Tax Facts: In 2018, US federal, state and local governments collected a combined total of $5.1 trillion in taxes or more precisely $5,086,700,000,000. This amounts to $15,535 for every man, woman and child in the US, or $39,869 for each household, or 24.8% of the US economy. On the other hand in 2018, federal, state and local governments spent $6.74 trillion leaving a deficit of $1.64 trillion………Source: GAO and JustFacts.
Tax Quotes: “The income tax created more criminals than any other single act of government” – Barry Goldwater
Tax Humor: “Why won’t a shark eat a tax collector?…..professional courtesy” – Author Unknown
and in the spirit of the season: “Taxes date all the way back to year one, when baby Jesus was visited by two wise men and an IRS agent who demanded half of the family’s frankincense” – Jimmy Kimmel
Tax Subject for the Day: Ten Major Trends in IRS Audits
Most taxpayers envision Internal Revenue Service audits as intrusive investigations resulting in criminal sentences. Today, nothing can be further from the truth. The IRS’s auditing power has been greatly diminished in the past decade as IRS audit resources have been reduced by 28% and the audit rate has dropped from 0.9% in 2010 to 0.5% in 2018. In fact, the number of IRS audits in 2018 (991,168) dropped almost in half compared to 2010 (1.735 million).
(1) Most audits are done by mail – 2018 audits by mail: 75%
(2) The main issue in audits is the EITC
(3) An alarming amount of people do not respond to an audit: 66% non-response rate
(4) The most common IRS challenge to a return is not an audit, but the dreaded CP2000 notice
(5) The IRS knows who to audit as it results in an adjustment 89% of the time
(6) Field audits are rare, expensive and saved for complex taxpayer situations such as businesses and
tax avoidance schemes, Average amount owed in a field audit: $85,400
(7) Want your business to escape an audit? Be an S-Corp or Partnership – audit rate 0.22%
(8) Audits on the wealthy are still popular, but has dropped to 1 in 31 earning $1 million or more
(9) Audits have dropped, but penalties are rising – In 2018, 606,121 individual taxpayers were assessed
an “accuracy penalty” compared to 58,366 in 2005
(10) Tax evasion prosecutions are low. In 2018, there were only 636 indictments for tax crimes – Source: taxprotoday.com
In no way am I recommending that you play the audit roulette game. Always file accurately.
Next time, the subject I’ll discuss will be: What the heck is an SFR
John Papile: email@example.com .