The fear of being audited by the IRS remains one of the biggest concerns of taxpayers. The other major concern of course is paying too much in taxes because of missing certain tax breaks. With regards to getting audited, recently released figures indicate which taxpayers are most likely to face an examination. Are you at risk?
IRS audit statistics
The IRS recently released key figures detailing the number of audits conducted during the period of October 1, 2011, to September 30, 2012. The data includes information about the type and number of returns filed, taxes collected, enforcement, taxpayer assistance and the IRS budget, among other key statistics. As a whole, the IRS audited slightly under 1% of all tax returns (business, personal, estates etc.) in fiscal year 2012. However, certain taxpayers had a greater chance of being audited.
IRS examinations increase for high-income taxpayers
The latest figures indicate that the IRS examined about 12.1% of the 337,477 tax returns reporting income of $1 million or more, compared to 2.8% of those reporting at least $200,000 and under $1 million, and 0.4% of those reporting income under $200,000 who didn’t file a Schedule C, E, F or Schedule 2106. It’s important to note that individuals with businesses are not included in these figures as the IRS has a separate process for examining business returns and schedules that include those activities.
Does an IRS examination mean that I’ll owe more taxes?
Not necessarily. The latest figures indicate that of the 1.5 million individual tax returns examined, nearly 54,000 resulted in additional refunds. Therefore, it’s quite possible that the IRS examination can be beneficial to you.
How many corporate tax returns were examined?
The IRS examined 1.6% of corporation income tax returns, excluding S corporation returns, in fiscal 2012. It should be noted that S Corporations are pass through entities that sometimes are under greater scrutiny when the business owner reports a salary that is below the standards for their industry. As you may be aware, S Corporation owners can receive distributions which are not subject to payroll taxes.
More Tax Questions? Browse Answers or ask your irs audit questions online.
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