IRS Collections From Audits Fell In 2008

WASHINGTON, D.C. (AP) — The amount of money the IRS collects from audits and other reviews fell by nearly $3 billion this year as the agency shifted resources to make sure people got their economic stimulus checks.

Overall, collections dropped to $56.4 billion for the fiscal year that ended September 30 — a 4.7 percent decrease from $59.2 billion collected in 2007, the agency said December 22.

It was the first year-to-year decrease in collections in a decade.

In addition to its regular duties, the IRS issued 117 million payments totaling more than $95 billion as part of the federal economic stimulus program this past spring.

“There was the challenge of doing stimulus and it was a tight budget year. Key enforcement resources actually declined slightly,” said Linda E. Stiff, deputy commissioner for services and enforcement. “The other key point to note is that 2007 was a record-breaking enforcement year, a high-water mark by any and all definitions.”

Ms Stiff said that when comparing 2008 to 2006 and earlier years, “you still have a healthy increase and a good trend even though we weren’t able to repeat the anomalies of 2007.”

The number of reviews of returns filed by individuals increased slightly this year. Those earning less than $200,000 had about a one percent chance of being audited. Those with incomes of more than $200,000 had about a three percent chance of being examined.

Meanwhile, taxpayers with incomes of more than $1 million had a 5.6 percent chance of being audited, a drop from 6.8 percent the year before. The number of audits for millionaires dropped even though their ranks increased by nearly 54,000. Sit-down audits with those making more than $1 million remained relatively flat. The big drop occurred with reviews conducted through correspondence.

Again, officials attributed part of that decline to staffing. They noted that the agency had about 465 fewer agents and officers in key enforcement occupations compared to the year before.

On the business front, the percentage of returns examined for larger corporations dropped from 16.8 percent to 15.3 percent. The examination rates increased slightly for companies with at least $50 million in assets, and dropped slightly for those with between $10 million and $50 million in assets.

Ms Stiff said the agency would continue to focus on larger corporations and international transactions next year. She said the struggling economy means the IRS will have to strike the right balance between helping taxpayers get through poor economic conditions while also helping them meet their tax obligations.

Customer satisfaction rates remained relatively high, though they dropped from 94 to 93 percent. But customers calling the agency’s toll-free line probably were not so pleased.

About 53 percent of callers seeking information were able to get through, a steep fall from previous years, when more than 80 percent of callers got through. Officials said the agency received 92 million telephone calls — almost double the prior year.

“When your demand doubles, guess what happens to customer service?” Ms Stiff said.

Consumers also are taking advantage of modern technology to interact with the IRS. People accessed the agency’s website more than 347 million times this year — a 61 percent increase.

Thirty-nine million people used the site to track the status of their refund, a 22 percent increase from the previous year.