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IRS Commissioner Admits That Chance Of Tax Audit Is Shrinking

Mike Godfrey, Tax-News.com, New York

16 February 2001

IRS Commissioner Charles O. Rossotti yesterday disclosed that the number of tax-payer audits carried out by the IRS last year fell almost by half to 617,765 - and the 1996 score was 1.94m. The figures released yesterday show that the chance of an individual tax return's being audited last year was less than one in 200, down from one in 112 in 1999 and one in 60 in 1996.

Commissioner Rossotti attributed the decline in audit rates to the shrinking in auditing staff numbers, a growing number of tax returns, and the mandatory use of some IRS employees in other roles as required by several new laws aimed at protecting taxpayers from abuses.

Those audits that were carried out, said the Commissioner, were concentrated on the working poor - again, under orders from Congress, audit staff were told to concentrate on tax returns filed by claimants of the working poor tax credit. 44% of audits were of this type, meaning that for those who did not claim the credit, the chance of being audited was a mere one in 370.

However, Mr. Rossotti warned against cheating on a statistical assumption that you won't be caught: "If gambling is what you have a passion for," he said, "I would say you have better odds going to Las Vegas. Yes, these audit rates are down, but audits are not the only way we identify taxpayers. We get more than a billion pieces of information that come in from third parties and even though we are slow, our computers eventually do their job."

Mr. Rossotti said he hopes for additional funding that will allow him to halt the continuing fall in audit rates. Perhaps - but while the Treasury keeps reporting an ever-higher surplus, there doesn't seem to be a very strong argument for giving more money to the IRS.

Even if more money is forthcoming, audit rates may not increase: the Commissioner said that even if his staff of auditors grew he might prefer to use auditors and tax collectors to go after abusive trusts and advisers who help taxpayers to hide income through offshore bank accounts.

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