Question

33 What is the statute of limitations for transactions involving: a. Fraud (e.g., failure to file a tax return) b. Disallowance of tax deduction items c. The omission of rental income that is greater than 25% of the taxpayer's reported gross income WOW

Answer 1

Two types of taxpayers are more likely to draw the attention of the IRS: the rich and the poor, according to IRS data of audits by income range.

Poor taxpayers, or those earning less than $25,000 annually, have an audit rate of 0.69% — more than 50% higher than the overall audit rate. It also means low-income taxpayers are more likely to get audited than any other group, except Americans with incomes of more than $500,000.
It may seem counterintuitive that low-income households are more likely to get audited than some wealthier taxpayers but it’s due to the IRS checking for fraud and errors related to the Earned Income Tax Credit.
Audit rates sharply spike for taxpayers with an annual income of more than $500,000. In fact, wealthy taxpayers with annual income of at least $10 million have the highest audit rate of all groups, at more than 6%.
With the reduction in IRS staff, all income groups have seen a decline in their audit rates, although the rich have enjoyed a sharper reduction than the poor. For instance, Americans with annual incomes of more than $10 million have enjoyed a 75% decline in audit rates since 2013, according to the most recent data from the IRS. The audit rate for taxpayers earning less than $25,000 has dipped about 30% during the same period.