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What are the odds you’ll be audited by the IRS?

The IRS has recently issued its annual data book for 2010, which contains statistics of activities conducted by the Service for the year. Below are some interesting stats pulled from the book:


The overall chance of being audited for individuals was 1.1%, up from 1.0% for the previous year. If your income was between $200,000 and $1,000,000, your risk jumped up to 2.5%, and if you were over $1,000,000, there was an 8.4% chance of being audited.

Returns with the Earned Income Tax Credit also saw an elevated risk of audit, as well as those including a Schedule C, the form used to report the profit or loss from a business that is organized as a sole proprietorship. Schedule C returns with gross receipts higher than $25,000 faced risks ranging from 2.5% - 4.7%, depending on the amount of receipts.

Farm returns and those without the Earned Income Tax Credit or Schedule C faced a risk of audit of less than 1%.

Corporations & Partnerships

S-Corporation and Partnership returns saw the lowest risk at .4%. Small corporations saw risks ranging from .9% to 3.%, with risks increasing as total assets of the corporation increased.

Large corporations (assets over $10 million) faced risks from 13.4% to 98% (98% is for returns with assets of $20 billion or more – there were actually 447 of that size filed in the US for the year). Even with the astronomical audit rate, the IRS only found fault with 8% of those returns.

Other interesting facts

  • Of individual returns containing math errors, 60.8% of the time it was the Making Work Pay Credit that was miscalculated.
  • 80.3% of individuals convicted of a legal-source (plain old tax evasion, not drug trafficking or an elaborate money laundering scheme) tax crime and sentenced were incarcerated. If you were convicted of an illegal-source (money laundering, counterfeiting  - all the bad stuff) and sentenced, your risk of incarceration dropped to 78.6%. Figure that one out!
  • The average additional tax per return resulting from field audits of individuals was $20,127 per return

As always, call if you have any questions.

Jon Majkut, CPA

Majkut CPAs LTD

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