IRS audits hit the richest — and the poorest

Tax audits by the Internal Revenue Service focus overwhelmingly on the richest taxpayers — and on the poorest, leaving middle-income earners the least likely

According to an analysis by tax law firm J. David Tax Law of data from the IRS, the two income brackets most likely to be audited were taxpayers earning $10 million or more, and those earning from $5 million to $10 million, at 66 and 39 audits per thousand filers, respectively. Coming third were those at the opposite end of the income spectrum — taxpayers with no positive income, at 18 per 1,000 filers.

The last figure may well reflect, at least in part, the fact that IRS examines a larger proportion of returns that claim the Earned Income Tax Credit, due to congressional requirements and higher rates of errors on those returns.

While high-income taxpayers have higher audit exposure, they actually account from a relatively small number of audits. The number of audits of those earning $10 million or more hit approximately 3,360 audits out of a group of 51,250 returns filed. Meanwhile, the 2.93 million returns filed by those with no positive income accounted for approximately 52,700 audits — and the 44.98 million returns of those earning between $1 and $25,000 generated almost 225,000 audits.

Audit exposure did not vary hugely geographically, though there was a tendency to higher rates in the South, with nine of the 10 highest in states in the Southeast or Southwest.

"These findings reinforce that audit risk is shaped by more than income alone," said Jonathan Sooriash, CEO of J David Tax Law, in a statement. "Where you file, the types of deductions you claim, and regional enforcement priorities all play a role."