IRS To Increase Audits In Tax Evasion Crackdown

by Mike Godfrey, Tax-News.com, Washington

19 March 2002

The US Internal Revenue Service has announced that, as part of a drive to improve taxpayer compliance numbers, it will be conducting significantly more audits over the coming three years.

Speaking to a subcommittee of the House Appropriations Committee recently, IRS Commissioner, Charles Rossotti revealed that he expects that the changes, which include the addition of 1,000 extra collection agents and tax examiners, and a revamped set of procedures to deal with errant taxpayers, to start bearing fruit this year.

'We believe that compliance activity levels will increase over the next three years,' he predicted, adding that: 'We will also be able to better identify and focus on key compliance problem areas.'

The rate of field, or in-depth, face-to-face taxpayer audits has fallen of recent years in response to budget cuts. According to reports, the IRS has come to rely increasingly on correspondence examinations, which are conducted by mail and deal primarily with simple, easily spotted errors.

However, with under-reporting of income and false deductions costing the US Treasury an estimated $250 billion per year, the IRS has decided that it is time to take action.

Although the IRS Commissioner did not reveal to the Committee how many taxpayer examinations are expected to take place over the three year period, it is thought that the number of audits will be substantially higher than the 2001 figure of 731,756, which is down from 1.9 million in 1996.

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