IRS Auditing More Returns Than it Admits

A recent report about the reduction in number of tax returns being audited by the IRS incited the Senate to respond that there are actually considerably more returns that undergo examination. The original report, which appeared last month, stated that the number of tax returns audited during 2000 had decreased nearly 50% from the prior year.

Members of the Senate are now pointing out that the definition of audit seems to have changed from 1999 to 2000, so the comparison from one year to the next isn't exactly accurate.

Senate Finance Committee Chairman Charles Grassley has indicated that the actual number of tax returns being audited may be as much as quadruple the number the IRS is reporting. The reason for the discrepancy can be found in the use of technology.

Much of the traditional audit process has now been automated, with initial examinations of tax returns being performed by computer. Comparisons are made to national averages and letters are sent asking taxpayers to explain or provide support for discrepancies. This process, which was once performed by humans, is now being done electronically, and millions of tax returns that are being examined in this way are not counted among those the tax commissioner includes with his audit figures.

Why is this an issue? The IRS is using the lower numbers of audited tax returns last year as reason for its request for additional funds. The IRS has asked Congress for an 8% increase in its budget and wants to hire an additional 4,000 employees. In previous years, the electronic examinations were included with audit figures to beef up the audit rate and show how well the IRS was doing its job.

You may like these other stories...

The Republican-led House of Representatives is expected to pass a bill this week that would permanently extend the bonus depreciation tax break. But don’t expect President Obama to sign it.The Obama administration said...
Washington D.C., our nation's capital, is the healthiest city in the country, according to a new report from USA Today. But now it's going to cost politicos on the Hill and Gen-Xers in Foggy Bottom a little extra to...
Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.