IRS Audit Rates Decrease

A report released yesterday from the Government Accountability Office (GAO) found that the number of audits completed by the Internal Revenue Service has been declining since 2010. The largest decreases came in taxpayers showing $200K to $500K in income.

The report also found that taxpayers earning less than $25K or more than $500K had a much greater chance of being audited. The highest category of all was lower income taxpayers claiming the earned income tax credit.

IRS officials blamed the decrease on staffing issues. Until recently, the Service had been on a hiring moratorium.

The lack of staff qualified to handle the complex audit of a higher income taxpayer is primarily due to older agents retiring and others being lured to higher paying jobs in the private sector. Audits of high income taxpayers also need to be reviewed by senior staff, making them more difficult and time consuming.

The opposite is true when auditing a return with less than $25K in income. This process is almost completely automated. As such, the lack of staff and the “brain drain” of qualified auditors has not affected the number of these returns being audited.

But the trend of less auditing will probably turn around in the short term, because the IRS is hiring 10,000 new employees in the next couple of years. I would expect the auditing numbers to again rise at the beginning of next year, once the new hires are trained and put to work.

Let me leave you with this.

As a Reminder

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