What are the chances?
Every year the IRS publishes the statistics of tax returns they are examining. Provided here are the last three years of published information and a look back to 2008 to see any trends:
| Audit Rate Statistics for INDIVIDUALS | ||||
| Fiscal Year Year | 2013 | 2012 | 2011 | 2008 |
| All Individual Tax Returns | 0.96% | 1.03% | 1.11% | 1.00 % |
| No Income (AGI) | 6.04% | 2.67% | 3.42% | 2.15% |
| Income under $25,000 | 1.00% | 1.05% | 1.22% | .90% |
| $25,000 - 50,000 | .62% | .70% | .73% | .72% |
| $50,000 - 75,000 | .60% | .64% | .83% | .69% |
| $75,000 - 100,000 | .58% | .64% | .82% | .69% |
| $100,000 - 200,000 | .77% | .85% | 1.00% | .98% |
| $200,000 - 500,000 | 2.06% | 1.96% | 2.66% | 1.92% |
| $500,000 - $1 million | 3.79% | 3.57% | 5.38% | 2.98% |
| $1 million - $5 million | 9.02% | 8.90% | 11.80% | 4.02% |
| $5 million - 10 million | 15.98% | 17.94% | 20.75% | 6.47% |
| $10 million and over | 24.16% | 27.37% | 29.93% | 9.77% |
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Note: These audit rates are stated as a percent of total tax returns in each Adjusted Gross Income (AGI) class as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year. Source: IRS Data Books |
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Observations:
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Overall audit rates in 2013 have now fallen below the levels in 2008. Much of this is due to budget cuts from sequestration per the IRS. |
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These lower audit rates did not impact those with no AGI or negative income. This group saw a dramatic increase in audits during 2013. |
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Taxpayers with AGI between $200,000 and $5 million also saw their returns reviewed at a higher rate than last year. |
Having good records
Always retain your tax records and support documents for as long as they may be needed to substantiate your tax return. This is usually three years after the filing due date or when the tax return was actually filed (whichever is later). Include any state record retention requirements as you evaluate when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, confirmation of asset purchases, asset sales and real estate transactions.
