14 IRS Audit Red Flags for Retirees
While the overall individual audit rates are extremely low, the odds increase significantly as your income goes up, as it might if you sell a valuable piece of property or get a big payout from a retirement plan. Plus, the IRS has been lambasted for putting too much scrutiny on lower-income individuals who take refundable tax credits and ignoring wealthy taxpayers. Partly in response to this criticism, very wealthy individuals are once again in the IRS's crosshairs.
And if President Biden gets his way, more upper-income individuals will be audited. He wants Congress to give the IRS billions of dollars for the agency to step up its enforcement efforts against wealthy individuals, large corporations and passthrough entities, such as partnerships and LLCs. The Treasury Department says that the president's proposal won't cause audit rates to rise for individuals with incomes below $400,000. Congressional Democrats have proposed in their Build Back Better bill to give the IRS $80 billion over 10 years for enforcement and other activities, but that bill is now stalled in the Senate amid infighting among Democrats.