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IRS Audits Plunge Amidst Budget Cuts

Last year saw the Internal Revenue Service’s criminal division bring just 795 cases against people for tax fraud. That’s nearly 25% fewer than the number brought in 2010. And officials are concerned that lack of enforcement could embolden people to cheat on their taxes.

A joint report from ProPublica and The New York Times finds the IRS is not auditing as frequently as it used to after its enforcement division was reduced by one-third after 2011 budget cuts.

With that smaller staff, the agency’s focus has shifted away from audits to larger crimes, such as money laundering and drug trafficking. And that could be costing the government billions. (One IRS estimate says businesses skip the tab on $125 billion in taxes each year, enough to finance the departments of State, Energy and Homeland Security, as well as NASA.)

The recent audit rate peaked in 2011, with a rate of nearly 0.9%. Last year, ProPublica reports, it was 0.5%.

The IRS expects 155 million returns to be filed this year. That puts an individual or family’s odds of being audited at one in 775,000.

Current and former IRS agents tell the news outlets that audits are not as intense as they used to be, either, as the agency pushes to close them as quickly as possible.