IRS Audit Rates Are Falling

Yippy Kai Yai Yay!  (That’s cowboy for hooray!  One of my dad’s favorite sayings.)  Taxpayers across the fruited plains are celebrating this fantastic news.

Turns out that Congress reduced the IRS budget recently by 9% compared to the prior year.  The House is already making noise to slash the IRS budget further in 2027.

The IRS has lost over 20% of its workers since Trump took office, through voluntary deferred resignations and layoffs with more departures expected later this year.  Many IRS folks are calling that “being doged.”  (Remember Elon Musk’s DOGE that recommended cuts in various Federal Agencies?)

The IRS enforcement arm is taking the brunt of the cuts.  By now, Congress has pretty much taken back all that money allocated to hire those “80,000 more auditors” under the Biden presidency.  Trump’s cut requests for 2027 includes an 18% cut in enforcement activities and is projecting the IRS to have fewer than 25,000 total enforcement employees.

On top of all this, the IRS is having a real brain-drain problem.  One-in-four enforcement workers who retired or left the IRS were experienced agents and managers with deep knowledge.  That lost experience will take time to replace.  In the meantime, there are a lot of underexperienced agents out there.  (That could be a bad thing if they make a lot of mistakes that hurt taxpayers.)

In recent years, the IRS audit rate for individuals was quite a bit under 1%, and it is going down.  The number of IRS audits of individuals with $10 million or more of income and partnerships has fallen from 6,786 to 3,174, respectively, and in Fiscal Year 2025 to 2,264.  IRS says these numbers will decline further in audits for Fiscal Year 2027.

Of course, the IRS is spinning this differently.  They claim the audits will be more targeted at maximizing the government’s recovery.  In other words, they will focus on larger taxpayers who reported complicated tax related items.  Solution here, breathe easy if you are not a high-income taxpayer and/or have a fairly standard type of tax return.  Also, the IRS is replacing lower-level audits with computer generated income matching discrepancies.  So, make sure you report all the income reported on 1099s.  Just remember though, there are no guarantees that you won’t get audited, but the odds are quite low.  In Nevada, we love to use odds.  Some might say, “It’s a sure bet you won’t be audited by the IRS.”

Have you heard?  Psalms 81:6 says, “I removed his shoulder from the burden.  His hands were freed from the basket.”

Kelly Bullis is a Certified Public Accountant in Carson City.  Contact him at 775-882-4459.  As well as on our website at BullisAndCo.com. You can also find us on LinkedIn and Facebook.