IRS Slipping on Enforcement

Will more taxpayers cheat on their taxes as the threat of being audited by the IRS decreases? New data, which shows a steady decline in IRS enforcement activities, begs the question but offers no answers.

IRS statistics, published by Transactional Records Access Clearinghouse (TRAC) at Syracuse University, reveal that the face-to-face audit rate for individual taxpayers fell to less than half a percent (.46%) in 1998. In 1981 the audit rate was 1.59%, more than three times as high.

Corporate audit rates also decreased over the last several years. Companies that filed 1120 return forms had an almost 3-out-of-100 chance (2.90%) of being audited in 1992. In 1998 the likelihood the IRS would audit a company's tax return was even more of a long shot; it audited only 2 out of every 100 (2.04%) corporate tax returns filed.

Prosecution of federal tax fraud has also fallen since the early 1980s. An examination of U.S. court records by TRAC indicated the number of federal tax prosecutions fell from 1,431 in 1981 to 766 in 1998.

Experts point to downsizing at the IRS as an explanation for the drop in enforcement numbers. IRS statistics show a positive correlation between the decrease in staffing and the decrease in audit and prosecution figures. In the last ten years, the number of revenue agents and tax auditors has shrunk by approximately 20%.

But just because the IRS is auditing less and dragging fewer taxpayers into court doesn't necessarily mean that more people will succeed in cheating on their taxes. David A. Lifson, chairman of the AICPA tax executive committee, said the IRS has developed ways to "compliance-check" millions of tax returns through W-2 forms and 1099s. Lifson, who is a tax practitioner with Hays & Co. in New York City, said the IRS uses document matching to zero in on returns that warrant auditing.

"I think the declining number of audits is creating a misconception that the IRS is checking less," Lifson said. "The IRS is just targeting its audits more efficiently than it ever has."  

Resume Writing 101

Professional Resumes for Tax and Accounting Occupations (CCH Inc., 1999) by David F. Noble provides readers with a collection of 335 sample resumes and 22 cover letters. The publication is intended to help tax professionals, accountants, lawyers and financial professionals to showcase their specialized talents to potential employers.

In addition to the resumes and cover letters, which are written by professional resume writers, the book gives readers tips on how to avoid common errors guaranteed to land a resume in the circular file.

Before rushing out to buy this handy guide, however, tax professionals should know that, despite its title, the book contains only 34 specifically tax-related resumes.


Preparing the statement of cash flows

This instructive white paper outlines common pitfalls in the preparation of the statement of cash flows, resources to minimize these risks, and four critical skills your staff will need as you approach necessary changes to the process.


Keeping you informed and prepared amid the COVID-19 crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.