The Internal Revenue Service’s audits of individual income tax returns in fiscal 2013 reached a decade low.  Less than one of every one hundred returns (0.96% to be precise) was audited.

The agency has lost $1 billion in funding and 8,000 employees over the past three years which may help explain fewer audits.  Similarly there are now less than 20,000 employees in “key enforcement positions” – a decline of 14% since the peak in 2010.

Ironically revenue collected from tax enforcement increased by 6.3% to $53 billion last fiscal year.  Audits brought in less than $10 billion.  The rest was generated through collections and appeals stemming from prior years’ tax returns.

Why gets audited the most?  You guessed it.  Among taxpayers with incomes exceeding $1 million close to 11% of returns were audited.  (It’s a good thing there’s no class warfare or attacking of the “rich.”)  OK so we’re being a bit cynical.  Clearly higher income returns are at greater risk of audit – the old “follow the money” adage.  With the number of enforcers down it’s important to choose audits where there’s (a) a high likelihood of generating revenue and (b) revenue to be generated.  There’s no sense in auditing a $15,000 W-2 taxpayer when a $150,000 small business owner can be shaken down.

Thank you IRS for your vigilance.  Let’s chat same time next year about my Obamacare penalty.