I wrote this latest press release after reading a CNN Money article titled “Spending cut bright spot: Fewer IRS audits.” I needed to dispute the article’s assertion that there would be fewer questioned tax returns as a result of the sequestering budget by Congress. The CNN article states that over $600 million in cuts to the IRS could result in IRS employee layoffs including examiners who audit tax returns. I agree with the premise that these budget cuts may result in less service to the American public, including fewer face-to-face audits and consequently fewer dollars recovered. What the article fails to mention is that the IRS has already changed its auditing strategy to one that is more heavily reliant on computer technology than examiners to find revenue.
Here are some points I wanted to make about IRS audit strategy going forward:
- Budget cuts will likely decrease the number of field audits. However, the IRS will continue to use technology such as computer generated notices (which the IRS does not consider an “audit”) to find more errors and money from taxpayers than ever before.
- Therefore, increases in computer generated technology are more likely to increase the audit rate from 1.1% to closer to 8%.
- An almost 7% increase in the audit rate means an additional 16 million people will receive IRS notices questioning items on their tax returns. This inquiry will result in the IRS extracting more money from the American taxpaying public.
- Statistically, American taxpayers who file and pay their taxes have the highest tax compliance rate in the world at 83%, but the government would like that number to rise. The use of computer generated audit notices is just the vehicle to increase the U.S. compliance rate.
In spite of budget cuts and IRS employee layoffs, taxpayers need to understand the IRS will continue to be as rigorous in its enforcement actions as ever. The IRS is only interested in assessing as much money as they can and will trample taxpayers’ rights if they don’t know what they are.
If the IRS or state income tax authority has sent you a letter of inquiry, representing yourself in an audit is like going to court without a lawyer – is a terrible strategy. The best protection in this climate is to have a qualified tax audit specialist handle your case. This experienced tax pro will help you with the following:
- Stand up for your rights and will make sure you are treated fairly.
- Take over all communications with the IRS on your behalf.
- Send the proper documents to the IRS to support the item(s) on your tax return in question.
- Help you create a step-by step strategy for resolving your tax problem.
Contact Tax Resolution Services at http://www.taxresolution.com/tax-relief-consultation.asp or call 1-866-IRS-PROBLEMS for a free consultation.
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