In 2018, only .59% of federal tax returns were audited. This was a decrease from 2017; in fact, it was the seventh straight year in which overall audit rates decreased. Taxpayers in Georgia and elsewhere who made more than $10 million also saw their audit rate decline in 2018. In that year, 6.66% of such returns were audited compared to 14.52% in 2017 and 34.69% in 2015.
Fewer returns are being audited in part because the IRS has fewer resources compared to previous years. Its operating budget is down 19% compared to 2010 when adjusted for inflation. The agency says that it has lost out on $3 billion in revenue annually because it doesn’t have enough people on staff. While the Trump administration has proposed increasing the tax collection agency’s budget, there is no guarantee that this will happen.
According to the chair of the subcommittee that overseas the IRS budget, funding increases should be based on results as opposed to mere requests for extra money. In addition to increasing the tax agency’s budget by 1.5% in 2020, President Trump wants to provide another $15 billion over a decade for increased enforcement. The belief is that increased revenue collected through stricter enforcement would help to recoup the additional money allocated to the IRS.
If a taxpayer receives an audit notice from the IRS, it doesn’t mean that he or she has done anything wrong. It is not uncommon for the government to make an error or assume that a taxpayer owes money when they may actually be entitled to a larger refund. An attorney might be able to help a taxpayer organize his or her records and develop a defense to the audit. This may result in the matter being closed with no additional taxes owed.