IRS Audits of High-Income US Households Drop to 6-Year Low

WASHINGTON (Bloomberg News/TNS) -

The U.S. Internal Revenue Service, struggling with a smaller budget, audited 7.5 percent of households with incomes exceeding $1 million last year, the lowest level since 2009.

The tax agency audited 0.86 percent of all individual tax returns, down from 0.96 percent the year before, according to data released Tuesday. Such audits are at their lowest level since 2004.

The decline in audit rates is “deeply disturbing,” IRS Commissioner John Koskinen said in prepared remarks for a speech Tuesday to the New York State Bar Association.

“This continues a long-term trend that carries serious implications for our tax system and the nation,” he said. “The math is pretty simple. There are fewer audits because we have fewer auditors.”

The IRS last year had 11,629 revenue agents, down 16 percent from the 2010 peak. The agency is in a hiring freeze and is considering shutting its doors for one or two days later this year to save money.

Koskinen has been arguing for more money for the IRS. The agency’s budget was cut by about 3 percent for the fiscal year that ends Sept. 30, and it now has the responsibility to administer health-insurance subsidies.

President Barack Obama’s budget plan sent to Congress earlier this month calls for an 18 percent increase for the tax agency, to $12.9 billion. The Republican-led Congress probably won’t agree.

The IRS audit rate peaked in fiscal year 2011. That year, the agency audited 1 in 90 individuals and 1 in 8 people with incomes exceeding $1 million. Last year, those rates were at 1 in 116 and 1 in 13, respectively.

An audit, or examination in IRS terms, is a review of the finances of an individual to check for compliance with tax laws. It can be triggered by random selection, computer screening or document matching.

The data were first reported by USA Today.