IRS Audit Rate Lowest in Almost 40 Years
For some people, the prospect of getting audited by the IRS is terrifying, and at best, a stressful situation that nearly everyone would like to avoid. However, there may be some relief for people who fear the almighty audit: according to the Wall Street Journal, the audit rate stood at 0.45% in 2019, its lowest level in nearly 40 years.
In fact, it was the eighth year in a row that the audit rate dropped, mostly due to years of IRS budget cuts and increased compliance and workload. Therefore, by some estimates, taxpayers are now half as likely to get audited by the IRS as they were 10 years ago.
What’s more, according to the Internal Revenue Service Progress Update for 2019, the audit rate for businesses went down to 1.6% in 2019, from a target 2.2%. Further, the IRS employed about 78,000 employees in 2019, a number that is well below staffing levels in previous decades. Specifically, in 2010, the IRS had more than 100,000 full-time employees, but the agency has lost more than 29,618 full-time positions between 2010 and 2019. Finally, the IRS estimates that up to 31% of its current workforce will retire within the next five years, creating further enforcement headwinds.
All of these facts have contributed to the lower audit rates, and naturally, this will be a cause for celebration for many Americans, or U.S. persons who have a green card or spend a significant amount of time in the U.S. and thus have U.S. tax filing obligations. However, in a bid to counteract these challenges, the IRS is incorporating data analytics, automation tools, and more sophisticated dashboards to improve its ability to monitor and improve decision making.
While time will tell how effective these new information technology initiatives will be, one thing is for sure: just because the audit rate is down, does not mean one can be careless when it comes to their reporting obligations. Indeed, in an uncertain political climate, one in which numerous candidates are calling for increased funding for the IRS, as well as numerous economic and geopolitical uncertainties around the world, the best defense is a good offense, and that means hiring experienced, thoughtful, and competent tax advisors to help you navigate these challenges.
If you have been audited by the IRS, it is crucial that you engage the services of a tax professional well-versed in these matters, in a timely manner. Polo Tax is able to represent taxpayers in all 50 states, and even U.S. taxpayers living overseas. Please get in touch with us immediately if you have been audited and need assistance. Even if you have not been audited, we can walk you through tax law changes and how they impact you, thus allowing you to sidestep and/or mitigate any potential pitfalls.