The Internal Revenue Service audited just 0.86 percent of individual tax returns last year. According to a recent article by Accounting Today, the odds of being audited next year will be even better for individuals. IRS funding continues to drop, making it more difficult for the agency to carry out tax enforcement.
As audit odds improve for individuals, the IRS worries that taxpayer fear of audits will diminish, making it more likely that some will take more chances with iffy claims on returns and others will simply be less scrupulous about filing accurate tax returns. As IRS enforcement efforts erode, so too do tax revenues. Of course, it’s worth noting that even though the odds of being audited are dropping, there will still be around 1 million audits conducted in 2016.
Last year, Crain’s Cleveland Business publication pointed out that several categories of taxpayers face higher than average risks of being audited, including those who have more than $1 million in income. About half of all audits are conducted in this income group.
At the other end of the spectrum are those who claim no income. Self-employed business owners who claim no income are of particular interest to the IRS. The agency is suspicious that the business has been created to take advantage of tax breaks or that the filer has significantly underreported income.
It’s safe to assume that even with the coming drop in audits next year, those two groups will see outsized shares of the audits that are conducted.
Accounting Today notes that because funding problems at the agency could even cause tax season to be extended in 2016. While that prospect will undoubtedly delight many, at this point, it is nothing more than speculation. Please don’t count on a delay, extension or other alteration.
In our next blog post, we will have more on IRS audits, appeals and the help the experienced, skilled tax attorneys at Robert J. Fedor, Esq., L.L.C. provide clients being audited.
