IRS Tax Problems

Odds of Being Targeted by the IRS for Audit

Odds of Being Targeted by the IRS for Audit

Nobody has ever done a survey on this, but it wouldn't be surprising to find out that every April, millions of people wake up from a nightmare about facing an IRS audit. As common as this concern may be, the truth is that the IRS picks and chooses where to focus their audit attention, and with limited time and resources they have no choice but to select the targets that are most likely to yield the biggest yield. That means that they are spending time looking at high income taxpayers, business returns, and the returns of those who have claimed the earned income tax credit - these are the returns that have the highest rate of fraud.

How do we know this?

The IRS tells us! The "DATA BOOK" is a publication that the agency puts out at the end of every fiscal year, detailing what they've done in the previous year and how they've done it. A careful examination of the information provided shows exactly how many returns have been audited, what categories they fall into, how much has been collected in taxes (over $3.3 trillion gross in 2016), and more.  The information is truly interesting, as it shows specifics such as how much businesses paid in taxes before refunds in 2016 ($345.6 billion), how much was paid in refunds ($426.1 billion issued to 122.3 taxpayers), and what percentage of individual income tax returns were audited (0.7 percent for individuals and 1.1 percent of corporations - excluding S-corps - in 2015).

For a more detailed breakdown of how many audits are conducted broken down by the taxpayer's adjusted gross income, see the table below:

It's important to take note of the breakdown of these individual income tax return audits, as a clear pattern can be determined. Of the slightly more then one million audits that were conducted, more than one third (36.7 percent, or 380,260) were selected based on the fact that the taxpayer had claimed the earned income tax credit (EITC).

It is also important to remember that less than a quarter (23.6 percent) of the audits that were conducted were done in person, by tax examiners, revenue officer examiners, revenue agents or tax compliance officers. The overwhelming majority (76.4 percent) of audits were done through correspondence alone, with no call for the taxpayer to attend or represent themselves.

In most cases, a letter from the IRS is best addressed by contacting an experienced, licensed tax professional who can review the details and respond accordingly. Not only does this assure you that it will be dealt with in the most efficient and effective manner, but also provides you with an added level of protection against scammers who may try to intimidate unsuspecting taxpayers out of their money.

Do not ever respond to an email or phone call purporting to be from the Internal Revenue Service or any other tax agency. The IRS does not contact taxpayers in any way other than via the U.S. mail.

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Gordon W. McNamee

Gordon W. McNamee

Gordon W. McNamee is a Certified Public Accountant (CPA) based in Rancho Cucamonga, CA. Gordon W. McNamee can assist you with your tax return preparation, payroll, accounting and tax planning needs. <br /> <br /> 2021 is Gordon W. McNamee, CPAs 38th year in the profession. As as a former IRS agent (1984 through 1987), Gordon has been in public accounting since 1987. Gordon specializes in individual, corporate, HOA, trust, estate and payroll taxes. He also prepares financial statements and provides accounting & bookkeeping services. He enjoys making his clients feel at ease while providing a personalized professional service.

GORDON W. MCNAMEE, CPA
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