IRS News – Audits & Other Tidbits of Interest

What’s going on at and with the IRS? Thought we would share the following items that run across our desk with you.

 

  • Brain drain is a big problem at the IRS as experienced tax examiners and managers continue to retire or go into the private sector and the agency has dwindling resources making it difficult to replace them. Over 30% of the IRS’s workforce is at retirement age. The IRS audit staff has fallen by over 2,500 revenue agents over the last 10 years and there are over 1,100 fewer special agents working on criminal cases than 20 years ago.

 

  • With budget cutbacks and dwindling employee headcount, audit rates continue to decline. Last year, the individual exam rate fell to 0.7%. The bulk of these audits were correspondence exams done by mail and focus on only a few issues. The drop in coverage applied to all income classes. In addition, audits of businesses, both large and small, have also declined.

 

  • Wonder how you get selected for an IRS audit? Two common reasons include making a lot of money and reporting large losses or no adjusted gross income. People with incomes of $200,000 or more had an examination rate of 1.7% last year compared with 0.65% for those with lower incomes. When income exceeds $1 million, the examination rate is almost 6%. If you report large losses or file Schedule C’s reporting losses from ventures that look like hobbies or from real estate activities, the examination rate was 3.25% last year.