I attended the USC Tax Institute, a gathering of tax geeks in downtown Los Angeles, last month. Among the more accessible topics was a presentation on tax audits given by Ted Meyer, a former territory manager for IRS auditors.
In 2014, he reported, the IRS audited only 0.86 percent of all returns filed. Of those returns audited, 77 percent were audited by correspondence: the IRS sent the taxpayer a letter, and closed the examination without speaking to the taxpayer. That means that only 23 percent of the audits (or one out of 500 tax returns filed) were done face-to-face.
Meyer shared that the Criminal Investigation Division (CID) of the IRS is down to 3,500 agents, but we don’t know what the high-water mark was here. However, a quick internet search shows that CID is doing less work in recent years.
My clients are also feeling the impact of lesser manpower at the IRS. It took the IRS two years to get one client into an installment agreement, even though she acknowledged owing $200,000 in tax and was fully cooperative. Another client had to wait 10 months for the IRS to review 20 pages of documents that lowered her tax bill. However, the most egregious case of short-staffed delay, involves a client who owes $300,000 and who has not heard from a collector in two years since I took his case.
By any measure, IRS enforcement is getting weaker, probably because the agency is relatively underfunded. Hey, Congress! Could you please fully-fund the agency you created? If you want to cheat on your tax returns, now is the time. Not that I recommend it.
February 18, 2016