The number of people audited in 2016 was just over 1 million.

The IRS claims that for every $1 spent conducting an audit returns $4 in previously unpaid taxes (source: IRS).

We prepared 2,651 federal tax returns in 2014 (the IRS is 2 years behind, if you get an examination notice it will be for 2 years ago), so statistically, we should have seen 19 federal audits (2,651/143). But we did not. We had only one (1) federal audit last year. That is 95% fewer than the average.

While looking for “red flags” that might trigger an audit is an important part of what we do, if something is legitimate we do not omit it from a tax return just to avoid an audit. We advise the taxpayer that it might cause an audit and assist in documenting the item. We will scan any documentation associated with the item and retain them in case we need to prove the item later.

Today is April 4th and we are extremely busy so I must be brief, but I have one last thing to share.

I saw something interesting in one of the periodicals to which I subscribe. Businesses located near IRS offices are more likely to face an audit, according to a recent joint study by professors from the University of Kansas, Clemson University, University of Texas at Austin and Texas A&M University.

Despite the sensational headline, the study only included publicly traded companies in its research and in my opinion was a waste of time and resources. Any conclusion that could possibly be drawn from the study would have more to do with geography and business activity centers than the audit selection process.

I think I may have one less periodical next year.