The IRS publishes statistics regarding the percentage of returns that have been examined by type of return. Not surprisingly, some taxpayers have a greater chance of being audited than others according to the latest statistics. Let’s take a look at some stats:
The majority of audits, 74.8%, were conducted via correspondence, and the remaining 25.2% were conducted in the field.
Overall audit rate: The overall audit rate is .5%, but the audit rate of individual returns is .6%.
Corporate audit rates:
.9% for all corporate returns, excluding s-corporations
8.1% for large corporations with assets of $10M or more
.2% for s-corp returns
Individual audit rates:
2.4% for returns with business income and gross receipts of $100,000 to $200,000
3.2% for returns with positive income of $1M or more
.2% for returns with income lower than $200,000, no Earned Income Tax Credit, no business income or rental income.
If you read the footnotes of the statistics, it appears that 37% of individual returns that were selected for examination were due to a taxpayer claiming the Earned Income Tax Credit (EITC). Also, the statistics do not include several million CP2000 notices that are sent to taxpayers each year when there is a mismatch between what is reported on their tax return and what is reported to the IRS. If those notices were included, then the audit rate would be much higher.
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