WASHINGTON (AP) – Budget cuts forced the IRS to reduce the number of tax audits last year to the lowest level in a decade, IRS Commissioner John Koskinen said Tuesday. And the number of audits could be even lower this year.
“The math is pretty simple,” Koskinen said in a speech to the New York State Bar Association. “There are fewer audits because we have fewer auditors.”
“Audits fell in virtually every individual category and across income levels,” Koskinen said. “This continues a long-term trend that carries serious implications for our tax system and the nation.”
Koskinen’s speech comes in the middle of tax season, just as millions of Americans are filing their annual returns.
Last year, the IRS audited 1.2 million individual tax returns. That’s less than 1 percent of the returns that were filed, the lowest rate since 2004.
Koskinen said the IRS is down more than 2,200 revenue agents since 2010. Last year, a little more than 11,600 revenue agents examined returns, and Koskinen is warning that the number of agents will decline again this year.
Congress has cut the agency’s budget by $1.2 billion since 2010. The IRS will receive $10.9 billion for the budget year that ends in September.
Fewer audits, however, don’t necessarily make it easier for average taxpayers to cheat on their taxes. Your employer probably reports your wages to the IRS, your bank reports interest income, your broker reports investment income and your lender reports the amount of interest you paid on your mortgage.
If you report making $40,000 in wages and your employer tells the IRS you made $50,000, the agency’s computers probably will catch that.
But if you operate a business that deals in cash, with income or expenses that are not independently reported to the IRS, your chances of getting caught are lower than they have been in years.
President Barack Obama has proposed a $12.9 billion budget for the IRS in the coming budget year – about an 18 percent increase. The proposal, however, was not well-received by Republicans who control Congress.
The agency’s budget cuts have come as the IRS is starting to play a bigger role in implementing Obama’s health care law. For the first time, taxpayers have to report on their tax returns whether they have health insurance.
Millions of taxpayers who are receiving tax credits to help pay insurance premiums have to report them as well.
Some Republicans in Congress have vowed to cut IRS funding as a way to stifle implementation of the health care law.
Koskinen has said it won’t work. He said the IRS is required to enforce the law, so other areas will have to be cut, including taxpayer services and enforcement.
The agency projects that about half the people who call the IRS for assistance this filing season won’t be able to get through to a person. The agency is also considering shutting down operations for two days later this year – after tax season – resulting in unpaid furloughs for employees and service cuts for taxpayers, Koskinen said.