The IRS has developed a new program, the National Research Program, which is designed to gather current information on the nation's taxpayers for purposes of judging the level of taxpayer compliance.
The program, which will begin in 2002, will include random audits of approximately 50,000 taxpayers. The audits will be broken down into groups with four degrees of invasiveness.
- Approximately 8,000 tax returns will be checked at the IRS with the taxing agency having no direct contact with the taxpayer.
- Approximately 9,000 tax returns will be subjected to correspondence audits, where IRS agents will receive letters from the IRS questioning information on the tax return. Many of the tax returns included in this group would have been chosen for correspondence audits whether or not this new program had been launched.
- The majority of tax returns chosen for the program, approximately 30,000, will be subjected to partial audits conducted in person in IRS offices. The IRS claims these audits will be less intrusive than the complete line-by-line audits.
- The remaining tax returns selected for the program, approximately 2,000 returns, will be subjected to complete line-by-line audits. Although each line of the tax return will be checked, taxpayers will not necessarily have to substantiate every number on the tax return.
The National Research Program will attempt to identify problems with filing compliance, payment compliance, and reporting compliance. "This approach will give us the tools we need to help ensure the fairness of the American tax system," said Charles O. Rossotti, IRS commissioner. "The process is substantially less intrusive on taxpayers (than in prior years), but it will help us catch tax cheating and improve tax administration."
The IRS has not performed audits for the purpose of research for 13 years. The information gathered in this audit program will provide statistics on the taxpaying population as a whole, and will include a detailed look at taxpayers earning over $100,000 per year.
The audits will begin in September, 2002, and will apply to tax returns filed for the 2001 tax year. The IRS will include in its audit notices explanations of why particular taxpayers were chosen for examination.