IRS Enforcement Getting Better

Don’t have tax problems or need tax help at the moment? California’s taxpayers beware: the IRS continues to make progress in a number of key enforcement areas. The IRS is showing improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury.

The IRS enforcement efforts increased again in fiscal year 2007. For instance, during 2007 the IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.

Highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:

Individuals

• Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.

• The IRS filed 3.8 million levies and almost 700,000 liens during 2007, an increase from the previous year and a substantial increase from five years earlier.

• Audits of individuals with incomes of $1 million or more increased 84 percent. One out of 11 individuals with incomes of $1 million or more faced an audit in 2007.

• Overall, the total individual returns audited increased by 7 percent. That’s the highest number since 1998.

• Audits of individuals with incomes over $200,000 reached 113,105 returns, up 29.2 percent from the prior year.

• The IRS increased audits of individual returns with income of $100,000 or more, up 13.7 percent from last year’s total.

Businesses

In the business arena, the IRS continued efforts to review more returns of flow-through entities – partnerships and S Corporations. Our business numbers reflect that we have placed more emphasis in the growing area of these flow-through returns. While large corporate audits are down slightly, we have increased our focus on mid-market corporations – those with assets between $10 million and $50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk.

• Audits of S Corporations increased to 17,681 during 2007, up 26 percent from the prior year.

• Audits of partnerships increased to 12,195 during 2007, up almost 25 percent.

• Audits of mid-market corporations increased to 4,473, up 6 percent from last year.

• Audits of businesses in general rose to 59,516, an increase of almost 14 percent from the prior year.

• Although the audits of large corporations dipped slightly in 2007 to 9,644 audits, the number of audits is up 14 percent.

Taxpayer Services

• More taxpayers chose to file electronically in 2007 than during the prior year, with 57 percent of individual tax filers choosing to e-file in 2007.

• More people visited the IRS internet site, IRS.gov. The IRS site was accessed more than 217 million times in 2007, up more than 10.5 percent.

• As in the prior year, the IRS accuracy was 91 percent on tax law questions answered through its toll-free telephone service.

For tax help with serious problems, call tax attorney Mitchell A. Port at (310) 559-5259.