What are my chances of being audited by the IRS?

The IRS reported that their percentage of individual audits has drastically been reduced by recent budget cuts. They have fallen to record lows not seen in over a decade. Operating with over 20% fewer revenue agents the IRS struggles to keep up with their workload.

How does this impact audits?

Budget cuts are being felt all over the IRS. The audit department is is no stranger to this tightening of the belt. They are said to have let over 40% of their normal revenue fall through the cracks this year.

Our office continues to receive calls from taxpayers receiving audit notices. So what is the change? We have seen a dramatic decrease, over the last few years in audits. We are seeing many more correspondence audit requests. The IRS numbers reflect that just under 1% of individuals will be audited. Although we are in a downward trend, the IRS still rakes in over $7 billion in revenue. So, Yes there is still a good chance you could be audited.

Who can be audited?

The simplest answer is anyone can be audited. Of course if you own a business your chances are greater to be flagged for an audit. If you have a side business and claim a loss year after year you may be a target for audit. If your deductions trigger a flag at the IRS you may be an audit target. Watch your deductions and your exemptions. Always consult with tax professionals to complete your returns. Just because online tax preparation is cheaper doesn’t mean it is better. If one of the online programs allows to claim something and advance to the next screen this does not mean it falls in line with tax law. Arm yourself with the knowledge to complete a correct return or hire someone who is well versed in the law to help you with preparation.

What to do if you get the dreaded audit letter?

If you receive an audit letter don’t ignore it or push it to the side. An audit is a very serious proceeding and not to be taken lightly. I highly suggest you research qualified attorneys in your area who can assist you in this process. Don’t test dangerous audit waters on your own the outcome could be detrimental to your financial well being. Sit with an attorney and discuss your options. Let them advise you on how to handle the proceedings. Don’t procrastinate as with most IRS issues time is of the essence.