IRS Audits of Millionaires Fell 19 Percent in ‘08, Study Shows

[Joanne98]

Source: Bloomberg

March 23 (Bloomberg) -- Millionaires were less likely to be called or visited by the IRS last year as the agency cut audits of the wealthiest taxpayers by 19 percent, according to a Syracuse University study.

The Internal Revenue Service audited 21,874 millionaires in fiscal 2008, 1,400 fewer than the year before. At the same time, the number of millionaires filing tax returns rose by more than 50,000, according to IRS figures.

The decline in audits came as the U.S. budget deficit ballooned to $459 billion and is forecast by the Congressional Budget Office to rise to $1.85 trillion this year. In 2008, face-to-face IRS audits of millionaires resulted in recommendations that the taxpayers owed about an additional $200,000, according to the Syracuse study. The additional-tax figure for mail audits was about $136,000, the study said.

“Just a year ago the IRS was boasting that its drive to focus increased attention on those reporting at least $1 million in income was in high gear,” said the report by the Transactional Record Access Clearinghouse, a data research center at Syracuse University.



Read more: http://www.bloomberg.com/apps/news?pid=20601213&sid=a8TMP6iD1Aqw&refer=home

[trthnd4jstc]

1. Imagine that, Bush lied about increasing the audits on the wealthy also.

Bush was a huge liar.

[Belial]

2. They all are...

[tanyev]

4. GOP SOP: Talk is cheap.

Make a big public show talking about what you are going to do, in order to hide what you are actually doing.

[Historic NY]

3. Maybe they all need a vetting process audit...

to show how much they didn't pay.

[Ohio Joe]

5. Not that I agree but I expect it made sense

To those that decided on doing this. Auditing the very wealthy would be very time consuming, with probably little to show for it. The wealthy hire lots of good accountants to make sure they pay as little as they can. The average person uses some software or does them themselves. A government auditor can go through the average persons quickly. They are easily scanned by computer and the validity established or not. The auditor can easily follow up. Not so with the wealthy, much harder to scan by computer the more complex the return the harder to spot hidden monies (especially when done by good pros).

From a management perspective, a good way to go to make a profit. I disagree because auditors should be looking to enforce tax laws by checking out those that will most likely be looking to cheat the system instead of chasing a profit by going after those the have errors either through programming error or misunderstanding of filling out forms.

[pattmarty]

8. Well, then it HAS to be changed then, right? I know it ain't easy...........

.............but if you start with the premise that X is the amount of money you take in (or are claiming you take in) and Y is the amount you spend on cars, houses, wives (you get where I'm going) and what not, AND there is a huge fucking gap between the two, I would think you would be able to find a tax cheat.

[Ohio Joe]

9. I think the way we do taxes should be changed

I'll be honest, accounting is not my thing, I suck at it. I don't know the right answer as to what our tax system should be but I do know that not only is our current system just plain wrong, it does not work the way it should. It definitely needs to be changed.

[pattmarty]

10. Totally agree. But what you are asking is kind of like changing...........

.........our Constitution. Many, many ideas from many, many people (too many many's) and nothing gets done. Most of us here at DU and other liberal sites have a pretty good idea what our tax system should be, but should AND could are two completely different (and impossible) things.

[happyslug]

15. When I studied Accounting 30 years ago, an ex=agent was my professor

He made the comment, that when the IRS audited the rich, the return on the cost of Investment was something like 10-1, mostly because of disallowed deductions that could only be taken if you filed the 1040 instead of the 1040A (The 1040 EZ came out later). Even today, the 1040EZ and 1040A forms can be audited by computer. Income is known, deductions are limited easy.

To properly audit someone who files a 1040A you need to understand his or her books, you need to know how he or she reported Gross Income, not what they did to get after they determined what is their Gross Income. Are all of the deductions legal? Is all the Income from Income generated property being reported? (When you work for salary or wages, those are reported to the IRS by your employer, which is the check on such worker's reported income, it is rare for buyers of items to report to the IRS what they paid to another tax payer except as part of their own books).

My point is most people who are earning more than 1 Million Dollars a year are NOT earning from Salary or wages, but from stocks, bonds, and other investments. The IRS can determine if the deductions form Income to get to Gross Income are valid in addition to determine is ALL income is being reported. That is where you "find" money in an audit, as my old professor said, he would have preferred to abolished all audits for people earning less then Median Income, it was NOT worth auditing them, the money you found rarely exceeded the cost of the Audit to the IRS. On the other hand, auditing people who are earning more then median Income made sense. First the IRS has a Computer program that will indicate what return has numbers that indicate Income not being reported (Not to be confused with the Random Audit program that picks forms at random to make sure the above program is doing its job). Second, rewards for people who report someone else NOT paying their taxes, and if found to be true is paid to the reporter (The IRS tries NOT to advertise the program but it exists). Third, the big issue in most tax fraud cases is NOT excessive deduction on the return themselves, but failing to report Income. Thus what is reported on the 1040 is NOT accurate and only an audit of the tax payer's books will reveal that.

One of the worse things Reagan did was break up the old Audit teams of the IRS, Those teams would to audit corporate/wealthy individuals books to make sure Income was reported as it is suppose to be. At the same time he reduced the numbers of Audits from 2% to less then 1 % (In the 1990s The GOP controlled Congress increased the budget for IRS audits, but then directed that increase and more to audit people who took the Earned Income Credit, in effect converted what appear on its face to be an increase in Audits to one that in reality was a cut, while more people were being audited, that increase was in low income people whose income was so low they were eligible for the Earned Income Credit, while the IRS had to cut Audits on people who earned millions of Dollars).

Sorry, how audits have been cut since Reagan, it may take years to get the IRS back to a position it can trace income NOT being reported by the wealthy (Provided Congress gives the IRS the funding to do the Audits). Given where the money is, the best way to get a return on audit dollars has been and continue to be in those people earning more then a Million Dollars a year.

[Skink]

6. Hasn't the irs audited you just by accepting your return.

[happyslug]

16. The IRS computers re-calculate your 1040EZ and 1040As but NOT 1040s themselves

The reason for this is that most people whose Income is from Wages and Salary use either the 1040EZ or 1040A. Only if your deductions (such as interest on your home mortgage) exceed the "Standard Deduction" does it make sense to use a 1040. 1040s are also used by people whose income is from operation of businesses and whose income is from Investments. Since the key to these forms of Income is how you get to Gross Income NOT what you do with Gross Income, 1040s are NOT subject ot Computer Review, but must be hand checked (1040s do go through the same Computer as 1040EZs and 1040As and the numbers reported are checked, but since the Deductions or income from business or investments may NOT be reported to the IRS independent of what is reported in your W-2s, it is impossible to use the same program to do a quick review of 1040s as you can do with the 1040EZs and 1040As.

What the IRS calls an audit in NOT the above recalculation of your return, but an audit of what is being reported on those forms. Did you report all Income? Did you take excessive deductions from the Cost of Goods sold to get to your Gross Income from your Business? Those are the issues in most Audits NOT what is done or reported on the return themselves (Except for the Gross Income Figure which is the real issue in most audits, i.e. HOW did you determine your Gross Income NOT what you did with in on the 1040 once you determined what your Gross income was).

[SlingBlade]

7. Bush Lied, Imagine That

Didn't he call millionaires his base ?:banghead:

[No Elephants]

11. Why annoy millionaires with tax audits? It's much more fun to watch the poor squirm and

sweat over chump change.

[kestrel91316]

12. They don't have TIME to audit the wealthy. They are way too busy auditing

The Little People. Not that it gets them any money.

Ask me how I know.......

[Earth_First]

13. Meanwhile my folks who are retired had their 2005 returns audited.

Result: you owe us $90.00

Yep.

[sarcasmo]

14. No surprise under the Bush Administration. That would be like auditing your friends.

[defendandprotect]

17. Government is too small now to have any sway over corporates/elites . . .

[Quantess]

18. Shocked, SHOCKED!!

</sarcasm>