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What Are the Chances of Being Audited?


The stress of tax time comes from organizing paperwork, crunching numbers, meeting deadlines and—oh yes—that slight but persistent possibility of having somebody go through your tax return with a magnifying glass looking for errors and omissions. I’m talking, of course, about an audit. If you’ve ever spent sleepless nights worrying about whether or not you will be audited, the following statistics will either put your mind at ease or leave you clutching for another Ambien.

These stats are taken and simplified from the Internal Revenue Services’ Fiscal Year 2009 Enforcement Results, their fuzzy way of saying audits.

  • Total 2009 IRS enforcement employees: 21,059
  • Total revenue collected from enforcement: $48.9 billion
  • Total individual taxpayer returns filed in 2009: 138,949,670
  • Field audits: 326,249
  • Correspondence audits: 1,099,639
  • Percentage of returns audited: 1.03 percent

For comparison, in 2000, only 0.49 percent of individual returns were audited by 20,832 enforcement employees. An increase in electronic filing is probably making it possible for the same number of employees to audit more returns. But I wonder if it’s also safe to assume that when economic times get tougher, so does tax enforcement. The less Americans earn, the more Uncle Sam needs to squeeze from those who are earning.

But here’s where this gets interesting. The more you earn, the more likely you will face an audit.

Audits on Taxpayers earning less than $200,000

  • Returns: 133,924,956
  • Field audits: 269,865
  • Correspondence audits: 1,280,735
  • Percentage of returns audited: 0.96 percent

Audits on Taxpayers earning $200,000-plus

  • Total returns: 5,024,714
  • Total field audits: 56,384
  • Total correspondence audits: 88,769
  • Percentage of returns audited: 2.89 percent

Audits on Taxpayers earning $1 million-plus

  • Returns: 441,715
  • Field audits: 15,730
  • Correspondence audits: 12,619
  • Percentage of returns audited: 6.42 percent

The bottom line? You have about a one percent chance of being audited. If you earn $200,000 or more, that chance triples, and if you earn $1 million or more, you’re six times more likely to face an audit.

Finally, ever wonder how many people go away every year for tax crimes? In 2009, the IRS recommended 1,269 cases for prosecution and got a conviction rate of 87.20 percent. Those convicted served an average sentence of 24 months behind bars.

These figures can be scary, but your chances of facing IRS enforcement are still pretty low. And though some returns are selected for audit completely at random, others are selected because they contain big red flags like unusual deductions; the more ordinary your tax return, the less likely you’ll be audited. Still, the best prescription for peace of mind is to do your taxes thoroughly and honestly with the help of tax prep software like TurboTax or a professional tax preparer. Good luck!

About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. My understanding is that the IRS only audits homeowners. Obviously the chance of being a homeowner usually increases with income, which is why the odds go up so much with income (do you know any millionaires who rent?). So the biggest thing you can do to avoid an audit is never own a home. It’s one of the reasons my boyfriend and I are opposed to home ownership.

  2. I should make one amendment – obviously business get audited, too. I meant that the only individuals who are audited are homeowners (or sole proprieters whose businesses are being audited).

  3. I’m going to have to disagree. It has more to do with taking deductions than home ownership. Home ownership brings real estate tax and interest paid deductions. Also you might get worried if you’re realizing all kinds of losses on your Schedule C or E. My tax professor in college told us that if you’re making 200k+ a year and claiming 30k in farm losses, then you should worry.