If your income is $1 million or more, the chance thatthe Internal Revenue Service (IRS) has called you in foran audit is minuscule, according to new figures from the agency. Sofar, the IRS has audited 0.05 percent of those earning $1 millionto $5 million in 2018, according to data released Monday. For thoseearning $10 million or more, that figure drops to 0.03 percent.

In total, the IRS has audited about 0.15 percent of individualreturns from 2018. People claiming the earned income tax credit aremost likely to face an examination, at a rate of 0.6 percent. AnIRS official said the audit rates appear to be lower than inprevious years because of a new way of calculating audits. Thosefigures will increase in coming years, as auditors open more casesbefore the three-year statute of limitations runs out.

The new calculations mean that the audit data is complete forreturns filed in 2015 or earlier, IRS officials told reporters on acall Monday. That's because the statute of limitations has run itscourse on those returns so the agency isn't conducting furtheraudits for those years. But for returns filed in 2016, 2017, and2018—the last year covered by the new report—the IRS will updatethe figures annually until the statute of limitations runs out.

Still, IRS audit rates have been trending downward for years, asbudget cuts and staff reductions have hobbled the agency's abilityto conduct widespread audits. The IRS audited nearly 14.5 percentof returns reporting $10 million in 2012; for returns filed in2015, that rate fell to about 8.2 percent.

"For the past decade, the IRS has seen an increase in the numberof returns filed as well as a decrease in resources available forexaminations," the IRS said in its annual data book released onMonday. For example, in fiscal year 2010, "the IRS received 230.4million returns and employed 13,879 revenue agents, compared [with]253.0 million returns and 8,526 revenue agents in FY 2019."

Covid-19 Puts a Damper on Corporate Audits

Audit rates could decline further in future years, asthe coronavirus pandemic has halted many agencyoperations. According to a separate report released Monday, the IRSinitiated 71 percent fewer corporate audits this spring comparedwith the same time period a year ago. The IRS began 718 corporateaudits from April 1 to June 1 of this year, compared with 2,445 in2019, according to a National Taxpayer Advocate report. The numberof partnership audits fell 79 percent, and individual examinationsdropped 65 percent, the report said.

The reduction is a result of an IRS decision to delay startingmany new audits between April 1 and July 15, unless the statute oflimitations would run out and keep the agency from pursuing a caselater. The IRS continued to work on existing audits remotely "wherepossible," but many employees are unable to fully do their jobsfrom home because of laws protecting sensitive taxpayer data.Additional delays were caused by phone line closures and closed IRSoffices where mail went unopened, according to the report.

"The IRS has begun reopening its operations, but it will takesome time before they are restored to full capacity," the reportsaid.

The data was included in the National Taxpayer Advocate's annualreport to Congress. The office is an independent unit within theIRS that helps taxpayers with significant problems.

The IRS faces another challenge as it continues to bring workersback to its offices, because the normal April 15 filing deadlinewas extended to July 15. Treasury Secretary Steven Mnuchin said hehas received requests to further delay the due date but hasn't yetmade a decision.

Many taxpayers filed before the extension was announced, but theIRS is still expecting millions of tax returns to be submitted. ByMay 22, the IRS had received nearly 120 million individual taxreturns of the more than 150 million it expects, the reportsaid.

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