IRS Individual Income Tax Audits Continue to Fall

09 January 2020

Taxpayers are now half as likely to be audited by the IRS for their individual income tax returns as they were a decade ago.

IRS Workforce Decline Largely to Blame

The IRS audited 0.45 percent of individual (1040) income tax returns during fiscal year (FY) 2019, according an IRS report released this week. This number is down from 1.1 percent of tax returns audited in 2010. The IRS’s ongoing loss to its total workforce is largely to blame for the consistent decline in IRS audits, according to the report.

“The IRS lost more than 29,618 full time positions between [fiscal year (FY)] FY 2010 and FY 2019, which includes Information Technology, Operations Support, Taxpayer Service and Enforcement personnel. These losses directly correlate with a steady decline in the number of individual audits during the past nine years,” the IRS report notes.

Hill Reaction

Although individual audits have significantly decreased, Democratic lawmakers on Capitol Hill are criticizing the fact that the IRS continues to conduct more examinations on lower-income individual taxpayers than it does higher-income taxpayers or corporations. However, the IRS has said previously that audits on higher-income individuals and businesses are significantly more complex and require more resources.

“IRS audit rates are at their lowest levels in 40 years, allowing the wealthy and well-connected to steal from taxpayers with no consequences,”Senate Finance Committee ranking member Ron Wyden, D-Ore., said in a January 7 statement. “The bulk of tax avoidance and fraud comes from corporations, pass-through business and those at the top. Ensuring the wealthy and corporations pay what they owe takes the most resources and manpower, and I’m working with the IRS to get a clear picture on funding and staffing levels needed to audit top earners at 2010 levels,” Wyden added.

Currently, the IRS anticipates that up to 31 percent of its workforce (nearly 19,719 full-time employees) will retire within the next five years, according to the IRS report. The IRS’s workforce decline is expected to create a “significant risk of a large knowledge and experience gap for the nation’s tax agency.”

The IRS’s FY 2019 Progress Update Report can be located here.

By Jessica Jeane, Senior News Editor