Are you at risk of an audit?
According to recent statistics, budget cuts, staff attrition, and a heavy workload for IRS employees mean your chances of undergoing a tax audit are less than 1%. Does that sound like a non-event to you? Don’t be lured into a false sense of security. The statistic is a blended rate covering many types of incomes and taxpayers. Here are some of the reasons returns were audited.
No adjusted gross income (AGI). For AGI of zero, audit risk jumped to over 5%. The IRS benchmarks AGI because it is total income including losses from businesses and investments.
Large adjusted gross income. Audit risk was nearly 2% for returns with AGI over $200,000. Audit risk climbed to 16% when AGI was $10 million or more.
International returns. Due to a focus on offshore tax evasion, the audit rate of international returns was almost 5%.
Estate taxes. Approximately 8.5% of estate returns were audited. Gross estates of $10 million or more were tagged with a 27% audit risk.
Corporate returns. Small corporations experienced up to a 2% audit risk. The risk for large corporations with assets over $20 billion was 85%.
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