Middle Class? Get Ready For Your Audit!

If you make from $25,000 to $100,000 dollars, the IRS is much more likely to audit you this year, and those caught cheating can expect to pay about $4,100 more in taxes.

From the NYT:

Middle-class Americans most likely to have their tax returns examined under the new strategy are those who own a business, even a side business, or are landlords or have investment income. There is little or no independent reporting of such income; the I.R.S. has proposed increased verification and some withholding of payments to independent contractors to reduce cheating, but Congress has not moved on any of those suggestions.

Middle-class taxpayers who file a Schedule C — freelancers, consultants and very small businesses — are three times as likely to be audited as those in the same income group with no such business income.

The I.R.S. is also increasing scrutiny of people whose returns show they have bought into any of the growing number of schemes sold by people who teach, falsely, that wages are not subject to tax. Some customers of these schemes have received prison terms of more than 10 years, and the Justice Department is pursuing civil and criminal cases against scores of tax fraud promoters.

Blended families are also more likely to be audited. The I.R.S. said that it is finding that families created after a divorce, or the death of a spouse, often have children who are claimed on more than one tax return.

Even though the middle class will be facing more audits this year, they’re still technically the least likely group to be targeted with an audit. For those making under $25,000 the odds are 1 in 94. Above $100,000: 1 in 16. Last year the middle class odds were 1 in 140.—MEGHANN MARCO

I.R.S. Audits Middle Class More Often, More Quickly [NYT]
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