WASHINGTON D.C. (KRQE) — The Internal Revenue Service (IRS) has been doing fewer and fewer audits over the years, according to a new federal report. And the declining scrutiny is greatest for those making above $200,000 a year.
From 2010 to 2019, the number of tax return audits done on individuals across the U.S. declined by over 70%, according to a recent report from the U.S. Government Accountability Office (GAO). In 2010. roughly nine out of 1,000 tax returns were audited. In 2019, only two or three out of 1,000 were audited on average, the report shows.
In response to the GAO report, the IRS highlighted concern over how the GAO report was made. The IRS reportedly had “concern about drawing conclusions from aggregated data.”
Audits are a way for the IRS to ensure that people pay the appropriate amount of taxes on the income they earn. In particular, audits can be used to ensure people aren’t underreporting their income. On average, the IRS estimates that more than $245 billion is left off of tax filings or underreported each year, according to the GAO report.
But auditing takes time, money, and staff. And audits for the wealthy (those making more than $200,000 a year) take more effort, according to the report. And lawmakers have questioned the equity of the auditing system.
That’s a potential explanation as to why the wealthy are audited less often, according to the report. The funding for so-called “enforcement activities” has dropped by nearly 30% from 2010 to 2018, the report notes. The IRS’s overall budget in 2021 was $2.7 billion lower than in 2010.
Audits for low-income individuals, on the other hand, generally require fewer IRS resources, the report notes. And in particular, individuals claiming Earned Income Tax Credits (EITC) are audited more frequently than average, the data shows.
In tax year 2019, roughly 0.17% (17 out of 10,000) of individuals making between $25,000 per year and $500,000 per year were audited, the GAO analysis shows. But 0.40% (40 out of 10,000) of those making less than $25,000 per year were audited. And 0.77% (77 out of 10,000) of those claiming Earned Income Tax Credits were audited.
That means the IRS audits those making less than $25,000 per year more than twice as frequently than those making between $25,000 and $500,000 per year.
The report also notes that the IRS does audit those making more than $500,000 most frequently. For example, in tax year 2019, a little over two out of every 100 individuals making over $5 million a year were audited. But, according to the IRS, when the high-income audits find that people owe additional money, that cash is harder for the IRS to collect than it is to collect from lower-income individuals.