The IRS is anticipating the chances of a tax return being audited to be the lowest in years.
The IRS audited less than 1% of individual tax returns in 2013, the lowest rate since 2005, and the number of individual returns that will be audited this year will decline even further, IRS commissioner John Koskinen told the Associated Press.
Thanks to successive rounds of budget cuts at the hands of Congress, the IRS has been forced to cut back on its audits. We keep going after the people who look like the worst of the bad guys, Koskinen told the AP. But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that were not going to catch.
Last year, the IRS audited just 0.9% of individuals who earned less than $200,000 a year, the lowest rate since 2005. The odds of being audited were more likely for high earners, but while 10.9% of individuals who earned $1 million or more were audited last year, that was the lowest proportion since 2010.
An average of 0.6% of business tax returns were audited last year. The rate was much higher for large corporations, with approximately 16% of corporations with assets of over $10 million subjected to audits.
To compensate in part for the cutbacks in budgets and manpower, the IRS is increasingly relying on technology to catch mismatches between the income that individuals report on their tax returns and the information reports that are filed by their employers, banks and other businesses. However, Koskinen would like to see Congress pass the Obama administrations proposed increase in the IRSs budget. According to the administration, the IRS takes in $6 for every $1 added to its enforcement budget. But with opposition to the IRS rampant in Congress in the aftermath of scandals tied to the so-called targeting of Tea Party groups, the agency is likely to endure another round of budget cuts next year.
Michael Cohn is the editor-in-chief of AccountingToday.com.
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