IRS Auditing Less And Less Returns

With the recent issues regarding taxation that many an audit insurance company have been asked about from customers, many Americans are wondering how the IRS are currently handling things.

According to the agency’s data, not so well; with only 0.6% of the 245 million tax returns the agency processed in 2017 being audited. That amounts to about 1 in every 160 individual returns. This continues the agency’s annual decline audits, the sixth time in a row, and is the lowest level its been in 15 years. In 2017, about 934,000 returns were audited, which is the lowest its been since 2003.

Richer Americans, who have, historically, been the ones more likely to draw the IRS’ attention, have also been facing less scrutiny. Among households with an income higher than $1 million, few considered talking to an audit insurance company, as only 4.3% were audited in 2017.That’s less than the number posted in 2015; 9.5%, and the lowest the audit rate for millionaires since IRS started keeping track of the rate back in 2004. The audit rate for American taxpayers earning $200,000 or less fell to 0.6% last, which is the lowest its been since 2002.

Certified Public Accountant Andy Mattson, Moss Adams, Silicon Valley, says that there is a noticeable, measurable decline in the level of the IRS’ audit activity, a trend he says stems from the decline in the agency’s funding.

Starting in 2011, the GOP-led Congress repeatedly cut the IRS budget, from $12.1 billion in 2011 to $11.2 billion in 2017. During that time frame, the agency cut down its enforcement personnel by roughly a third. Part of these departures included professionals, replaced by lower-level personnel. As a result, the IRS is outgunned by the armies of lawyers and accountants high-income filers tend to have.

Fewer and fewer Americans are getting audited, with two particular groups more likely to be audited; people in the higher tax brackets and people who report little to no income at all, according to data from the agency itself.

Americans who are self-employed or don’t own their own taxes are also more likely to attract the IRS’ attention, as it’s more effective for them and state tax agencies to handle them.


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