IRS Audits Decline as Agency Deals with Cutbacks | AccountingWEB

IRS Audits Decline as Agency Deals with Cutbacks

IRS Commissioner Charles O. Rossotti announced Thursday that the number of tax returns selected for audit during 2000 decreased by nearly 50% over the prior year. The chances of a tax return being audited during 2000 was 1 in 200, compared to 1 in 112 in 1999.

Mr. Rossotti attributed the change to the shrinking of the IRS audit staff, the increase in the number of tax returns filed, archaic computer systems, and the diversion of IRS employees to other functions as required by several new laws aimed at protecting taxpayers from abuses.

The IRS said that between 1992 and 2000, the agency's work force fell by 17 percent to 97,862, while the total number of tax returns filed by individuals, businesses and all other categories increased 13 percent to 230 million.

The reduced likelihood of being audited should not be seen as an opportunity to cheat on your taxes, according to Mr. Rossotti. "Although the number of audits may be down, it is not an excuse to ignore the nation's tax laws," Mr. Rossotti said in a statement. "People need to remember that the IRS still has an extensive system to catch people who don't report their income."

Audit statistics show that the focus of audits has shifted from tax returns filed by wealthy taxpayers to tax returns filed by low income taxpayers claiming the Earned Income Tax Credit, an area of the tax law that confuses many taxpayers.

Mr. Rossotti indicated that he hopes to get budget increases in the future that will enable the agency to increase the number of returns that are examined. John Feehrey, a spokesman for House Speaker J. Dennis Hastert of Illinois, said that "there is no movement in the House to compel the I.R.S. to audit more people."

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