The Internal Revenue Service (IRS) audited almost 1.1 million tax returns in 2017, representing approximately 0.5% percent of all returns filed in the previous calendar year. According to the IRS, the majority—70% of audits—were conducted via correspondence and the remaining 29.2% were conducted in the field.1 However, selection for an audit does not always suggest there’s a problem. That’s because the IRS uses several different selection methods:2
While the IRS does fewer full-blown audits each year, certain red flags on taxpayers’ returns may still generate IRS inquiries and examinations. Common red flags for retiree tax returns include:3
Beware of IRS impersonators
While the odds of being audited by the IRS are low, the odds of being targeted by the “IRS Impersonation Scam” continue to grow, especially for retirees who remain a chief target of this type of fraud. In fact, the IRS reports that they generally see a surge in this particular scam during tax filing season.4 This is an increasingly common scam where individuals impersonating IRS employees make unsolicited telephone calls to taxpayers, using the threat of arrest to obtain money from victims by falsely stating that the victims owe back taxes or other fees. The perpetrators generally demand that the victims send them money via gift cards, prepaid credit or debit cards, money orders, or bank wire transfers.
It’s important to know that if your return is selected by the IRS for audit, the IRS will notify you by mail. They will not initiate an audit or other inquiry by telephone. If you receive a phone call from someone saying they’re from the IRS asking you to provide personal information or send money—hang up immediately. If you believe you have been a victim of an IRS Impersonation Scam, contact the U.S. Treasury Department to file an incident report.
Six IRS Audit Red Flags for Retirees
| February 01, 2020