IRS revs up its audit machine; audit rates rise across-the-board — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

IRS revs up its audit machine; audit rates rise across-the-board

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The latest data from the IRS confirms what the feds have been saying for the past year. (IRS News Release IR-2007-63)

Alert: Taxpayer audits are up across-the-board. The number of audits has increased for virtually every taxpayer category based on type (individual or business entity) and income level, according to the new IRS Data Book for the 2006 fiscal year, Oct. 1, 2005, through Sept. 30, 2006.

What’s more, the IRS vows to keep the pressure on as it focuses on a perceived $300 billion revenue “tax gap.”

Here are several key facts included in the 2006 Data Book.

About 1.3 million individual income-tax returns were audited, as were 41,648 employment-tax returns and 28,799 corporate returns.

Audit rates for individuals with an AGI of between $50,000 and $100,000 increased from .57 percent in 2005 to .60 percent for 2006.

Audit rates for Schedule C filers with an AGI above $100,000 jumped from 3.65 percent for 2005, to 3.90 percent for 2006. (For 2004, this figure was only 1.86 percent.)

Exams of S corporation returns increased from .30 percent for 2005 to .40 percent for 2006. But audit rates of non-S corporations remained at 1.60 percent.

IRS personnel conducted approximately 30 percent of all the audits. The remaining 70 percent were correspondence audits.

Tip: View the entire IRS 2006 Data Book (also called Publication 55B) at,,id=168593,00.html. Printed copies may be obtained by writing the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. You also can call for a copy at (202) 512-1800 or fax a request to (202) 512-2250.

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