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."

 

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U.S. begins new wave of UBS client tax fraud and evasion cases

 U.S. prosecutors are beginning a new wave of UBS-related tax-evasion cases against individuals ahead of the April 15 tax-filing deadline, sources familiar with the proceedings said on April 6, 2010. The first case in the new round of prosecutions — intended to create a splash of media attention before tax day — was filed on Tuesday in the U.S. District Court for the Southern District of Florida, where many of the cases have been prosecuted, according to court documents. The sources, who were not authorized to comment on the record, said cases coming within days will charge individuals with evading U.S. taxes by using accounts at the Swiss bank and will be prosecuted in New York City and elsewhere.

The government has secured eight guilty pleas so far from UBS clients since the bank admitted that it helped taxpayers avoid U.S. taxes. UBS last year paid the government $780 million and gave information about 250 accounts to the U.S. authorities. UBS AG client Paul Zabczuk of Woodlands, Texas, pleaded guilty to failing to account for funds held in a UBS account in Switzerland. Also last year, UBS settled the government's civil case against it and agreed to hand over 4,450 more client names, though that deal is tied up in legal wrangling in Switzerland.

The Internal Revenue Service and its lawyers want to make a "big splash" to remind people of their duty to report offshore income, one source said. The cases prosecuted so far involved UBS clients with accounts in the range of $10 million and less. Two sources said some of the new cases would be within that range. On April 5, Commissioner Shulman said the agency is still sifting through an additional 15,000 records it received from individuals who took part in an IRS amnesty program for offshore income that ended last year. The agency is looking for patterns in the records to identify other banks and advisers that helped wealthy individuals avoid taxes. That area will be "the next wave," of the investigation, Shulman said, without naming other banks.