In our last blog post, we discussed some of the reasons that may increase the likelihood that an individual will receive a notice from the Internal Revenue Service that he or she is being audited. Dreaded by all U.S. citizens, the audit process requires a taxpayer to produce copious amounts of detailed financial records which may result in fines, penalties, an additional tax bill or even criminal tax charges.
Information released earlier this week is welcome news for U.S. taxpayers as the IRS reported that audit rates of both businesses and individuals have significantly dropped. Hampered by budget cuts and a high employee attrition rate, the IRS reported that audit numbers for the 2014 tax year fell to equal audit rates of nearly a decade ago.
For 2014, the IRS reported its business audit rate fell to 0.57 percent which is the lowest since 2005. Businesses with assets of more than $10 million appeared to fare especially well as 2014 audit numbers for these companies dropped by more than 20 percent from 2013 numbers. In total the IRS reported that it conducted audits of roughly 57,000 U.S. companies.
Individual taxpayers also have reason to breathe a tentative sigh of relief as the IRS reported that its rate of individual audits also fell to 0.86 percent. The IRS also noted that 2015 rates for both business and individual audits are expected to decrease as the Republican-controlled Congress isn't likely to be very sympathetic to the agency's budget woes.
Even though the rates of IRS audits continue to decrease, business owners and individual taxpayers would be wise to take steps to ensure their tax and financial documents are accurate. In the unfortunate event that a business owner or individual learns that he or she is the target of an audit, it may be wise to consult with an attorney.
Source: USA Today, "IRS business audits drop," Kevin McCoy, March 2, 2015
