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Your Money > Taxes

Audits on wealthy rise
IRS data show those making more than $100K most likely to be audited. But overall, rates remain low.
March 12, 2004: 10:10 AM EST

NEW YORK (CNN/Money) Audit rates are rising at the IRS particularly for taxpayers whose adjusted gross incomes are $100,000 or more - but overall a taxpayer's chances of tangling with Uncle Sam are still quite low.

According to data released Thursday by the IRS, among taxpayers whose AGIs were $100,000 or more, 1 in 94 filers (or 1.06 percent) were audited in 2003. That's a 24 percent increase over 2002.

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The majority of the increase came from the milder form of audits known as the correspondence audit, which is conducted by mail, as opposed to the more dreaded face-to-face audit known as a field audit.

For taxpayers whose AGIs were under $100,000, 1 in 164 filers (or 0.61 percent) were audited last year, an increase of 12.4 percent over 2002. Again, correspondence audits accounted for the biggest increase.

Among taxpayers overall, 1 in 154 filers were audited, a 14.2 percent increase compared with the prior year.

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Taxpayers have six weeks to get their tax returns into the IRS. If you have not yet tackled that project, you may be in for a surprise. CNNfn's Valerie Morris reports.

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Enforcement activity at the IRS had been on the decline during the 1990s as the IRS, under a mandate from Congress, tried to improve its customer service. But IRS Commissioner Mark Everson told reporters at the agency's headquarters that the decline had a "negative effect" on the public paying taxes.

He indicated the step-up in audits is likely to continue. "We need to do more and continue to increase it, particularly on the big income area," said Everson. "But I don't think it's necessarily the case that audits need to return to rates of 10 or more years ago."

The Bush administration's 2005 budget proposal earmarks an additional $490 million for the IRS. Of that, $393 million would be devoted exclusively to enforcement efforts, particularly against high-income taxpayers, corporations and tax evasion, the IRS reported. The proposal also calls for the hiring of 5,000 new auditors, tax collectors, criminal investigators and other staff.  Top of page

Reuters contributed to this report

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