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IRS Enforcement Efforts Stepped Up

Posted by HomeWork Solutions on Nov 16, 2009 8:30:00 AM
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The IRS's 2010 budget request includes an increase of approximately $300 million above its 2009 appropriations for enforcement. Conventional wisdom says that IRS compliance activities recoup $5 for every $1 spent. Historically, IRS enforcement efforts step up in times of budgetary crisis. The efforts target closing the "tax gap" - the difference between taxes owed and taxes paid. The "nanny tax gap" is estimated to be more than $5 billion per year and possibly as much as $20B.

The IRS Commissioner, Douglas Shulman, has promised to have an additional 4500 IRS examiners on the payroll, and he expects them to generate an additional $2 billion once the new hires reach full potential in FY 2012. Here are some interesting audit numbers provided by the Commissioner Shulman in recent testimony before Congress.

Increased Revenue.

Enforcement revenue has risen from $33.8 billion in '2001 to $56.3 billion in 2008, an increase of 67 percent.

Audit Numbers. The IRS conducted nearly 1.4 million examinations of individual tax returns in 2008, an 8 percent increase over 2006.

High-Income Earners Targeted. Most audits were of individuals with incomes over $200,000. Audits of these individuals increased 24 percent between 2007 and 2008. Their audit rate has risen from 2.68 percent in FY 2007 to 2.94 percent in FY 2008.

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Want to learn more about the "nanny tax" and the employer's legal and financial obligations? Download HomeWork Solutions' free e-Book, the HWS Guide to Household Payroll.

Topics: payroll tax enforcement

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