Audits of High-Income Filers Increased

The IRS’s annual report on enforcement shows that the audit rate on millionaires in the government’s fiscal year 2011 (ending September 30, 2011) rose to 12.48%, compared with just 8.36% in the previous fiscal year. Even the rates of those with income between $200,000 and $1 million increased to 3.93%, compared with 3.1% in fiscal year 2010.

Looking ahead, the number of future audits may decline because the IRS has about 3,000 fewer enforcement agents due to budget cuts. However, over the past 10 years the IRS has doubled the number of correspondence audits (querying returns by letters), and this trend could continue because correspondence audits are not labor intensive.