by Bill Sweet
Audit rates by the IRS are at 14-year lows, according to USA Today and the Department of the Treasury.Your chances of audit were about 0.7% last year, meaning about 99.3% of taxpayers did not undergo an audit.
That rate is the lowest in 14 years, and a decline of almost 50% since 2010 (1.58 million then vs. 1.03 million in 2016).
Of course, certain taxpayers face a higher audit risk. If your income was in excess of $200,000, you had a 1.6% chance of an audit, and more than $1,000,000 was 5.8%.
Furthermore, there are many areas where the IRS pays special attention. S-corporations that don't pay any wages to officer shareholders is one, as are small businesses that operate at a loss, as well as excess charitable or business-related deductions on Schedule A.
We don't necessarily fear audits at Stevens & Sweet, and have undergone two in the past 12 months. We firmly demand that our clients keep adequate records of income and expenses and thus feel that we are well-equipped to answer any concerns in an audit from the IRS or state agency.
The key is to keep good records and be able to produce these records in an organized manner on demand. Doing so will save you time, energy, and most importantly, your ability to sleep at night knowing that you have proof if the tax man comes calling.
- Bill
