Some Georgia residents may be concerned about the possibility of receiving an audit letter from the IRS. However, very few people are audited, and even a notice of an audit is not necessarily something to worry about. The most important thing to do is open the letter as soon as possible and take action. There will probably be a response deadline, and complications and penalties can mount over time.
Georgia taxpayers may be at increasing risk of an IRS audit in the years ahead. At present, the IRS audits fewer than 1 percent of taxpayers, but audits may go up based on hiring news from the agency. Despite a claim that budget cuts would leave it unable to make new hires, 700 enforcement and audit personnel have been added to its staff.
Georgia residents who have already filed or who will be filing their tax returns may wonder whether they are likely to get audited. The odds are not high. In 2015, the IRS audited less than 1 percent of tax payers, and the number is unlikely to increase in 2016. However, there are certain red flags that make an IRS audit more likely, and one of these is earning more than $1 million. Taking a disproportionately large charitable donation is another.
Georgia residents may be happy to know that they do not live in one of the top 10 states for federal tax audits. According to a study by TaxAudit.com, taxpayers who live in Vermont are more likely to be audited by the Internal Revenue Service than people in other states. The second-worst state for federal tax audits is California followed by Nevada, Massachusetts, Delaware, Colorado, New York, New Jersey, Florida and New Hampshire.
Georgia residents who have received an audit letter from the Internal Revenue Service may be wondering what it means. While the letter may not indicate a person is guilty of tax fraud, it also should not be ignored.
Georgia taxpayers who earn more than $1 million per year may be less likely to face an in-person or field IRS audit but might be significantly more likely to be audited by mail, also known as a correspondence audit. The IRS has always focused on auditing taxpayers with higher incomes, but it has shifted its focus to correspondence audits. This is in part due to a drop in staffing at the agency. Correspondence audits are less costly.
It is not uncommon for Georgia residents to make mistakes when filing a tax return due to how complicated the process can be. If they have multiple bank accounts and investments, they may have a number of sources of income, and it might not always be clear how to report it.