Is My Religion Going to Get Me Audited by the IRS?

irs-audit-red-flags-the-dirty-dozenShort answer: no.

Longer answer: actually, still no.

Context: 

On Wednesday, Mitt Romney called Donald Trump out for not releasing his tax returns.[fn1] At the GOP debate last night, Trump explained that he wasn’t releasing his tax returns because he’s currently under audit. But his post-debate explanation of why he might be under audit is what piqued my interest (and motivated this post): he said the IRS may have targeted him

maybe because of religion, maybe because I’m doing something else, maybe because I’m doing this, although this is just recently.

When pressed on what he meant by saying he may have been targeted because of his religion, he elaborated:

Well maybe because of the fact that I’m a strong Christian, and I feel strongly about it. And maybe there’s a bias,” Trump said, adding, “You see what’s happened. I mean, you have many religious groups have been complaining about that. They’ve been complaining about it for a long time.[fn2]

If Trump’s Christianity[fn3] led to his audit, presumably we, as Mormons, should be concerned, too. The American public views Mormons less warmly than other Christian religions.

Fortunately, religious affiliation doesn’t appear to affect the likelihood of audit. My friend and sometime coauthor David Herzig has a great explanation of why not here. I want to reiterate one of his points, and add a couple more.

The one I want to reiterate is this: audits are really, really rare. The IRS is underfunded, and Congress cuts their funding every year. In fact, in 2015, the individual audit rate hovered somewhere below 1 percent. That means, on average, one out of every 100 tax returns were audited.

But for individuals making more than $1 million, the audit rate was ten times higher. One in ten of these high-income individuals faced an audit in 2015. So on its face, Trump’s audit was probably triggered by his income, not his religious affiliation.[fn4]

Those numbers also tell us that Christianity is a tremendously unlikely trigger. Per Pew, 70.6% of Americans identify as Christian. Christian  affiliation, then, would be a really, really blunt instrument to use to figure out who to audit.

And frankly, it’s really hard to tell religious affiliation from tax returns. If you’re one of the 30 percent or so of Americans who itemize deductions, and pay tithing to the church, you’ll include the name of the church on your tax return. But figuring out who to audit by looking through 147 million returns and trying to find particular religious donations seems like a really inefficient way to target delinquent taxpayers, especially because, to the best of my knowledge, there’s no correlation between religious affiliation and cheating on taxes.

Which is to say, you can rest easy that your religious affiliation isn’t going to increase your likelihood of audit. (Though if you’re really worried about it, you might want to make sure you don’t earn more than $1 million in any given year.)

[fn1] (Side note: candidates’ releasing their tax returns has a long and storied history, going back at least to Nixon in 1952. In fact, if you want to see past presidential tax returns, as well as the returns of several former presidential candidates, you can look here.)

[fn2] You can watch the video of his explanation here if you want.

[fn3] By the way, any comments debating Trump’s assertion that he is a Christian will be immediately and unceremoniously deleted. For purposes of this post, his religiousity is only relevant to the extent it did or did not motivate an IRS audit.

[fn4] As a side note, he’s not completely clear about who the IRS is auditing. He’s presumably a partner in several partnerships, and the owner of several corporations, and it’s certainly possible that he’s conflating audits of his various entities

Comments

  1. The owner of the company I once worked for said that if you aren’t getting audited, you paid too much in taxes. I’m sure Trump gets audited because he (his lawyers) interprets things substantially in his favor, so as not to pay “too much in taxes”.

  2. I went through an audit years ago with a client and doing so ended any fears I had of ever personally being audited. I saw first hand how easy it is for business owners to cheat on their taxes in a way that a salaried/hourly employee just cannot. It’s pretty much impossible for me to take my family’s six week vacation to Europe as a tax deduction (or the expenses for our four cars, nightly dinners out, kids school expenses, housekeepers, groceries… I could go on and on) as a tax deduction. Of course, I don’t actually have the funds for such deductions anyway.

    Trump and the other million-plus-a-year club are a different story. They ~should~ be audited on a regular basis. And the more money they have, the more often that audit should occur (and hopefully does). It makes sense that the IRS would target him. Now what would be really interesting would be to see his tax returns and the ‘corrections’ the IRS makes to them.

  3. wreddyornot says:

    “If you’re one of the 30 percent or so of Americans who itemize deductions, and pay tithing to the church, you’ll include the name of the church on your tax return.”

    No. Looked at a Schedule A lately? “Line 16 Gifts by cash or check. If you made any gift of $250 or more, see instructions.” The instructions for the schedule require only a total number and nothing more be filed with the return. The IRS has no idea from your return who you gave charitable money to if you fill out the return correctly.

    Otherwise, couldn’t agree with you more.

    Sincerely,
    Your friendly retired IRS Santa Claus (aka appeals officer).

  4. Trump is playing so many cards in those statements none of which are likely true and all of which are targeted to gain voter sympathy. He’s getting audited likely because of how he runs his businesses: on the absolute edge of propriety. Just barely legal.

  5. In that the number one faudulent deduction is reported to be religious charitable donations, the profiling assertation might be correct.

  6. This snippet is from today’s WSJ concerning Trumps not releasing his tax returns:

    Meanwhile, Mr. Trump for the first time invoked the IRS as his reason for not releasing his tax returns. “For many years, I’ve been audited every year. Twelve years, or something like that. Every year they audit me, audit me, audit me,” he said in the debate. “I will absolutely give my return, but I’m being audited now for two or three years.”

    So is it 12 years of audits, or only two or three? And no matter the years, an audit doesn’t mean he can’t release his returns. The IRS explains on its website that “most audits will be of returns filed within the last two years” and “if a substantial error is identified, the IRS will not go back more than the last six years.”

    So even if Mr. Trump wanted to keep his returns confidential during an audit, he could still release returns from the last decade. His resort to the IRS—an agency most conservatives loathe—is a political excuse and diversion. This reached almost comic proportions when he told CNN that he might be audited so much because he’s “a strong Christian.”

    Messrs. Rubio and Cruz said they plan to release more of their tax returns in the coming days. But Mr. Trump will delay releasing his as long as he can and then only snippets. He doesn’t want voters to see how wealthy he really is—or isn’t.

  7. As if I needed another reason not to vote for that charlatan.

  8. If you look at this in terms of bench audits (as opposed to correspondence audits where you just see a letter proposing changes based on document matching and automated screening) and returns showing income under $200,000, the likelihood is dramatically lower–less than 214,000 bench audits compared to more than 140 million returns with income under $200,000 in 2015, or about 1 in 500.

    I thought the meme of being audited for religion started with a concern about charitable contributions. I don’t think it is true, or has ever been true, but when my father doubled his tithing every other year, and took a standard deduction on the off years, I wondered.

    [Mr. Trump’s antics are wrong or incorrect or misleading in so many ways that I am determined and trying to pay him no attention.]

  9. Anon for this says:

    After retirement, my father regularly contributed nearly half of his income to charities–both religious and non-religious. One year–which was of course the year that he moved just in time to miss the letter–the IRS sent him a letter disallowing the entire deduction. No questions, no inquiries, nada. Just, “Your deduction for charitable contributions is disallowed.”

    We provided evidence of the contributions and that decision was reversed.

    Was that a “correspondence audit”? I don’t know IRS terminology, and frankly don’t want to know any more about them. But it was obvious that the high level of charitable contributions was the trigger for the IRS notice.

  10. Yes, that’s a correspondence audit, and yes, that’s how they work. A taxpayer is responsible for providing evidence of deductions; I suspect there was an earlier letter that maybe got lost in the move. If your dad didn’t respond to the IRS’s request for information, the next step would be to disallow the deduction entirely.

  11. Well, Trump is saying that he is being audited because he is a Christian. That seems likely to me. I mean, if he were a Mormon, or a Jainist, or a Zoroastrian, it would be probably be impossible for the IRS to target him. The fields are just too crowded. But being in such a vanishingly small minority like Christianity makes him an easy target. How many Christians can there even be in the United States, like a couple thousand, tops.

  12. Ugly Mahana says:

    I say take the man at his word, and rejoice. His conversion is so complete and, as a result, his charitable donations so yuge, that he has caught the attention of the Revenooers. But this meek soul does not complain. However, he did have to provide an explanation to his faithful as to why he cannot continue to exhibit the high level of transparency that he has hitherto championed.

  13. Last Lemming says:

    In that the number one faudulent deduction is reported to be religious charitable donations

    Reported by whom? They might be the number one fraudulent itemized deduction, but (as RT explains above) fraudulent deductions for business expenses–especially by the self-employed–are a much bigger issue overall.

  14. That’s true. I haven’t seen anything that suggests that charitable deductions are more likely than any other kind of deduction to be fraudulent.

  15. it's a series of tubes says:

    Just an anecdote: I’ve been audited once, apparently a “correspondence audit”. The category in question? Charitable donations.

  16. Charitable donations of *property* are frequently cited as an area of abuse, and the subject of legislation especially regarding valuation and documentation. Cash (and marketable securities) donations not so much.

  17. John Mansfield says:

    I can tell you about the IRS errors in processing my 2009, 2010, and 2013 returns, errors adding up to $11,000. After the third go around I wondered if religious bias could at work. I won’t go into it though if that would be an unwelcome, irrelevant tangent to a post about audits.

  18. Clark Goble says:

    Never attribute to malice that which can adequately be explained by stupidity. Or in this case the fact the IRS seems particularly underfunded such that the staff that is there is overworked.

  19. Last Lemming says:

    And we must punish their incompetence by cutting their funding even further. That’ll show ’em.

  20. John Mansfield says:

    Clark, hours on the phone with IRS incline me toward your view, and the idea that I might be targeted didn’t occur to me until the third time, while Lois Lerner was in the news. But I’m not sure Sam Brunson wants this experience with IRS that was not an audit cluttering his post comments.