Fewer Taxpayers Audited by IRS

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The IRS released its 2018 Data Book on May 20. Published annually, the Data Book contains tables providing a snapshot into the Service's revenue collected, refunds issued, tax audit coverage, law enforcement action, and other matters. The version issued this week describes IRS activities conducted from Oct. 1, 2017, to Sept. 30, 2018 (FY 2018). IRS Commissioner Charles Rettig commented that "underlying the numbers in this year's edition of the Data Book is the hard work of IRS employees."


The IRS collected nearly $3.5 trillion of revenue in FY 2018, processed more than 250 million tax returns, and issued almost $464 billion in refunds. More returns were processed for every major tax return type than the year before, except estate tax (which was down less than 1%). There were 5% more partnership returns and 6% more S corporation filings.


The Data Book shows a continuing downward trend in the audit rate. The IRS audited about 991,000 returns that were filed during calendar year 2017, about one-half percent of the total. 74.8% of these were correspondence audits and the remaining 25.2% were conducted face-to-face. About 30,000 of all examinations resulted in refunds, totaling more than $6 billion.


More than 892,000 of the exams were audits of individual tax returns, representing 0.6% of the total but down slightly from the previous year. 6.7% of individual returns reporting adjusted gross income (AGI) of more than $10 million were examined, while income ranges running from $25,000 to $500,000 were all at about 0.5% coverage. 3.2% of returns with at least $1 million of AGI were chosen for exam, and the IRS audited just over 2% of taxpayer returns reporting no AGI.


The IRS audited 0.2% of partnership returns and the same percentage of S corporation returns. 88.5% of those were face-to-face field exams. 0.9% of C corporation income tax returns were examined, 97.7% also in the field. The IRS audited 15,562 tax-exempt organizations, employee retirement plans, government entities, tax-exempt bonds, and related taxable returns.


The Data Book also summarized the customer service provided to taxpayers by the IRS. Its employees handled nearly 55 million taxpayer calls in FY 2018. The website IRS.gov had over 608 million visits. More than 64.8 million taxpayers were assisted through service channels such as correspondence, telephone helplines, and Taxpayer Assistance Centers. More than 309 million inquiries were made to the "Where's My Refund" application, up 11% from FY 2017.


Although the chance of being audited is statistically low, if your return is chosen, the matter should be taken seriously. Contact your LM Cohen professional immediately if you receive an audit letter from the IRS or any state. All our prior Tax Alerts are available on the Updates page of our website.


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