Tax Compliance: Trends of IRS Audit Rates and Results for Individual Taxpayers by Income


The IRS will compare your itemized deductions to the average total deductions for a given item claimed by other taxpayers who are in the same income range as you. A taxpayer whose deductions appear to exceed these averages may be further scrutinized by the IRS. Don’t hesitate to claim every deduction that you are entitled to – just make sure you have the proper documentation. Learn more here on what IRS audit triggers you should know for Tax Day 2023. The Internal Revenue Service is the U.S. federal agency that oversees the collection of taxes—primarily income taxes—and the enforcement of tax laws.

  • Keep tax records for three years after the later of the due date or filing date of your return.
  • Oddly, people who make less than $25,000 have a higher audit rate.
  • IRS estimated that individual taxpayers underreported their income tax on average by $245 billion each year for tax years 2011 to 2013.
  • Writing off expenses for a business is allowable but writing off expenses for a hobby is not.
  • The standard nightmare has Internal Revenue Service agents with badges showing up on your doorstep, or the agency—seizing smorgasbord-style—the bulk of your personal assets.

Visit our website terms of use and permissions pages at for further in “No one in Iowa that I talk to is begging for more IRS auditors. “If it wasn’t so complicated to calculate your tax bill, it would be a lot easier to complete your return and avoid making mistakes. “The reckless tax and spending bill passed by DC Democrats last month more than doubles the size of the IRS, which already has nearly 80,000 full time employees.

The Audit Letter

The type of IRS audit tends to reveal much about its purpose and the overall strategy of the Internal Revenue Service. The IRS finds a lot of things to change on your return. 360 Degrees of Financial Literacy is a FREE PROGRAM of the nation’s certified public accountants to help Americans understand their personal finances through every stage of life. If you have one, meet with a trusted representative before your first interview with the IRS agent to discuss strategies and expected results.


Working with a credible tax professional, however, may be your best line of defense when it comes to IRS audits. The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn’t reported on your return, could trigger further review. So, if you receive a 1099 that isn’t yours, or isn’t correct, don’t ignore it. Contact the issuer of that 1099 and ask them to report a corrected form to the IRS. But just because the odds of being audited are small doesn’t mean that it’s impossible for you to be audited by the IRS.

Myth: Those with low to moderate incomes don’t get audited

As part of the irs audit‘s efforts to clamp down on unreported income from these transactions, revenue agents are mailing letters to people they believe have virtual currency accounts. And the IRS has set up teams of agents to work on cryptocurrency-related audits. Additionally, all individual filers must state on page 1 of their Form 1040 whether they received, sold, exchanged or otherwise disposed of a digital asset. Many business owners will have to file a Schedule C to report business income as part of their individual tax returns. This is true of sole proprietorships, which make up the bulk of small businesses.


This can include a neutral site, like the office of your accountant, tax attorney or tax professional. You also have the right to schedule the meeting when it works best for you. Some tax professionals recommend asking for a delay to give you time to gather the appropriate documents. It’s important to remember that an IRS audit doesn’t mean your business did something wrong. It’s a way to verify the information you reported on your latest tax returns and to confirm you’re paying the right amount. Not surprisingly, the government uses statistics to analyze tax returns and to determine which taxpayers it selects for IRS audits.

Need help dealing with an IRS audit penalty?

The IRS also reviews refundable tax credits more carefully since filers can still receive the tax credit with zero balance due. Some of the common audit red flags are excessive deductions or credits, unreported income, rounded numbers and more. The IRS may normally flag one return for audit but it does have the authority to audit returns from the past several years. Typically , it will audit your returns from the past three years but if additional discrepancies are discovered, it can review returns from the past six years to make an assessment. The audit timeline will depend on the complexity of your case.

Rise of the tax machines: IRS algorithms are coming for you – The Hill

Rise of the tax machines: IRS algorithms are coming for you.

Posted: Sun, 19 Feb 2023 17:00:00 GMT [source]