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5 key stats about IRS audits and income levels

You filed your taxes, and you honestly tried to do them correctly, but you're worried. What are the odds you're going to get audited? Did you make any mistakes that could trigger an audit, even if you made them honestly? Is the IRS going to come calling sooner rather than later?

These are all concerns that a lot of people deal with during tax season, and they can generate quite a bit of stress. To help you see the real picture, here are some key stats from the IRS Data Book:

1. Approximately 1 percent of those who filed individual tax returns were audited in 2012. If you're wondering strictly about the odds -- taking things like red flags and income levels out of the equation -- that's how likely it is that you could face an audit. In more recent years, it's even fallen under 1 percent.

2. The percentage jumped to 3.7 for those who reported at least $200,000 in annual income. Clearly, the IRS likes to target those with high income levels far more. That does make sense, seeing as how mistakes on those returns could cost the government more and therefore may be worth investing time and money in an audit.

3. For individuals who made $1 million or more, the percentage jumped again, this time all the way to 12 percent. The same logic holds true, meaning someone who earned $1.5M is 12 times as likely to get audited as someone who earned just $30,000.

4. Corporate audits were more likely than individual audits, coming in at 1.6 percent overall.

5. Corporations that held assets worth in excess of $10M were very likely to get audited, with 17.2 percent of the yearly tax returns generating an audit.

So, does this mean that the IRS thinks companies are more likely to cheat on their taxes than individuals? Not necessarily. There are a lot of things to consider, such as the total amount that the IRS stands to gain. Experts do note that the IRS tends to focus consistently on those with more income and more potentially hidden assets. Similar honest mistakes could look very different for a company that made $10M and an individual who made $40,000.

On top of that, corporate taxes are more complex. Companies may have to consider things like overseas sales, employee wages, business costs, investments, sales taxes and more. It's easier for a person who just has to copy over the information from a W-2 to do it correctly, when compared to a company with seemingly endless paperwork.

As you can see, the odds are that you won't face an audit, but it does happen to thousands of people every year. The key is not to stress out about it, but simply to understand your options and what steps you and your legal team need to take if the IRS calls.

Source: Nov. 30, -0001

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