IRS Commissioner boasts about increases in enforcement

Taxpayers should expect continued increases in audit and collection efforts in 2006.

Need for professional services, preparation and advice is higher than ever.

This week marks the mid-point of Mark Everson’s five-year term as Commissioner of Internal Revenue. In March of 2003, at his confirmation hearing, he articulated three goals for the IRS:

  • better serving the taxpayers
  • continued modernization
  • enhanced enforcement activities to ensure everyone pays their fair share.

While modest gains were cited in customer service and electronic filing of individual tax returns were at an all time high, Mr. Everson seemed most pleased in the increases in the numbers of audits and efforts in collections. It is very clear that under his leadership the IRS plans on continuing to increase the number of audits and to come down aggressively on taxpayers that are not paying their taxes or filing their returns. It would appear that the idea of having a “kinder, gentler IRS” is now officially been declared dead. A softer IRS was simply walked on by the taxpayers, in a word — many of us abused their trust in us.

On November 3, 2005 the IRS released its enforcement results and other key statistics for fiscal year ended September 30, 2005. Most notably in those results were the enforcement results and the substantial increase in the number of audits in all areas, highlighted by the following reported results:

  • Enforcement revenues — the monies from IRS collection, examination, and document matching activities — increased by 10% to a record $47.3 billion.
  • Total individual returns audited increased by over 20% to 1,216,000 from 1,008,000 in 2004. The number completed is back to a level last achieved in 1998.
  • Audits of individuals with incomes over $100,000 surpassed 221,000, the highest figure in 10 years, and well over double the 92,000 completed in fiscal year 2001. The IRS reports that the coverage rate in this category is still too low, but at 1.58% is double what it was four years ago.
  • Audits of small businesses organized as corporations turned up after years of decline. 17,867 were completed in 2005 against 7,294 a year earlier.
  • Audits of larger corporations — those with assets over $10 million — also increased, up 14% from a year ago to 10,878. The coverage rate of 20% has rebounded significantly from that of 12% just two years ago.
  • IRS collection activities, levies and liens have recovered to 1998 levels. While asset seizures remain a little used tool, they did increase from 2004.
  • Criminal prosecutions recommended to the Justice Department declined by 6% from a year ago. Notably, the decline was attributable to lower numbers of narcotics and money laundering cases. Tax and tax-related cases were flat year over year.

The commissioner emphasized that the gains reported were made while the IRS continued to make strides in customer service and modernization. He pointed out these statistics to support his position.

  • This year, for the first time, over half of all individual returns were filed electronically.
  • Toll-free tax law accuracy hit a high of 89%.
  • Telephone level of service was 83%, well above the 62% of just 4 years ago.
  • Customer satisfaction with toll-free service was a record 95%.

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