IRS To Tighten Audit Screws In Search Of New Revenue
With the US economy slowing and the federal deficit rising, a much needed surge
in tax revenue means that a growing number of taxpayers can expect to be audited,
while Americans already burdened by tax debt will find it harder than ever to
resolve their tax disputes with the Internal Revenue Service (IRS), according
to one tax expert. In fiscal year 2007, IRS audit rates were up from the previous year for individuals
overall. Additionally, audits of S Corporations were up 26% and audits of partnerships
increased almost 25% from 2006. Tax expert Michael Rozbruch says that the IRS will continue to increase audits
of corporations, partnerships and individuals. He recommends, however, that
those in receipt of an audit letter should respond by the deadline in order
to avoid being placed in the collection department. "If the IRS garnishes your wages, they can take as much as 75% of your
net pay and make you live on USD168 a week," warned Rozbruch, founder and
CEO of Tax Resolution Services, a company that provides advise to people in
dispute with the IRS. "The IRS is the most brutal collection agency on the planet," he
remarked. While taxpayers can expect renewed IRS compliance efforts, the national credit
crisis will make it even more difficult for Americans to pay their taxes. But
Rozbruch says that Americans who anticipate having problems with their taxes
should know that there are ways to work with the IRS. "Not filing your taxes is the worst thing you can do because you can
incur a 25% failure to file penalty right off the bat," Rozbruch said.
A report by the Transactional Records Access Clearinghouse (TRAC) at Syracuse
University revealed that, while the audit rate for the largest corporations
in the United States in 2007 plunged to its lowest level in the last 20 years,
the number of small corporation audits climbed in the two years to fiscal year
2007. The TRAC study, which was based on IRS data, found that the audit rate of small
corporations which have assets of between USD10mn and USD50mn increased to 14.7%
in 2007, significantly higher than either the 10.9% or 11.5% audit rates for
larger firms in each of the next two higher asset brackets (USD50 to USD100mn,
and USD100 to USD250mn), "Moving the focus of the corporate auditors away from the large corporations
and towards the smaller ones has been quite effective when it came to increasing
the overall number of these kinds of audits," the TRAC researchers observed,
although they concluded that this was actually a "counter productive"
strategy for the IRS in financial terms. .
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