Georgia taxpayers may be under the impression that the Internal Revenue Service conducts audits on only a tiny number of tax returns each year. However, according to H&R Block, the number may be significantly higher than commonly reported statistics indicate.
For example, the IRS says that it audits around 0.7 percent, or one out every 143, tax returns each year. That adds up to over 1 million tax returns annually, but that isn’t the true total. Many taxpayers don’t realize that the IRS also subjects millions of returns to automated audits each tax season, a practice that bumps up the chance of an audit to one in 23 tax returns. Automated audits electronically verify the accuracy of tax returns through various sources, including 1099s and W-2s. If a tax return is flagged through the automated system, it could be assessed additional taxes, penalties and interest. At a minimum, the taxpayer will have to provide the IRS an explanation for the flagged information.
According to the IRS Taxpayer Advocate, the IRS used automated audits to challenge at least one portion of over 11 million tax returns in 2011. In comparison, it only conducted 1.56 million traditional audits.
The IRS is once again using automated tax audits for the 2018 tax season. If people receive a letter questioning a portion of their tax return or informing them of an audit, it may be prudent to contact a tax attorney as soon as possible in order to discuss the best way to respond.
Source: Accounting Today, “IRS more likely to question returns than taxpayers think: Block“, Jeff Stimson, March 13, 2018