IRS enforcement efforts decrease, according to new TRAC report

IRS enforcement efforts decrease, according to new TRAC reportApril 21, 2001Cynthia J. Moritzcjmoritz@syr.edu

Almost every type of enforcement effort by the IRS has declined since the early 1990s, according to a report issued recently by the Transactional Records Access Clearinghouse (TRAC) at SU. At the same time, the number of individual and corporate tax returns filed with the government has increased.

The data were part of TRAC’s yearly report on the IRS. TRAC was established in 1989 to provide the American people, oversight institutions, news organizations and others with comprehensive information about the activities of the federal government and the communities in which these activities take place.

TRAC obtains much of its data through use of the Freedom of Information Act. Its data and findings are made available through its public Web site (http://trac.syr.edu) and two e-commerce sites where subscribers can query TRAC’s databases directly.

While declining to draw conclusions from the new data, TRAC co-director Susan Long commented that the report “certainly raises questions about whether this level of enforcement is adequate to support the government’s tax collection efforts.” Long is also an associate professor of quantitative statistics in the School of Management.

Examples of the IRS’s faltering enforcement efforts include:

?A computer program identifies individual returns with potential underreporting discrepancies. In the early 1990s, the IRS followed up on one-third to one-half of these. In 1998, it followed up on only one in six.

?In 1991, 4.8 million taxpayers received correction notices asking them to pay more taxes. In 2000, only 1.4 million of these notices went out.

?In 1992, the IRS did face-to-face audits of 55 percent of the nation’s largest corporations. In 2000, only 31 percent were audited.

?In 1987, the IRS brought civil suits against 2,519 noncompliant taxpayers. In 2000, the number of such suits was just 641.

The report points out that it is impossible to know the impact of these enforcement changes on taxpayers’ level of compliance because the IRS does not measure compliance levels. “In the absence of reliable information on the subject, however, experts are concerned that on a long-term basis less enforcement may well result in less compliance with the tax laws,” the report states.

IRS staffing has been cut by almost one-third since 1988, according to the report. At the same time, the number of individual and corporate returns has increased by 20 percent, and the agency has been instructed to offer additional services that require more people.

The TRAC report says that while technology has allowed the agency to accomplish some tasks with fewer staff, computers have not completely made up for staffing decreases.