Tax day is here and hopefully the more than one hundred million Americans who are required to file an annual income tax return have done so, or have at least filed for an extension. The Internal Revenue Service lets anybody have an additional six months to file, as long as they pay what they estimate their tax debt to be.
But just because April 15 is about over and people have filed their returns, that doesn't mean it's the last they may hear from the IRS this year. Whether filing individual returns or those for a business entity, the nation's taxing authority also has some extent of law enforcement capability. That starts with the dreaded IRS audit.
Tax filers who use a Certified Public Accountant, Enrolled Agent or tax attorney for preparation of their returns can have their tax professional represent them on all audit matters, including during any necessary in-person hearings. Audits start, however, with correspondence. The agency does not ever contact taxpayers via email.
For the many professionals who file hundreds or even a thousand client tax returns annually, managing IRS notices and correspondence can be made easier with solutions like Beyond415. But for taxpayers who didn't use one of these specific types of tax professionals, you're mostly going it on your own.
So, what are the odds of being audited? One factor that affects the odds is income, with top earners much more likely to receive IRS correspondence, a visit or a formal hearing. Likewise, large corporations also are more likely to be audited than small businesses. However, other specific factors, like a dramatic loss in small business profit or loss, or deductions that are far from averages can result in the IRS' computers flagging a return for further scrutiny.
Here are the numbers from last year, according to the Internal Revenue Service's Fiscal Year 2012 Enforcement and Service Results report, which covered the tax season that ended in April 12, 2012:
Total of All Individual Returns Filed: 143,399,737
- Mail/Correspondence Audit: 1,122,216
- Field Audit/In Person: 359,750
- Total Combined Audits: 1,481,966
- 1.03 percent
Total Individuals with Income Under $200,000: 138,554,470
- Mail/Correspondence Audit: 1,012,898
- Field Audit/In Person: 290,015
- Total Combined Audits: 1,302,913
- 0.94 percent
Total Individuals with Income Over $200,000: 4,845,267
- Mail/Correspondence Audit: 109,318
- Field Audit/In Person: 69,735
- Total Combined Audits: 179,053
- 3.70 percent
Total Individuals with Income Over $1 Million: 337,477
- Mail/Correspondence Audit: 23,139
- Field Audit/In Person: 17,826
- Total Combined Audits: 40,965
- 12.14 percent