New IRS Data Book shows steady increase in audits

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in Employee Benefits Program,Human Resources

More audits are coming! More audits are coming!

The IRS just released its 2005 Data Book that includes vital tax information from the past year. (IRS Information Release 2006-46) And it doesn’t take a midnight ride from Paul Revere to sound an alarm to the taxpaying public.

Alert: The national audit rate continues to climb, especially for taxpayers with adjusted gross incomes (AGIs) above $100,000.

According to the new Data Book (formally known as IRS Pub. 55B), the IRS conducted over 1.21 million audits of individual tax returns last year. That’s nearly a 12 percent increase from the prior year.

The overall audit rate for individual taxpayers is still a shade under 1 percent (0.93 percent, compared with 0.62 percent in 2004). But the IRS appears to be making good on its recent promises to turn up the enforcement heat.

People who filed Schedule C business returns also faced a greater audit risk. While only 1.47 percent of Schedule C filers with incomes between $25,000 and $100,000 were audited in 2004, that percentage rose to 2.21 percent last year. And Schedule C filers who earned above $100,000 saw their audit chances nearly double from 1.86 percent in 2004 to 3.65 percent last year.

The Data Book provides a wealth of other information for taxpayers to ponder, including the amount of tax revenue collected, the number of tax refunds and figures on electronic filing. It features state-by-state breakdowns in categories ranging from examination coverage to employee benefit plans.

You can access the Data Book online at www.irs.gov/taxstats (click on “IRS Data Books” in the Products, Publications and Papers section). Or, you can request a copy by calling (202) 512-1800.

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