In April, the nonprofit newsroom ProPublica reported on a surprising imbalance at the IRS. Although it would almost certainly be both more effective and bring in more revenue if it focused on auditing the rich, the agency does not do this. No, it audits the working poor at almost the exact same rate as it does the richest 1% of Americans.
Indeed, it doesn’t plan to stop. For one thing, auditing the poor is much easier because their taxes aren’t very complex. Relatively low-level auditors can perform these audits by mail. It’s very efficient to audit the poor, even though they aren’t as likely to have committed major tax blunders, and even though the money garnered through these audits is small.
Conversely, the tax returns of the rich and powerful are often very complex. It takes many hours of senior auditors’ time to examine these tax records – and the IRS is running short on senior auditors due to budget cuts and attrition.
According to a recent follow-up by ProPublica, the IRS even admits that it would be a good idea to focus more of their auditing resources on the rich. It simply cannot do so with its current budget. Since 2011, Congress has chopped the agency’s enforcement budget by over a quarter, even taking inflation into account.
“Congress must fund and the IRS must hire and train appropriate numbers of [auditors] to have appropriately balanced coverage across all income levels,” the IRS said in a report.
Does this mean I’m more or less likely to be audited?
It depends. Are you among the working poor? If so, your audit rate is unquestionably higher than it once was and arguably should be. Are you among the richest 1%? Your chances of an audit are comparatively low.
It’s hard to say whether you’ll be audited based on your income, but there are certain red flags that the IRS keeps an eye out for. If you’re concerned about being audited or have been contacted about an audit, discuss your situation with an experienced tax attorney.
