Week in Insights: Harvard Study Shows Auditing the Rich Pays Off

Year to year, the IRS generally audits less than 0.005% of tax returns. This minuscule percentage encourages tax dodgers who might want to make a fraudulent deduction or under-report income—it seems the odds are in their favor, and that rolling the dice might be a rational choice.

Of course, the overall percentage of audited returns doesn’t give the full picture. Returns aren’t randomly selected for scrutiny. The same activities that might appear worth the risk will, in most cases, place a return into a subcategory with a much higher likelihood of audit.

From the policy side, tax authorities are making ...