IRS Audits Up 50% as Agency Targets Middle-Income Americans


October 17, 2024 09:00am PDT

(PenniesToSave.com) – The IRS has recently increased its audit rate by 50%, with a substantial portion of audits now targeting middle-income Americans. This surge reflects the IRS’s broader efforts to bolster tax compliance using an expanded budget. However, this trend may leave many households dealing with unexpected stress and financial burdens.

What Triggers an IRS Audit?

The IRS audits taxpayers to ensure they accurately report income and deductions. An audit can be triggered by several factors, such as inconsistencies in reported income, high deductions relative to income, or claims for specific tax credits. While audits traditionally focused on higher earners, middle-income households—those earning between $75,000 and $200,000—now face increased scrutiny as the IRS prioritizes tax compliance across income brackets.

The IRS’s expanded budget, approved in 2022, aims to modernize the agency and enforce compliance, which has resulted in a significant uptick in audits for middle-income earners. According to recent reports, this shift has raised concerns for many families who may not be prepared for the potential financial impact.

What Happens During an IRS Audit?

An IRS audit involves an in-depth examination of a taxpayer’s financial records to verify the accuracy of their tax return. The audit process varies:

  • Correspondence audits are conducted by mail and typically request specific documents, like receipts or bank statements, to verify deductions or credits.
  • Office and field audits are more extensive, involving in-person reviews of documents either at an IRS office or the taxpayer’s home or business.

If the IRS finds errors, the taxpayer may be required to pay additional taxes, along with potential interest and penalties. However, taxpayers can challenge the audit findings by providing more evidence or contesting the IRS’s conclusions. Knowing the type of audit and what it entails can help families prepare and minimize stress during the process.

How Far Back Can the IRS Go?


In general, the IRS can audit returns from the past three years. However, if they identify a significant error—such as underreporting income by more than 25%—the statute of limitations extends to six years. For cases involving suspected fraud, the IRS can go back indefinitely. Deciding to contest an audit can open the door to a review of prior years’ returns, which underscores the importance of keeping organized, accurate records over time.

For middle-income households, this means potential exposure to multiple years of tax filings. Consulting with a tax professional can be beneficial, not only to reduce the likelihood of an audit but also to navigate the process if one occurs.

Impact on Middle-Income Households

An audit can lead to unexpected expenses, such as legal or accounting fees, even if the taxpayer has done nothing wrong. The audit process can also be time-consuming, requiring families to gather and present financial records. As a result, audits may affect households’ financial stability and contribute to tax season stress.

Increased audit risk might also change how families approach deductions and credits, as some may feel reluctant to claim legitimate expenses out of fear of scrutiny. This cautious approach can ultimately increase tax bills, further straining household budgets.

Final Thoughts

As IRS audits increase for middle-income earners, American families should take proactive steps to safeguard against potential issues. Accurate record-keeping, careful tax filing, and consultation with tax professionals can help manage the risks and minimize the impact of an audit. While the IRS aims to promote compliance, these audits can present significant challenges for households that may already be feeling financial pressure.

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