IRS Audits Drop to 8-Year Low

Monday, January 13, 2014

Audits by the Internal Revenue Service (IRS) were down to their lowest level since 2005, following several years of budget cuts by Congress.

 

Just under 1% (0.96%) of all individual tax returns were audited in 2013. The rate marked the second consecutive yearly decline, and the lowest level in eight years.

 

Audits were down across the board regardless of income. Among those earning $1 million or more, the audit rate was nearly 11%. This is twice the rate of audits for the wealthy in 2006.

 

IRS efforts to answer calls from taxpayers also declined last year. Only 60% of Americans who called the agency’s toll-free line were able to speak to a representative, the lowest level in five years.

 

Budget cuts may be impacting the IRS’s mission. It has lost $1 billion in annual funding and 8,000 employees over the past three years. “Key enforcement positions” now number 19,531 employees, down 14% since the 2010 peak.

 

The agency has tried to make up for the lost funding by increasing revenues from tax enforcement. Last year, it pulled in $53 billion from enforcement actions, which was an increase of 6.3%.

 

Audits generated $9.83 billion, less than $10 billion for the first time since at least 2003.

 

President Barack Obama is seeking $12.9 billion in funding for the IRS for fiscal year 2014, which would be $1.7 more than it received last year. House Republicans, however, want several billion slashed from the budget, proposing that the agency instead be allocated $9 billion for the coming year.

-Noel Brinkerhoff

 

To Learn More:

IRS Audits of Individuals Reached Lowest Rate Since 2005 (by Richard Rubin, Bloomberg)

2013 Annual Report to Congress (National Taxpayer Advocate) (pdf)

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