IRS Audits Decline in the Face of Increasing Budget Cuts – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on March 9, 2014

Thanks to a steadily decreasing budget, the IRS is struggling to keep up the number of audits it performs every year. According to the IRS Deputy Commissioner for Services and Enforcement John M. Dalrymple during a speech given at the 2014 Tax Law Conference sponsored by the Federal Bar Association Section on Taxation, the agency managed to audit the returns of 1.4 million Americans last year, 5% less than the number performed in 2012 and the lowest level since 2008. Indeed, the audit coverage rate, or the number of audits divided by the total number of tax returns, fell below 1% for the first time in over a decade.

The shortfall in audits has led to a corresponding drop in the revenue obtained. In 2013, that revenue fell by nearly $400 million in 2013 to $9.83 billion, the lowest level in 10 years. Dalrymple forecasts that the number of audits is expected to continue falling in 2014 by at least another 100,000, while the number of collection activities will drop by 190,000.

The fall in audits and enforcement revenue is certainly related to the budget cuts facing the IRS. In current dollars, the agency’s enforcement budget decreased from $5.9 billion in 2010 to $5 billion last year, representing a 15% cut in inflation-adjusted spending. Similarly, the IRS’s overall budget has dropped from $12.15 billion to $11.2 billion during the same time period. This is despite the fact that the total population of individual and business filers has grown by more than 4 percent since 2010.

The smaller budget means the IRS simply cannot keep up with the volume of tasks it is assigned, especially in light of new changes mandated by the healthcare law. Dalrymple estimates that the IRS Appeals staff will process 8,000 fewer cases this year, causing more anxiety to taxpayers and giving them less ability to resolve tax liability issues. Telephone wait times will also continue to increase, with the IRS estimating that 18 million calls to its help lines, or 39%, will go unanswered. These worries were echoed during recent congressional testimony from the IRS Commissioner John Koskinen, who fears that the IRS will struggle to help taxpayers ahead of the tax filing deadline.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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