I have written before about the federal budget cuts and reduction of IRS personnel and what sorts of implications this has on the typical taxpayer. One of the most noticeable consequences is that when you pick up the phone with a tax question or an inquiry into your tax account, you have about a 50/50 chance of getting through and speaking with someone. Customer service is at an all-time low.
But something else has hit a record low, at least in the last ten years. And that something is Audits. Less than 1 percent of tax returns were selected for audit in 2014, and even fewer will be audited this year.
Obviously this is very good news for the taxpayer, but very frustrating for IRS executives, including Commissioner Koskinen, who stated that this trend “carries serious implications for our tax system and the nation.” I can’t say for sure, but I’d assume that at least one implication is less revenue. That’s my attempt at a joke. Of course that’s one of the implications. They are the Internal Revenue Service. What’s the point if they’re not bringing in revenue? Which leads me to an interesting question: Assuming it is true that your chances of being audited are the lowest they have been in 10 years because there are only about 11,600 revenue agents (and dropping) conducting audits, if you are selected, what are the chances of walking away unscathed?
The fact is some tax return audits result in zero liability. But I could see that becoming a thing of the past. First, I could see the IRS becoming more selective in the returns it picks for audit. They will pick the returns with more obvious issues; ones that will more likely result in additional revenue for the government. Second, I could see the IRS becoming more rigorous in their audit techniques. If the overall number of audits is low, then the IRS has to be more “effective” in their audits to keep the revenue flowing. I apologize in advance for this obnoxious analogy, but a boa constrictor often goes months in between meals, so when it does capture its prey, it is not going to let go before it squeezes the life out of them. We’ll keep an eye on the IRS and see if these snaky predictions come true.
