as many as 87,000 IRS employees. But this money and the new IRS agents aren’t coming all at once so stepping up the audit rate might take some time.
ACTUALLY EVERY TAX RETURN GETS SOME KIND OF AUDIT
Actually every tax return each year gets some kind of audit. Every tax return is checked over by the IRS for accuracy in math, and every tax return is checked over to be sure that the income statements reported on the return match the income statements received by the IRS. These income statements include W2 forms sent by employers, and 1099 forms sent for gig and freelance work, and W2G forms sent by casinos for jackpots paid. But even with these spot checks and computer checks, the number of actual audits is still less than 1 in a hundred. And keep in mind this figure might change.
THE LATEST AUDIT RATES BY INCOME
The IRS has released the newest data on audit rates and income and this data comes for the tax year 2019. Here are the key findings for those 2019 tax return audits:
If you claimed the Earned Income Tax Credit your audit rate was 8-tenths of 1-percent. This makes sense because the IRS wants to check for fraud with the EITC program.
If your 2019 tax return showed no net income your audit rate was 1.1-percent.
If your income was under $25,000 your audit rate was only 4-tenths of 1-percent.
Now get ready for a big surprise. The audit rate for taxpayers earning between $25,000 and $500,000 was only 2-tenths of one percent.
Why are lower income taxpayers audited more? Perhaps they get more “undocumented income” such as cash tips is one reason we’re given.
Taxpayers with income above $500,000 have an audit rate of 6-tenths of one percent and the more you make the higher the audit rate is. Those earning more than $10-million have an audit rate near 9-percent.
Remember, you don’t have to be rich to be audited and if you are audited consult with a tax professional.
AUDITS AND THE IRS FRESH START INITIATIVE
It’s our belief, and the belief of many tax professionals that the IRS audit rate will be increasing as soon as the first of the new 87,000 IRS agents finish training and start work. While the IRS has said much of its enforcement action will be targeting those earning more than $400,000 per year, the common belief is that the audit rates will also be going up for lower and middle income Americans as well.
The new IRS agents and employees also will help clear up the backlog of IRS paperwork and the processing of tax returns, and that could make it more difficult for an IRS Offer In Compromise or an application for an IRS Fresh Start Initiative to sail through. Our feeling is an early application for an IRS Fresh Start Initiative and an Offer In Compromise will have better success.
CALL NOW ABOUT THE IRS FRESH START PROGRAM
Call us now for a free consultation about the IRS Fresh Start Program. In 15 minutes or less we can tell you if you can qualify for the IRS Fresh Start Initiative and its various programs including the Offer In Compromise. Watch this video to find out how easy it is to have this consultation with one of our tax resolution experts.
Here again is the direct phone number to call our senior tax resolution specialist Tom at our office: 949-359-0810
Or, you can call our general number on this page to reach any of our tax resolution experts about the IRS Fresh Start Initiative or the IRS Offer In Compromise.