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IRS Audits of Individuals Reached Lowest Rate Since 2005

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Jan. 8 (Bloomberg) -- The U.S. Internal Revenue Service audited 0.96 percent of individual tax returns in fiscal 2013, declining for the second straight year and reaching the lowest rate since 2005.

The tax agency, which has lost $1 billion in annual funding and 8,000 employees over the past three years, increased the revenue it collected from tax enforcement by 6.3 percent to $53 billion last fiscal year, according to data released today.

That increase came largely in collections and appeals, which often stem from previous years’ tax returns. Revenue generated from audits was $9.83 billion, less than $10 billion for the first time since at least 2003. The IRS has 19,531 employees in what it calls “key enforcement positions,” down 14 percent since the 2010 peak.

Audit rates in all income groups declined in 2013. Among taxpayers with incomes exceeding $1 million, 10.85 percent were audited, a figure that’s still more than double the rate in 2006.

Audits of corporations and partnerships were also less frequent in 2013.

Taxpayers also had more trouble reaching an IRS employee on the phone. About 60 percent of people who called an IRS toll-free line were able to speak to a person, the lowest level since 2008.

House Republicans proposed a $9 billion IRS budget for fiscal 2014, compared with $11.2 billion the agency received in 2013 and the $12.9 billion President Barack Obama is seeking.

Republicans also proposed other restrictions on the agency’s funding in response to the agency’s extra scrutiny of small-government Tea Party groups. The final budget is likely to be set in the next week or two as part of a broader agreement on spending.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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