Syracuse, N.Y.April 9Analysis
of IRS data indicates that a broad range of the agency's techniques
for persuading individuals and businesses to pay their taxes are
The declines in IRS enforcement involve almost
every tool in the agency's arsenal, from its use of sophisticated
document matching programs to the filing of criminal and civil court
cases against the most serious violators.
Examples of the deteriorating IRS enforcement
effort include the following:
key computerized program identifies individual returns with potential
under-reporting discrepancies. But agency follow-up on the atuomated
warnings has declined from one out of two or three in the early
1990's to only one out of six now.
computer-based document matching program sends out correction notices
to individual taxpayers. In 1991,
when this program peaked, 4.8 million taxpayers were billed for
under-reporting errors. In 2000, only 1.4 million were sent notices.
Face-to-face audits for all taxpayerseven
the largest corporationshave tumbled. In 1992, 55% of the
corporations with $250 million more in assets were audited. In 2000,
only 31 percent.
to data recorded by the United States Attorneys, civil suits filed
by the IRS against recalcitrant taxpayers went from 2,519 in 1992
to 641 in 1999. Criminal tax fraud prosecutionsmostly by the
IRSdropped by more than half1,550 in 1987 (at its peak),
632 in 2000.
[For the latest comprehensive data about
federal tax enforcement and the taxpayer services offered by the
IRS go to http://trac.syr.edu/media]
A key factor driving all the enforcement declines
has been the loss of IRS staff. The total number of individual and
corporate tax returns has increased by 20% since 1988, returns filed
by individuals reporting $100,000 or more in income have quadrupled,
and returns filed by the largest corporations have doubled. But
during the same period the permanent staff of the IRS has been cut
by almost one third (31%).
Although the argument has been made that the
naton's tax enforcement gap can be closed with high-speed computers,
the record shows the government's maze of semi-automated programs
are covering less ground today than in the recent past.
The impact of all these changes on the behavior
of taxpayers is not known. This is mainly because several years
ago Congress eliminated an IRS program specifically designed to
measure how well or poorly individual and business taxpayers were
meeting their obligations. Even without hard data, however, some
experts are concerned that in the long run less enforcement may
lead to less compliance.
Regional Variation. When it comes to
auditing America's largest corporations, the principle of equal
treatment under the law does not apply. IRS data show, for example,
that three out of four of the 100 largest corporations headquartered
in the IRS's Upstate New York district on average have been audited
in each of the past three years. For the 400 largest corporations
with headquarters in the Delaware-Maryland district, only one in
five were audited each year.
Among the districts where the largest corporations
face the smallest chance of an audit were areas that long have been
considered important national or regional business centers. In the
cellar along with Delaware-Maryland were other centers of commerce
such as Manhattan, Houston and New England.
TRAC is a non-partisan data gathering,
research and data-distribution organization associated
with Syracuse University. TRAC has been supported by the
University, the Rockefeller Family Fund, the New York
Times Company Foundation, the John S. and James L. Knight
Foundation and many other organizations. TRAC's embargo
on the tax enforcement and staffing information is intended
to give news organizations adequate time to contact responsible
government officials for their comments. For detailed
information about where the latest data is available go
Washington, D.C.: Suite 200, 1718 Connecticut Avenue, N.W., 20009
Tel. (202) 518-9000
Syracuse: 488 Newhouse II, Syracuse, NY 13244-2100 Tel.