The announcement that Federal government’s tax-take hits all-time high as the federal government collected a record amount of taxes in fiscal year 2014, topping $3 trillion in revenue for the first time in its history, has the tax man taking a bigger bite than ever. Yet, the take that the collection bureau seems un-phased from all their scandals to put the taxpayer through their third degree audits are easing up. Why? The answer may surprise when the ledger is tallied up.
The Wall Street Journal reports, Fewer Taxpayers Are Audited Amid IRS Budget Cuts.
“Audit rates also fell in nearly every individual category and across income levels, according to the IRS. “Field” audits, which are more labor-intensive because they can involve in-person meetings with the taxpayer or his representative, dropped 15% to 292,000 in 2014. “Correspondence” audits, which are conducted by mail, fell more than 10% to about 1 million.”
Bloomberg follows up with their account IRS Audits of Individuals Reached Lowest Rate Since 2005.
“Revenue generated from audits was $9.83 billion, less than $10 billion for the first time since at least 2003. The IRS has 19,531 employees in what it calls “key enforcement positions,” down 14 percent since the 2010 peak.”
As individual returns get processed routinely, the corporate filings go through with even less scrutiny. As the article, IRS business audits drop states the IRS is under pressure to increase funding. Can anyone say Obamacare?
“Continuing a push for budget hikes, the IRS said Monday that just over 57,000 companies underwent audits of their federal tax returns during fiscal year 2014. The total represents the lowest number since 2006, new data issued by the agency show.”
Confirming this trend, CNBC provides this assessment in IRS says US corporate tax audits down sharply after budget cuts.
“Over the last five years, IRS funding has fallen by more than $1.2 billion, or 7 percent, to about $11.3 billion, while the number of revenue agents dropped by over 16 percent to 11,629, according to data released by the agency.”
Less employers, gives rise to fewer audits, while government revenues rise to an all time high. Wow, that must be the formula for efficient funding – WILLFUL COMPLIANCE.
Now just ask any prominent Tea Party activist if their fear of IRS retaliation is unwarranted? Doubt that absence of malice has diminished from IRS political hacks towards a movement that professes to be Taxed Enough Already. Somehow that message has fallen on deft ears for most of the rest of the population.
For the largest of corporate enterprises, their team of CPA’s and tax attorneys apply their trade to writing the tax laws in ways that their full time reporting requirements leave plenty of time for golf course recreation.
Even some small business avoided the audit as reported by the WSJ, “Audits of small businesses those organized under Subchapter S of the tax code—fell about 12.6% in fiscal 2014. That rate fell to about 0.36%. Around 4.5 million small firms filed in calendar 2013.”
However, “Partnership audits increased somewhat, amid a push by the IRS to put more scrutiny on that area” still provides greater risk of a review for individually owned businesses.
The anti-tax paying culture has not grown, nor has it taken hold on the larger business interests which accept that filling out forms and providing income and expense information is just a normal part of everyday life.
The notion that paying individual taxes is voluntary has never made it to prime time. The war against the taxpayer by the IRS has been won in the agency’s favor, if judged by the reluctant abidance from even the most disgusted tribute payer.
With the automated electronic procedures put in place through the banking and financial services system, concealing or even under reporting income is no easy matter. Even though a significant portion of the public challenges the intrusive techniques used to monitor their financial transactions, very few are willing to drop off the money tracking map.
This reality translates into a begrudging, hold your nose and pay up mentality, which underpins that infamous willful compliance mindset.
Another reason that audits are down comes from the user friendly correspondence from the Internal Revenue Service. Their site illustrates the advantage for the taxpayer to accept a government bill and just pay up. “If you receive a letter or notice from the IRS, it will explain the reason for the correspondence and provide instructions. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.”
Dread from receiving such a letter befalls the recipient throughout the entire opening and reading process. The feeling of relief, just to fill out and sign a check, in order to avoid a face to face meeting is extremely strong for most docile citizens.
This attitude provides a substantial rationale why concern over audits has lessened, while the terror of the tax collector remains. This kind of trepidation lesson, with the degree of intractable subservient acceptance, suggests that paying your taxes is the price of living in a civilized society.
Well, so much for that argument, when you look at what you get from government for the money you so cheerfully contribute. The aspect of the behavior modification experiment that the income tax code is essentially all about has little to do about raising revenue to fund the operations of state.
The proof of this affirmation rests upon the practice of deficit spending and continuous expansion of government programs. There will never be enough money from taxes to feed the beast. Transferring your normal concern from an IRS examination might well be re-directed towards reducing the size, scope and intrusiveness of your government.
Calls to eliminate the IRS have merit. As the financial world transitions into an electronic money tyranny, the need to physically interrogate taxpayer subjects becomes less necessary. The careerists “pols” will just debit your bank accounts when they want more of your wealth.
James Hall – March 18, 2015
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