Our comprehensive guide reveals essential strategies to prepare middle-class earners for IRS audits. Learn about the types of audits, how to organize documents, and your rights during the process.
In a surprising twist of the tax story, IRS audits have turned out to be primarily focused on middle-income earners. Despite political promises that the audit burden would be shifted to the wealthy, in the summer of 2023, a staggering 63% of audits focused on those with incomes below $200,000. This trend places a significant spotlight on the $200,000 filer, making it crucial for middle-class taxpayers to arm themselves with knowledge and strategies to prepare for potential audits.
Recent reports have revealed the IRS’ audit priorities, revealing a disproportionate focus on middle-class taxpayers. The Wall Street Journal’s editorial board highlighted this trend, coining the term “IRS’s most wanted” for the $200,000 income bracket. These findings are supported by the Transactional Records Access Clearinghouse, which reports that 67% of audits are directed at those with an annual income of more than $200,000.
An IRS audit can be daunting, but being prepared can significantly ease the process. Here are some actionable steps to ensure you’re ready if an auditor comes knocking:
Differentiate between mail, office examination, and field audits, each with varying levels of scrutiny.
Compile all necessary financial documents, including mortgage statements, pay stubs, and previous tax returns.
Engage significantly with a tax preparer or accountant if they have previously assisted with your tax filings.
Familiarize yourself with taxpayer rights, such as the right to professional treatment and to appeal IRS decisions.
The current audit climate is a wake-up call for middle-class earners to stay vigilant and prepared. Taxpayers can be confident when they understand the audit process, organise documentation and seek professional advice or are aware of their rights. Being proactive is the best defense against unexpected tax challenges as the IRS continues to target this demographic group.
