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IRS Increasingly Shying Away From Auditing Millionaires, Giant Corporations

Chris Gaetano
Published Date:
Mar 8, 2019

Data from the Syracuse University Transactional Records Access Clearing House reveal that IRS audits of millionaires and multibillion-dollar corporations have reached record lows, as have criminal prosecutions by the agency's law enforcement wing. 

Of the 504,278 returns filed from individuals worth $1 million or more last year, 16,305 were audited, the lowest it has been in close to a decade. The year 2012 saw the largest number of audits of millionaires since 2010: 40,965. The report said that the IRS is likely missing out on billions of dollars worth of unpaid taxes. 

"In FY 2010, such audits turned up $5.1 billion in unreported taxes," said the report. "Even then, 92 out of every 100 millionaires were not audited. Now with just half the audits, the government uncovered only $1.9 billion in unreported taxes in FY 2018. Few audits means many millionaires escape paying billions of dollars owed the U.S. Treasury."

Audit rates for the largest corporations have also dropped precipitously. Of the 633 firms with $20 billion or more in assets, 302, fewer than half, were audited. This is in stark contrast to 2010, 2011, and 2012, which saw audit rates of 96 percent, 94 percent, and 93 percent, respectively. Much as with individual audits, the report said that the IRS is likely missing billions in owed taxes. 

"Audits in 2010 of large corporations (>$250 million in assets) turned up $23.7 billion dollars in unreported taxes. This had dropped in half to just $12.5 billion during FY 2018," said the report. 

Finally, criminal convictions, which have been steadily dropping since the 1980s, reached an all-time low of 928 last year, and of these, 530 were for tax fraud rather than other types of offenses such as identity theft or money laundering. The report noted that convictions have dropped by 63 percent in just five years, and 75 percent over 25 years. 

"IRS of course has major responsibility for not only going after tax cheats who don't pay their taxes on legal sources of income, but also for tax evaders that fail to report and pay taxes on illegally gotten gains," said the report. 

The report noted that, due to continuous budget cuts, IRS personnel has dropped 22 percent since 2010. The number of revenue agents specifically has dropped 35 percent; the number of tax examiners has dropped 17 percent; and the number of criminal investigators has dropped 27 percent. 

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