According to a new report, the IRS audited fewer taxpayers last year than in 2021. However, high-income taxpayers ($1 million + net worth) saw a slight increase in their audit rates for FY 2022 after years of decline. This was in response to persistent complaints about the IRS failing to properly audit high-income taxpayers.
The Report
Released on Wednesday by Syracuse University’s Transactional Records Access Clearinghouse, the report found that for FY 2022, the IRS audited 626,204 returns. That’s down from 659,003 in FY 2021. The IRS has been heavily relying on correspondence audits, with those making up 532,609, and only 93,595 being regular. 85% of audits were also conducted through the mail.
“Together this means that last year the odds of audit had fallen to 3.8 out of every 1,000 returns filed (0.38%),” said the TRAC report. “For FY 2021, the odds of audit had been 4.1 out of every 1,000 returns filed (0.41%).”
Millionaires Have a Higher Chance to Be Audited
In the report, it was acknowledged that millionaires had the highest chances of being audited, but their audit rate (1.1%) was lower than that of the targeted lowest-income wage earners, whose audit rate was 1.27%. Earned Income Tax Credit claimants with low incomes experienced audit rates five and a half times higher than nearly everyone else.
The EITC claimants have historically been targeted for examinations not because they account for the most tax under-reporting, the report noted, but because they are relatively easy targets at a time when the IRS increasingly relies on correspondence audits but doesn’t have the resources to help taxpayers.
Wrap Up
The $80 billion in funding the IRS received from the Inflation Reduction Act is supposed to be used in part to increase tax audits for FY 2023 to close the tax gap. However, most of that money will be used on increasing IRS taxpayer service and upgrading its aging technology systems. If you need any assistance with audits or any other financial issues, give a trusted financial professional a call.