One of the scariest things a taxpayer can envision is being audited by the IRS. So what are the chances of your tax return receiving IRS scrutiny?
According to the IRS’s recently released annual data book dealing with fiscal year 2012 (calendar year 2011), which provides some insight into what your chances are of being audited, of the 143,399,737 individual tax returns filed in 2011, 1,481,966 were audited – or about 1%.
For business returns (other than farm returns) showing total gross receipts of $100,000 to $200,000, 3.6% of returns were audited, down from 4.3% in FY 2011. For businesses with total gross receipts of $200,000 or more, 3.4% of returns were audited, down from 3.8% in FY 2011.
For returns with total positive income of $200,000 to $1 million, 2.8% of returns not showing business activity were audited and 3,7% of returns showing business activity were audited. The audit rates for the previous year were 3.2% and 3.6% respectively.
The audit rate for returns with total positive income of $1 million or more was 12.1%, down from 12.5%the previous year.
For small corporations with returns showing total assets of $250,000 to $12 million, the audit rate was 1.7%; for $1-5 million, 2.1%, and $5-10 million, 2.6%.
For large corporations with returns showing total assets of $10 million or more, the overall audit rate was 17.8%, up slightly from the previous year. The rates varied as the total assets increased, but to give you an example, the audit rate for those with total assets of $10-50 million was 10.5%, down from 13.4% the previous year.
What can we learn from this? The chances of being audited are remote, but don’t try to hedge your bets on your tax return. You’ll sleep better at night.