In 2013, the IRS audited roughly 1 percent of all tax federal tax returns. However, there are specific factors that could increase the odds that a specific return is audited. For instance, those who made more than $1 million a year are audited at a rate of 11 percent. In comparison, those who made less than $200,000 a year were audited at a rate of .88 percent.
Part of the reason why audit rates are so low has to do with Congress. In 1998, they ordered the IRS to focus more on taxpayer rights and less on auditing. However, recent budget cuts have also forced the agency to focus on a lower number of returns for further examination. To help the government find returns most likely to result in a successful audit, they rely on the DIF score.
Each return is put through a computer that compares an individual’s claimed deductions versus the average for people with similar income or other deductions. For instance, those who deduct a large amount of mortgage interest compared to their income could be flagged for an audit. Other factors that could trigger an audit include unreported income, a home office and large deductions for meals and entertainment by self-employed taxpayers.
Those who are audited by the IRS may wish to consult with an attorney who may be able to dispute the audit during negotiations with the government or in tax court. During a tax dispute, an attorney may be able to help an individual who is facing an audit organize records that the service may examine during the proceedings. Additionally, legal counsel may be able to help an individual look for any sections of the return that may be revised for a more accurate estimation of the taxes owed.