The 2011 IRS Data Book, a compilation of statistical data and IRS activities, is out. You can read the whole book here: http://www.irs.gov/pub/irs-soi/11databk.pdf or just skip to page 22 of the publication for the important stuff.
In summary, the average audit rate for individual tax returns is 1.1%. But what’s in your return can push you above the average. At the high end, those making more than $1 million have an audit instance of 12.5%. At the other end, returns for those making under $200,000 and without any business or rental activities have a 0.5% chance of being selected. Of returns with a business activity, the range was 4.3% for non-farm returns with gross business income of between $100,000 and $200,000 to a low of 0.6% for farm returns of any size.
The average audit risk for estate returns was 18.2%, with a 40.3% risk for those estates valued at $10 million or more. The audit rate for gift tax returns was only 1.2%.
The only guaranteed way to avoid an audit is to not make any money, give everything away, and/or die broke. Absent your enthusiastically embracing this plan, we recommend you consult your tax advisor not only to have your returns prepared technically correct, but to help ensure audit survivability or quantify any risks.
For further information, please contact your Aronson tax professional or Larry Rubin, Aronson’s Tax Controversy Practice Leader, at 301.222.8212.