A federal court, on Monday, ordered the Internal Revenue Service (IRS) to turn over extensive statistical information to Susan Long, the co-director of the Transactional Records Access Clearinghouse (TRAC) and a professor at Syracuse University. The decision comes a week after TRAC released a report stating that only 30 of the nation’s 180,000 millionaires were subject to face-to-face audits during fiscal year 2005. The IRS challenged the report on the same day it was issued, claiming the official numbers provided by the IRS were incorrect.
Judge Marsha Pechman, of the U.S. District Court for the Western District of Washington, ordered the IRS to turn over statistical data within 14 days, concluding a legal battle that began in mid-2004 when the agency stopped complying with a 1976 court order to disclose IRS audit and examination data. In ruling that the 1976 order remains enforceable, Judge Pechman rejected the argument that compliance would be burdensome and violate a statute prohibiting public release of tax return information about individual taxpayers because there was no evidence that the data could be used to identify any taxpayer.
“It is essential that a powerful agency like the IRS live by the law,” Long said today in response to TRAC’s legal victory. “This ruling, which requires the agency to abide by the Freedom of Information Act (FOIA) and provide TRAC with information about how it is collecting the nation’s taxes, is a win for the American people, who want to assure themselves that the IRS is operating in a fair and effective manner.”
TRAC uses the statistical data provided by the IRS to produce reports like those published last week. According to that report, taxpayers reporting less than $25,000 in total positive income were six times more likely to be subject to the Service’s comprehensive face-to-face audits than taxpayers reporting income of $200,000 or more. Even when the more common correspondence audits were also considered, poor taxpayers were twice as likely to be audited as the wealthy. Poor taxpayers were also more likely to be audited than middle income taxpayers.
The detailed statistics that might explain these findings were not provided by the IRS at the time the report was released. It is not known whether the very low rate of face-to-face audits for millionaires during 2005 was new or whether the policy was in place during previous years because the IRS has never before provided information about the number of audits of wealthier taxpayers. Analysis of data from previous years, however, has indicated that, in broad terms, low-income individuals were more likely to be audited than the rich. The report does note that in a March 17 press release from the IRS, the Service reported completing 1.215 million audits of individual taxpayers during fiscal year 2005, “up almost 21 percent from last year’s figure of 1.008 million.”
According to the note at the top of the report, TRAC has requested additional information to better understand the reasons for the error. If warranted, a follow-up report will be posted.
The effect of the court ruling on this report, or the errors, was unknown at press time. The ruling specifically states that copies of any monthly, quarterly and year-end Audit Information Management Systems (AIMS) Table 37 reports for fiscal years 2002, 2003, 2004 and 2005, as well as any monthly and quarterly reports for fiscal year 2006, be turned over to TRAC by April 17, 2006. In addition, the court awarded Susan Long reasonable costs and attorney fees for obtaining the order which specifies that the IRS will provide, upon request by Ms. Long, AIMS Table 37 reports as long as the agency continues compiling such reports.