Straight Talk About Tax Audits

The IRS has published figures showing that its audits of individual and corporate tax returns have fallen by about 50% between fiscal year 1998 and fiscal year 2000. Furthermore, the overall audit rate of taxpayers with low business and non-business income was greater than that for taxpayers with higher incomes in both 1999 and 2000. The IRS announcement raised concern about the continued viability of our tax system which, to a considerable degree depends on taxpayer willingness to voluntarily report their income and pay their fair share of taxes. But some people think that the IRS data was intentionally skewed for political reasons to obtain a larger budget appropriation from Congress. In disclosing the audit rate, the IRS entirely ignored the fact that it is engaged in extensive document matching and discrepancies result in correspondence audits of taxpayers (as well as field audits) and in the filing of amended returns as well as payment of additional taxes, interest and penalties. Actually, IRS tax collections have been increasing, and the Agency reports that it's only costing 39 cents per hundred dollars of tax revenue collected, the lowest cost since 1954.

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