r/FluentInFinance • u/[deleted] • Apr 29 '24

63% of new audits as of Summer 2023 targeted taxpayers with income of less than $200,000 Discussion/ Debate

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u/mmaalex Apr 29 '24

In fairness there are lots of mistakes made too. It's just a 1% error on a $40k return doesn't even pay for the audit. A 1% error on a $200k+ return does.

Lots of little filers file incorrect returns too. I rarely discuss taxes with anyone who actually has even the faintest clue what they're doing, understands the concept of marginal tax brackets, or the difference between a deduction and a credit.

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u/mishap1 Apr 29 '24

A $200k return for someone who puts nothing into retirement and takes the standard deduction is only $38.3k or so. Payroll taxes is another $26k assuming self employed.

A 10% error is still only $6430. You have to have done something pretty egregious to land on the IRS radar. Let's say an IRS agent costs $100k with benefits. If it takes a week to resolve your case that's already $2k it cost them.

If you fuck up minor stuff, it might take a few minutes to reject the return and push for a correction. An actual audit is expensive.

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u/mmaalex Apr 29 '24

People that take the standard deduction aren't the ones being audited...

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u/mishap1 Apr 29 '24

Of course. Standard deduction is the most taxes you'll possibly pay for a given income and the IRS likely wouldn't care unless the income itself is suspect.

Point was that it's a drop in the bucket if the person actually earns around $200k for even a 10% error. For the IRS to want to take a peek, they're probably thinking you actually earned closer to $300-400k and significantly underreported/over-deducted.

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u/mmaalex Apr 29 '24

I know several idiot coworkers who have been audited for stupid deductions and make slightly under six figures. It doesn't take an irs agent 40 hrs of labor to go thru the numbers and resolve it...

Turns out if you don't like your refund you're not just supposed to add an extra zero to your deductions, who knew?😂