Millionaire?  Here’s how likely you are to be audited by the IRS.

Millionaire? Here’s how likely you are to be audited by the IRS.

The Biden administration has proclaimed its plans to crack down on wealthy tax dodgers, directing $46 billion to the IRS so it can track down money hidden by the ultra-rich.

For the time being, however, the chances that a high earner will be checked by the IRS remain negligible. A new report released by Syracuse University’s Transactional Records Access Clearinghouse found that a millionaire’s chances of meeting a CPA face-to-face have dropped to just 1.1% in 2022.

Although IRS law enforcement officers devote a quarter of their time to checking millionaires, nearly 700,000 millionaires “are not checked at all,” the group found.

The IRS has been a little more active in mail-in checks — cases where the agency requests additional information about certain items on an individual’s tax return. According to TRAC, around 85% of all audits and almost half of the millionaire audits were carried out by mail. Nevertheless, it called this form of enforcement a “fiction”.

The number of multimillion-dollar tax returns the IRS reviews each year has fallen from nearly 41,000 a decade ago to just 16,800 in 2022, with the pace of enforcement slowing as the agency lost funds and staff.

“Heavy budget cuts over the years have resulted in fewer and fewer millionaire returns being investigated by the IRS,” TRAC said.

While the number of millionaire checks increased slightly from 2020 to 2022, the rate remained low because the number of high-income tax returns also increased during this period.

In 2022, 703,000 tax returns were filed showing income of at least $1 million, IRS figures show.

“Easy Sheet Music”

One group that hasn’t benefited from the shrinking IRS are lower-income taxpayers. Those earning less than $25,000 who qualify for the Earned Income Tax Credit are audited five times as often as everyone else, TRAC found. In fiscal year 2022, almost 1.3% of these tax returns were subject to an in-person or postal review.

For comparison: The average verification rate of all tax returns last year was only 0.4%.

“[T]This group of taxpayers has historically been targeted not because they are responsible for most tax filings, but because they do not have the resources to contact taxpayers at a time when the IRS is increasingly relying on correspondence checks to help or answer their questions are easy prey,” concluded TRAC.

“While these small differences may sound trivial, the difference represents tens of thousands of low-income families,” the report said.

The Biden administration has vowed to crack down on ultra-wealthy tax dodgers while vowing to keep audit rates the same for anyone earning less than $400,000 a year. The IRS released data last year showing that it has stepped up scrutiny of the highest earners, with a particular focus on those earning $5 million or more.

Still, the recent funding push for the IRS in the Inflation Reduction Act has prompted some Republicans to do so claim The agency is mobilizing a “new army” of tax collectors to harass middle-income workers. While these are partisan claims designed to discredit the IRS, TRAC notes that the agency’s own track record in this area leaves it open to criticism.

Under former Commissioner Charles Rettig, whose tenure marked increased audits of low-income Americans and recently left the agency, TRAC is calling on the IRS to create “a full and detailed transparency program.” Americans deserve to know “how these new tools will be used in selecting taxpayers for enhanced audits,” the report says.

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