Every year, the Internal Revenue Service releases a Data Book: a detailed compendium of national statistics touching on topics from returns filed, to tax audits performed, to IRS criminal investigations conducted. The IRS recently published its 2018 Data Book (individual tables of which are listed here), shedding new light on how many taxpayers were audited – or investigated for tax crimes – last year. If you are concerned about the possibility of a criminal tax investigation into your business or personal finances, contact the California tax attorneys at the Tax Law Office of David W. Klasing right away for assistance.
IRS Publishes 2018 Statistics on Federal Tax Audits, Criminal Investigations
According to the Data Book, the IRS received 195,750,099 tax returns during the 2018 fiscal year. Combined with “other forms,” this number increases to around 250 million.
While the majority were processed without incident, a small portion triggered IRS audits – or led to prosecution for tax crimes. Of course, even “a small portion” of such a large figure still equates to nearly 1 million audits (plus several thousand criminal tax investigations), spelling trouble for taxpayers and businesses across the U.S.
Below, our San Bernardino tax evasion attorneys have compiled some of the Data Book’s stand-out statistics on audits and criminal investigations.
2018 Tax Audit Statistics
According to the IRS 2018 Data Book, during the 2018 fiscal year, approximately 0.5% of the returns filed were audited. However, this percentage varied widely by type of return. For example, the IRS audited 0.6% of returns filed by “small corporations,” compared to 3.4% of all “international returns.” As those who have been following along with our tax blog already know, this is consistent with the government’s tax enforcement priorities, which have long included foreign account reporting requirements such as FBAR and FATCA.
Overall, large corporations had a high likelihood of being audited, particularly those with the greatest assets: 26.2% when assets ranged from $5 billion up to $20 billion, and 49.3% – nearly half – when assets reached or exceeded $20 billion. At the other end of the spectrum, large corporations with assets in the lowest range – $10 million to $50 million – were audited in 4.6% of cases.
Other 2018 audit statistics included the following:
- Estate Tax Returns – 8.6% were examined
- Gift Tax Returns – 0.9%
- Individual Income Tax Returns – 0.6%
- Partnership Returns – 0.2%
- S Corporation Returns – 0.2%
- Employment Tax Returns – 0.1%
The majority of these examinations (741,400) were correspondence audits, which take place entirely via mail and are generally utilized for minor issues. A smaller number (249,768) were field audits, which are more complex and intensive. You can learn more about correspondence audits versus field audits from our comparison of the types of IRS tax audits. You may also be interested in our articles discussing how long an audit takes, what to do when you are under audit, or how many years an IRS audit can go back into your tax history.
2018 IRS Criminal Investigation Statistics
Compared to more than 991,000 examinations, the IRS initiated just 2,886 criminal tax investigations. However, that does not mean taxpayers with compliance errors can afford to be complacent. On the contrary, many investigations arise from audits (though they can also stem from tips provided by whistleblowers, who are rewarded by the IRS with a percentage of the amount collected).
As we discussed in our article about civil audits turning criminal, this can happen if auditors discover signs of tax fraud during the examination. At this point, the auditor may stop the audit and refer the case to a criminal investigator, or “special agent,” from the IRS’ Criminal Investigation Division (IRS-CI). For more information on this subject, refer to our article explaining how the IRS develops a tax fraud case.
Circling back to the Data Book, here are a few additional criminal statistics you may find noteworthy:
- Most of the investigations initiated were specifically for tax crimes, such as employment tax fraud (1,099). These were followed by “illegal source financial crimes” (1,064), such as money laundering, with a smaller number of drug-related financial crimes (723).
- A total of 1,879 criminal convictions resulted from these investigations, including 668 convictions specifically related to tax crimes.
- A total of 1,732 individuals, or 82%, were incarcerated. As the IRS explains, “The term ‘incarcerated’ may include prison time, home confinement, electronic monitoring, or a combination thereof” (i.e. house arrest, ankle monitoring).
California Tax Evasion and IRS Audit Defense Attorneys
If you are concerned about a potential criminal tax violation, such as willful falsification or non-filing of income tax returns, it is in your best interests to protect yourself proactively by hiring an experienced criminal tax defense attorney, like the Orange County tax evasion lawyers at the Tax Law Office of David W. Klasing. But why choose an attorney, rather than another type of tax professional, to handle your matter? If you are charged with a tax crime or wish to litigate a tax dispute, you will need a representative who thoroughly understands court procedures, filing deadlines, legal statutes, case law, and common strategies used by federal prosecutors – as well as the tax defense tactics that can be used to counter them. Additionally, the information you share with an attorney is protected by the attorney-client privilege, which does not protect correspondence with your accountant or tax preparer – who may, in fact, be one of the government’s strongest witnesses against you.
A skilled tax lawyer may be able to reduce the IRS penalties you face – but only if you act before it is already too late. To discuss your tax issue confidentially with an experienced tax attorney in California, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
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Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here:
Read more about Tax Audits in our FAQ library:
Your Rights During an IRS Audit
What Can I Do to Prepare for an Audit?
Can I Find Out Why the IRS Chose to Audit Me?
How Does the IRS Decide Who to Audit?
How to Survive an Audit after Cheating on Your Tax Return
What is a Reverse Eggshell Audit?
Best Possible Outcomes of an Eggshell Audit
Effective Tax Defense Counsel Goals in an Egg Shell Audit
Why is a Reverse Egg Shell Audit Dangerous to a Taxpayer?
How Should Tax Audits be Handled by a Criminal Tax Counsel?
Warning Signs of a Criminal Referral from an IRS Audit
Why Should You Hire David W. Klasing to Represent You in an Audit?
