Robert J. Fedor, Esq., L.L.C.

IRS auditors turn focus away from individuals

Most taxpayers want as little to do with the Internal Revenue Service as possible. While keeping accurate financial records and filing and paying taxes on time can help reduce the likelihood that an individual will be the subject of increased IRS scrutiny or an IRS audit, anyone can be the subject of such unwanted attention.

Recent information related to the IRS's funding, however, may be of comfort to some taxpayers. From 2010 to 2012, the federal agency apparently took a three percent hit to its annual budget, a move that forced the agency to layoff some 5,000 auditors.

The budget cuts and subsequent layoffs also reduced the agency's ability to perform tax audits. As a result, the number of audits performed during this timeframe fell by roughly 13 percent. While this may be cause for celebration for some taxpayers, particularly small business owners or independent contractors who seem to be disproportionately targeted by the agency, it's not all good news for everyone.

While audits of individual taxpayers appear to have decreased, the agency seems to have refocused their efforts on corporations. In fact from 2010 to 2012, there was a 35 percent jump in the number of corporations that were audited. One can speculate that the agency has decided to focus its efforts on corporations in an attempt to recoup more tax dollar debt.

We'll continue to report on how funding cuts are impacting the IRS's actions in the coming months as portions of the Affordable Care Act kick into effect and politicians in Washington warn of additional budget cuts.

Source: Bloomberg Businessweek, "The IRS Hasn't Been Going After as Many Taxpayers as Before. Why?," Kristen Hinman, Sep. 18, 2013

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