Over the past decade, the number of IRS tax audits has decreased.

• In 2022, the IRS conducted audits on 3.8 out of every 10,000 income returns, amounting to a rate of 0.038%.
• Audit rates have dropped for all income brackets between 2010 and 2019.
• During that period, the agency experienced a decline in funding of more than 20%, when adjusted for inflation.

The arrival of tax season triggers anxiety about potential IRS audits.

The likelihood of getting audited by the IRS is low for most American taxpayers, as only 0.38% of income tax returns were audited in 2022.

Since 2010, the audit rate has been steadily decreasing, reaching a low of 0.25% in 2019, which is a significant drop from the 0.9% rate in the same year.

In 2019, the percentage of wealthy taxpayers who experienced an audit decreased from 16% in 2010 to less than 2%. This was reported by the Government Accountability Office.

Taxpayers earning more than $1 million have experienced a significant decrease in audit rates, yet they are still audited more frequently than those earning below $200,000, according to Alex Muresianu, a policy analyst at the Tax Foundation.

The decline in audits at the IRS was primarily due to a decrease in funding, which dropped by more than 20% between 2010 and 2019 when inflation is taken into account.

According to Mark Everson, a former IRS commissioner and current vice chairman at Alliantgroup, the IRS, like other government departments, depends on the annual appropriations process. However, Everson believes that the issue lies with Congress's inability to adequately fund the government.

The IRS's labor budget accounts for approximately 70% of its overall budget. Due to budget cuts, the IRS staff was reduced by 22%.

Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center, stated that the most significant reduction in enforcement, specifically targeting the highly skilled agents responsible for audits and collections, has had a significant impact on the tax system. These agents are particularly adept at handling complex and challenging tax returns.

According to Everson, the work is highly technical and requires experience. Therefore, a person who has been out of college for three years won't be doing the technical work on the ExxonMobil tax return.

He remarked that acquiring that level of knowledge and sophistication takes time.

A turnaround began amid the pandemic

The pandemic resulted in a slight increase in full-time employment at the IRS due to supplemental funding from Congress in 2020 and 2021.

In August 2022, President Biden signed the Inflation Reduction Act into law, allocating nearly $80 billion for the IRS to use over the next decade.

Everson stated that the amount is unusually large for the IRS, but when compared to the Navy or the Department of Health and Human Services, it is not a large amount of money, so it's all relative.

Over $46 billion will be allocated for tax enforcement, $25 billion for operation support, $3 billion for taxpayer services, $5 billion for technology modernization, and $500 million for provisions such as renewable energy tax credits.

The IRS plans to hire 10,000 workers with the additional funding, which may increase audit activities. The Congressional Budget Office estimates that the additional funding will increase government revenues by approximately $200 billion over the 10-year period.

The IRS has been affected by a decade of budget cuts, resulting in lower audit rates.