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Tax audit rate falls again in fiscal 2016

On Behalf of | Mar 2, 2017 | Tax Audits

Tax audits are down for the fifth straight year according to information from the Wall Street Journal. In fiscal year 2016, just .7 percent of returns were audited, which translates to about one audit for every 143 returns. That was the lowest volume of audits since 2003. Georgia residents and others in the highest tax bracket also saw a reduction in the number of returns audited.

In 2016, only 5.83 percent of tax returns for those reporting more than a $1 million in income were audited. That was down from 9.55 percent the year before despite claiming that those returns would be a priority for the agency. Since 2010, the IRS has cut 30 percent of the staff who were tasked with auditing returns.

The reduced staffing levels and reduced audit rate from the IRS is partially because of a cut in funding in recent years as opposed to an increase in taxpayer honesty. However, this may change under new Treasury Secretary Steven Mnuchin. He is reportedly concerned about the lack of funds for the government tax agency. During his confirmation hearing, he did leave open the possibility that he would bring up this issue with President Trump.

Those who are involved in a tax dispute with the IRS may wish to talk to an attorney. Legal counsel may be able to negotiate on behalf of a taxpayer, which may increase the odds of reaching a favorable resolution. Even if a taxpayer has an attorney, he or she may still wish to respond to IRS correspondence in a timely manner. An attorney may also represent a taxpayer at trial if a case reaches that point.