If you’re a high-income taxpayer or business owner, your likelihood of being selected for an IRS audit has skyrocketed in recent years. And as anyone who has ever gone through the process can attest, an IRS audit can be stressful, time-consuming, and often very expensive.
Even if you’ve kept careful records and done your best to comply with our increasingly complicated tax code, a simple error or oversight could end up costing you huge sums of money.
The rate of IRS audits is up 50% for higher incomes, but remains unchanged for incomes less than $200K per year.
Although the risk of random IRS audits is still low, recently released IRS data shows that the frequency of audits have increased by 50 percent over the past six years for taxpayers reporting more than $200,000 in income, while audit rates for taxpayers earning more than $1 million have doubled.
During the same time period, the audit rate for taxpayers reporting less than $200,000 per year has remained steady at 1%.
The Watson CPA Group points out that audited tax returns are selected based on scoring by the Discriminant Inventory Function System (DIF) — a process that rates all tax returns according to their potential for adjustments or errors using historical data and IRS experience. Essentially, the system is weighted toward audits that have the highest probability of resulting in a revenue gain for the IRS.
What does all of this mean to you? It means that no matter what your income level may be, it’s essential that you prepare and file your taxes properly. Unless you have extensive tax law experience yourself, we highly recommend working with a professional. The stakes are simply too high.
For some of you, it may be too late. If you’re currently in the midst of an IRS dispute, we can help! We have years of experience negotiating with the IRS on behalf of taxpayers, and we can handle the process so that you don’t have to. IRS disputes can make your life downright miserable— so give us a call today and let us get the IRS off your back!