How Often Does the IRS Audit Previous Tax Years?

The Internal Revenue Service overall audit rate is 1.03 percent for individuals, according to the agency's stats for fiscal year 2012. That includes a 1 percent rate for auditing older returns from fiscal 2011. The odds of an audit for any year are low, but high income or particular deductions can change that. The older the return, the less likely it is you'll face an auditor.

Time Limits

If you haven't done anything screamingly suspicious, there's a zero frequency of audits for returns more than three years old. That's the normal statute of limitations, but if the IRS thinks you've underestimated income by at least 25 percent, it can push that to six years. A 2012 Supreme Court case limited the evidence the IRS can use to justify auditing that far back, though. In fraud cases, or if you never file a return, there's no statute of limitations.The IRS says it usually focuses on returns no more than two years old.

Frequencies

The IRS audit rate varies with income. In the 2012 fiscal year, the IRS audited 2.67 percent of returns from individuals who reported an adjusted gross income of zero. The agency also audited 27.37 percent of people reporting an AGI above $10 million. For a more normal AGI -- $50,000 to $75,000, for example -- the rate is .64 percent. These stats aren't broken down into different tax years. Individuals with business income have slightly higher audit rates.

Red Flags

Some red flags can trigger a higher risk of IRS audit. If your reported income doesn't match up to W-2s or 1099-MISC forms the IRS receives from the people who pay you, that's guaranteed to raise auditor eyebrows. Large charitable donations, claiming the write-off for a home office or taking big deductions for business meals and travel can all increase the audit odds. They're easy deductions to abuse to reduce your taxable income, so they draw heightened IRS attention.

The Audit

Don't expect a visit from the auditor just because the IRS spotted a problem: 76 percent of audits are done through the mail. The IRS may tell you, for example, that your charitable deductions are pretty high for your income. All you have to do is copies of your receipts and other documentation. If the problem's complicated and the IRS wants an in-person visit, you might want to think about having your CPA or attorney join the party.

About the Author

A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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