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Thanks to years of budget cuts, the overall IRS budget is about 20 percent below its level a decade ago in inflation-adjusted terms. Meanwhile, the agency has been given more and more responsibilities. These include implementing the Foreign Account Tax Compliance Act, combating identity theft and tax-refund fraud, dispensing multiple rounds of pandemic stimulus payments, and, possibly very soon, issuing monthly cash payments to families with children.
With fewer resources available to handle all these duties, something had to give. That something turned out to be enforcement. Tax cheats can now get away with murder — or at least the ability to substantially shortchange Uncle Sam.
The number of IRS revenue agents — the auditors qualified to examine complex returns — has plummeted 43 percent over the past decade, according to a report from Syracuse University’s Transactional Records Access Clearinghouse. Audit rates of those filing these complex returns have also sharply declined.
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For example, the number of millionaires who were audited in fiscal 2020 was about a quarter of the number from fiscal 2012. Accordingly, these IRS audits turned up unreported tax bills of $1.2 billion last year, about a quarter of the $4.8 billion found in fiscal 2012.
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