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Your Chances of Being Audited Continue to Decline

audit decline

What’s the scariest possible outcome of filing your taxes? Almost anyone would answer that question with “being audited.” Being audited by the IRS is never fun. Fortunately, it’s something that most people will never have to experience. The fact is the IRS actually audits very few returns all things considered. Furthermore, the IRS also goes after a lot fewer tax evasion cases than it used to. For example, the agency only brought 795 cases of tax fraud to courtlast year. That represents close to a 25 percent decline from the year 2010.

Why the Decline?

So what’s behind the drop incases? Simply put, it’s a numbers game. Congress started reducing the IRS’s budget and power, back in 2011. The agency’s staff has been cut by one third. The IRS has also shifted its focus on the kinds of crimes it goes after. While taxpayers might be overjoyed by the news, there are definitely some consequences.

Billions in Lost Revenue

Because so few people are now audited, it’s highly likely that more and more taxpayers are getting away with tax fraud and tax evasion. That is costing the government billions of dollars. In fact, the IRS says business owners skip out on about $125 billion taxes every year. For reference sake, that is enough money to fund several major national government departments combined.

It All Starts With Fewer Audits

Again, this all goes back to the decrease in the number of audits the IRS performs. It used to be that the agency could detect many of these evasion and fraud cases. But since 2011, the number of audits has gone down by 42 percent. The number of criminal referrals has been hit even harder. To be clear, they’ve always been on the rare side, but in 2016 they dropped to just 328 cases. There were 589 in 2012. The IRS performed 1.2 million audits in 2016, which represents one criminal case for every 3,600 audits performed.

Audits Have Changed

Of course, the real purpose of an audit is to actually collect tax dollars, and not necessarily to catch fraud. Furthermore, according to many who work at the IRS, or have worked there recently, audits are not nearly as in-depthas they used to be. The agency encourages auditors to review and complete audits much faster, meaning they request fewer records and hold fewer interviews.Another reason audits have declined is that the IRS has put a lot more focus on tracking down cases of identity theft. As the number of these cases has increased dramatically, the agency has recently assigned a significantly higher amount of agents to go after these thieves. That means there are fewer agents to conduct audits.

You Can Breathe Easier

The bottom line is if there were ever a time to sneak something by the IRS, now is that time. Of course, we don’t recommend trying to cheat the IRS out of money. It’s always best to report an honest tax return. That way, in the event the IRS does choose to audit your return, you’ll have nothing to worry about.

The post Your Chances of Being Audited Continue to Decline first appeared on Advisors to the Ultra-Affluent – Groco.


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