The Internal Revenue Service (IRS) has revealed that its audit rates among certain income groups have increased during recent months but still remain low when compared to around a decade back.
Among earners of $1 million to $5 million, the audit rate more than doubled from 0.6 to 1.3 percent. For individuals making $5 million to $10 million, the audit rate doubled from 1 to 2 percent. The biggest increase was seen among those making above $10 million, with the audit rate jumping over four times from 2 to 8.7 percent.
Interestingly, the audit rate for those who made above $10 million in tax year 2010 was 21.5 percent, which declined to 5.8 percent in tax year 2017. Audit rates for every income group upwards of $50,000 were also substantially higher for the 2010 tax year. The agency claims that “resource constraints” are limiting the work it can do.
At present, there are only 6,500 front-line, revenue agents performing “these types of exams” on the field. Due to this, enforcement activity among the high end of the income distribution is “far lower than in the past,” the agency stated.
The IRS said in the statement that “substantially all experienced, field Revenue Agents” are focused on high-income individuals and related entities as far as personal income tax is concerned.
Back in March, the IRS had planned to hire 10,000 workers. On June 1, the agency issued a notice announcing that it plans to hire over 4,000 contact representative positions at IRS offices across the country this summer.
Due to the pandemic, the IRS faced an unprecedented amount of work in the 2021 filing season. The agency kicked off this year with over 8.4 million unprocessed individual tax returns and transactions according to a preliminary report by the Treasury Inspector General for Tax Administration.