How to check out your tax preparer

tax123

bankrate.com

via Moak: How to check out your tax preparer, clarionledger.com, 2/9/2016

Now that most of us have gotten our W2’s, 1099s and various other documents required to do our taxes, businesses and individuals who prepare those taxes are kicking into high gear. You have until April 18 this year to get your individual taxes done, but many of us aren’t waiting.

Finding someone to prepare your taxes is easy. A simple Google search (or a few minutes in front of a local TV channel) will provide you with a wide variety of choices. But increasingly, many consumers have found themselves scammed by shady preparers, finding out their well-meaning-but-incompetent preparer got it wrong, or finding out their preparer misrepresented his or her credentials.

Our tax system allows you to get your taxes done by anybody you want (including yourself). To be a paid tax preparer, all the law requires is that you have a Preparer Tax Identification Number (PTIN). But if you want to find people who are really qualified, you should do a little research.

The Internal Revenue Service has a tool to help you find qualified preparers. Keep in mind not every preparer can go the distance with you if you have problems with the IRS; the ability of some agents to represent you before the IRS is limited by law. The database allows you to search by zip code or last name, and includes the following:

  • Attorneys. Attorneys must possess a current license.
  • Certified Public Accountants. CPAs must be in good standing with their state Board of Accountancy.
  • Enrolled Agents. These preparers must pass a three-part examination, which requires they demonstrate their proficiency and knowledge, and they must complete 72 hours of continuing education every three years.
  • Enrolled Actuaries. These people have a license from an organization called the Joint Board for the Enrollment of Actuaries.
  • Enrolled Retirement Plan Agents. These individuals are licensed by the IRS and (like enrolled agents) must pass a special exam and 72 hours of continuing education every three years.
  • Annual Filing Season participants. These people may not fall in one of the above categories, but the IRS recognizes them as official agents if they complete a certain number of continuing hours in preparation for the specific tax year. Their ability to represent your interests before the IRS is not as broad as those in other categories.

It’s also advisable to check them out by doing an Internet search, or asking for recommendations from friends. Keep in mind, just because someone is on the list, doesn’t mean they will do your taxes for you. It’s up to the individual preparers (and their firms) to determine whether they will take your case. Fees vary, so it’s a good idea to find out their rates in advance.

Here are a few other suggestions (visit irs.gov to get more advice):

  • Never sign a blank return.
  • Always review your return before signing. Once you sign it, you are certifying its completeness and truth, so you should check everything to make sure it’s accurate and honest.
  • Report abuses immediately. If you suspect your preparer has acted dishonestly, report the issue as soon as possible to law enforcement or the IRS.
  • Understand your rights. Visit https://www.irs.gov/Taxpayer-Bill-of-Rights to find out what rights you have as a taxpayer.

Entergy sponsoring free tax help on Feb. 6

tax help

meridenlibrary.org

via Moak: Entergy sponsoring free tax help on Feb. 6, clarionledger.com, 1/27/2016

It’s tax season, and for many of us, filing our taxes has never been more difficult. Tax laws are only getting more complex, and with the addition of the Affordable Care Act and other recent changes, many consumers are bewildered.

But there is reason to hope. There are many agencies and organizations who can help negotiate the maze of tax laws and help us file our returns and provide answers. On Feb. 6, residents can take advantage of Super Tax Day, sponsored by Entergy Mississippi and local United Way organizations. Volunteers certified by the Internal Revenue Service (IRS) through the Volunteer Income Tax Assistance (VITA) program will help local residents file their taxes free of charge, and help determine if they qualify for the federal Earned Income Tax Credit (EITC) program and other refunds and credits.

Current Super Tax Day sites in Mississippi include the Jackson Medical Mall and the M.R. Dye Library in Horn Lake. Both sites will be active from 9 a.m. to 3 p.m.; more sites may be added later.

According to the IRS, EITC benefits families or individuals earning up to nearly $54,000 in 2015, and can benefit a family up to $6,200 (based upon the number of children in the household). “The IRS reports that 20 percent of EITC funds are unclaimed each year simply because people don’t know they are available,” noted Entergy’s Mara Hartmann in a news release.

“It’s clear from the numbers and the research that helping our customers apply for and receive these available tax credits makes a significant economic impact, both for the customer and the local community,” said Robbin Jeter, Entergy Mississippi vice president of customer service. “Entergy’s Super Tax Day events are one of the many ways we power life in our communities.”

According to the nonpartisan Center on Budget and Policy Priorities, EITC is one of the nation’s most effective anti-poverty programs, helping lift millions out of poverty, leading to better school performance, improving infant and maternal health, and even leading to increased graduation and attendance rates.

“Entergy’s support to Super Tax Days and VITA in the four states its utilities serve — Arkansas, Louisiana, Mississippi and Texas — has resulted in approximately 74,000 customers receiving $126 million through the EITC program since 2011,” Hartmann noted. “In Mississippi more than 10,200 residents have received nearly $22.9 million since Entergy Mississippi launched the program by partnering with local advocates.”

Hartmann also noted the company-wide program has brought in $189 million in economic benefits in Entergy’s service area, once you factor in “multiplier effects” to local communities.

To learn more about the program, visit entergy.com/eitc.

Tax scam targets Mississippians

via Moak: Tax scam targets Mississippians, clarionledger.com, 11/3/2015.

I got an urgent call yesterday from my Dad, rattled by a phone call. “I just got off the phone with somebody who said the IRS was about to sue me, then hung up,” he said. Now, if you know my dad, he’s as honest as they come, and so was shocked at hearing this “news.” Taking the number, I told him I would check it out. It turns out that a lot of Mississippians are getting the same call.

“These scammers continue to search for their next victim before, during and even after tax season,” noted Meredith Aldridge, director of the Consumer Protection Division for Attorney General Jim Hood’s office.

It turns out this is an old scam, and for some reason, Mississippians are lately being targeted.

It’s difficult to determine exactly who is perpetrating this scheme, but it’s always pretty much the same. Scammers claim to represent the IRS or Treasury Department, and claim you not only owe the IRS immediately, but they’ll sue you if you don’t pay. If you know how the IRS actually operates, the lie is immediately apparent — if you’re on its radar, you’ll know it well before this point. You will never be surprised, because the IRS simply doesn’t operate that way.

According to Aldridge, targets might be lured in with a potential refund, but they have to provide personal information to claim it. “These con artists are intimidating and sound convincing, using fake names and bogus IRS identification badge numbers,” noted Aldridge’s office in a news release. “They may even know a lot about their targets, and they may even alter the caller ID to make it look like the IRS is calling.”

“The answer is simple for this and other similar phone scams,” Aldridge advises. “Do not share or verify any personal information over the phone.  If it sounds too good to be true or is suspicious, don’t take the action requested.”

Here are a few more tips:

  • The IRS will never call to demand immediate payment, nor call about taxes owed without first having mailed you a bill and allowing you to question or appeal the amount they say you owe.
  • They won’t require you to use a specific payment method for your taxes, such as a prepaid debit card, or request that you wire a payment, or ask for credit or debit card numbers over the phone.
  • They won’t threaten to bring in local police or other law-enforcement groups to have you arrested for not paying. If they did that, many famous tax cheats would long ago have gone to jail by now.
  • Finally, they won’t use email, text messages or any social media to discuss your personal tax issue involving bills or refunds.

If you know you owe taxes or think you might owe the IRS any amount, Aldridge urges you to call the IRS at 1-800-829-1040, and request to speak to someone about payment. If you know you don’t owe anything, report the incident to the Treasury Inspector General for Tax Administration at 1-800­366-4484 or at http://www.tigta.gov.

More tips are available at http://www.agjimhood.com, or by calling 1-800-281-4418.

Hood: Tax scammers at it again

Although it’s been two months since the primary tax deadline, scammers are still trying to collect from gullible Mississippians.

State Attorney General Jim Hood reminded taxpayers that scammers are calling consumers and impersonating officials from the Internal Revenue Service. Hood told Mississippians in a Tuesday news release to use common sense if approached by someone with a phone pitch.

“The answer is simple for this and other similar phone scams — listen to your instincts. If something sounds too good to be true or is suspicious, don’t take the action requested,” he advised.

Tax scammers have been especially busy this year. Very early in tax season, scammers stole the identities — and refunds — of thousands of taxpayers. And in May, the IRS warned consumers about a “phishing” email, which asks consumers to provide personal information with a plea to “update your IRS file.”

This time, according to Hood’s office, the scammers are calling Mississippians claiming to be calling from the IRS. “The victim is told he or she owes money to the IRS and it must be paid promptly through a preloaded debit card or wire transfer,” the releasenoted. “If the victim refuses to cooperate, the scammer threatens the victim with arrest, deportation or suspension of a business or driver’s license.”

In addition, victims may be told they have a refund in an effort to trick them into sharing private information. “If the phone isn’t answered, the scammers often leave an ‘urgent’ callback request,” Hood noted. “These con artists can sound convincing when they call, using fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.”

Hood notes the IRS will never:

  • Call to demand immediate payment. Nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Use email, text messages or any social media to discuss your personal tax issue involving bills or refunds.

So, if you are contacted by a scammer, Hood offers these tips:

  • Don’t answer the phone for a number you do not recognize or that shows up as your own.
  • If you do answer, hang up the minute you realize it is a scam. Even answering simple questions in the affirmative or negative could be used to try to scam you.
  • Be suspicious of anyone who is vague in identifying themselves on the phone.
  • Never wire or send money in any form to persons or organizations you do not know.
  • Always protect your personally identifiable information. Giving personal information out could cause you to become a victim of identity theft.
  • If you know you owe taxes or think you might owe the IRS any amount, call the IRS at 1-800-829-1040. The IRS workers can help you with a payment issue.

If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the treasury inspector general for Tax Administration at 1-800-366-4484 or at www.tigta.gov. For more information, visit the consumer section of the attorney general’s website, http://www.agjimhood. com. If you suspect your personal information has been compromised or think you have been a victim of fraud, identity theft or any other crime, call the Consumer Protection Division of the attorney general’s office at 1-800281-4418 for further assistance and guidance.

Originally published in the Clarion-Ledger on 6/18/15.

How long should you keep records?

With April 15 now rapidly receding into the rearview mirror, most people are probably not spending a lot of time thinking about their taxes, choosing to focus rather on picking out a good beach book or perfecting their golf swing. But now that the pressure’s over, it might be a good time to think about planning for the future. One nagging question I’ve faced – and you have probably thought about it too – is just how long should you keep all those old tax records?

“As a generic rule across the board, you should keep your tax records for at least three years after the date in which you filed – according to the statute of limitations outlined by the IRS,” noted Turbotax’s Philip Taylor in a blog post (blog.turbotax.com). “For example, if you filed this year on April 15, 2015, you should keep your 2014 tax return documentation until April 15, 2018. Simple math.”

…But it’s not always so simple. The IRS uses a concept called the “period of limitations” to determine how far back to go in looking at your past records. The period of limitations is defined as the “period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.” This leaves a fairly wide loophole for the IRS. And if you’re selected for an audit, you’ll need every bit of documentation you can find.

What to keep

Experts advise that, when it comes to the IRS, taxpayers should err on the side of caution.  This means saving anything that you used to figure your taxes, whether it’s W2s, mileage logs, 1099s, receipts or other documentation. Save copies of your notes which back up the deductions and situations you described. And, of course, save a copy of your return.

How long to keep it

Perhaps unsurprisingly, there are many different situations governing how long the IRS advises you to keep records. Here are a few:

  • Keep records for three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
  • Keep records for seven years if you file a claim for a loss from worthless securities or bad debt deduction.
  • Keep records for six years if you fail to report income you should report, if it’s more than 25 percent of the gross income shown on your return.
  • Employment tax records should be kept for at least four years after the “date that the tax becomes due or is paid, whichever is later.”
  • And the IRS has some interesting advice for people who file fraudulent returns or none at all when they should (keep records indefinitely).

Confused by all the deadlines? You’re not alone. Most people (advisably) rely on the services of a professional when answering such questions.

But it’s not just tax records that consumers are struggling with; how long – for example – should you keep the receipts for major purchases, or kids’ medical records? There are no hard and fast rules here; it depends on the situation. I did find some good advice on Consumer Reports’ website.

Once, keeping records meant keeping the actual paper, and for many people, that could mean lots of storage space. But that’s 20th-century thinking; in a digital world, you can store all your records on a device you can carry in your pocket. Therefore, you could theoretically store all your records forever.

But if you do, here are a few things to keep in mind:

  • If you scan your documents, be sure to store the files in a secure location, making sure there is adequate protection against viruses and intrusions. If you store the files on a flash drive, CD or other portable medium, make sure the device is password-protected, and keep it in a safe place.
  • Once you’re done scanning, make sure the paper is destroyed, preferably by shredding. Agencies have periodic shred days, where you can take your documents for free shredding services. You can also buy a shredder; look for a crosscut version, rather than one that cuts paper into strips.
  • Consider reducing the paperwork. Most businesses these days offer a completely paperless experience, including technology like electronic billing and payment. Taking advantage of these services can reduce the paper clutter.
  • For really important documents, such as birth and death certificates, social security cards, insurance documents and passports, consider keeping them in a safe-deposit box. Many people use a fireproof safe in their home, but remember that these can be stolen.
  • You don’t have to save everything. For example, you probably don’t need to save paperwork from monthly bills, such as utility bills. And most companies keep an electronic record you can access online, should you need it.

Doing your taxes just got more complicated

Originally published in the Clarion-Ledger on 4/3/2015.

PDF:Doing taxes just got more complicated

For those of us who have procrastinated doing our taxes, there are just a couple weeks left. April 15 approaches like an oncoming steam roller; we all knew it was coming, but many of us will wait till the last hours anyway. And this year’s taxes are going to be just a bit different than before, thanks to the Affordable Care Act (“Obamacare”), so it might be a good idea to go ahead and get on it now.

For the first time, tax filers this year are going to have to answer questions about their health insurance coverage. For most people, it will be as simple as checking a box to indicate you (and your dependents) had health insurance coverage – from any source — during 2014. But for some of us, it’s going to be a little more complicated. Regardless of how any of us might feel about the Affordable Care Act, we are all facing the same requirements to have health insurance, and to report it on our tax returns.

The Department of Health and Human Services (HHS) sent out a news release recently, reminding us of the deadline and the new requirements. For example, if you didn’t have health coverage during all or some part of 2014, you need to be prepared to give details and possibly pay a fee. But in a few cases, you can get an exemption from the requirement under certain circumstances.

If you had health insurance coverage you obtained through the Health Insurance Marketplace (during 2014), you should by now have received a form called Form 1095-A, which gives details on the coverage and any tax credits used to offset the cost of the coverage. If you haven’t received yours yet, you can get it online at healthcare.gov, or by calling the Marketplace Call Center at 1-800-318-2596.

And if you couldn’t get coverage for some reason, whether you couldn’t afford it, or had other reasons for not being covered, you may qualify for one of many exemptions. Here are a few, from www.healthcare.gov:

Income-related exemptions: You might qualify if the lowest-cost health insurance option available to you would cost more than eight percent of your household income, or your income is below the level that requires you file a return.

Health coverage-related exemptions: If you were uninsured for no more than two months of 2014, if you enrolled in a plan by May 1, 2014, would have qualified if Mississippi had expanded Medicaid, you may qualify. There are several other exemptions in this category as well.

Group membership exemptions: If you’re a member of a Native American tribe, participate in a health care sharing ministry, or are a member of a religious group which objects to having health insurance on religious grounds, you may qualify for an exemption.

Hardship exemptions: This is a broad category of exemptions which covers an array of circumstances. You may qualify if you’ve been homeless, incarcerated, are facing eviction, foreclosure or bankruptcy, if you had one of your utilities shut off for non-payment in the past three years, and many others.

And if you find that you still have to pay the fee, you can still sign up and avoid the fee for next year. A special enrollment period has been set up for this purpose, and runs through April 30. If you have any questions about any of these topics, you can get help by calling 1-800-318-2596, or by visitingwww.healthcare.gov/taxes.

Your tax refund is getting a lot of attention

Originally published in the Clarion-Ledger on 1/30/2015.

PDF: tax refund attention

While some of us can’t wait to start filing our taxes and others will let things drag on into April (depending on who’s going to owe whom), a lot of people are champing at the bit to get their hands on your money now. And while some businesses are providing services to help you file your taxes and even hand over your refund money early (often for a fee), there are also lots of scammers out there, hungrily eyeing your potential windfall.

There’s a lot of money at stake: some sources say the average American family gets back $3,116 from their taxes. And although some pundits warn that this year’s refunds are likely to be negatively affected by Obamacare and new tax regulations, billions are out there in potential refunds.

Just last week, Wal-Mart announced a new program called Direct2Cash, a partnership with tax prep firms Jackson-Hewitt and Liberty Tax Service to provide consumer refunds in the form of cash, in about the same amount of time as getting the funds direct-deposited if they paid on time. The program is targeted at people who traditionally get paper checks. While this option is probably a lot less costly than some others, it’s a smooth marketing ploy by the discount shopping behemoth to place cash into the hands of customers who are already in their stores. There’s little doubt that Wal-Mart is betting that those cash-laden consumers will leave much — if not all — of that money behind as they spend on impulse purchases.

And tax-related scams are growing at a breakneck pace. Tax identity theft is one area of explosive growth; it was the most common form of identity theft reported to the agency in 2014. Complaints about criminals impersonating Internal Revenue Service (IRS) officials skyrocketed 24 times over from 2013 to 2014. The IRS estimates it paid out $5.2 billion in 2013 from this particular scam.

“We’ve seen an explosion of complaints about callers who claim to be IRS agents – but are not,” said Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection. “IRS employees won’t call out of the blue and threaten to have you arrested or demand specific methods of payment.”

The IRS impersonation scams are distant cousins to the “jury duty” scam which has recently been making the rounds here in Mississippi. Here’s how the IRS impersonation scam works: typically, you’ll get a phone call from someone claiming to work for the IRS. They may even have “IRS” or “Internal Revenue Service” on the caller ID. Once they get you on the phone, they say you owe money to the IRS, and may threaten you with arrest or fines if you don’t pay up. In some cases, they even have all or part of your Social Security Number. By now, they’ve got the unwary consumer right where they want them; nobody wants trouble with the IRS. Consumers give up credit card and bank account numbers to make the problems go away; the scammers get rich.

To educate consumers about all that fraud potential, the FTC and a host of partners have dubbed his week as Tax Identity Theft Awareness Week.

“IRS impersonation scams prey on consumers’ lack of knowledge about how the IRS contacts consumers,” the FTC noted in a news release. “The IRS will never call a consumer about unpaid taxes or penalties – the agency typically contacts consumers via letter. If consumers get a call purporting to be from the IRS, they should never send money – once it’s sent to the criminal, it is impossible to retrieve.”

If you get a call from someone claiming to be the IRS, hang up and report the call to the Treasury Inspector General for Tax Administration (TIGTA) at tigta.gov. If you’ve been victimized, file a complaint immediately either online or by phone at 1-877-FTC-HELP, as well as contacting the TIGTA office at 1-800-366-4484.

It’s also a good idea to file your taxes as early as possible; filing early is no panacea, but it can help to reduce the odds that someone can obtain your Social Security Number or other private information.

And as far as getting your taxes filed, there are lots of resources to help you. For example, Entergy Mississippi, Inc. and United Way are helping working families who qualify for the federal Earned Income Tax Credit.

On January 31 in Jackson and Tunica, and throughout tax season at local VITA sites, volunteers certified by the IRS will help residents determine if they qualify for EITC and provide free tax preparation. The program benefits families or individuals earning $52,400 or less in 2014. For a list of VITA sites, visit entergy.com/eitc.

IRS considering outsourcing collections…again

via Consumer Watch: IRS considering outsourcing collections…again on 5/27/2014.

PDF: IRS Private Collectors

Back in 1997, the Internal Revenue Service decided it would hire private collection firms to go after taxpayer debt to the IRS. Ordinarily, the IRS performs its own debt collection services. However, the program was widely considered a disaster. Not only did it erode the already-strained relationship between the IRS and taxpayers, it actually lost money. The idea was tried again in 2009, with similar results.

Now, Congress wants to try it again. This is generally a bad idea, for lots of reasons.

Taxpayer Advocate Nina Olson, writing to Congress last week, pleaded with Congress in a 21-page letter to abandon ship on the proposal. The EXPIRE Act, introduced in April by Senate Finance Committee Chairman Ron Wyden (D-Ore.) would restore the failed program. Olson has been joined by the IRS Oversight Board and a coalition of 15 organizations in opposing the plan to hire private collection firms.

“Based on what I saw, I concluded the program undermined effective tax administration, jeopardized taxpayer rights protections, and did not accomplish its intended objective of raising revenue,” Olson wrote. “Indeed, despite projections by the Treasury Department and the Joint Committee on Taxation that the program would raise more than $1 billion in revenue, the program ended up losing money. We have no reason to believe the result would be any different this time.”

It’s hard to imagine a way this could work out well for taxpayers, who already fear the IRS and its legendary collection power. Indeed, the vast majority of Americans pay their taxes; despite high-profile cases of tax cheats, the reported tax delinquency rate is about 8.7 percent (about five million taxpayers). That means about 91 out of every 100 Americans are paying on time. But it is worth noting that taxpayers are still owed billions. Interestingly, even some Senators and Congressmen owe back taxes, as well as federal employees.

Olsen went on explain that the IRS has more collection ability than any private company, noting that the IRS is “the most powerful creditor in the country, and most taxpayers do not want to get crosswise with it.” The IRS has the independent authority to levy taxpayer bank accounts, garnish wages and intercept Social Security benefits, and even seize personal property to satisfy debt. However, the IRS also has the authority to forgive portions of debt by designating it “Currently Not Collectable” due to hardships, or to accept lower amounts in settlement.

Conversely, she explained, the private debt collection business has a clear motive to collect profit without having to consider the customer’s total picture, while the IRS is bound by policies which would place individuals into financial hardship. “This is the right thing for the government to do,” Olson noted, “and it also may be cost effective because aggressive collection actions would force some marginal taxpayers into public assistance programs that may ultimately cost the government more than the amount of tax collected.”

The collection industry is a troubled one, ranking among top complaint categories for many agencies. Certainly some are better than others, but hardly a week goes by without some bill collection company getting fined for using heavy-handed tactics, and in some cases deceiving consumers. Just last week, the Federal Trade Commission slammed California-based Asset Capital and Management Group with a $4 million fine after the firm allegedly “posed as process servers in calls to consumers and third parties, falsely threatened consumers with lawsuits, wage garnishment, seizure of their property, and arrest, and disclosed debts to consumers’ employers, colleagues, and family members.”

Certainly, the collection industry provides a necessary service. But turning over tax cases to private collection firms should be a non-starter. It’s already been tried, and it failed.

Cleaning up the IRS has been a big story in Washington; perhaps the best way to start is by making it do what it’s supposed to be doing, anyway, instead of trying to do the same thing, the same way, and expecting different results.

When it comes to audit risk, don’t assume anything

Originally published on clarionledger.com, about April 29, 2014.

As April 15 came and went, you could almost hear the collective sigh of relief as taxpayers finished their taxes. The April 15 deadline looms large in the public’s subconscious. There is probably no date (other than Christmas and the 4th of July) that is as deeply ingrained in Americans as this one.

I began thinking of the motivations that go into meeting this deadline, and filing our taxes in general. I suspect few people’s motivations in doing their taxes — not only on time, but also accurately — are altruistic; it’s far more likely that fear of punishment is the big motivator. One cause of taxpayer angst is the fear of an audit.

Wallethub.com recently published a study showing that, although your chances of getting audited are pretty low (about 1 in 100 for individual), the potential sting of being audited — and the attendant risk of criminal charges — still help keep us in line.

The enforcement capability of the Internal Revenue Service (IRS) has been affected severely by budget cuts, and the agency is having to do more with less. Still, Wallethub found that the smaller the income, the larger the rate of dishonesty.

Here are a few more of Wallethub’s findings:

  • Audited consumers who make less than $200K pay 83% higher penalties (as a percentage of adjusted gross income) than people making more than $200K.
  • Audited corporations that earn $250K – $1M pay more than 11-times higher penalties (as a percentage of adjusted gross income) than corporations earning $10M – $50M.
  • Individual taxpayers have a 1% chance of being audited. The individual audit rate has fallen more than 9% since 2010.
  • Small businesses have a 1% chance of being audited. The small business audit rate has increased more than 17% since 2009.
  • Large corporations have a 15.80% chance of being audited. The large corporation audit rate has increased 8.6% since 2009.
  • Eleven percent of individual audits result in no additional tax obligation, compared to 28% of small business audits and 27% of large corporation audits.
  • The number of IRS agents dedicated to Examinations, Collections and Investigations has declined more than 12% since 2010.
  • The annual number of incarcerations for tax crimes has increased more than 117% since 2003.

So, to summarize, while our overall risk is low, we shouldn’t assume that we shouldn’t mind our Ps and Qs on our taxes. And just because there are fewer people in the IRS’ massive employ, don’t assume that means it’s any less risky to fudge on your taxes. In short (as the saying goes), assuming is dangerous anyway.