The 2012 audit rate fell to 1.3% for individuals, one out of every 97 returns. 2011’s rate was 1.11%. The number of enforcement staff dropped nearly 6%, partly due to budget cuts. And many agents were detailed to work identity theft cases.
Filers with incomes of $1 million or more continued to get the most scrutiny. The Service audited 12.14% of these filers. That’s one out of every eight tax returns. Exams of folks with lower incomes declined in proportion to the drop in the audit rate.
Audits of all classes of business returns rose last year to 0.71%. That reflects an effort by IRS to check most S companies, partnerships and regular corporations. Exam rates ranged from 17.78 for returns by corporations with assets of $10 million or more to 1.12% for small corporations, 0.48% for S firms and 0.47% for partnerships.