The Chances of Being Audited

The Chances of Being Audited

Here is what is happening now

Every year the IRS publishes the statistics of who 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
FiscalYear Year	2012	2011	2010	2008
All Individual Tax Returns	1.03%	1.11%	1.11%	1.00 %
No Income (AGI)	2.67%	3.42%	3.19%	2.15%
Income under $25,000	1.05%	1.22%	1.18%	.90%
$25,000 - 50,000	.70%	.73%	.73%	.72%
$50,000 - 75,000	.64%	.83%	.78%	.69%
$75,000 - 100,000	.64%	.82%	.64%	.69%
$100,000 - 200,000	.85%	1.00%	.71%	.98%
$200,000 - 500,000	1.96%	2.66%	1.92%	1.92%
$500,000 - $1 million	3.57%	5.38%	3.37%	2.98%
$1 million - $5 million	8.90%	11.80%	6.67%	4.02%
$5 million - 10 million	17.94%	20.75%	11.55%	6.47%
$10 million and over	27.37%	29.93%	18.38%	9.77%
Note: These audit rates are stated as a percent of total tax returns with "total positive income" (TPI) as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year. Source: IRS Data Books

Observations:

	After dramatic audit increases in incomes over $200,000 during 2011, the audit rates have come down slightly, but still at least 2x the rates in 2008.
	Those with incomes over $10 million will have a 1 in 4 chance of being audited.
	Automatic spending cuts from sequestration could impact the audit rates in 2013. How far they will drop is anyone''s guess.
	It is also unknown what the 2013 tax increases for those with incomes over $250,000 will do to audit rates as more of the total revenue collected will come from these upper income groups.

Play it safe

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). Make sure you include any state record retention requirements as you review 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, and real estate transactions.