A recent study by the National Taxpayer Advocate Service (TAS) might help you figure out your chances of getting audited. Or at least it could help you decide if you’re a high audit risk or low audit risk. The new TAS report attempts to define the “tax cheat” demographic.
The highest concentration of “tax cheats” (and, therefore, the highest concentration of IRS auditors) are found in the Los Angeles, San Francisco, Atlanta, Houston, and Washington D.C. metropolitan areas. And there are some communities in California that seem to be especially attractive to the IRS, namely, Beverly Hills and Newport Beach.
TAS also confirmed what we have known for a long time: self-employed taxpayers are more likely to be targeted in a tax audit than wage earners. There are even certain industries that tend to be audited more, like construction and real estate rental.
Finally, according to the TAS report, tax cheats tend to congregate in groups. Apparently they are a social animal. A tax cheat is often a member of one or more of the following groups:
- civic leagues
- fraternal societies & clubs
- trade associations
- labor unions
I guess if you are a self-employed Shriner with rental properties in Newport Beach, you’re pretty much screwed.