Audit Rate for Returns of Wealthy Americans Dropped Sharply in FY 2008
"Face-to-face audit rates for this group have sunk to, at best, the same level thwy were five years ago, before IRS aanounced it intended to target these high-income tax returns for increased scrutiny," TRAC said in its report.
"In the face of growing federal deficits and public calls to lower the tax gap - the amount of taxes due but not reported and paid - the drop in millionaire audits is surprising," TRAC said.
Big Underreporting Errors
TRAC noted that no other class of individual tax returns comes close to the size of underreporting erros, with the average audit resulting in a recommended adjustment of just under $200,00 in additional taxes.
The report further pointed out, however, that in the sapce of the past five eyars the millionaire class has doubled from 190,000 to 392,000.
Although the IRS said in January 2008 that it had put in place a drive to focus increased attention on those reporting $1 million or more in income, the agency confirmed to TRAC that its 2006 and 2007 audit numbers had to be revised downward because of coding errors in the way some of the returns were categorized, TRAC reported.
According to the research group, "the core error appears to have occured in the agency's tracking of correspondence audits at IRS campuses," and said it has been unsuccessfully seeking samples of the audit reports prepared under a newer system setup in 2004.