Tax News

CCH (cch.taxgroup.com) reports:

  The IRS's enforcement revenues declined by $2.8 billion in fiscal year (FY) 2008, statistics released on December 22 revealed. The IRS collected $56.4 billion from collection activities, audits and document matching, down almost 5 percent from FY 2007 revenue of $59.2 billion.

  Deputy Commissioner Linda Stiff attributed the drop to a number of factors. Enforcement personnel declined by 2.2 percent, to 20,722 agents and officers, because of retirements and a flat budget, she indicated. To administer the economic stimulus program, the IRS shifted enforcement personnel to taxpayer service to deliver 117 million checks and respond to a "crush" of phone calls. She noted that 2007 was a record year, because of closings of large corporate audits and heavy tax shelter activity, such as Son of BOSS settlements.

  According to Stiff, the IRS held steady on key service and enforcement results. Correspondence audits of individuals increased to 1.08 million and face-to-face audits remained at 310,000. Some other measures of enforcement activity declined; others stayed even or increased. Audits of individuals increased by 7,000 (one-half of 1 percent), based on the increase in correspondence audits, but audit coverage of individuals declined from 1.03 percent to 1.01 percent. Audits of individuals with income under $200,000 declined by 11,000, or 1 percent, but audits of individuals with income of $200,000 and higher increased over 15 percent.

  Business audits essentially held steady, but business filings increased by almost 460,000, primarily in the partnership and S corporation categories. Overall corporate audits increased slightly, to 30,000, and audit coverage of large corporations ($10 million or more in assets) was over 15 percent. However, audit coverage of partnerships and S corporations was less than one-half of 1 percent. Audits of tax-exempts increased by 4 percent, to almost 7,900, while filings increased to 890,000 returns.

  Stiff said there will be continued emphasis on high-income individuals and the largest corporations. Priorities for 2009 will also include international transactions and employment taxes. Audit coverage of smaller corporations (under $50 million in assets) is not likely to increase, she indicated.

  The IRS needs to be sensitive to taxpayers in distress situations and strike the right balance in the collection area, Stiff said. She noted that the IRS recently provided relief on lien discharges, to facilitate taxpayer housing sales, and has provided additional training to IRS employees on the exclusion of cancellation of debt income. The IRS increased lien filings 85,000, to 768,000, but levies of taxpayer property declined 30 percent, to 2.6 million. Seizures of taxpayer assets dropped 10 percent, from 676 to 610.

  In the taxpayer service area, the IRS statistics indicated that the electronic filing rate increased from 57 to 58 percent and web page visits to IRS.gov increased 65 percent, to 348 million. The level of accuracy for toll-free assistance remained at 91 percent, and customer satisfaction ratings held at 93 percent. However, the toll-free assistance level of service rating dropped to 53 percent.

  By Brant Goldwyn, CCH News Staff