IRS Audit Rate Doubles Among Multiple Income Groups But Remains Historically Low

Internal Revenue Service (IRS) headquarters building in Washington on March 8, 2018. (Samira Bouaou/The Epoch Times)

The Internal Revenue Service (IRS) has revealed that its audit rates among certain income groups have increased during recent months but still remain low when compared to around a decade back.

The 2019 audit rates of taxpayers belonging to income categories above $50,000 have doubled or more than doubled in the last seven months, the May 26 statement said. The audit rate for those making $50,000 to $75,000, $75,000 to $100,000, $100,000 to $200,000, and $200,000 to $500,000 doubled from 0.1 percent to 0.2 percent. For those earning between $500,000 and $1 Million, the audit rate doubled from 0.3 percent to 0.6 percent.

Among earners of $1 million to $5 million, the audit rate more than doubled from 0.6 to 1.3 percent. For individuals making $5 million to $10 million, the audit rate doubled from 1 to 2 percent. The biggest increase was seen among those making above $10 million, with the audit rate jumping over four times from 2 to 8.7 percent.

Interestingly, the audit rate for those who made above $10 million in tax year 2010 was 21.5 percent, which declined to 5.8 percent in tax year 2017. Audit rates for every income group upwards of $50,000 were also substantially higher for the 2010 tax year. The agency claims that “resource constraints” are limiting the work it can do.

At present, there are only 6,500 front-line, revenue agents performing “these types of exams” on the field. Due to this, enforcement activity among the high end of the income distribution is “far lower than in the past,” the agency stated.

The IRS said in the statement that “substantially all experienced, field Revenue Agents” are focused on high-income individuals and related entities as far as personal income tax is concerned.

Speaking to a House Oversight Subcommittee last month, IRS chief taxpayer experience officer Ken Corbin claimed that audit rates of those making over $200,000 have decreased largely because such higher-income audits tend to become “more complicated,” according to CNBC. As such, auditors are required to review more issues.

Back in March, the IRS had planned to hire 10,000 workers. On June 1, the agency issued a notice announcing that it plans to hire over 4,000 contact representative positions at IRS offices across the country this summer.

“We have a variety of jobs available all over the country,” Corbin said in the notice. “Contact representatives, among other things, deal directly with taxpayers by helping them with their tax obligations.”

Due to the pandemic, the IRS faced an unprecedented amount of work in the 2021 filing season. The agency kicked off this year with over 8.4 million unprocessed individual tax returns and transactions according to a preliminary report by the Treasury Inspector General for Tax Administration.

In May, IRS Commissioner Charles Rettig testified before the Senate that the agency has taken steps to cut down the backlog by the end of this year and start 2023 with a “healthy level” of inventories.