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Businessman sitting at desk, placing hand on head while staring at laptop screen - Worried About Getting Audited?

Worried About Getting Audited? Here’s What You Need To Know About Your Chances

Have you heard about the IRS’s recent hiring spree? With a significant funding boost, they’re adding new agents, and many fear this could lead to a rise in audits. While an audit is never a pleasant experience, understanding your risk factors can help you prepare.

This article explores the likelihood of getting audited by the IRS, focusing on factors like income level and claimed credits. We’ll also delve into the overall audit rate and provide tips to minimize your chances of facing an audit.

Increased Scrutiny: What to Expect

The IRS’s recent budget increase signals a potential shift towards stricter tax enforcement. This has many taxpayers wondering if certain groups are targeted more than others.

Who Gets Audited? Understanding the Risk Factors

While the IRS strives for fairness, some factors can raise red flags and trigger an audit. Let’s explore some key considerations:

  • Earned Income Tax Credit (EITC): This valuable credit for low-to-moderate income earners can raise audit flags. The complex eligibility requirements and potential for errors make EITC claims a focus for the IRS.
  • Income Level: Studies suggest taxpayers earning less than $25,000 might be audited at a higher rate. However, this can be partially explained by a higher error rate in these tax returns due to the complexity of claiming benefits.
  • High-Income Earners: Don’t feel exempt! While the overall audit rate is lower for high-income earners, it increases progressively as income climbs. Those making over $10 million face a significantly higher audit risk (around 8.7%).

It’s a Balancing Act: Fraud and Scrutiny

The increased scrutiny of low-income tax returns is partly due to the potential for fraud. Unfortunately, the complexity surrounding benefits like the EITC creates opportunities for exploitation. The IRS needs to be vigilant to ensure the integrity of the tax system.

Putting It in Perspective: How Common Are Audits?

Despite the concerns, audits are still relatively uncommon. In 2022, only about 0.38% of tax returns were audited. Here’s a breakdown of audit rates based on income for the 2019 tax year:

  • $100,000 – $200,000: 0.2%
  • $500,000 – $1 million: 0.6%
  • Over $10 million: 8.7%

The Importance of Professional Help

Navigating tax complexities can be overwhelming. If you’re unsure about claiming credits or worried about an audit, consulting a financial professional is crucial. They can help:

  • Ensure accuracy: Reduce the risk of errors that might trigger an audit.
  • Streamline the process: Facilitate a smoother and less stressful experience in case of an audit.

Remember: An audit doesn’t necessarily mean trouble. Often, the IRS simply needs additional documentation for your tax decisions. With proper preparation and guidance from a professional, you can minimize audit risks and ensure a smooth resolution if needed.

Taking Control of Your Tax Journey

By understanding the factors influencing audit selection and seeking professional advice, you can approach tax season with more confidence. Remember, the IRS website offers valuable resources to guide you through the filing process.

Do you have questions about claiming specific credits or navigating tax complexities? Contact our team of financial professionals today! We’re here to help you make informed decisions and ensure a stress-free tax season.

JS Morlu LLC is a top-tier accounting firm based in Woodbridge, Virginia, with a team of highly experienced and qualified CPAs and business advisors. We are dedicated to providing comprehensive accounting, tax, and business advisory services to clients throughout the Washington, D.C. Metro Area and the surrounding regions. With over a decade of experience, we have cultivated a deep understanding of our clients’ needs and aspirations. We recognize that our clients seek more than just value-added accounting services; they seek a trusted partner who can guide them towards achieving their business goals and personal financial well-being.
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