OTR Interviews

Who's most at risk for an audit and how can you avoid one?

All you need to know about dreaded IRS audits and how you can avoid them


This is a rush transcript from "On the Record," April 14, 2014. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: OK. In four and a half hours, it is April 15th. The tax deadline, of course, you have until midnight on the 15th. But something many people fear even more than the taxes is getting audited.

So, how likely are you to get audited? "The Wall Street Journal's" Jason Bellini is uncovering some startling numbers. He joins us. Nice to see you, Jason.


VAN SUSTEREN: OK. So, who is at risk of being audited and why.

BELLINI: Well, the most wealthy people making over a million dollars, they're most at risk. You have about a one in ten chance of being audited if you make over a million dollars. And that's up from about 6.5 percent just five years ago. Now, people have at the lower end of the spectrum, if you are making under $200,000 you only basically got less than 1 percent chance. Lower than it was five years ago.

VAN SUSTEREN: And in terms of the man power. Is the IRS growing so there are more people to do audits or they're cutting back on that? What's the IRS ability to audit people?

BELLINI: Well, I mean the reason they are going after the higher dollar people is because they have fewer people available to do this work. Their budget is down. President Obama has proposed to increase the budget by 10 percent for IRS enforcement. And they say in their budget proposal that for every dollar that they spend on enforcement. They will bring in an additional $6 in revenue.

VAN SUSTEREN: In terms of the IRS, I mean, is there a sense -- I mean, people I hear who get audited, I mean, they are terrifying experiences. I mean, do you ever hear that someone says, well, you know, OK, it is an audit. I didn't like doing it but at least I thought it was orderly and I understand it.

BELLINI: Well, they did a lot of different types of audits, but there are a few that are just off one -- the audit from hell is the research audit. And that's actually done at random where they are trying to find unreported income. Where you really have to worry, we're told is if two agents show up. That's when they are really going to dig deep and that's where you really need to have a lawyer there to help you.

VAN SUSTEREN: I suppose if you have a W-2 Form, if that's your form of employment that it is probably less likely that you are gonna get audited, then if you happen to do business with a lot of cash. Is that fair? Is that true?

BELLINI: That's exactly right. The way it works these days, is they are using computer algorithms to try to find people who are outliers. People who have more deductions than the norm, more than the median, and that they're also looking very closely now, at -- you know, those people who have other red flags. If you've got rounded numbers in your taxes, that's a red flag in this computer algorithm. Anything that makes you stand out from the crowd puts you at greater risk of an audit.

VAN SUSTEREN: Do you ever hear about people getting audited and at the end they get more money back or is it that do you have to pay.

BELLINI: I haven't personally heard of that. I think that.


VAN SUSTEREN: I haven't, either.

BELLINI: In most cases they find things that there are -- and you know, they want receipts for everything, especially for your charitable deductions. If anything over a few hundred dollars you need to have a letter to back that up.

VAN SUSTEREN: Well, anyway, so April 15th, it's almost here and then got 24 hours. Got that -- you know, to deal with the IRS, anyway or file an extension. Jason, thank you.

BELLINI: Thanks, Greta.