For an agency used to asking a lot of questions, the IRS is having a lot of trouble coming up with answers about who knew what and when regarding two separate scandals.
Already under fire for targeting conservative groups through its Cincinnati office responsible for reviewing applications for tax exempt organizations, the IRS now has to face scrutiny about excessive conference expenditures.
Outrage continues to grow as the various players involved are called before Congressional committees investigating the circumstances of these events. Already we’ve seen the resignation of the acting IRS Commissioner, and the commissioner of the Tax Exempt Entities Division asserting her fifth amendment rights.
The IRS suffers from an image problem as one of the least popular government agencies, so most people aren’t feeling a lot of sympathy toward the IRS now that they are the ones facing audit-like probing.
There is one question regarding this story that isn’t likely to come up in a Congressional hearing so we thought we would discuss it here.
How does this affect the odds of being audited?
There have already been some threats from Congressional leaders for restricting funding to the agency based on how these proceedings progress.
With budget sequestration already having an impact, any further cuts would make it more difficult for the IRS to increase audit rates. Last year an individual tax return had a 1.03% chance of being flagged for an audit. However, the IRS has been putting more emphasis on wealthy taxpayers and that tactic is likely to continue.
Regardless of what happens as a result of these scandals you need to understand what ‘flags” may trigger an IRS audit. Most of the time it’s a simple matter of forgetting to include income from a 1099 or W-2 or a math error.
If you do get a letter from the IRS asking for more information, expect a longer wait to get your issue resolved. The IRS has quite a few things on its plate.
If you have questions regarding correspondence from the IRS please consult your tax advisor.
Photo credit: davidboeke
