Most people would rather get locked in the stocks than deal with an IRS audit, but the odds of getting audited are less than 1 percent for the typical person. Image from Wikimedia Commons.
Everyone dreads getting a notice of a tax audit from the Internal Revenue Service. There are few documents that cause as much terror as an audit notice. However, the odds of being audited are very low.
78 of 100 audits take place via correspondence
According to a recent post on CNN, up to 78 percent of tax audits in the year 2009 took place via mail correspondence. The article also clarified that “22 percent took place in person.” That means fewer Internal Revenue Service agents are being dispatched out to conduct audits. Performing audits via correspondence is cost effective for the IRS, and it is happening more frequently because the IRS has already had to deal with diminishing budgets and is facing a further $600 million in cuts from its budget. A Taxpayers Advocacy Service survey cited in the CNN piece revealed, however, that more people would prefer an audit in person because the legalese is difficult to understand. However, normal taxpayers should fear not, because only 1.6 million people were audited in 2009. That’s less than 1 percent of the U.S. population.
Rich audited more often
Those most likely to be audited by the IRS are the wealthy. According to Forbes, those with an income of $200,000 or more per year stand a 2.7 percent chance of an audit, and the Wall Street Journal reports that those making $10 million or more stood an 18 percent chance of being audited. Forbes and the Wall Street Journal noted that the rate at which the wealthy were being audited was increasing. Though that is awful news for Donald Trump, the rest of us can rest easy knowing there is a 1 percent or less chance of being audited.
If an audit does come around
Beware of any phone calls or emails concerning an IRS audit; those are scams. The Internal Revenue Service only communicates in an official capacity by mail. According to Investopedia, should always keep at least the last three years of income tax returns and related records on hand. Most audits happen for a reason and are triggered by red flags in a person’s tax file. The IRS has a lot of people and a lot of data to keep track of and won’t take the time to perform an audit unless it thinks it should. The most common penalties are 20 percent and 75 percent of the amount of tax that should have been paid.
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