Newly released IRS Data Book numbers confirm decline in audit rates.

• Author: Caplan, Robert M.

Along with frustrating backlogs, declining audit rates have been the topic of many accountant discussions regarding how IRS budget constraints have affected taxpayers. The latest IRS statistics confirm the declining audit numbers.

On May 26,2022, the IRS released its Data Book, 2021 (Publication 55-B). The Data Book, published annually since 1863, contains statistical tables describing a full range of IRS activities, including returns, collections, refunds, enforcement, and the IRS workforce. The recent report covers the fiscal year ending Sept. 30, 2021. This is the first full tax year affected by COVID-19.

The first table, "Tax Year 2019 Audit Rates Over Time," shows IRS audit rates for tax year 2019 measured as of Sept. 30, 2021, and May 1, 2022. It includes the following types of audits:

Tax year 2019 audit rates over time Tax year 2019 audit rate in Data Book: Total positive income (TPI) ranges Sept. 30,2021 Returns with EITC 0.8% No TPI 0.8% TPI $1-$25,000 0.4% TPI $25,000-$50,000 0.2% TPI $50,000-$75,000 0.1% TPI $75,000-$100,000 0.1% TPI $100,000-$200,000 0.1% TPI $200,000-$500,000 0.1% TPI $500,000-$1 million 0.3% TPI $1 million-$5 million 0.6% TPI $5 million-$10 million 1.0% TPI >$10 million 2.0% Tax year 2019 audit rate as Total positive income (TPI) ranges of May 1,2022 Returns with EITC 0.8% No TPI 1.1% TPI $1-$25,000 0.4% TPI $25,000-$50,000 0.2% TPI $50,000-$75,000 0.2% TPI $75,000-$100,000 0.2% TPI $100,000-$200,000 0.2% TPI $200,000-$500,000 0.2% TPI $500,000-$1 million 0.6% TPI $1 million-$5 million 1.3% TPI $5 million-$10 million 2.0% TPI >$10 million 8.7% Source: IRS, Data Book, 2021, Table 17, as referenced in IRS statement, "Updated IRS Audit Numbers" (May 26,2022). * Office, field, large business, and international cases, including highwealth individuals;

* Correspondence exams; and

* Underreporter inquiries (CP 2000). Normally, a taxpayer who qualifies for the earned income tax credit (EITC) has income under $100,000. The relatively high audit rate for the EITC includes the IRS EITC ami-fraud initiatives.

To understand the significance of the 2019 audit rates, it is important to compare them with those of prior years. The table "Audit Rates Over Time" compares audit rates for tax years 2017 and 2010. Here we can see a dramatic decline in the percentage of taxpayers audited over the eight-year period, with the largest decreases in the highest income categories.

The IRS claims to aggressively audit high-income...