More IRS Audits

The IRS has recently increased its audit activity. Those with incomes over $50,000 have seen at least a doubling of audit rates over the past 6 months. On May 26th, the IRS released audit numbers for tax returns filed in 2019 and earlier years. For tax year 2019 tax returns, taxpayers with incomes over $50,00 and under $10 million were twice as likely to be audited as of May, 2022 as opposed to September 2021. The current administration has overseen a substantial increase in IRS tax audits. However, the current audit rate is still lower than it was in 2010.

For instance, the audit rate for individuals with incomes below $200,000 declined by approximately half when looking at tax year 2010 as opposed to tax year 2017. For taxpayers who claimed no taxable income, audit rates declined from 21% to 7% from 2010 to 2017. Also, the audit rates for taxpayers with incomes in excess of $1,000,000 declined by about three-quarters (3/4) from 2010 returns to 2017 returns. Likewise, audits of C corporations declined from 2010 to 2017 by about two-thirds (2/3) for those assets in excess of $10 million and under $5 billion. C corporations with assets in excess of $5 billion saw a smaller decline in audit rates. S corporations and partnership audit rates were cut in half from 2010 to 2017.

The IRS has about 6,500 front-line revenue agents who are in the field (usually at the taxpayer site) auditing individuals and companies. The IRS plans to hire 10,000 workers to handle the backlog of more than 20 million unprocessed returns. The IRS is also considering using contractors to relieve the backlog. These new workers will likely not be involved in audits in the near term, but with additional resources, the IRS will likely increase audit rates in coming years.

Bowman Law Firm, LLC, Gene M. Bowman, Attorney at Law