Who Gets Audited by IRS
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Individual Enforcement
By: Robert E. McKenzie ©2011
3.20 The total number of audits of individual returns increased in 2010. Those who earned less than $200,000 had about a 1 percent chance of being audited. Those with incomes of $200,000 and more had about a 3 percent chance of being audited.
| Total Individual Returns | ||||||||
| FY 2001 | FY 2002 | FY 2005 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | |
| Field | 202,515 | 205,134 | 247,235 | 302,785 | 311,339 | 310,429 | 326,249 | 342,762 |
| Corres-pond | 529,241 | 538,747 | 968,073 | 981,165 | 1,073,224 | 1,081,152 | 1,099,639 | 1,238,632 |
| Total | ||||||||
| Exam | 731,756 | 743,881 | 1,215,308 | 1,283,950 | 1,384,563 | 1,391,581 | 1,425,888 | 1,581,394 |
| Cover-age | 0.58% | 0.57% | 0.93% | 0.97% | 1.03% | 1.01% | 1.03% | 1.11% |
Income Under $200,000
| FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | |
| Field | 266,726 | 267,699 | 256,854 | 269,865 | 284,241 |
| Correspondence | 929,666 | 1,011,315 | 1,003,976 | 1,010,870 | 1,144,178 |
| Total Examinations | 1,196,392 | 1,279,014 | 1,260,830 | 1,280,735 | 1,428,419 |
| Returns Filed in Prior year | 128,875,395 | 130,600,177 | 133,407,479 | 133,924,956 | 137,892,685 |
| Coverage | 0.93% | 0.98% | 0.95% | 0.96% | 1.04% |
Income $200,000 and Higher
| FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | |
| Field | 36,059 | 43,640 | 53,575 | 56,384 | 58,521 |
| Correspondence | 51,499 | 61,909 | 77,176 | 88,769 | 94,454 |
| Total Examinations | 87,558 | 105,549 | 130,751 | 145,153 | 152,975 |
| Returns Filed in Prior CY* | 3,400,435 | 3,942,702 | 4,442,156 | 5,024,714 | 4,930,420 |
| Coverage | 2.57% | 2.68% | 2.94% | 2.89% | 3.10% |
Millionaires
3.30 Meanwhile, taxpayers with incomes of more than $1 million had an 8.36 percent chance of being audited, up from 6.42 percent the year before. The number of audits for millionaires increased to 32,494 from 21,874 in 2008. The ranks of millionaires decreased by nearly 50,000 taxpayers in 2010 to 388,763 taxpayers.
Income $1 Million and Higher
| FY 2004 | FY 2005 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | |
| Field | 5,857 | 7,166 | 9,459 | 12,259 | 12,233 | 15,730 | 16,509 |
| Correspondence | 3,719 | 5,669 | 4,728 | 10,941 | 9,641 | 12,619 | 15,985 |
| Total Exams | 9,576 | 12,835 | 14,187 | 23,200 | 21,874 | 28,349 | 32,494 |
| Returns Filed in Prior | 190,372 | 210,280 | 270,161 | 339,138 | 392,776 | 441,715 | 388,763 |
| Coverage | 5.03% | 6.10% | 5.25% | 6.84% | 5.57% | 6.42% | 8.36% |
Businesses
3.40 On the business front, the overall number of audits decreased slightly, and dropped as a percentage of businesses that submitted a tax return. More emphasis was placed on medium and large corporations, as audit rates decreased slightly for those companies with more than $10 million in assets and increased slightly for those with less than $10 million in assets. According to 2010 IRS enforcement data released by the IRS it audited 14.16% of returns of corporations with assets of $10 million or more. That is the lowest audit coverage level since 2003 and down from a 20% coverage rate in 2005.
The tax audit rates of the largest companies are less than half what they were 20 years ago while more small and mid-size businesses are coming under scrutiny, according to an organization that monitors the Internal Revenue Service. The Syracuse University-based Transactional Records Access Clearinghouse has described a “historic collapse” in audits for corporations holding assets of $250 million or more. About 26 percent of them were audited in the 2007 budget year compared with 34 percent in 2006 and 43 percent in 2005.
Examination –Business Return Closures and Coverage Rates (1)
| FY 2001 | FY 2002 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | |
| Total Returns Examined | 40,557 | 40,287 | 52,149 | 59,516 | 59,823 | 58,144 | 58,067 |
| Returns Filed in Prior | 7,384,600 | 7,576,681 | 8,722,410 | 9,072,828 | 9,530,662 | 9,951,648 | 9,949,946 |
| Coverage | 0.55% | 0.53% | 0.60% | 0.66% | 0.63% | 0.58% | 0.58% |
| Small Corporation Returns | |||||||
| (Assets Under $10 Million) | FY 2001 | FY 2002 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 |
| Returns Examined | 14,332 | 14,655 | 17,849 | 20,020 | 20,580 | 18,298 | 19,127 |
| Returns Filed in Prior CY* | 2,372,900 | 2,329,479 | 2,230,024 | 2,171,144 | 2,166,197 | 2,146,400 | 2,039,625 |
| Coverage | 0.60% | 0.63% | 0.80% | 0.92% | 0.95% | 0.85% | 0.94% |
| Large Corporation Returns | |||||||
| (Assets $10 Million and Higher) | FY 2001 | FY 2002 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 |
| Returns Examined | 8,718 | 8,443 | 10,578 | 9,644 | 9,406 | 9,536 | 10,207 |
| Returns Filed in Prior CY* | 57,800 | 59,602 | 56,847 | 57,357 | 61,641 | 65,546 | 72,076 |
| Coverage | 15.10% | 14.20% | 18.60% | 16.80% | 15.26% | 14.55% | 14.16% |
| Subchapter S Returns | |||||||
| Form 1120-S | FY 2001 | FY 2002 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 |
| Returns Examined | 12,437 | 11,646 | 13,970 | 17,657 | 16,634 | 17,455 | 16,327 |
| Returns Filed in Prior CY* | 2,887,100 | 3,022,589 | 3,715,249 | 3,909,730 | 4,155,830 | 4,390,857 | 4,414,662 |
| Coverage | 0.43% | 0.39% | 0.38% | 0.45% | 0.40% | 0.40% | 0.37% |
| Partnership Returns | |||||||
| (Form 1065) | FY 2001 | FY 2002 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 |
| Returns Examined | 5,070 | 5,543 | 9,752 | 12,195 | 13,203 | 12,855 | 12,406 |
| Returns Filed in Prior CY* | 2,066,800 | 2,165,011 | 2,720,290 | 2,934,597 | 3,146,994 | 3,348,845 | 3,423,583 |
| Coverage | 0.25% | 0.26% | 0.36% | 0.42% | 0.42% | 0.38% | 0.36% |
Examination – Large Corporation Return Closures and Coverage Rates
| FY 2001 | FY 2002 | FY 2005 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | ||
| Total Returns Examined | 8,718 | 8,443 | 10,829 | 10,578 | 9,644 | 9,406 | 9,536 | 10,207 | |
| Returns Filed in Prior CY | 57,800 | 59,602 | 54,091 | 56,877 | 57,357 | 61,641 | 65,546 | 72,076 | |
| Coverage | 15.10% | 14.20% | 20.00% | 18.60% | 0.66% | 0.63% | 0.58% | 0.58% | |
| By Asset Class | |||||||||
| FY 2001 | FY 2002 | FY 2005 | FY 2006 | FY 2007 | FY 2008 | FY 2009 | FY 2010 | ||
| $10 Million < $50 Million | |||||||||
| Returns Examined | 3,071 | 2,540 | 3,535 | 4,218 | 4,473 | 3,833 | 3,473 | 4,307 | |
| Coverage | 9.70% | 7.80% | 12.30% | 14.20% | 15.00% | 11.70% | 10.10% | 10,95% | |
| $50 Million < $100 Million | |||||||||
| Returns Examined | 973 | 865 | 1,148 | 999 | 801 | 893 | 1,158 | 1,259 | |
| Coverage | 12.30% | 10.70% | 16.40% | 13.80% | 11.40% | 11.70% | 14.30% | 14.02% | |
| $100 Million < $250 Million | |||||||||
| Returns Examined | 1,369 | 1,289 | 1,287 | 1,085 | 946 | 1,026 | 1,134 | 1,191 | |
| Coverage | 17.60% | 16.00% | 17.50% | 14.00% | 12.10% | 12.80% | 13.60% | 13.15% | |
| $250 Million and Higher | |||||||||
| Returns Examined | 3,305 | 3,749 | 4,859 | 4,276 | 3,424 | 3,654 | 3,771 | 3,450 | |
| Coverage | 32.10% | 34.40% | 44.10% | 35.20% | 27.20% | 27.40% | 25.70% | 23.44% | |
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