There’s less chance the IRS will audit you. The 2014 IRS audit rate was at the lowest level in at least 10 years and may drop even further according to the agency.
The percentage that an individual’s tax return was examined in person or through the mail fell to 0.86% last year. It’s the lowest percentage since 2005. The audit rate rose between 2005-2010 and then dropped steadily by more than 20% during the next 5 years. Approximately 1.2 million taxpayers were audited in 2014 down 162,000 from 2013.
1.2 million Taxpayers with an income of $200,000 and 34,000 Taxpayers with annual incomes of $1 million or more were audited in 2014. Kevin Thompson, CPA says “as a 40 year veteran of this business, I say this is great news for American taxpayers. The vast majority of examinations in which I have participated have been unnecessary.”
The reason that there are less audits is because of drops in IRS funding and less revenue agents. The IRS is also seeking Congressional approval for a 2016 fiscal budget hike after being lambasted for less taxpayer services and allegations it was targeting conservative tax-exempt organizations.
IRS Commissioner John Koskinen warned that the rate in audits may “corrode” even more American’s faith in the federal tax system. He is also concerned that taxpayers may not comply with making voluntary payments. Thompson says “I disagree. I think the Service should be thinking about value for the American Taxpayers and finding more efficient ways to verify the accuracy of returns.”
He says that right now most people are paying their fair share, but if people start finding out their neighbors are not paying, they may not either. Thompson says “my experience is not this prediction at all. Every client of this office is directed to pay their share of the tax burden – But, NOT ONE PENNY MORE!”
Koskinen believes that if the number of IRS agents is restored and trained, it would produce $1.3 billion in government enforcement revenue by 2018. Audits require rigorous training so they can’t simply shift other IRS workers into those jobs. Jobs throughout the IRS have been reduced and they are short-staffed as it is. “This is true and I can tell you that from experience” says Thompson. “Although the examination puts us at odds against the Service, I feel they are out-manned at every turn. Unless the taxpayer made a mistake, these examinations almost always result in a no-change.”
Sen Orrin Hatch, R-Utah believes that the operations of the agency and their request for more funding will be looked at with scrutiny and the IRS is not up to withstanding this scrutiny. Thompson says “I once spoke with a high-up official in the Memphis office and she asked me how the IRS was doing.” I said “as a practitioner, you scare me. You have so much power that results in the taxpayers and many of their representatives being afraid of the IRS. It should not be like that at all.” Thompson closed by saying “I strongly concur with Senator Hatch.”