IRS Audits on Wealthy Recover $12 for Every $1 Spent

Auditing the wealthiest taxpayers will generate a great amount of revenue, according to a new report.

A new paper from economists at the Department of Treasury, Harvard University, and the University of Sydney said that auditing the top 1% yields $4.25 per dollar spent, and $6.29 per dollar when auditing the top 0.1%.

The economists added that every additional dollar could yield up to potentially $12 in revenue from the top 90th percentile of earners.

A 2021 study from the IRS and economists found that the top 1% of earners don’t report nearly a quarter of their income, and the top 0.1% under report twice as much, Business Insider reported.

The Treasury Department previously estimated that the top 1% avoid $163 billion in taxes annually.

Wealthy Americans who avoid paying their share of taxes means that “low- and moderate-income families must pick up a bigger share of the overall cost of government,” Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, told Insider.

“It also means that the public services that we all depend on are underfunded,” Hanauer told the outlet. “So we have less revenue to pay for healthcare and education and higher education and infrastructure and all of the things that our tax dollars support that enable us to have strong communities.”

IRS audits have fallen for the country’s highest earners, according to IRS data, with the audit rate for those earning $10 million or more falling from nearly 14% in 2012 to 9% in 2018.

However, a 2022 report from the Government Accountability Office found that from 2010 to 2018, audit rates fell the most for taxpayers making over $200,000.

Auditing the wealthy, who typically have more complex incomes, generally costs more than auditing people earning less, the Insider reported.

It costs a little more than $5,000 to audit someone who’s in the bottom half of earners, and just more than $15,000 to audit someone earning in the top 0.1%.

An audit of a person in the top 0.1%, though, brings in an average of around $95,491, according to the paper.

And those taxpayers, after getting audited once, are more likely to keep paying more of what they’re supposed to pay, the paper reported.