Chances are, you most definitely are not. In the past, the “wealthier” sector, or those who made over $200,000 a year, were about twice as likely to be audited as those who made less. Historically, the more money you make, the more likely you are to be audited. But last year, the IRS audited the lowest number of people in the past seven years: less than one percent of the population. Only two percent of the “wealthy” population was audited (those who make $200,000 to $1 million dollars annually). Even the super-wealthy, those who make more than $1 million annually, only were audited 7.5 percent of the time, and that is the lowest number of super-wealthy Americans that have ever been audited.
The reasons for this are uncertain, although it’s been claimed that IRS workers are miserable, overworked and burned out. It certainly has proven to be of substantial financial gain to the IRS to audit people: they recoup billions in unreported revenue tax each year. The more they audit, the more they profit. Not does the financial benefit occur the year that someone is audited – academic research shows that people who are audited by the Internal Revenue Service just once in their life are much more likely to be completely honest about taxable income and tax breaks for the rest of their life.
It makes sense why the IRS wouldn’t spend much time auditing the working poor, who likely qualify for tax breaks that leave them paying almost no taxes anyway, nor the middle class, who are not likely to have large financial assets or hard-to-track income. So who is the sector if Americans that should be most concerned about getting a tax audit?
It turns out that Americans living overseas are much more likely to be audited by the IRS and there’s a specific reason why: taxpayers living overseas are coping with new laws and regulations on investments held overseas that have made their tax filing much more difficult. In 2012, only about 2.5 percent of taxpayers in this situation were audited. in 2014, that number had doubled to a 5 percent audit rate.
However, that doesn’t mean that the rest of the U.S. should let their guard down or think they will get away with tax evasion – there’s still a one percent chance that they may be audited, and unless you are being honest and have all financial papers and matters in order, an audit is a nightmare. Of course, that 99 percent chance you won’t be audited is very alluring, but it’s still in your best interest to keep a careful record of income, tax breaks, receipts, preparer’s names, and any additional information that could help you in the case of an audit.
[Photo by floridataxlawyers]