- 2019 is the eighth consecutive year that IRS audits are on the decline.
- As a result of IRS enforcement budget cuts, the Treasury has lets billions of dollars go uncollected.
- Money is being invested in rebuilding the IRS enforcement function, as it could generate $1 trillion one decade.
As an individual taxpayer, you are less likely to be audited by the IRS now than ever before.
The IRS audited only 0.45% of personal income tax returns in fiscal year 2019, although their goal was to audit 0.5% for fraud. This marks the eighth consecutive year of IRS audit declines, according to a recent report. In 2010, 1.1% of tax returns were audited, which is more than double what it is today.
The 2019 audit is the lowest number of audits made by the IRS in approximately four decades.
Budget Cuts and Fewer Agents
The surprisingly low figures are a result of years of budget cuts within the agency and an increased workload. In the recent report detailing the decline of IRS audits, the Internal Revenue Service stated that the agency had lost almost 30,000 full-time workers since 2010. The agency is making an effort to rebuild the IRS enforcement function by hiring more workers. Currently, they have roughly 78,000 full-time employees, and the IRS has gauged that around 30,000 more will retire within the next five years.
Tax experts say that the combination of budget cuts and increased workload has lead to the Treasury allowing billions of dollars to go uncollected annually.
Given that the audit rate reported in 2019 was less than half of the 2010 rate, the IRS enforcement “urgently needs to be rebuilt,” said Chuck Marr, director of federal tax policy at the Center of Budget and Policy Priorities in Washington.
Rebuilding IRS Enforcement
Democratic presidential candidates are pushing for the increase of IRS funding, making it part of their agenda. The government evaluated that every dollar spent on tax enforcement may yield more than $4 in revenue. Furthermore, investing in IRS enforcement could generate approximately $1 trillion in the course of a decade. This estimate comes from Lawrence Summer, former Treasury secretary in the Clinton administration, and University of Pennsylvania professor Natasha Sarin.
As a means of rebuilding the IRS enforcement function, IRS commissioner Charles Rettig, who was appointed by President Trump, is looking toward improving how the IRS uses data analytics, which he thinks will help the IRS utilize enforcement resources more efficiently. Despite a decline in audits, Rettig is working to implement an aggressive strategy to find people who are breaking the law.
In his recent report, Rettig wrote that he and the compliance employees are committed to fraud awareness as they continue with their enforcement efforts. “We want to maintain a visible, robust enforcement presence as we continue to explore innovative strategies and techniques in support of our mission,” he wrote.