Current:Home > InvestEchoSense:Many taxpayers fear getting audited by the IRS. Here are the odds based on your income. -RiseUp Capital Academy
EchoSense:Many taxpayers fear getting audited by the IRS. Here are the odds based on your income.
SignalHub Quantitative Think Tank Center View
Date:2025-04-09 09:27:01
IRS Audits help the agency collect money that tax cheats owe the federal government,EchoSense but experts say they also serve another important purpose: They help deter fraud.
That can cause some serious agita, of course. The IRS says about 6 in 10 taxpayers cite the anxiety of getting audited as a motive for being honest on their taxes.
Meanwhile, the IRS has vowed to increase audits on taxpayers with annual income over $400,000 as a way to raise revenue and crack down on tax dodgers, funded by the Inflation Reduction Act. After the 2022 law was passed, roughly a quarter of voters expressed concern about getting hit with an audit, according to Morning Consult research.
So what are the odds of getting audited? Very low. Only 0.2% of all individual income tax returns filed for the 2020 tax year faced an audit, according to the most recent data available from the IRS. That means about 1 in 500 tax returns are audited each year.
To be sure, some people face higher audit risks than others, and one of them might surprise you. The taxpayers most likely to be audited are those with annual incomes exceeding $10 million — about 2.4% of those returns were audited in 2020. But the second most likely group to get audited are low- and moderate-income taxpayers who claim the Earned Income Tax Credit, or EITC.
Why can the EITC trigger an audit?
The higher audit rate for people who claim the EITC has sparked criticism from policy experts. The Bipartisan Policy Center notes that these examinations tend to disproportionately fall on people of color, partly because they are more likely to qualify for the tax credit.
People can claim different amounts through the EITC based on their income and their number of dependent children. For instance, a married couple filing jointly with three kids and less than $63,398 in income can claim the maximum EITC amount, at $7,430. But the most a single taxpayer with no kids can claim is $600.
EITC returns can get flagged if the IRS' records show the taxpayer doesn't qualify for all or some of the credit, such as claiming a child who isn't actually eligible (which can happen if they're over 19 and not a full-time student). About 8 in 10 audited returns that claimed the EITC had either incorrectly claimed a child or misreported income, the National Taxpayer Advocate noted in a 2022 report.
Still, these audits are slightly different than the kind a wealthier taxpayer would typically face. The IRS relies on so-called "correspondence audits" to handle EITC issues, which are handled via letters and phone calls, rather than in-person visits from an IRS agent, or how audits are handled with high-income taxpayers.
Are taxpayers more or less likely to get audited these days?
Quite the opposite. In fact, the audit rate has been declining for years, according to IRS data.
For instance, the agency in 2014 audited about 9.4% of all tax returns for people earning more than $10 million a year — that's almost four times the present audit rate, IRS data shows.
Middle-class taxpayers are also much less likely to get audited today. IRS figures show that the audit rate for people with annual income of $50,000 to $75,000 was 0.4% in 2014 — also four times higher than the current audit rate.
The reason, the IRS says, is partly due to its shrinking workforce. In fiscal year 2022, the agency had about 79,000 full-time equivalent workers, a 9.1% decline from 2013. But the IRS is now beefing up its staff, thanks to Inflation Reduction Act funding, and it says that it is focusing on increasing audits for those earning above $400,000.
- In:
- IRS
- Taxes
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (34551)
Related
- Whoopi Goldberg is delightfully vile as Miss Hannigan in ‘Annie’ stage return
- Father of slain Ohio boy asks Trump not to invoke his son in immigration debate
- Britney Spears praises Sabrina Carpenter after VMAs homage: 'She made me cool'
- NFL Week 2 picks straight up and against spread: Will Chiefs or Bengals win big AFC showdown?
- Bodycam footage shows high
- Teen Mom's Amber Portwood Slams Accusation She Murdered Ex-Fiancé Gary Wayt
- Longtime Mexican drug cartel leader set to be arraigned in New York
- 'The Roommate' review: Mia Farrow is sensational in a decent Broadway comedy
- Arkansas State Police probe death of woman found after officer
- Is sesame oil good for you? Here’s why you should pick it up at your next grocery haul.
Ranking
- Could your smelly farts help science?
- 'Grey's Anatomy' returns for Season 21: Premiere date, time, cast, where to watch
- The Best Boot Trends for Fall 2024 & We're Obsessed - Featuring Styles From Kenneth Cole, Amazon & More
- Senate committee to vote to hold Steward Health Care CEO in contempt
- Paris Hilton, Nicole Richie return for an 'Encore,' reminisce about 'The Simple Life'
- McDonald's $5 Meal Deal staying on the menu in most markets until December
- Disney-DirecTV dispute extends into CFB Week 3, here's the games you could miss
- Max Verstappen has a ‘monster’ to tame in Baku as Red Bull’s era of F1 dominance comes under threat
Recommendation
Jorge Ramos reveals his final day with 'Noticiero Univision': 'It's been quite a ride'
Ex-Massachusetts lawmaker convicted of scamming pandemic unemployment funds
Dua Lipa announces Radical Optimism tour: Where she's performing in the US
Consumers are expected to spend more this holiday season
Chuck Scarborough signs off: Hoda Kotb, Al Roker tribute legendary New York anchor
Tua Tagovailoa concussion timeline: Dolphins QB exits game against Bills with head injury
Senate committee to vote to hold Steward Health Care CEO in contempt
'Focus on football'? Deshaun Watson, Browns condescend once again after lawsuit