Executive Summary
The Internal Revenue Service (IRS) is responsible for auditing tax returns to ensure that taxpayers are paying the correct amount of taxes. While the IRS audits a small percentage of all tax returns, certain groups are more likely to be audited than others. This report examines the two groups most likely to be audited by the IRS: millionaires and low-income wage earners.
Millionaires
Millionaires are one of the most frequently audited groups of taxpayers. This is because they have complex tax returns that require more time and resources to audit. In addition, millionaires are more likely to have unreported income or to engage in tax avoidance schemes.
In recent years, the IRS has stepped up its efforts to audit millionaires. This is due in part to the fact that the IRS has received additional funding from Congress. In addition, the IRS has developed new tools and techniques to audit millionaires more effectively.
As a result of the IRS’s increased focus on millionaires, the audit rate for millionaires has increased in recent years. In 2022, the IRS audited 1.1% of all millionaire tax returns. This is up from 0.7% in 2021.
Low-Income Wage Earners
Low-income wage earners are the other group most likely to be audited by the IRS. This is because they are more likely to claim certain tax credits, such as the Earned Income Tax Credit (EITC). The IRS often audits these tax credits to ensure that they are being claimed correctly.
In addition, low-income wage earners are more likely to make mistakes on their tax returns. This is because they may not have access to the same resources as higher-income taxpayers.
As a result of these factors, the audit rate for low-income wage earners is higher than the audit rate for other taxpayers. In 2022, the IRS audited 1.27% of all tax returns filed by low-income wage earners. This is up from 1.1% in 2021.
The IRS audits a small percentage of all tax returns, but certain groups are more likely to be audited than others. Millionaires and low-income wage earners are the two groups most likely to be audited. The IRS has increased its focus on auditing millionaires in recent years, and the audit rate for millionaires has increased as a result. The IRS also audits a relatively high number of tax returns filed by low-income wage earners, often because they claim certain tax credits or make mistakes on their returns.
Frequently Asked Questions
- Why are millionaires more likely to be audited than other taxpayers?
Millionaires are more likely to be audited because they have complex tax returns that require more time and resources to audit. In addition, millionaires are more likely to have unreported income or to engage in tax avoidance schemes.
- Why are low-income wage earners more likely to be audited than other taxpayers?
Low-income wage earners are more likely to be audited because they are more likely to claim certain tax credits, such as the Earned Income Tax Credit (EITC). The IRS often audits these tax credits to ensure that they are being claimed correctly. In addition, low-income wage earners are more likely to make mistakes on their tax returns.
- What can I do to reduce my chances of being audited?
There are a few things you can do to reduce your chances of being audited. First, make sure that you are reporting all of your income and that you are claiming all of the deductions and credits that you are entitled to. Second, make sure that you are filing your tax return correctly. Third, keep all of your tax records in a safe place in case you are audited.
- What should I do if I am audited?
If you are audited, you should cooperate with the IRS. The IRS will send you a letter explaining why you are being audited and what information they need from you. You should gather all of the requested information and send it to the IRS. You may also want to consider hiring a tax professional to help you with the audit.
Why The IRS Is More Likely To Audit Low-Income People (In The Loop)
FAQ
Who gets audited more rich or poor?
What percentage of millionaires are audited?
What group gets audited the most?
What income is most likely to get audited?
Do wealthy people get audited?
And remember, 70% of examinations are done by mail. It’s true that wealthier people stand a significantly higher chance of being audited. As Money explained last year, “People who make less than $200,000 in a year get audited 1% of the time, and this percent goes up with income. If you make over $500,000, you face a 3.62% chance.
How have audits impacted the rich and poor?
But while the number of audits has fallen across the board, the impact has been different for the rich and poor. For wealthy taxpayers, the story has been rosy: Not only has the audit rate been cut in half, but audits now tend to be less thorough. The median EITC recipient has annual income under $20,000.
How likely are you to be audited by the IRS?
Here’s how likely you are to be audited by the IRS. The Biden administration has trumpeted its plans to crack down on rich tax evaders, funneling $46 billion to the IRS so it can ferret out money hidden by the ultra-wealthy. For now, though, the chances of a high income earner being audited by the IRS remain vanishingly low.
Are millionaires less likely to be audited?
Every year, the IRS, starved of funds after years of budget cuts, loses hundreds more agents to retirement. And every year, the news gets better for the rich — especially those prone to go bold on their taxes. According to data released by the IRS last week, millionaires in 2018 were about 80% less likely to be audited than they were in 2011.