Many people get nervous when they hear the term “IRS audit," but very few Americans are actually audited. In fact, less than 1 percent of people who file individual tax returns are audited, and the IRS chooses people carefully, focusing on higher earners.
During the last fiscal year, the IRS audited 1.5 percent of tax returns for filers with incomes between $200,000 and $400,000. Over 12 percent of those with incomes above $5 million were audited.
It was recently reported that the IRS may decide to further target audits to the super-wealthy, The Wall Street Journal reported, on advice from the inspector general. The reason is because busting the super-wealthy for tax indiscretions is much more lucrative for the government.
Ultimately, the inspector general’s report stated that the IRS currently spends most of its audit funds on people with incomes between $200,000 and $400,000, but it would be more productive to focus on the super wealthy because there are fewer people in that group and the rewards are much higher.
However, in a response to the inspector general’s report, the IRS said that its decisions with regard to auditing practices cannot be solely tied to productivity. You can read more about the inspector general’s report and the IRS’s response here.
The best way to avoid a tax audit, no matter what income level you are a part of, is by making sure that you comply with the tax laws in the first place. The tax laws are always changing, which is why it’s so important to work with an experienced tax professional who stays on top of all of the requirements.
If disputes do arise with state and federal taxing authorities, you need more than just a tax professional in your corner, you need an attorney. Connie Yi of the Law Offices of Connie Yi, PC is both a CPA and an attorney, which is a huge benefit. You can read more about her background here.