Tax Tip of the Week | No. 250 | Tax Penalties and Audits Don't Correlate with Income Levels

Tax Tip of the Week | May 14, 2014 | No. 250 | Tax Penalties and Audits Don't Correlate with Income LevelsHere is an interesting study we came across...

BY MICHAEL COHN, EDITOR-IN-CHIEF, ACCOUNTINGTODAY.COMFor consumers and corporations, the lower the income, the higher the rate of tax penalties is according to new research.The research, from the personal finance social network Wallet Hub, found that audited consumers who earn less than $200,000 a year pay 83 percent higher penalties as a percentage of their adjusted gross income than people making more than $200,000.Similarly, audited corporations that earn between $250,000 and $1 million pay more than 11 times higher penalties, as a percentage of their adjusted gross income, than corporations earning between $10 million and $50 million, according to Wallet Hub’s research.Conversely, individuals who make $10 million or more are 3,933 percent more likely to be audited than those who make between $25,000 and $100,000.Individual taxpayers and small businesses have a 1 percent chance of being audited, compared to 15.80 percent for large corporations.Individual audit rates have declined in recent years, while corporate audit rates have increased, the report noted.For the complete report, visit http://wallethub.com/edu/irs-audit-report/3433/.From our vantage point, we often see that many taxpayers and business owners do not make an effort to get proper representation to protest penalties and audits.  Always give us a call if you receive any correspondence from the IRS.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt - the guy behind TTW...until next week.