IRS is staffing up. Does that mean more people will get audited? – USA TODAY

Maurie Backman| The Motley Fool

Filing a tax return can be stressful in its own right. But then there's the notion of being audited to think about, and that can take tax-related stress to a whole new level.

Now, the reality is that the IRS audits less than 1% of all tax returns filed, so the likelihood of having yours further scrutinized is pretty low. But with the IRS taking steps to boost audit activity, that could result in more tax returns getting a second look.

A big reason the IRS audits such a small percentage of tax returns filed is that the agency doesn't have the staff to do more. But that could soon change, because the agency is hiring in an effort to ramp up auditing among filers with higher incomes.

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While the IRS currently has only 6,500 agents available to audit high-income filers, it has plans to hire thousands of additional employees in the coming months. And that could lead the way to an uptick in audits.

Between 2015 and 2019, IRS audits dropped by 44%, according to a 2021 report from the Treasury Inspector General for Tax Administration. Audits also dropped by 75% for filers making $1 million or more, and so now, the IRS is hoping to change that.

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Let's get one thing out of the way: a tax audit is not necessarily the scary thing you might expect it to be. Most of the time, IRS audits are conducted and settled by mail, and sometimes, they can work out in filers' favor (meaning, an audit doesn't result in owing more money to the IRS).

If you were honest about your income when you filed your most recent tax return, then there's really no reason to be worried about an audit. If you lied about your deductions or failed to report income, that's a different story, of course. But as long as you were truthful, there's no reason to assume that your tax return will get flagged.

Furthermore, if you're an average earner, you're less likely to get audited than a very high or very low earner. For the 2019 tax year, for example, the audit rate was just 0.2% for people earning between $25,000 and $500,000. For those earning $5 million to $10 million, it was 2%. So unless you pull down a millionaire's income, your chances of having your tax return scrutinized are very slim.

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If you want to reduce your chances of getting audited, though, make sure to truly report every cent of income you earn, whether it's payments for a side job or interest income from your savings account. And also, claim reasonable deductions. If you're self-employed and earn $75,000 a year and you write off $45,000 in deductions, that could raise a red flag.

But otherwise, if you commit to being honest with the IRS, there's a good chance it will leave you alone. The IRS is still extremely resource-constrained, so while it wants to ramp up auditing, the reality is that focusing on higher earners is its best bet. We're unlikely to see an uptick in audits among average earners for quite some time.

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IRS is staffing up. Does that mean more people will get audited? - USA TODAY