In an all time low, statistics by Syracuse University’s Transactional Records Access Clearinghouse (TRAC) found that out of every 100 millionaires, only 3 were audited by the IRS last year, while less than half of the state’s largest corporations – each possessing over $20 billion – were audited as of 2018.
Never before has annual audit rates dipped below 50% like this, and for some, this can seem suspicious. Is the IRS playing favorites – giving a pass to the wealthier upper class?
The answer is a resounding no.
For one thing, that same wealthy upper class is where the money’s at. Out of the attentive 96% of large corporation audits performed in 2010, over $23.7 billion in additional taxes were discovered – now down to $12.5 billion this year. For companies with over $1 million, 2010 audits brought in $5.1 billion, while that number is now reduced to 2018’s $1.9 billion.
Either way you look at it, that extra uncovered tax money is a win for the IRS and for the government that holds them responsible. Which leads us to the only correlation between the significant audit drop: decreased staff.
Congress has always pushed to chip away at funding for the IRS, but especially of late. In the last two years, the nation has undergone significant changes with passage of the Tax Cuts and Jobs Act, while in the same time period, IRS staff has been cut by over 3,000 employees. That difference in staff is even more apparent when comparing the current 79,071 employees to the more than 100,000 IRS workers of 2010, and with such budget cuts, the IRS has been forced to prioritize.
As a result, a multitude of audits have fallen to the back burner, along with even a majority of criminal cases – prosecutions dropping a dramatic 63% in the past 5 years, with only 530 charged with tax fraud this year.
Leaving the IRS with their latest focus: easing the transition of new tax laws into implementation, cracking down on evolving identity fraud schemes, and replacing outdated systems and computers with modern technology to make up for the lack of human eyes.
The IRS, for one, hopes it works and that new software developments can help them accomplish more with less.