What's Good for the IRS, May not be so Good for You

Nov 19, 2004

IRS Commissioner Mark Everson announced on November 18 that the IRS made substantial progress in enforcement efforts in fiscal year (FY) 2004. According to data released on November 18, the IRS captured a record $43.1 billion in enforcement revenue in FY 2004. That figure reflects an increase of $5.5 billion over the total amount of revenue brought into the Treasury from audits, collection activity, and document matching in FY 2003.

At a press conference, Everson said that the results demonstrated that increased funding for the IRS is a sound investment. "Compared against our overall budget of over $10 billion, which includes all taxpayer service and education, our enforcement revenues yield a 4-to-1 direct return on every dollar invested in tax administration." He commented that, if funding is increased for the IRS, the government will see a significant return on investment. Everson called on Congress to support the IRS's efforts and approve President Bush's 2005 budget proposal.

Increase in Audits

Here are some of the other enforcement results. These are figures for Fiscal Year 2004, which ended Sept. 30:

• Audits of high-income taxpayers - those earning $100,000 or more - topped 195,000. That's a 40 percent increase from 2003 and a 74 percent increase from 2002.
• Total audits of all individual taxpayers topped 1 million for the first time since 1999. In 2004, there was a nearly 19 percent increase from 2003 and almost a 36 percent jump from 2002.
• After years of decline, audits of the largest businesses - those corporations with assets of $10 million and over - climbed to 9,560. That's up from a low of 7,125 from last year. One in six of these large corporations were audited in fiscal 2004.
• The number of levies - a key enforcement tool - issued topped 2 million, a 21 percent increase from 2003 and triple the number in 2001.
• Criminal investigation activity increased in several areas, including more than 3,000 recommended prosecutions, a nearly 20 percent jump. A big piece of this involves financial crimes, including money laundering and other white-collar crimes where we work cooperatively with the Department of Justice.
• One area where we the IRS plans to increase their efforts is small businesses - those with less than $10 million in assets. The audits dropped to 7,290 in 2004 from 13,680 last year. The decline is due to several reasons, including diverting resources to auditing high-income individuals and labor-intensive abusive schemes. Staff time also went to the National Research Program, which will help the agency better identify audit cases.