written by Joe Farias

The IRS revealed the newest data and it shows a decline in audits amid all income groups for the year of 2013 with individual audit coverage rate at it’s smallest since 2006.

Audit Types
The IRS classifies different types of audits into several classes. Field Audits are usually complete audits. Correspondence audits are carried out via mail with the taxpayer.

The overall individual audit rate last year was lower than 1.03 percent. In the year 2011 the audit rate was 1.11. The last time the rate was that low was in 2006. To put a perspective on the matter, The IRS chose 1,404,931 individual tax returns for verification. Out of all of those audits – 1,060,779- were correspondence audits while fields audits were only a mere 344,152.

Higher Income Individuals
The higher income earned the higher the audit coverage rate. Higher income is regarded as so if income is over $200,000. Within higher income classes, the amount of field audits increased in 2013 contrasted 2012. The increase in field audits could potentially be due to the IRS trying to curb tax evasion by secretly conceal assets in tax heavens or unreported accounts. The IRS is trying to promote taxpayers to come forward with their offshore voluntary compliance program.

Audits also declined for businesses in 2013. The IRS reported that it selected 0.61 percent of all business returns for examination compared to 0.71 percent in 2012. For the first time in three years, the audit rate of both small and large corporations declined. The IRS selected 0.95 percent of returns for examination from corporations with assets under $10 million and 15.84 percent of returns from corporations with assets over $10 million.

S corporations and partnerships are among the most popular business entities for small and mid-size businesses. The IRS received 4,476,307 S corporation returns in 2013 and 3,550,071 partnership returns in 2013.

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