April 16, 2010
IRS Increased its Audits of Small Companies Through Return per Audit Hour is only 1/8th of Return When Auditing Large Companies
The Internal Revenue Service (IRS) has reduced the number of hours agents spend auditing corporations with assets of $250 million or more by one-third since 2005 and increased the number of hours spent on audits of companies with assets of less than $10 million by 30 percent, according to a report bythe Transactional Records Access Clearinghouse (TRAC), a nonpartisan research group affiliated with Syracuse University.
This trend in IRS priorities will not yield greater revenue gains. Data show that audits of larger corporations produce significantly higher returns per audit hour – $9,354, for audits of large corporations compared to $1,025 for small to mid-size companies. Revenue per audit hour for large companies increased from $6,594 in the five-year period revenue from audits of small to mid-size companies actually decreased in 2009 from the $1,294 reported for 2005.
IRS statistics show 94 percent of tax underreporting comes from large companies, with only 6 percent coming from small companies, the study reports.
The authors of the study, TRAC co-directors Susan Long and David Burnham, find that that the current political context makes this shift even more puzzling. "The dramatic collapse in the auditing of those corporations with assets of $250 million or more has occurred during a period of increasing national concerns about growing federal deficits, growing public distrust of big business, and intense worry about the extent of white collar crime personified by executives like the investment adviser, Bernard Madoff."