A new report by the Treasury Inspector General for Tax Administration says the Internal Revenue Service should focus its audits on taxpayers making over $600,000 instead of those making between $200,000 and $399,999 if it wants to see the most revenue gains.
Audits were performed on 62,159, or 1.5 percent, of the lowest high-income bracket while the IRS audited 6,309 or 12.1 percent of the country’s highest earners.
The Treasury inspector general recommends the agency reevaluate its income thresholds for its high-income and high-wealth strategy.
For every hour spent on audits, just $605 is collected in additional taxes from those making between $200,00 and $399,999, while $4,545 is collected per hour on those with returns on incomes over $5 million.
“Given the IRS’s goal of providing higher audit coverage to high-income taxpayers and its reduced operating budget, it is that much more important that the IRS selects audits that have the highest compliance impact,” the report says.
Due to budget cuts, the IRS performed fewer audits over the past three years.
USA Today reports the percentage of taxpayers audited has reached its lowest point in 10 years — standing at just 0.84 percent.
While the IG’s findings indicate focusing on higher income brackets may be more lucrative, the IRS says it isn’t the only factor it will take into consideration when determining its auditing process.
“IRS management told us that decisions on resource allocation cannot be made solely on the basis of productivity measures alone,” the inspector general says in the report. “However, given the decreasing budgets that the IRS is working under, it is critical for the IRS to determine the best use of its limited resources.”
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