The chances of an IRS audit for people making at least $10 million a year plunged during the government’s last fiscal year, according to data released Monday.
The audit rate for those high earners fell to 6.66% for fiscal year 2018, less than half the 14.52% rate the year before, according to the Internal Revenue Service data. The government’s fiscal year runs from Oct. 1 through Sept. 30.
The most recent data span the nearly three months before the enactment of the 2017 Republican tax-code overhaul, which cut rates for individuals and businesses. It also spans the first nine months of 2018 in which the revamp first affected tax filers.
The IRS tries to balance what it calls a twin policy of service and enforcement. IRS Commissioner Charles Rettig said in the report that included the recent figures that “enforcement of the tax laws is critical to ensuring fairness in our tax system.”
For both fiscal years, audit rates for those earning more than $10 million in adjusted gross income — the wealthiest income group tracked in the data — were still the highest of any income groups.
But audit rates also plunged for those earning $5 million to $10 million in adjusted gross income, to 4.2% from 7.9%. They also dropped for those earning $1 million to $5 million in adjusted gross income — to 2.2% from 3.5%. Audit rates fell very slightly for groups with incomes of $100,000 to $200,000, to 0.44% from 0.47%.
The fresh data also showed a steep drop in the tax agency’s collection of gift taxes during its last fiscal year, to $1.2 billion from $1.9 billion. Last year’s tax law doubled the value of assets that can be transferred to heirs without triggering federal estate or gift taxes — to nearly $11.2 million for an individual and $22.4 million for a married couple.
The thresholds rise slightly in 2019 and potentially more in later years, before expiring at the end of 2025, when the exemptions revert back to half of their current levels. Amounts over exemption levels are taxed at 40%. The IRS said in November that it won’t seek to “claw back” taxes on gifts made before 2026.