If you have a tax problem this year, you might be off the hook.
Budget cuts and new responsibilities are weakening the Internal Revenue Service’s ability to police tax returns. This year, the IRS will have fewer agents auditing returns than at any time since at least the 1980s, reports the Associated Press.
The lack of staff will also impede the agency’s ability to answer phone calls regarding tax inquiries.
“We keep going after the people who look like the worst of the bad guys,” IRS commissioner John Koskinen said in an interview with the AP. “But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that we’re not going to catch.”
Despite the shortcomings in oversight, there is a good chance technology will catch those who make easily traceable dishonest statements about their income when filing taxes.
If a taxpayer claims to have earned a salary lower than what their employers report paying them, computers are likely to catch the fraud. The same holds true for investment revenue and many deductions that are reported to the IRS by financial institutions.
However, for businesses that operate with cash, with revenue or expenditures that are not independently reported to the tax agency, the chances of getting caught for tax evasion are lower than they have been in years.
The percentage of individuals Koskinen predicts will be audited this year will be lower than last year’s 1 percent, which was the lowest since 2005.
The probability of an individual getting audited varies depending on their income. In other words, the more you make, the more likely you are to get a letter in the mail from the IRS.
Last year, only 0.9 percent of people making less than $200,000 were audited. That was the lowest rate since the agency began publishing the statistic in 2006.
But the IRS kept a much closer eye on wealthy individuals. Out of those making $1 million or more, 10.9 percent were audited in 2013.
The same trend applied to business returns. IRS agents did not put many resources into investigating small businesses. However, around 16 percent of corporations with assets exceeding $10 million were audited.
Although fewer people and businesses will have to deal with IRS agents this year, a large number of people will also have difficulty getting their questions answered by the agency.
In 2013, only 61 percent of taxpayers received help from the IRS when they called the agency. This year the numbers are expected to be similar. In an effort to free up the phone lines, callers with complicated questions will likely be directed to the agency’s website.
Enforcing the Obama administration’s healthcare mandate, among other components of the law, has consumed many of the agency’s resources, contributing to the downturn in available auditors.
And the reaction from lawmakers and the American public from the revelations about the IRS’s targeting of conservative groups applying for tax-exempt status is, in part, the reason behind the agency’s reduced budget. This animosity resulted in the IRS’s budget falling to $11.3 billion in the current budget year from $12.1 billion in 2010.
Much to congressional Republicans’ dismay, the president has proposed a 10 percent increase to next year’s budget. The administration claims the IRS would collect an additional $6 for every $1 increase in the agency’s enforcement budget.
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