Fewer Taxpayers Are Audited Amid IRS Budget Cuts
By LAURA SAUNDERS
Associated Press
Worried about a tax audit? The good news is that you’re far less likely to be chosen than you were a few years ago. The bad news is that the improved odds apply to tax cheats, too.
The Internal Revenue Service audited only 0.86% of individual taxpayers in 2014, the lowest rate in a decade, according to data released by the agency. In 2005, the audit rate was 0.93%. As recently as 2010 and 2011, the rate reached a recent high of 1.11%.
The overall number of returns audited in 2014 was 1.24 million, which was 11.5% fewer than the 1.4 million returns examined 2013.
Audit rates also fell in nearly every individual category and across income levels, according to the IRS. “Field” audits, which are more labor-intensive because they can involve in-person meetings with the taxpayer or his representative, dropped 15% to 292,000 in 2014. “Correspondence” audits, which are conducted by mail, fell more than 10% to about 1 million.
The only exception to the trend was in correspondence audits for taxpayers earning more than $200,000. They grew 4% in 2014 when compared with 2013.
While the IRS still audits a far larger percentage of high-income taxpayers than lower earners, the audit rate among high earners shrunk more last year. The audit rate for returns reporting income of $1 million or more dropped by one-third, to 7.5% from 10.85%. At the same time, the number of returns in this category grew 26%.
By contrast, the number of returns reporting less than $200,000 of income fell slightly last year. Their audit rate dropped by one-tenth, to 0.78% from 0.88%.
The decline in audits corresponds to drops in IRS funding and a steady attrition in revenue agents. According to IRS Commissioner John Koskinen, the IRS has lost about 2,200 revenue agents since 2013, and the current number of 11,600 is also the lowest in a decade. Each trained revenue officer, he says, generates $1.2 million a year in revenue that otherwise would go uncollected.
Mr. Koskinen has repeatedly called for reverses in IRS budget cuts, which he says have shrunk the agency’s funding by $1.2 billion since 2010. “At our current funding level,” he said recently, “both enforcement and taxpayer service will suffer.”
via Fewer Taxpayers Are Audited Amid IRS Budget Cuts – Total Return – WSJ.