IRS Audit Rates: Rate for Individual Taxpayers Has Declined But Effect on Compliance Is Unknown

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A letter report issued by the General Accounting Office with an abstract that begins "The Internal Revenue Service (IRS) does various compliance checks to ensure the accuracy of information reported on taxpayers' returns. In recent years, the audit rate--the proportion of tax returns that IRS audits each year--has drawn attention because of a long-term decline in audit rates and the differences in audit rates for lower and higher income individuals. This report (1) describes the changes in audit rates for individual income tax returns overall and for categories, such as major sources (i.e., nonbusiness versus business) and levels of income ... continued below

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United States. General Accounting Office. April 25, 2001.

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This report is part of the collection entitled: Government Accountability Office Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. More information about this report can be viewed below.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "The Internal Revenue Service (IRS) does various compliance checks to ensure the accuracy of information reported on taxpayers' returns. In recent years, the audit rate--the proportion of tax returns that IRS audits each year--has drawn attention because of a long-term decline in audit rates and the differences in audit rates for lower and higher income individuals. This report (1) describes the changes in audit rates for individual income tax returns overall and for categories, such as major sources (i.e., nonbusiness versus business) and levels of income for fiscal years 1996 through 2000; (2) discusses IRS' reasons and related data explaining the changes in audit rates; and (3) describes what is known about the effects of changes in the audit rates on tax compliance. In comparing fiscal years 1996 and 2000, GAO found that the overall tax audit rate of individuals declined about 70 percent. These rates declined regardless of the individual taxpayer's income level. IRS cited the following three reasons for the decline in audit rates for fiscal years 1996 to 2000: (1) the number of IRS auditors for individual returns declined by more than half due to a decline in total staff and decisions to change staffing priorities to focus on customer service; (2) the remaining auditors were used in other areas, such as assisting taxpayers; and (3) audits took longer due to additional audit requirements, such as more written communications with taxpayers about the status of their audit. To explain the changes in the audit rates by income levels, IRS officials cited increases in the number of high-income tax returns and an audit focus on noncompliance by earned income credit claimants, who are lower income individuals. Finally, neither IRS nor external observers know how the decline in audit rates affects voluntary tax compliance."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • April 25, 2001

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  • June 11, 2014, 5:03 a.m.

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United States. General Accounting Office. IRS Audit Rates: Rate for Individual Taxpayers Has Declined But Effect on Compliance Is Unknown, report, April 25, 2001; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc293547/: accessed April 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.