WHAT ARE YOUR CHANCES OF BEING AUDITED?

The IRS has just released its FISCAL YEAR 2011 ENFORCEMENT AND SERVICE RESULTS.

The total “examination” results are as follows –

Income Under $200,000 = 1.02%

Income $200,000 and higher = 3.93%

Income $1 Million and higher = 12.48%

The number of examinations for those with income under $200,000 is down from the previous fiscal year, but the other two categories are up.

However the number of examinations, or audits, is made up of two components – field audits and correspondence audits.  While the report does not offer any introductory comments or explanation, I assume that the correspondence audit component represents the CP 2000 and similar notices, which are handled my mail or a phone call, while the field audits are the actual office audits.

Looking at the individual components, just under .0023 (less than ¼ of 1%) of taxpayers with income under $200,000 were subject to field audits, and only 1.76% of those with income of $200,000 and higher.

The report did show an increase in field audits in all categories – approximately 29,000 more for under $200,000, 20,000 more for $200,000+, and 4,000 more for $1 Million and over.

I was surprised to learn that correspondence audits were down in the under $200,000 category.  It had seemed to me I was dealing with more CP-2000s than in past years.

So the chances of most of my clients being called for a “sit down” audit at the IRS office is less than ¼ of 1%, as it has been for a while now.

In practice, of the over 10,000 returns I have prepared over the years I can count the number of actual sit down audits I have had to deal with on the fingers of my two hands – so my audit rate is less than 1/10 of 1%.

I would be curious to see the numbers for taxpayers with incomes under $100,000.

Does anyone know if the “income” referred to in the study is gross income, AGI, or net taxable income?

TTFN