Key Points: The Changing Landscape of IRS Audits: What You Need to Know
- Audits by the IRS are declining overall, with only 0.06% of tax filers being audited currently. This is due to limited IRS resources and staffing.
- Mail audits are much more common than in-person field audits. Taxpayers should be wary of IRS scams and only trust mail directly from the IRS.
- S-Corps are seeing fewer audits lately. This may be something for businesses to consider when structuring or reclassifying.
- The IRS is often willing to make changes when documentation is provided challenging an audit. Getting help from an audit defense team is recommended.
- Errors with the Earned Income Tax Credit are a common trigger for IRS audits currently. This often stems from mistakes by inexperienced filers.
- Most audits will be done by mail rather than in-person field audits. Providing documentation by mail is usually sufficient.
- The IRS readily issues accuracy penalties when audits uncover issues. Getting a tax return reviewed is important to avoid errors.
- Criminal prosecutions for tax evasion are less common lately. The IRS is more focused on collecting back taxes owed.
- Payment plans or Offers in Compromise are options to settle IRS debts for less than the full amount. The IRS wants to work with taxpayers.
Death and taxes — they’re two things that are guaranteed in this life, as the old adage beautifully states.
In handling your taxes, guarantees go entirely out of the window when you are targeted for an audit by the Internal Revenue Service (IRS). You’ll need to address an audit head-on if it happens.
But is an IRS question commonplace right now? What are the most common trends?
To learn more about today’s IRS audit trends, consider the points below.
IRS Audit Trends to Know About
When you owe the IRS, it can be one of the most uncomfortable feelings that you go through. By understanding the current trends, it’s easier to take the steps that suit you best.
1. Audits are Down Each Year
Right now, only .06 percent of people that file their taxes today are getting audited. These numbers are trending downward each year.
The IRS is simply swamped with lots of work and is understaffed, so they are having trouble getting around to audits unless they are of the most pressing situations.
If you are trying to get your taxes in order, you can take solace in the fact that you are far less likely than usual to get audited at the moment.
2. Mail Audits Are Far More Likely
Just because IRS audits are down doesn’t mean that there aren’t several checks and balances in place. Field audits are expensive and time-consuming, so you are far more likely to get some correspondence by mail.
In fact, since several IRS scams are being perpetuated today, you shouldn’t take any communication seriously by anyone claiming to be the IRS unless it came in the mail.
3. S Corps Aren’t Getting Audited Frequently
S-Corps are standard business designations that aren’t being audited nearly as frequently.
This is a trend to keep in mind if you are in the middle of filing a new business or reclassifying a current one. Look into the ins and outs of S-Corps to see if this makes sense for you.
4. The IRS Is Very Willing to Make Changes When Audits Are Challenged
The great part about the current audit trends is that you won’t feel as though you’re thrown into the wolves.
Based on many tax filers’ experiences, the IRS is willing to make changes whenever someone provides documentation or otherwise proves their case.
You should always get the help of an audit defense team to assist you in getting the best shot at fairness and accuracy.
5. Earned Income Tax Credit Errors Are Common
There are always some common IRS audit triggers. Right now, improper use of the Earned Income Tax Credit (EITC) is a big reason that people get audited.
It is often due to mistakes made by inexperienced tax filers.
6. Don’t Expect a Field Audit in Most Cases
It takes a lot for the IRS to send someone to your door to conduct field audits.
In most cases, as long as you respond to your mail, put together some documentation to support any claims, fill out forms appropriately, and include any other correspondence, you should never have to see or talk to an IRS agent.
With that said, be prepared for any kind of defense that you have to put together, and never get so relaxed that you assume that an audit can’t happen.
7. The IRS Isn’t Shy About Handing Out Accuracy Penalties
While the IRS is quick to fix issues with an audit, make no mistake that they are also ready to hand out penalties when necessary.
The main tax penalty that people get hit with is an inaccuracy penalty for any information on your return.
It always pays to get another couple sets of eyes on your tax return, to be sure that the preparation was done with every level of care and detail addressed.
8. People Aren’t Getting Prosecuted for Tax Evasion Nearly as Frequently
Since the IRS’ resources are stretched thin when it comes to audits, people are also getting arrested and charged for tax evasion far less frequently. In most cases, the IRS just wants the money and will be happy to work with you in whatever way makes sense.
In most cases, this means that you will be given the option of a payment plan to satisfy your bill with a payment once a month. Usually, there will be a minimum amount that you are allowed to pay for your payment plan to be accepted.
You can also put in an Offer in Compromise (OIC), which allows you to settle your tax debt at an agreed-upon amount that is less than what you owe. This is a way to handle your balance and settle your account so that you don’t endure any other penalties.
Since criminal charges aren’t as likely, you should do what you can to get a fair settlement agreement or dispute any charges that you don’t believe accurate or valid.
Be Prepared for An Audit
These are the IRS audit trends that you should be fully in the know about. The best thing you can be in the face of an IRS audit is prepared.
When you can study the trends and see the playing field for what it is, you are better able to address any audit head-on, and with the help of some skilled and seasoned professionals.