For corporations with assets over $20 billion, the audit rate has declined from about 100% in 2010 to under 50% in 2018.
We can thank our representatives in Congress for siding with corporations over the IRS.
This is FUD
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It was a setback for Microsoft. But as the court case ground on, the company and its allies went to work on Capitol Hill to make sure something like this never happened again.
In the autumn of 2015, a new trade group emerged. It was called the Coalition for Effective and Efficient Tax Administration, or CEETA. Among the members were Microsoft, the U.S. Chamber of Commerce and a host of other business and tech groups. The new coalition hired lobbyists at PwC, another Big Four firm and one with a stable of well-connected former government officials and congressional staff.
The new group’s clout soon became clear. In October 2015, just a few days after CEETA members fired off a letter to the IRS decrying the use of outside counsel on audits, Pam Olson, one of CEETA’s PwC lobbyists, sat down for a two-hour meeting with Doug O’Donnell, the head of the IRS division that audits large corporations.
“When it comes to the tax law, I don’t like the word ‘enforcement,’” Olson, who oversaw tax policy as a Treasury Department official in the early 2000s, said in a speech to corporate tax executives that December. “Let’s remember that the agency is the Internal Revenue Service,” she said. Olson forwarded a copy of her speech to O’Donnell, who responded, according to emails obtained by ProPublica, “Thanks for sharing — I appreciate your perspective.” He said he would pass it on to other senior IRS officials.
CEETA’s lobbyists stalked the halls of Congress, urging reforms in response to the IRS’ newfound aggression. They found a ready audience. In late 2015, a senior aide to Hatch participated in an online seminar for tax professionals along with a senior Microsoft executive. According to a description, participants discussed “the actions of an increasingly aggressive IRS” and the need for reform. (The aide, Christopher Armstrong, has since left Congress and now works as a lobbyist. He did not respond to requests for comment.)
“Focusing on litigation destroys cooperative relationships between taxpayers and the IRS,” read a document distributed by CEETA’s lobbyists to lawmakers around that time and obtained by ProPublica. The proposals targeted the three bold steps Hoory had taken in the Microsoft audit: CEETA wanted lawmakers to curtail the IRS’ ability to block taxpayers’ access to the Office of Appeals, rein in the use of designated summons and prohibit outside lawyers from questioning witnesses.
Instead they said they don't like the word "enforcement" (with no other context provided for that quote). So let's google it.
CEETA said "In some instances CEETA members have observed that IRS exam teams seem more occupied with “preparing for litigation rather than ascertaining the correctness of a return and resolving issues.”
That doesn't seem that nefarious to me? Determining the correctness of a return first?
The IRS isn’t stupid. If they don’t think they can win, they don’t fight.
And when the stakes are this high, it provides more incentive to fight because the potential outcome is far higher.
If you want to blame someone for this, blame Congress and their vague tax laws.
The idea the IRS should have the authority to interpret tax law as they see fit isn’t how the system works. If there is uncertainty, you can challenge it in the courts.
Clearly the IRS didn’t think their odds were that great of winning.
But when you're very rich, you have the advantages of an army of tax attorneys and accountants who implement tax minimization/BEPS and tax planning. They also have bending the tax code in their favor, a form of regulatory capture, through lobbyists, powerful friends, and elected officials.
the IRS only knows about your $15k of income because the person you earned it from filed the 1099 sent it to you and took a tax deduction. The IRS then goes looking at the 1099 recipient for the tax. Its a social graph.
When things are more disconnected from a graph it is still complicated for the IRS.
If you do owe shit, you just go to the IRS.gov site and pay the dumb bill, and the site is perfectly functional and not a PITA to use.
I have no idea why people misrepresent the IRS so much
And as the original article posted shows, entities like Microsoft will spend money on lawyers, lobby Congress, and spend time in court to fight the IRS, whereas the poor won't.
He plainly says that it's because they don't have the resources to conduct higher income audits.
Can you quote the exact part of the letter where they say "we target EITC because we don't have the money to audit high income individuals"?
The IRS cannot simply shift examination resources from single issue correspondence audits to more complex higher income audits because of employee experience and skillset. A GS-8 tax examiner is not trained to conduct a high-income, high wealth taxpayer audit. In order to increase parity of number of taxpayers audited, the IRS must reallocate high-graded resources from certain issues to high income, high wealth taxpayer returns. Further, the rate of attrition is significantly higher among these more experience examiners. It is also important to maintaining the voluntary compliance level that the IRS has an audit presence across all income groups, including EITC.
In the short term, the IRS will continue to open additional audits in FY 2019 in the category of TPI of $10 million and over. [...] In the longer term, Congress must fund and the IRS must train appropriate numbers of RAs to have appropriately balanced coverage among all income levels.
Further, he notes that "EITC correspondence audits are the most efficient use of available IRS examination resources with the average time to complete the audit about 5 hours of return."
Although audits have been decreasing among all parts of the population, they've been decreasing more sharply for top earners. According to ProPublica, citing this document[1], audit rates have dropped by about 80% for all groups with an income of over $200k, and only 34% for EITC recipients; as a result, EITC recipients are now about equally likely to receive audits as top 1% income earners (1.41% vs 1.56%).
So, due to their dwindling resources, the IRS is auditing all groups less, but they're particularly focusing on auditing low income and EITC recipients and less on high income earners.
[1]: https://www.documentcloud.org/documents/6023996-Effects-of-E...
Been trying to get an EIN and the site tells me to call a customer service number. The number has a wait time of 1hr+.
Oh also the site has "working hours" Monday to Friday, 7 a.m. to 10 p.m. Eastern Standard Time.
that's fucking wild