It’s unlikely that the IRS will audit more taxpayers in 2021 because audits are trending downwards since 2010. In 2010, the IRS audited about 0.9% of tax returns, and in 2019, the IRS audited around 0.4% of tax returns. Whether you live in Texas or another state, you don’t have to worry about an audit as long as you’re honest and keep records.
Proof of your deductions and income
With how low the statistics are for investigating tax returns, you shouldn’t worry much about it happening to you. However, you should still keep accurate records just in case you’re one of the few to get an audit. Unlikely doesn’t mean impossible. As long as you keep accurate records, your audit should go smoothly. You won’t have to waste valuable time gathering all the important information and proof you need. Failing to keep records can cause you to lose money since you wouldn’t be able to prove your deductions. If you need assistance with this, you can consult with an attorney who is familiar with tax law.
Unlikely to see an IRS agent
Most people never even meet with an IRS agent when the IRS audits them. 74% of audits didn’t require an IRS agent to go to the taxpayer’s home. In 2021, you are approximately 56% less likely to receive a tax investigation than in 2010. Out of the 200,039,000 tax returns in 2019, the IRS audited 771,000.
Understaffed and underfunded
The IRS is losing money by not auditing more tax returns, but they can’t afford to hire new staff either. This is the biggest reason why audit rates are so low. Adjusted for inflation, the IRS collected $28.2 billion from audits in 2010 but only $11.1 billion in 2019. From 2010 to 2019, funding for the IRS decreased by $1.6 billion.
Audits are expensive for the IRS to conduct, so they are usually for higher-income taxpayers. Millionaires are more likely to experience an audit than those who are earning less though even this percentage has become low. In 2010, 12.5% of millionaires had to go through an audit compared to 2.4% in 2019.
Although the IRS doesn’t conduct a lot of audits, you should always fill out your tax returns honestly and keep records of your deductions and income. That way, you know you’re safe during an audit, and it won’t be a time-consuming headache for you.