Last year’s audit rate of 0.6% for individuals was the lowest in years. So does this mean it’s open season for cheating on your taxes? Not really. The annual examination rate doesn’t tell the full story. When calculating the figure, IRS counts only in-person exams and correspondence audits done by service centers. Of these two types, correspondence exams by mail make up the bulk of the audits.
The agency questions many more taxpayers. It doesn’t count as audits computer-generated CP2000 notices about mismatches between income and deductions reported on tax returns and data on third-party information returns, such as W-2s, 1099s and 1098s. Also, not included are math error corrections and other programs that may require taxpayers to send in documents or other information to the Service and may feel like an audit for many individuals. If these corrective procedures are factored in, the agency’s coverage rate for last year jumps to close to 6%.