Audits rising for the poor

By Albert Crenshaw

The Washington Post

WASHINGTON — IRS tax-return audit rates increased slightly last year, almost entirely among low-income taxpayers who filed simple returns, according to a study to be released today.

Audit rates were down for taxpayers with incomes of more than $100,000, continuing a decade-long decline in examinations of the returns of the wealthiest Americans, according to an analysis of Internal Revenue Service data by the Transactional Records Access Clearinghouse at Syracuse University.

Today is the deadline for Americans to file income tax returns.

Audit rates for low-income taxpayers, which first exceeded those for the wealthy in 1999, did so again last year. The IRS says that is because of a congressional mandate that it aggressively examine claims for a low-income tax credit. Most of those audits are conducted with letters requesting more information rather than through face-to-face meetings.

Overall, the odds of being audited were about 1 in 170, compared with 1 in 200 the previous year.

The clearinghouse said taxpayers least likely to be audited were those with incomes between $25,000 and $100,000. For them, the audit rate was less than in one in 400.

"Particularly striking" over the past 10 years has been the decline in audit rates for the wealthy, said Susan Long, a Syracuse University professor and co-director of the clearinghouse. "There has been a really pronounced change at the high-income level," she said.

High-income taxpayers remain more likely to be audited face to face than lower-income taxpayers, though the odds of any taxpayer being required to submit to such an audit are quite small.

Last year, 0.16 percent of all taxpayers were audited face to face, including 0.08 percent of those with simple returns and income of less than $25,000 and 0.38 percent of those with incomes of more than $100,000, the study found. The rates of such audits for individual taxpayers at all income levels were lower last year than in 2000.

In the past, high-income taxpayers were far more likely to be audited than low-income people. In 1990, the wealthy were more than 10 times as likely as low-income taxpayers to be audited.

Long said the disparity is notable because such audits are not time-consuming as far as the IRS is concerned, and doing them "is more lucrative at high-income levels."

A correspondence audit of a low-income taxpayer raised an average of $2,577 last year, versus $4,567 for a high-income taxpayer.

The IRS has been struggling to recover from the beating it took from the Republican-led Senate Finance Committee in 1997 and 1998 over charges that it abused taxpayers. The panel’s hearings spurred passage of a law restructuring the agency, and those changes are in progress.

The IRS is also working to replace its aged computer systems, which it hopes will provide not only better service for law-abiding taxpayers, but also make it more efficient at catching cheats.

OK, all you federal income tax procrastinators, time has run out.

Your date with destiny comes tonight at midnight, the deadline for getting your return in the mail.

Unlike past years, the post office won’t station people outside to collect letters this year. But it will pick up and postmark returns mailed by midnight at these locations in Snohomish County: