As you bask in your retirement years, enjoying dinners with your friends, spending time with family, and traveling more than you did during your working years, you may think that your chances of being audited by the IRS would be low. After all, why would the IRS examine tax returns that you file in your golden years? And generally, you would be right. Over the past few years, the IRS has been auditing less than 1% of all tax returns filed by individuals, with most of those being exams conducted by mail. The audit rate is likely less for retirees, who don’t claim as many refundable credits as other taxpayers and whose returns are generally not very complicated. However, not all retirees are in the clear in terms of IRS audits.
Last year’s Inflation Reduction Act gives the IRS $80 billion in extra funds over 10 years, with a large chunk of that money to be used by the agency for enforcement activities. Increased audits won’t happen overnight. It will take time for the IRS to hire experienced examiners and to train them to audit complicated tax returns. Most of the enforcement effects from the IRS’s $80 billion windfall won’t be felt by taxpayers for a while. But remember, the IRS is always a year to 18 months behind in auditing returns. So, by the time the IRS starts selecting 2022 returns for audit for example, it could have more enforcement capability than it does now.
Comments