IRS Tax Audit Rates (2017)

In a groundbreaking study the TaxFoundation.org released a study of IRS tax audits for the 2015 Fiscal Year (thru 9/30/15, the most recent tax year for which IRS tax audit statistics have been released), which revealed the following:

1. The overall IRS audit rate has dropped from 1.1% (2010), 1 in 90 taxpayers to .8% (2015) less than 1%, 1 in 120 taxpayers.

2. However, IRS tax audit rates have greatly increased for high income earners. For taxpayers at the higher income levels: between $500k to $1m (3.81%, 1 in 26 compared to approximately 3% for recent tax years); between $1m-$5m (8.42%, 1 in 12 compared to approx. 7% for recent tax years); $5m-$10m (19.44%, 1 in 5 compared to 11 % for recent tax years); $10m over (34.69% 1 in 3 compared to 16 % for recent tax years).

3. Effective tax rates may be as high as 55% for “blended” Federal/CA tax rates based out phase-out for personal exemptions, itemized deductions and minimal or no pension contributions.

Tax projections include the following:

1. Income over $500,000, tax is 40.4%: $210,966( $137,330/Federal, $45,375/ CA; $17,261/ FICA);

2. Income over $1m, tax is 45.45%: $454,486 ($317,123/Federal, $108,352/CA; $29,011/FICA);

3. Income over $5m, tax is 50.02% $2,501,188 ($1,738,067/Federal, $640,110/CA; $123,011/FICA)

4. Income over $10m, tax is 50.60% $5,059,747 ($3,514,125/Federal, $1,305,110/CA; $240,511/FICA).

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