TaxAlerts Tax Article
February 2011 | Written by: Karen Reed, EA
According to IRS statistics released in December, 1,581,394 audits of individual tax returns were conducted during the fiscal year ending on September 30, 2010, an increase of nearly 11 percent over the previous year. Collections actions, including levies, liens and seizures, also increased, and so did the number of criminal investigations and prosecutions. Revenue collected as a result of the 2010 audits was $57.6 billion, up from $48.9 billion in 2009. With another enforcement budget increase proposed for 2011, IRS audits are sure to continue trending upwards.
Individuals with incomes over $200,000 were audited by the IRS nearly three times more often than lower income folks. Millionaires were eight times more likely to hear from the agency than the people who made less than $200,000.
Business audits have been holding steady for the past several years. While the overall audit rate for business entities is fairly low at .58 percent, more than 14 percent of corporations with assets of $10 million or more were audited last year. Audits of large corporations peaked at 20 percent in fiscal year 2005 and have been decreasing each year since.
Since an audit can happen to anyone at any time, it’s important to make sure you have documentation to support the income and deductions you report on your tax return. Having a complete and organized tax file before you submit your return to the IRS will save you lots of time and stress if you do happen to be selected for examination a year or more down the road.