IRS tax audits down overall, but increasing in some areas

The Internal Revenue Service has been conducting fewer tax audits in recent years, according to a report from the U.S. Treasury. The trend is at least partially the result of budget cuts that have affected the size of the agency's enforcement staff.

Between 2010 and 2012, the IRS decreased its workforce by 8,000 full-time employees, Bloomberg News reported. Included among them were 5,000 front-line enforcement workers, or auditors. Overall, the staff reductions amounted to a 14 percent cut in IRS employees. Due in part to those budget cuts and personnel reductions, IRS audits brought in significantly less money in 2012 than in 2011. As indicated in the agency report, tax enforcement actions yielded $50.2 billion during the 2012 fiscal year. While this figure may seem staggeringly high to the average taxpayer, it represents a 9 percent drop from the year prior.

Fewer audits for some, more for others

But although tax audits have been down overall in recent years, the IRS has softened its focus on certain taxpayers while sharpening it on others, Bloomberg reported. For example:

  • Corporate tax audits have increased by 15 percent since 2009.
  • Audits of S-Corporations and Partnerships spiked by 33 percent and 35 percent, respectively, from 2010 to 2012.
  • Audits of individual taxpayers fell slightly from 2011 to 2012.
  • In 2012, according to the report, the IRS audited one out of every 97 individual tax returns. In 2010, the agency audited one in 90 individuals.

Steps to take to avoid a tax audit

Being audited by the IRS can be both expensive and time consuming, even for taxpayers who have done their best to comply with the law. Fortunately, there are a few simple steps that taxpayers can take to help reduce their chances of triggering an audit:

  • Be vigilant about separating business and personal expenses, and keep detailed records of all business deductions.
  • Be consistent when claiming donations and deductions, as big changes year-over-year can raise a red flag to the IRS.
  • Use caution when claiming a home office deduction; many people claim this deduction erroneously, making it an easy target for auditors.
  • Check your work to avoid mathematical errors, typos or missing information that will draw more attention to your return.

What to do if you are audited

In the event that you are notified of an IRS audit, it is in your best interest to get help right away from an experienced tax lawyer - even if you are confident that you have done nothing wrong. Once an audit begins, its course can be unpredictable, especially for taxpayers who are unfamiliar with the examination process and the myriad of regulations and IRS policies and procedures that govern audits. Obtaining legal counsel from the very beginning can help keep the audit focused, and save you time and/or money.

If you are facing an audit, or have even begun the process already and find you need help, an attorney with broad experience in IRS enforcement actions can help you navigate the audit process and will work hard to resolve the matter quickly and fairly.