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Your chance of getting audited by the IRS is lower than ever

Middle-class incomes aren't keeping up
Two years after Trump's tax reform, middle-class incomes aren't keeping up 01:21
  • U.S. taxpayers are half as likely to get audited as they were a decade ago, according to new IRS data.
  • The decline in audits stems from a sharp reduction in agency staff, with the IRS now having fewer auditors than at any point since World War II.
  • Audit rates for millionaires have fallen more sharply than for the middle class.

Taxpayers are half as likely to be audited by the Internal Revenue Service as they were a decade ago following a sharp reduction in staff over the past several years.

The audit rate for individuals declined to 0.45% for fiscal-year 2019, down from 0.9% in 2009, according to IRS data. Even a decade ago, the audit rate was sharply lower than in the 1970s, when the agency audited about 2.5% of individual returns. The IRS now has fewer auditors than at any point since World War II.

The staffing reduction at the IRS is taking a toll on auditing, with some critics saying the trend is allowing billions in potential tax revenue to go uncollected. Former U.S. Treasury chief Lawrence Summers has argued that the federal government could collect an additional $100 billion a year without raising taxes a cent — simply by increasing the audit rates for millionaires.

But audit rates for taxpayers who make over $1 million a year fell by half between 2010-2018, according to a Syracuse University analysis.

Where the IRS is most likely to audit taxpayers 01:01

Middle-class Americans aren't as lucky. The audit rate for taxpayers earning between $50,000 to $75,000 has declined, but at a slower rate. Audit rates for individuals in that income bracket have declined 31%, dipping to 0.54% in 2018. Taxpayers with incomes between $1 up to $25,000 have seen their audit rates drop by 42%, to 0.69%, while those earning between $25,000 up to $50,000 have had their audit rates decline by 34% to 0.48%.

In other words, audits for lower-income and middle-class taxpayers have dropped far less than the decline enjoyed by millionaires.

Audit rates may continue to slip, given the IRS' forecast that it will lose up to 31% of its current workforce, or almost 20,000 full-time workers, to retirement within the next five years.

The IRS hasn't released audit rates for last year, but data for 2018 shows the percentage of returns that got audited based on your income:

  • $1-$25,000: 0.69%
  • $25,000-$50,000: 0.48%
  • $50,000-75,000: 0.54%
  • $75,000-100,000: 0.45%
  • $100,000-$200,000: 0.44%
  • $200,000-$500,000: 0.54%
  • $500,000-$1 million: 1.1%
  • $1 million-$5 million: 2.2%
  • $5 million-$10 million: 4.2%
  • Over $10 million: 6.7%

Audits for rural Americans

And previous research has found that individuals in poor, rural counties are more likely to be audited than those from rich areas. The county where residents are most likely to face an audit is Mississippi's tiny Humphreys County, where the median household income is less than $24,000 a year, or less than half the income of a typical U.S. family.

The reason is due to an IRS policy of scrutinizing taxpayers who claim the Earned Income Tax Credit, or EITC, a refundable tax credit aimed at low- and moderate-income Americans, researcher Kim M. Bloomquist, a former senior economist in the IRS Office of Research, said last year. Many of those rural counties with high audit rates have larger minority populations.

By contrast, the counties with the lowest audit rates tend to have higher incomes and a population that's mostly white. Denali, Alaska, with the lowest audit rate of all U.S. counties — at 2.17%, compared with 4.8% for Humphreys County — is 84% white and has a median household income of more than $83,000, according to Census data.

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