WASHINGTON — As millions of Americans race to meet Tuesday’s tax deadline, their chances of getting audited are lower than they have been in years.
Budget cuts and new responsibilities are straining the Internal Revenue Service’s ability to police tax returns. This year, the IRS will have fewer agents auditing returns than at any time since at least the 1980s.
Taxpayer services are suffering, too, with millions of phone calls to the IRS going unanswered.
“We keep going after the people who look like the worst of the bad guys,” IRS Commissioner John Koskinen said in an interview. “But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that we’re not going to catch.”
Better technology is helping to offset some budget cuts.
If you report making $40,000 in wages and your employer tells the IRS you made $50,000, the agency’s computers probably will catch that. The same is true for investment income and many common deductions that are reported to the IRS by financial institutions.
But if you operate a business that deals in cash, with income or expenses that are not independently reported to the IRS, your chances of getting caught are lower than they have been in years.
Last year, the IRS audited less than 1 percent of all returns from individuals, the lowest rate since 2005. This year, Koskinen said, “The numbers will go down.”
Koskinen was confirmed as IRS commissioner in December. He took over an agency under siege on several fronts.
Last year, the IRS acknowledged agents improperly singled out conservative groups for extra scrutiny when they applied for tax-exempt status from 2010 to 2012. The revelation led to five ongoing investigations, including three by congressional committees, and outraged lawmakers who control the agency’s budget.
The IRS also is implementing large parts of President Barack Obama’s health law, including enforcing the mandate that most people get health insurance. Republicans in Congress abhor the law, putting another bull’s-eye on the agency’s back.
The animosity is reflected in the IRS budget, which declined from $12.1 billion in 2010 to $11.3 billion in the current budget year.
Obama proposed a 10 percent increase for next year; Republicans are balking.
Rep. Ander Crenshaw, R-Fla., chairman of the House subcommittee that oversees the IRS budget, called the request “both meaningless and pointless” because it exceeds spending caps already set by Congress.
Koskinen said he suspects some people think if they cut funds to the IRS, the agency won’t be able to implement the health law. They’re wrong, he said.
The IRS is legally obligated to enforce the health law, Koskinen said. That means budget savings will have to be found elsewhere.
Koskinen said he can cut spending in three areas: enforcement, taxpayer services and technology. Technology upgrades can only be put off for so long, he said, so enforcement and taxpayer services are suffering.
Last year, only 61 percent of taxpayers calling the IRS for help got it. This year, Koskinen said he expects the numbers to be similar. To help free up operators, callers with complicated tax questions are directed to the agency’s website.
“The problem with complicated questions is they take longer,” Koskinen said.