An IRS audit is the review or examination of an individual or business’s accounts and financial records in order to determine whether information is being reported correctly and the right amount of taxes were paid.
With the tax deadline last week, many Americans shifted their concerns from making sure they filed their taxes on time to wondering if they would be selected for an audit.
The IRS conducts audits at random and also when certain issues raise red flags, which we have discussed in past posts.
However, people are concerned about being audited can take some relief knowing that, according to recent reports from the Associated Press, this year the IRS will have the fewest number of agents conducting audits on income tax returns in several decades because of budget shortfalls.
Last year, the audit rate for Americans making less than $200,000 was just under 1 percent, while the audit rate for Americans making $1 million or more was 10.9 percent. Both rates were the lowest they had been in years.
When it came to business returns, only about 0.6 percent were audited last year, the AP reported, while about 16 percent of corporations with assets worth $10 million or more were audited.
Audit rates could be even lower this year as the IRS deals with a smaller budget and a need for technology improvements that soaked up a large portion of the limited funds. As a result, the IRS will be spending even less money on audits this year, it is expected.
Even though audit rates are down, many individuals and businesses in New York will still receive the dreaded audit notice from the IRS in coming months or even years.
An audit letter or notice for the IRS needs to be taken seriously so that individuals and businesses can make sure they are complying with the law while protecting their own rights. A tax attorney who has experience handling audits can be crucial during this time.