Question of the Day (Updated): What income level on tax returns is audited least frequently by the IRS?

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Apr 14, 2021
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Taxes, Question of the Day

Answer: $25,000-$50,000 income level are audited 0.40% of the time or 4 in 1000 tax returns 

Questions:

  1. Why do you think the percentage of returns that get audited is so low? Explain your reasoning.
  2. Why do you think that taxpayers are so afraid of being audited? Is their fear warranted?
  3. Do you think that low audit rates can contribute to more taxpayers "cheating" on their tax returns? Why or why not? 

Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (IRS):

Despite common misperceptions about IRS examination rates, the reality is that the likelihood of an audit significantly increases as income grows.

Taxpayers with incomes of $10 million and above had substantially higher audit rates than taxpayers in every other income category for each calendar year from 2010 through 2015. Those with incomes above $1 million also had higher exam rates than all other groups earning less.

Tax Year 2015 provides a good historical overview of where IRS compliance priorities are focused. The exam coverage rate of taxpayers with incomes of $10 million or more is 8.16%. The rate for those between $1 million and $10 million is 2.53%. And other income categories are far below that – generally less than 1%.

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April 15 is the traditional tax filing deadline. Find out what the new tax deadline in 2021 is here. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.