Everson Unveils Enforcement Results

by Mike Godfrey, Tax-News.com, Washington

22 November 2006

In a statement delivered this week, IRS Commissioner, Mark Everson unveiled the US tax department's Fiscal Year 2006 Enforcement and Service Results.

He stated that:

"The IRS made strong progress in a number of key enforcement categories. We are showing consistent improvements in areas critical to running a fair, efficient tax system. We are bringing in billions of dollars to the Treasury through our expanded enforcement activity. At the same time, I want to emphasize that this increase has not been at the expense of taxpayer service. We continued to show improvements in key areas involving services for taxpayers in fiscal 2006."

"There are a lot of different ways to look at numbers. But no matter how you look at our results, they show a strong rebound in our enforcement efforts. Our enforcement activity is up from the low points following the Restructuring and Reform Act of 1998, and it has climbed significantly since I became Commissioner three-and-a-half years ago."

He continued:

"The bottom line for our enforcement efforts shows that dollars collected rose again last year. There’s a strong trend line going up. Fiscal 2005 was a watershed year for us, with a number of big initiatives that helped push enforcement revenues up 10% to $47.3 billion. In Fiscal 2006, enforcement revenues – the monies we get from our collection, examination, and document matching activities – increased to a record $48.7 billion. Our exam dollars were down slightly this year because of the big bump from the Son of Boss settlement initiative in 2005. Even with that, our overall dollars collected jumped nearly 3% in 2006 principally because of a strong rise in collections."

"The individual enforcement categories bear out the significance of our invigorated enforcement efforts."

According to Everson, total individual returns audited increased by over 6% to 1,293,681 in 2006 from 1,215,000 in 2005, the highest number since 1998.

He went on to add:

"An important part of our enforcement effort has targeted high-income taxpayers. We’ve put a lot of emphasis in increasing audits in this area because it’s critical to ensuring faith in the tax system. If you earn more than $100,000 or you’re a millionaire, you’re a lot more likely to be audited these days than just a few years ago."

"Audits of individuals with income of $1,000,000 and higher increased to 17,015 from 12,835, a nearly 33% increase in just one year. About 1 in every 16 of these taxpayers faced audits last year. If you’re earning that kind of money and we notice a problem, you’re going to hear from us."

"Audits of individuals with incomes over $100,000 surpassed 257,000, an 18% increase from 2005. That’s the highest figure in more than a decade, and well over double the 92,000 completed in fiscal year 2001."

With regard to businesses, Mr Everson revealed that audits of S corporation returns increased to 13,984 from 10,417, a 34% increase.

For partnerships, audits of these flow-through returns increased to 9,777 from 8,489, a 15% increase.

Audits of small businesses organized as corporations remained about the same. 17,871 audits were completed in 2006, up slightly from 17,858 in 2005. Both of these figures are more than double the 7,294 audits of small businesses in 2004.

Audits of larger corporations – those with assets over $10 million – dipped by 2.2%, to 10,591 from 10,829 in 2005. While down slightly this year, audits remain up nearly 50 percent from 2003.

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