For the past decade, the IRS has seen an increase in the number of returns filed paired with a decrease in resources available for examinations particularly for the most complex tax returns of high-income and high-wealth individuals, large corporations, and complex partnerships. More returns, fewer audits.
Going forward, as the IRS moves to implement the Strategic Operating Plan released earlier this month, the agency is focused on pursuing high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe. As a result, the IRS has no plans to increase the audit rate for households making less than $400,000.
The 2018 information is the most recent year we have final audit rate data because it is the most recent tax year for which the statutory period has closed, meaning in most cases no new audits will be started and the audit coverage rates should be final. Typically, audit rates for higher-income categories increase over time as new audits are opened during the statutory period. This means the audit numbers for higher-income taxpayers listed in the 2022 Data Book Table 17 will increase over time for tax years within the statutory period; the final exam rates for these taxpayers will be significantly higher in future years.
While IRS accepts most returns as filed, some are selected for examination or audit. In FY 2022, the IRS closed 708,309 tax return audits, which resulted in nearly $30.2 billion in recommended additional tax.
That being said, we dont make tax planning or strategic choices from a place of fear. If you have all your records and you make choices within the confines of the law then you have nothing to fear. Take advantage of every tax deduction to which you are entitled!
If you have any questions or concerns about your 2022 or 2023 filings based on the expanded Strategic Operating Plan, please reach out to me.
I also have 3 days still available in May to work one on one with you to get your business to where it needs to be -> 50% profit before tax. Sign up here.