The Internal Revenue Service has increased the number of audits it conducts annually on the returns of taxpayers earning more than $1 million a year.
According to the IRS’ own numbers, 12 percent of millionaires were audited in fiscal year 2011. That’s double the 6 percent from 2009 and an increase from the 8 percent of audits in 2010. In all, the IRS reported that it audited just 1 percent of individual tax returns, or 1.6 million of the 141 million filed. That rate has almost doubled in the past 10 years.
For taxpayers making less than $200,000, the audit rate has maintained a consistent 1 percent over the past few years. Among people with earnings of more than $200,000, the IRS audited 4 percent of their returns in 2011, an increase from the 3 percent rate of the prior five years.
An IRS official said that by increasing the number of audits, lower-earning taxpayers will see that high-wage earners must comply with all tax laws as well. Additionally, the IRS said it audited large corporations more frequently than it did smaller ones. Last year, the IRS audited the returns of 28 percent of corporations with holdings exceeding $250 million. In 2011, just 1 percent of corporations with less than $10 million in assets were subject to an audit.
IRS enforcement, which includes audits and other legal efforts, brought in more than $55 billion in 2011. That’s just a small portion of the $2.3 trillion the IRS took in last year.
While the target of audits fall more toward higher-income workers, it is important to still file tax returns accurately and on time to not attract any unwanted scrutiny from the IRS.
Source: Associated Press, “IRS says audit rates have grown for the wealthy,” Alan Fram, Jan. 5, 2012