22 July 2017

IRS Audits Of Individuals Drop For Fifth Straight Year

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The Internal Revenue Service, which has lost 30% of its enforcement staffing since 2010, audited 0.7% of tax returns in fiscal year ended Sept. 30.

U.S. tax audits of individuals declined for the fifth straight year in 2016 to reach the lowest level since 2003, showing the effects of budget cuts at the Internal Revenue Service.

The IRS, which has lost 30% of its enforcement staffing since the 2010 peak, audited 0.7% of tax returns in the fiscal year that ended Sept. 30, according to preliminary data released Wednesday. That means the IRS audited roughly 1 in every 143 individual tax returns, down from 1 in 90 back in 2010.

Audits declined even for the high-income households that have been an enforcement priority for the IRS. In 2016, the agency audited 5.83% of returns with income over $1 million, down from 9.55% in 2015 and marking the lowest audit rate for that income group since 2008.

Business audits also dropped in 2016. Overall, the IRS audited 0.49% of business tax returns, the lowest level since 2004. The IRS audited 6,453 large corporations, those with assets exceeding $10 million. Four years earlier, the agency audited more than 10,000.

Republicans in Congress have been steadily freezing and cutting the agency’s budget, both as part of broader spending cuts and in an attempt to punish the tax agency for its treatment of tea-party groups seeking nonprofit status.

Treasury Secretary Steven Mnuchin said during his recent confirmation hearing that he was concerned about the decline in IRS resources and that he thought he could make a return-on-investment case to President Donald Trump. The IRS has said in the past that it could generate about $4 to $6 in tax revenue for every additional dollar it receives. The Trump administration is slated to release its first budget in March.

Click here for the original article from Wall Street Journal.

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