Your Chances of Being Audited Continue to Decline
What’s the scariest possible outcome of filing your taxes? Almost anyone would answer that question with “being audited.” Being audited by the IRS is never fun. Fortunately, it’s something that most people will never have to experience. The fact is the IRS actually audits very few returns all things considered. Furthermore, the IRS also goes after a lot fewer tax evasion cases than it used to. For example, the agency only brought 795 cases of tax fraud to court last year. That represents close to a 25 percent decline from the year 2010.
Why the Decline?
So what’s behind the drop incases? Simply put, it’s a numbers game. Congress started reducing the IRS’s budget and power, back in 2011. The agency’s staff has been cut by one third. The IRS has also shifted its focus on the kinds of crimes it goes after. While taxpayers might be overjoyed by the news, there are definitely some consequences.
Billions in Lost Revenue
Because so few people are now audited, it’s highly likely that more and more taxpayers are getting away with tax fraud and tax evasion and this is costing the government billions of dollars. In fact, the IRS says business owners skip out on about $125 billion taxes every year. For reference sake, that is enough money to fund several major national government departments combined.
It All Starts With Fewer Audits
Again, this all goes back to the decrease in the number of audits the IRS performs. It used to be that the agency could detect many of these evasion and fraud cases. But since 2011, the number of audits has gone down by 42 percent. The number of criminal referrals has been hit even harder. To be clear, they’ve always been on the rare side, but in 2016 they dropped to just 328 cases. There were 589 in 2012. The IRS performed 1.2 million audits in 2016, which represents one criminal case for every 3,600 audits performed.
Audits Have Changed
Of course, the real purpose of an audit is to actually collect tax dollars, and not necessarily to catch fraud. Furthermore, according to many who work at the IRS, or have worked there recently, audits are not nearly as in-depth as they used to be. The agency encourages auditors to review and complete audits much faster, meaning they request fewer records and hold fewer interviews.
Another reason audits have declined is that the IRS has put a lot more focus on tracking down cases of identity theft. As the number of these cases has increased dramatically, the agency has recently assigned a significantly higher amount of agents to go after these thieves. That means there are fewer agents to conduct audits.
You Can Breathe Easier
The bottom line is if there was ever a time to sneak something past the IRS, now is that time. Of course, we don’t recommend trying to cheat the IRS out of money. It’s always best to report an honest tax return. That way, in the event the IRS does choose to audit your return, you’ll have nothing to worry about.
We hope you found this article about “Your Chances of beingAudited Continue to Decline” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
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The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
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Introduction: In this interview, Alan Olsen, CPA and featured guest Micah Fink discuss how Horses and Heroes use horses to aid veteran care and much more. Transcript: Alan Olsen Welcome to American Dreams. My guest today is Micah Fink, CEO and founder of Heroes and Horses. Micah, welcome to today’s show. Micah Fink Alan, thank…
Introduction: Two dad’s discussing life balance in the hectic world of IPOs with featured guest, Travis Combs, Managing Director at the Effectus Group. In this interview, Alan Olsen, CPA, MBA and Travis address family, faith, career, client’s best interest, and trying to strike a balance. Transcript: Alan Olsen Welcome to American Dreams. My guest today is…
Introduction: A candid discussion about investment banking and philanthropy with Mike Bennett, Managing Partner of Crewe Capital. In this interview, Alan Olsen, CPA, MBA and Mr. Bennett open a window into his Crewe Capital‘s early beginnings the connection between investment banking and philanthropy. Transcript: Alan Olsen 0:01 Welcome to American Dreams. My guest today is…
Introduction (teaching business success at Barr Business School) In this interview, Alan Olsen, CPA, MBA discusses teaching business success with Dr. Frumi Rachel Barr. Dr. Frumi Rachel Barr is the Founder and Chief Mentor at the Barr Business School. Transcript: Alan Olsen Hi, this is Alan Olsen and welcome to American Dreams. My guest today is…