Here are the chances your return will be selected
You can be audited the later date of either three years after the filing deadline of your tax return or when you actually filed your tax return. However, there are two main exceptions to this rule that can extend the risk of being audited;
| 1 | If the IRS audits a tax return and discovers an error of more than 25% of your claimed tax obligation they can go back six years. |
| 2 | If the IRS deems there is fraud involved, they can go back indefinitely. |
Every year the IRS publishes their examination statistics. Provided here are the last two years of published information and a look back to 2008 to identify any trends:
Audit Rate Statistics for INDIVIDUALS
| Fiscal Year Ending | 2011 | 2010 | 2008 | |||
|---|---|---|---|---|---|---|
| All Individual Tax Returns | 1.11% | 1.11% | 1.00% | |||
| No Income (AGI) | 3.42% | 3.19% | 2.15% | |||
| Income under $25,000 | 1.22% | 1.18% | .90% | |||
| $25,000 – 50,000 | .73% | .73% | .72% | |||
| $50,000 – 75,000 | .83% | .78% | .69% | |||
| $75,000 – 100,000 | .82% | .64% | .69% | |||
| $100,000 – 200,000 | 1.00% | .71% | .98% | |||
| $200,000 – 500,000 | 2.66% | 1.92% | 1.92% | |||
| $500,000 – $1 million | 5.38% | 3.37% | 2.98% | |||
| $1 million – $5 million | 11.80% | 6.67% | 4.02% | |||
| $5 million – 10 million | 20.75% | 11.55% | 6.47% | |||
| $10 million and over | 29.93% | 18.38% | 9.77% | |||
| Note: These audit rates are stated as a percent of total tax returns with “total positive income” (TPI) as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year. | ||||||
| Source: IRS Data Books | ||||||
Observations
| ♦ | Audit rates are up dramatically with the exception of those with incomes between $25,000 – $50,000. |
| ♦ | Upper income taxpayers can almost assume they will be audited every 3 to 5 years. |
| ♦ | Those with incomes over $10 million have seen their audit rate go up over 300% since 2008. |
In addition to the above statistics, the IRS audited over 134,000 taxpayers last year where no tax return was filed.
Play it safe
Always retain your tax records and support documents for as long as they may be needed to substantiate claims on your tax return. Make sure you consider any state record retention requirements as you review when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, and real estate transactions.
