Like many Americans, taxes are probably one of the last things you want to deal with – especially after you file your tax return. But unfortunately, there is always the possibility that you could face an audit.
If you earn a minimum of $10 million annually, you know the amount of dedicated effort you invested to achieve success. And since the IRS is more likely to audit those with substantial incomes, you might be happy about a reduced chance of an audit.
Audit risks decreased in fiscal year 2018
During fiscal year 2017, those making at least $10 million had nearly a 15% chance of being audited. But according to recent data, that number fell just below 7% last year. Audit rates also dropped for those in other income groups as follows:
- The risk of audit for those earning incomes over $5 million, but less than $10 million, dropped from nearly 8% to just over 4%
- Audit risk for people in the income bracket between $1 million to $5 million decreased from 3.5% to slightly more than 2%
- Though less significant of a drop, people reporting income between $100,000 and $200,000 also saw a decrease in audit risk – from 0.47% to 0.44%
Despite the reduction of tax audits during fiscal year 2018, the IRS still performed nearly 900,000 individual income tax audits.
If you receive notice of an audit, be willing to show the documentation supporting your claims. Although there is a potential for making mistakes, providing transparency in your tax return should help you through the process if the IRS audits you.