Significant decline in IRS staff leads to fewer audits

BY SALLY P. SCHREIBER, J.D.

The Transactional Records Access Clearinghouse (TRAC), reports that the IRS plans to expend 18% fewer staff hours auditing large businesses with assets of more than $10 million in fiscal year 2013 (which ends Sept. 30) than it did in FY 2011. These lower numbers do not take into account the effects of budget cuts that resulted from the sequester.  

TRAC, a data research organization at Syracuse University, based the report on information it has received after filing a Freedom of Information Act (FOIA) suit against the IRS.

The report also notes ongoing reductions in IRS staff in the individual tax area, explaining that the number of IRS employees fell 23% between 1992 and 2012, while the number of tax returns filed increased by 27% during the same period. Some of the reduction in IRS staff is compensated for by the increase in correspondence audits, Form 1099 matching programs, and expanded math error correction authority, but it is impossible to tell how much. The report says that an individual’s chance of being audited declined 7% from FY 2011 to FY 2012 and that face-to-face audits declined by 10%.

As a result of its FOIA suit, TRAC now receives monthly planning reports from the IRS and is in a position to track ongoing trends. Nonetheless, it mentioned that it was impossible to tell how big the IRS needs to be to do its job adequately because there are no systematic reports studying those needs. It pointed out that there used to be a program called the Taxpayers Compliance Measurement System that calculated the IRS’s effectiveness in allocating its resources. However, that program, which began in the Kennedy administration, was ended by the Reagan administration.

Without this information, TRAC questions the IRS’s ability to live up to its mission statement: “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” While the IRS currently has a program called the National Research Program that is intended “to design and implement a successful strategy to collect data that will be used to measure payment, filing and reporting compliance,” TRAC says these efforts have not been successful.

Sally P. Schreiber ( sschreiber@aicpa.org ) is a JofA senior editor.

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