44 THE QUEENS COURIER • QUEENS BUSINESS • MAY 10, 2018 FOR BREAKING NEWS VISIT WWW.QNS.COM
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Co-Author of the
best selling book
“Breaking the Tax Code”
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Salvatore P. Candela, EA, ATA, ABA
Enrolled Agent - Tax Advisor
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BY JOHN SAVIGNANO, CPA
The IRS audit rate continues its
downward spiral, agency statistics
show. Last year’s individual
IRS audit rate was 0.6%...1 out of
every 167 returns. The bulk were
correspondence exams done by
mail…focusing on one or two
issues. 2017 marked the sixth
consecutive year that the audit
index has gone down.
Despite the overall low exam
rate, some individuals got more
IRS attention. Filers claiming
the earned income tax credit…
over 1% were audited last year.
Sole proprietors. The Service
examined between 1% and 2.1 of
taxpayers who ran a business and
attached Schedule C reporting
over $25,000 of gross receipts.
Upper-incomers. Individuals
with incomes between $200,000
and $1 million and no Schedule
C attached had a 0.8% audit
rate…1.6% for Schedule C filers.
Millionaires saw the most scrutiny.
4.4% of tax returns reporting
incomes of at least $1 million
were audited by the Service in
2017, down from 5.83% in 2016.
The 2017 overall exam rate for
regular corporations (C corps)
was 1%. Corporations reporting
assets of $5 million or more had
greater audit coverage.
Exam rates for partnerships
and S corporations were 0.4%
and 0.3%. The Service does a
poor job of picking pass-through
returns for audit. Per agency statistics,
43% of partnership exams
and 29% of S corporation audits
that were conducted by agents in
the field last year resulted in no
change to taxes.
Here are some useful tips for
individuals who get an audit
notice from IRS.
Don’t panic. Most exams nowadays
are done by mail-in correspondence
focusing on one or
two narrowly defined items on
your return. The letter will ask
that you mail in the records or
other justification for the item
in question. The process is more
complicated if IRS wants you to
come in for an office audit.
Make sure you’re prepared.
You’ll probably have a few
weeks to get ready, and if you
need more time, call the agent
to request that the audit be
rescheduled. Pull together the
records to support the numbers
you reported on your return. If
you have some gaps, try your
best to reconstruct the missing
documentation.
Organize your records. You
don’t want to bring in a shoebox
full of receipts. Consider contacting
a tax professional to go
with you or to go in your place.
Choosing this option depends
on a number of factors, including
your comfort level with handling
IRS examiners and whe
John Savignano is a partner
with Savignano Accountants &
Advisors located at 47-46 Vernon
Blvd., Second Floor, in Long
Island City. If you have any questions
or require additional information,
please call John at 718-
707-0955.
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