For the next couple of months, millions of Americans will be sending the Internal Revenue Service their tax returns, and hope they can receive a refund. It’s also the time of the year that many individuals fear being audited by bureaucrats and tax collectors. Well, those taxpayers can be assured that the odds of being audited are very low.
According to new data obtained by the USA Today, the audit rate has fallen to its lowest level in a decade last year, and it’s expected to dip even further this year. It isn’t clear as to why they’re falling, but the decrease in audit rates comes as the IRS faces a decline in budget and revenue agents.
The audit rate for Americans’ tax returns IRS revenue agents examined in person or through correspondence dropped to 0.86 percent in 2014, the lowest figure since 2005. The audit rate did rise from 2005 to 2010, but the data suggests audit rates lowered 21.4 percent during the next five years.
Last year, the IRS audited approximately 1.2 million individuals, down by more than 162,000 in 2013 and 339,000 in 2010. The falling trend was seen in nearly every category and income levels.
In 2014, the IRS audited more than one million taxpayers with incomes of less than $200,000, down from 1.4 million in 2010. Forty-one-thousand people with incomes of a minimum of $1 million were audited in 2012, but, again, it tumbled to around 34,000 last year.
The IRS will attempt to garner a budget increase from Congress for the fiscal year 2016. IRS Commissioner John Koskinen told the national newspaper that the tax collecting agency isn’t the most loved organization in the United States, but if the audit rate continues to drop then it could diminish Americans’ support of the federal tax system and reduce voluntary payment compliance.
“At this point, we do have a tax compliance ethos and people pay their fair share,” said Koskinen. “If you’re in Des Moines and you’re writing that check, and you feel that maybe your neighbor down the street isn’t, or is getting away with something, that’s a problem.”
U.S. taxpayers will have until Apr. 15 to send in their tax returns.
Over the past couple of years, the IRS has been marred in controversy. First, it was accused of targeting conservative and Tea Party organizations.
“The Committee has identified eight senior leaders who were in a position to prevent or to stop the IRS’s targeting of conservative applicants,” a 2014 House Oversight and Government Reform Committee report stated. “Each of these leaders could have and should have done more to prevent the IRS’s targeting of conservative tax-exempt applicants.”
Second, its effectiveness has come into question. For instance, we reported late last year that the IRS issued $6 billion in fake child care credits. In 2012, it suffered the same fate as it handed out $14.1 billion in erroneous earned income tax credits. The IRS blamed this on the paucity of agents conducting tax audit.
Treasury inspector general for tax administration (TIGTA) recommended that the IRS immediately tackle its problem of improper payments otherwise it could face even further billion-dollar losses.