Jack Hornady/The Washington Times NEW YORK You don’t have a nanny or any other household help, nor are you chauffered around in a
limo with a personal driver supplied by a friend. That may make you eligible for a political appointment, but it doesn’t shield your tax return from an audit. Yet if the fear of an audit has you paralyzed as you are preparing this year’s 1040, you can take comfort in the fact that such reviews are relatively rare, and most often involve only the exchange of a few pieces of mail. Nearly 1.4 million individual returns were audited in 2008, or “examined” in Internal Revenue service parlance, up about a half percent from the prior year. That represents just over 1 percent of federal returns filed in 2007. The likelihood of an audit increases for higher-income earners. While less than 1 percent of all returns for incomes under $200,000 are examined, data shows that nearly 3 percent of returns for incomes over $200,000 were reviewed last year. The figure climbs to almost 5.6 percent of returns for incomes of $1 million or more. Still, the majority of examinations, almost 78 percent, involved only letters sent to taxpayers seeking more information.
Known as correspondence audits, such queries, said , senior tax analyst from the Tax & Accounting business of Thomson Reuters, are generally easy to handle. “Some people don’t think of it as an audit, because they’re not physically seeing the IRS representative in an office.”