New data confirms ongoing downward trend on audits

The 2019 tax season is now officially upon us. Plus, the federal government is at least temporarily reopened, although the IRS workers had been called back to work. The season will be noteworthy for the above issues as well as the 2017 Tax Cut and Jobs Act that revamped the rules for determining one’s tax obligation. Nonetheless, one trend that continues is the fact that the IRS continues its downward trend of auditing fewer and fewer filers.

How likely am I to be audited?

Different types of taxpayers have varying chances of getting audited, but the overall average is .542 percent chance (1 in 161) of getting singled out for an audit. According to a recent survey, the top rates for the likelihood of an audit include the following:

  • International taxpayers: 1 in 19
  • Taxpayers whose gross income is over $1 million: 1 in 23
  • Sole proprietors with income between $100,000 and $200,000 before deduction: 1 in 48
  • Sole proprietors with income between $200,000 and $1 million: 1 in 64
  • Taxpayers with self-employment income under $25,000 who claim Earned Income Tax Credit (EITC): 1 in 72
  • Farmers: 1 in 228
  • Wage earners who make under 200,000 and do not claim the EITC: 1 in 364

Legal guidance can be necessary

Taxpayers often do their best to pay the right amount. However, the new tax law as well as other ongoing complications can leave individuals, business owners and even tax professionals wondering what the correct answers are. It is wise to consult business and tax attorneys regarding these issues, particularly if a taxpayer is audited or receives a CP2000 income challenge notice from the IRS.