We hear this from our clients all the time: "What is the chance I will be audited?" Thanks now from a recent study by Kiplinger magazine, we know the answer. Your chances are 1 in 116.
The IRS has a steep incentive to audit taxpayers. By their figuring, the IRS says that every $1 it spends on audits and other “enforcement” activities brings in $4 to the U.S. Treasury.
But wait, your chance of being audited could be even less. Fully three-quarters of all audits are handled by mail, not by mano a mano combat with an IRS agent during an office examination or a field audit. And if your return doesn't include income from a business, rental real estate, farm, employee business expense write-offs, or earned income credit, the basic 1-in-116 chance of being challenged dwindles to about 1-in-300.
Even if you get audited, there is little reason to panic. Each year, tens of thousands of taxpayers walk out of an audit with a check from the government. In 2014, for example, almost 40,000 audits resulted in refunds totaling nearly $830 million. And 9% of field audits and 14% of correspondent audits end with the conclusion that everything is hunky-dory: no change in what the taxpayer owes Uncle Sam.
The 1-in-116 chance of being audited is the overall average from last year. Because of funding pressures at the IRS, there’s an even smaller chance this year. But in any year, your personal odds turn on the kind of return you file and the type of income you report.
Still worried? Give us a call and schedule an appointment. Professional advice is your best defense against unnecessary stress or inadvertent mistakes on your returns.