This month’s newsletter discusses the chances of having your tax return audited by the IRS. Also included is a list of tax and financial tips for those ready to walk down the aisle. And who can forget Father’s Day? Enjoy our little Father’s Day quiz. All this and some bad news for 100,000 taxpayers who had their identity compromised by a data breach on an IRS web site.
As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.
The Chances of Being Audited
Every year the IRS publishes the statistics of the number of tax returns they are examining. Provided here are the last three years of published information and a look back to 2008 to see any trends:
|Percent of Individual Tax Returns Audited|
|All Individual Tax Returns||0.86%||0.96%||1.03%||1.00 %|
|No Income (AGI)||5.26%||6.04%||2.67%||2.15%|
|Income under $25,000||.93%||1.00%||1.05%||.90%|
|$25,000 – 50,000||.54%||.62%||.70%||.72%|
|$50,000 – 75,000||.53%||.60%||.64%||.69%|
|$75,000 – 100,000||.52%||.58%||.64%||.69%|
|$100,000 – 200,000||.65%||.77%||.85%||.98%|
|$200,000 – 500,000||1.75%||2.06%||1.96%||1.92%|
|$500,000 – $1 million||3.62%||3.79%||3.57%||2.98%|
|$1 million – $5 million||6.21%||9.02%||8.90%||4.02%|
|$5 million – 10 million||10.53%||15.98%||17.94%||6.47%|
|$10 million and over||16.22%||24.16%||27.37%||9.77%|
|Note: These audit rates are stated as a percent of total tax returns in each Adjusted Gross Income (AGI) class as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year.|
|Source: IRS Data Books|
|Overall, you have less than a 1 out of 100 chance of being selected for an audit. The .86% audit rate is down .10% versus 2013.|
|Audit rates are down for all income levels versus 2013 due to resource constraints per the IRS. The IRS claims this translates into the potential loss of $2 billion in tax revenue. However, the audit rates for those with incomes over $500,000 is still up dramatically when compared to 2008.|
|The IRS is continuing its focus on returns with no AGI or negative income. This group’s 5.26% audit rate is significantly over the 2.15% audit rate in 2008.|
Having good records
Always retain your tax records and support documents for as long as they may be needed to substantiate your tax return. This is usually three years after the filing due date or when the tax return was actually filed (whichever is later). Include any state record retention requirements as you review when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, confirmation of asset purchases, asset sales, and real estate transactions.
Know Someone Getting Married?
Summer is a popular time to tie the knot. Planning for the event takes hundreds of hours and thousands of dollars. Often overlooked in the craziness of the event are important tax and financial topics. If you are planning to get married in the near future or know of someone who is, here are some things to consider.
The Father’s Day Quiz
As fathers head out for a day of golf, fishing, and general relaxation why not explore the roots of this popular holiday? Here is a fun quiz around the origins of Father’s Day.
In the News: IRS Data Breach
Was your taxpayer identity stolen?
As always, should you have any questions or concerns regarding your situation please feel free to call.