• The IRS “Annual Report” for fiscal year 1988 contains some interesting information. Only 1.03% of personal income tax returns filed in fiscal year 1988 were audited (down from 1.09% in 1987). However, the actual audit rate varied significantly depending on the IRS district involved and the amount of income reported. For example, the audit rate was 1.45% in Anchorage, Alaska, 1.44% in San Francisco, and 1.36% in Manhattan, New York, but only 0.55% (i.e., about half of a percent) in Boston and Newark. For returns reporting income of at least $50,000 (none on Schedule C), the audit rate was 2.32%. The audit rate jumped to 4.2% for taxpayers reporting income of at least $100,000 on Schedule C.

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