Not many of us have much sympathy for the IRS. However, it is good to know they have problems of their own. Because of these problems, i.e. hiring freeze, an increasingly complex tax code and a surge in tax refund identity theft, the IRS finds it harder to spend time detecting fraud and/or tax mistakes. In other words, the odds of getting audited have gone down some.
According to the IRS’s own information, the peak for audits was 2010 when they audited one taxpayer out of every 90.
IRS Deputy Commissioner, Steven Miller, was interviewed and said audit rates “may drop a little bit this year” because the agency has reassigned more workers to help deal with the increased number of cases of identity theft related tax refund fraud. If the overall audit rate drops below 1%, this will be the first time it has happened since 2001 through 2006. “The IRS is put between a rock and a hard place” stated Mark Luscombe, who is a Principle Tax Analysis for CCH.
Essentially, the IRS is being asked to do more with less resources and this has an impact on their ability to perform audits.
Here are some facts:
In 2011, the IRS processed more than 234 million tax returns, bringing in more than 2.4 trillion dollars to fund the government. Yet, the IRS estimates the gap between what taxpayers owe in a year and what is not paid on time, because of mistakes or fraud which totals $385 billion dollars.
The IRS budget for 2012 is 11.8 billion dollars. This is nearly a 2.1% cut from 2011. This is the second year in a row their budget has been reduced. Fortunately, those cuts leave the IRS “unable to adequately detect and address non-compliance, requiring honest taxpayers to shoulder, it gets proportionally large share of the tax burden” states Nina Olson, of the National Taxpayer Advocate, her 2012 annual report to Congress.