With Limited Auditing Resources, IRS Focuses on These Tax Filers

On behalf of Brian Coggins of Coggins Law, P.C. posted in IRS on Thursday, May 14, 2015.

It's been about a month since the April 15 deadline for filing federal tax returns. If you are not sure you filed and reported everything correctly, you may be worried about getting audited. No one wants to hear that the IRS is going to take a closer look at their tax returns.

A person can get audited for any number of reasons. But because the IRS has finite resources that have been shrinking in recent years, the agency is getting especially picky about who should be audited. In today's post, we'll discuss likely candidates for audits based on the IRS' recent track record.

In 2010, the commissioner of the IRS announced that the agency would try to work smarter by paying attention to tax returns with more than $10 million in reported income. There are at least two reasons for this. The first is that very wealthy individuals seemingly have the most incentive to cheat on their taxes. The second reason is that by auditing the very wealthy, the IRS recovers more money if it discovers mistakes or fraud.

Similarly, the IRS also seems to pay attention to those who report no income – especially business owners who report an operating loss for the year. For most Americans who earn average or above-average income, however, the risk of an audit is relatively low.

The other two groups likely to be audited are those who file international tax returns and those who file an estate tax return with assets of $5 million or more. For international returns, the IRS is concerned about individuals who may be hiding money in offshore accounts to avoid paying taxes on them. For large estate tax returns, the IRS is likely interested for the same reason it is interested in high-income filers: It's where the money is.

Most of us who don't meet any of the criteria above probably don't have to worry about being audited. That being said, an audit is almost always a possibility. So if you ever find yourself facing an audit, please seek the help of an experienced tax law attorney.

Source: TIME, "These Are the People Who Are Most Likely to Get Audited," Kara Brandeisky, April 14, 2015