The IRS audited approximately 1.0 million tax returns in Calendar Year 2017. This was less than 1% of all returns, approximately 0.5 percent. The IRS conducted 74.8 percent of Fiscal Year 2018 through correspondence audits. Of these 1.0 million audits of tax returns, almost 30,000 resulted in additional refunds of more than $6.0 billion to taxpayers.
However, the IRS conducts compliance activities that are not considered traditional audits, such as automated under-reporter notices about math errors and document-matching. A reply letter explaining and clarifying any discrepancy with any underlying evidence attached will normally suffice and resolve the issue with finality. For example, taxpayers must respond to a math error notice within 60 days with any request for abatement, or the IRS may summarily assess the tax without any other action.
In contrast, traditional audits include specific requests by the IRS to examine returns and supporting documentation formally. These traditional audits are commonly done through correspondence (examination by mail) and field (face-to-face audit) examinations.
While 1.0 million traditional audits may seem like a vast number, it is a drop from 1.74 million audits in 2010. The IRS is conducting fewer audits of returns primarily due to federal budget cuts that have affected the size of the IRS staff. However, in the fiscal year 2016, the IRS audited 1 million returns through the traditional audit method while the number of “unreal” audits was over 8 million.
This does not diminish the fact that there are certain taxpayer actions that can cause the Internal Revenue Service to take notice and trigger an audit. If taxpayers do the right (wrong) thing, the IRS tends to find them like bees, honey. Enlisting the assistance of a qualified Atlanta tax professional can significantly reduce the risk of IRS scrutiny.