IRS Publishes Fiscal 2007 Enforcement and Services Results

by Mike Godfrey, Tax-News.com, Washington

18 January 2008

The US Internal Revenue Service (IRS) on Thursday published details of its progress in a number of key enforcement areas in fiscal 2007.

According to its report, the IRS has continued to make strong progress in a number of these areas, and is showing "consistent improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury".

At the same time, the agency argued, it has continue to improve service to taxpayers.

It stated that:

"The IRS enforcement efforts increased again in fiscal year 2007. For instance, during 2007 the IRS audited 84% more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached USD59.2 billion, up from USD48.7 billion in 2006 and nearly USD34.1 billion in 2002."

Reported highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:

Individuals:

Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.

• Audits of individuals with incomes of USD1 million or more increased from 17,015 during fiscal year 2006 to 31,382 during fiscal year 2007, an increase of 84%. One out of 11 individuals with incomes of USD1 million or more faced an audit in 2007.
• Overall, the total individual returns audited increased by 7% to 1,384,563 in 2007 from 1,293,681 in 2006. That’s the highest number since 1998.
• Audits of individuals with incomes over USD200,000 reached 113,105 returns, up 29.2% from the prior year total of 87,885.
• The IRS increased audits of individual returns with income of USD100,000 or more, auditing 293,188 of these returns in 2007, up 13.7% from last year’s total of 257,851.
• The IRS filed 3.8 million levies and almost 700,000 liens during 2007, an increase from the previous year and a substantial increase from five years earlier.

Businesses:

In the business arena, the IRS continued efforts to review more returns of flow-through entities – partnerships and S Corporations - and placed more emphasis in the growing area of these flow-through returns.

While large corporate audits are down slightly, the tax authority explained that it had increased its focus on mid-market corporations – those with assets between USD10 million and USD50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk.

• Audits of S Corporations increased to 17,681 during 2007, up 26 % from the prior year’s total of 13,984.
• Audits of partnerships increased to 12,195 during 2007, up almost 25% from the prior year’s total of 9,777. Audits of mid-market corporations increased to 4,473, up 6% from last year’s total of 4,218.
• Audits of businesses in general rose to 59,516, an increase of almost 14% from the prior year’s total of 52,223.
• Although the audits of large corporations dipped slightly in 2007 to 9,644 audits, the number of audits is up 14% from the fiscal year 2002 level.

Taxpayer services:

• More taxpayers chose to file electronically in 2007 than during the prior year, with 57% of individual tax filers choosing to e-file in 2007, up from 54% in 2006.
• More people visited the IRS internet site, IRS.gov. The IRS site was accessed more than 217 million times in 2007, up more than 10.5% from the same period in 2006.
• The IRS helped more taxpayers find out about their refunds through the agency’s internet-based system ‘Where’s my Refund?’ The system was accessed 32.1 million times during 2007, up 30% from last year’s usage of 24.7 million.
• As in the prior year, the IRS accuracy was 91% on tax law questions answered through its toll-free telephone service.
• The agency held a 94% customer satisfaction rating for its toll-free telephone service.

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