Audits are not as common as many people think. That’s especially true if you make less than $200,000 per year.
In 2015, for example, the IRS got 147 million individual returns. They only audited about 0.84 percent of them. The year before, the rate was 0.86 percent, so there was a small drop even into 2015. That stuck with the trend, as the number was the smallest it had been in about 10 years.
So, how does income factor in? For those making under $200,000 each year, the odds of an audit stood at a mere 0.76 percent. In 2014, that number was 0.78 percent for the same group, and it was 0.93 percent 10 years ago. It’s clear that the IRS is focusing more and more often on the upper end of the wage spectrum.
For example, those who earned $1 million or more last year saw an audit rate of almost 10 percent, more than 10 times what was noted for those under $200,000.
The IRS isn’t trying to do this to be kind, though. Budget cuts were a big part of it. It takes a lot of manpower to carry out so many audits, so reductions meant the number that were done also had to drop. Going after those with a higher level of income means that there is more to gain when mistakes are found. The IRS may spend more than it would gain to audit someone who only made minimum wage last year.
If you are in this higher income bracket, the IRS could be targeting you more than others with lower earnings. When they do, be sure you know what legal steps you need to take. An audit can be stressful and complicated, but being prepared in advance will help you move forward.
Source: Bankrate, “IRS audit red flags that will tempt the auditors,” Kay Bell, accessed Dec. 01, 2016