Your chances of being audited have increased dramatically overall, and the IRS is now using data to target taxpayers most likely to cheat on their taxes.
By Steven N. Klitzner
One million.
That’s how many federal tax liens the Internal Revenue Service filed in fiscal year 2010.
That’s nearly twice the amount filed in fiscal year 2007 – illustrating just how aggressive the IRS has become in enforcement and tax collection.
In fact, the recently released IRS Data Book, which has detailed information about the tax-collecting agency’s activities, provides page after page of evidence that Uncle Sam is doing everything he can to collect tax revenue – and make sure U.S. taxpayers are following the tax laws.
For example, in 2010, the IRS launched nearly 2,000 full-blown, labor-intensive investigations of tax crimes.
Across the board, tax audits are up – way up.
The IRS examined 18.4 percent of the returns of taxpayers reporting more than $10 million in income – nearly double the previous year’s 10.6 percent.
The percentage is a bit lower for taxpayers reporting incomes between $5 million and $10 million. They had an 11.6 percent chance of having a visit from the IRS. That’s still 3.1 percent higher than the previous year’s 7.5 percent chance of audit.
Overall, the IRS audited 1.56 million tax returns for fiscal year 2010. That’s an audit rate of 1.11 percent – a slight jump from the previous year’s 1 percent.
The lowest audit rate went to taxpayers reporting $75,000 to $100,000 per year in income. They had a 0.64 chance of audit.
That’s a lot of numbers and percentages, right?
You might be asking: What does this mean for me?
For one thing, these numbers should demonstrate that your chances of audit today are significantly higher than they were several years ago. This is due in part to the IRS’s mandate to collect as much revenue as possible – and also a result of the lackluster economy and the government needing to ensure its tax coffers remain full.
But if you owe money in back taxes or are cheating on your taxes, you’d make a significant mistake by assuming that you only have, say, an 11 percent chance of audit. While indeed only 11.6 percent of people earning between $5 million and $10 million were audited, this percentage is an overall one. It doesn’t take into effect how highly targeted IRS audit have become.
As IRS Commissioner Doug Shulman explained recently in a speech in Baltimore, the IRS is using sophisticated data collection and analytics to determine which taxpayers are most likely to cheat on their tax returns.
So, sure, maybe you only have a 10 percent audit risk overall.
But are you confident you’re not in one of the IRS’s highly targeted groups of taxpayers? Don’t be too sure, pal.
Steven N. Klitzner is a Certified Tax Resolution Specialist, a member of the American Society of IRS Problem Solvers, and an Aventura attorney. You can contact him at 305-682-1118 to obtain a free subscription to his newsletter titled The IRS Times & Inquirer.
