If you're scared of an audit by the IRS, there's less to fear these days. New data show that budget cuts at the IRS mean the agency is investigating fewer wealthy taxpayers.
An average taxpayer's chance of being audited has tumbled 23% in three years, in line with an IRS budget that's dropped an inflation-adjusted 17% since 2010. Only 0.9% of individual taxpayers were audited last year, the lowest proportion in seven years.
Even in this era of IRS austerity, wealthier people still face more scrutiny than average. If you make $200,000 to $1 million annually, your chances of an audit are around 2.2%, more than double the average. It's even higher for the extra-wealthy—people who earn more than $1 million are audited at a rate of around 7.5%. But those rates are dropping, and precipitously:
The only major group that saw an increase in their chances of an audit last year? Taxpayers living overseas. New laws and regulations on investments held overseas have made their tax filing much more difficult.
