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Chance of IRS audit increases with income

Just what are your chances of having your income tax return audited by the IRS?

It depends on how much money you make.

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The average odds are approximately 1 in 100. In the latest figures released by the IRS, for tax year 2011, more than 1.4 million taxpayers were audited of 143 million tax returns filed.

But for Americans in higher tax brackets, the chances go up, with the wealthiest taxpayers having a 1 in 4 chance of hearing from the IRS.

Individuals The likelihood of being audited for taxpayers with the following adjusted gross incomes is:

  • Between $25,000-$50,000 – 0.70 percent
  • Between $50,000-$100,000 – 0.64 percent
  • Between $100,000-$200,000 – 0.85 percent
  • From $200,000-$500,000 – 1.96 percent
  • From $500,000-$1 million – 3.57 percent
  • Between $1 million-$5 million – 8.9 percent
  • Between $5 million-$10 million –17.94 percent
  • More than $10 million – 27.37 percent

Businesses For business income, the same is true: the higher the revenues, the higher the number of audits. For businesses other than farms, with the following gross receipts, the chance of being audited is:

  • Under $25,000 – 1.2 percent
  • Between $25,000-$100,000 – 2.4 percent
  • Between $100,000-$200,000 – 3.6 percent
  • Between $200,000-$500,000 – 3.4 percent
  • Between $500,000-$1 million – 2.8 percent
  • More than $1 million – 2.1 percent
  • Only 1 in 200 farm returns was audited.

CorporationsFor corporate returns, other than S corporations, the average chance of an audit was 1.5 percent. For partnership and S corporation returns, the audit rate was just 0.5 percent. Again, the percentage goes up with the total assets of the corporation. The largest corporations are almost sure to be audited.

  • $250,000-$1 million – 1.7 percent
  • $1 million-$5 million – 2.1 percent
  • $5 million-$10 million – 2.6 percent
  • $10 million-$50 million – 10.5 percent
  • $50 million-$100 million – 20.7 percent
  • $100 million-$250 million – 23.2 percent
  • $250 million-$1 billion – 22.7 percent
  • $1 billion-$5 billion – 31.4 percent
  • $5 billion-$20 billion – 45.4 percent
  • More than $20 billion – 93 percent

Maxwell Locke and Ritter Certified Public Accountants and Consultants