Keeping IRS Audits Fair

Posted on February 09, 2016

April 18th is the deadline for filing taxes. But after the crunch—and perhaps a collective sigh of relief from taxpayers—the IRS’s work continues. That includes identifying a small percentage of returns to examine more carefully. These audits help ensure a fair tax system and reduce the $450 billion gross tax gap—the difference between the amount of taxes owed and the amount of taxes paid voluntarily and on time. [2/9: The sentence on the size of the tax gap has been edited due to an error in the earlier post.]

So, who gets an audit notice, and who just gets a refund? With tax season upon us, today’s WatchBlog explores the IRS’s audit selection process.

Will I be audited?

The IRS generally tries to audit tax returns that are most likely to have problems. These could include returns claiming certain tax credits, like the Earned Income Tax Credit, or returns from people who have high incomes but fail to file a return.

And if an audit shows you owe more? You’ll get prioritized for collections. High priorities for collection include federal employees who haven’t filed or paid their taxes.

If this happens to you, you’ll know. The IRS may robo-call you or send you one or more letters asking for some kind of response. In some cases, you may end up talking with an IRS official in person or on the phone.

But note: the IRS never initiates contact or requests personal or financial information by email, text message, or social media channels. And scammers can alter caller ID to make it look like the IRS is calling. If you receive an email, text, or contact through social media, or get a suspicious sounding call, you should report it.

GAO-16-103(Excerpted from GAO-16-103)

Being fair

If you are audited, you’re not alone. Millions of taxpayers go through the audit and collection process each year.

Part of the IRS’s mission is enforcing tax laws with fairness and integrity to all. So it’s important that the IRS has clear policies and procedures to guide its employees on how to enforce tax laws.

However, that hasn’t always been the case. In 2015 and 2016, we found that the IRS didn’t always document why it selected people for audit or how the selection processes should work. That raises the risk that IRS staff may not understand how to select people for audits or apply the same selection standards to everyone.

Keeping the faith

For taxpayers to have faith in the tax system, the IRS must ensure that it enforces tax laws with fairness and integrity to all. To this end, we made a number of recommendations to the IRS, which it agreed with and is taking steps to implement.

Interested in learning more? Check out our work on how the IRS selects individuals and small businesses to audit and prioritizes and selects taxpayers to pursue.

GAO Contacts