According to IRS enforcement data released Monday, “audits of large corporations fell for the third straight year” in 2008. The IRS audited just 15.3 percent of returns of corporations with assets of $10 million or more, which is “the lowest audit coverage level since 2003 and down from a 20% coverage rate in 2005.”
IRS Deputy Commissioner Linda Stiff said 2008 was “a very challenging year,” since enforcement staff levels declined 2 percent and “some enforcement staff were re-directed to help field calls from taxpayers related to tax rebates that Congress ordered as part of economic stimulus legislation.” While this may be true, the turn away from corporate audits comes on the heels of reports that Bush’s IRS is expending a lot of effort to cut corporate taxes.
As Time’s Stephen Gandel found, in 2008 the IRS has been “unusually aggressive in doing what it can to lower corporate taxes, going above and beyond what has been allowed in the past.” The IRS this year has issued 113 notices — breaking the record of 111 set in 2006 — “many of which will lower the taxes companies will pay this year and in the future.”
Furthermore, Dean Zerbe, national managing director of the public accounting firm alliantgroup LP, said that the IRS — in a “disturbing” trend — is simply shifting its focus away from large corporations and onto “small and medium-sized firms“:
Audits of small and mid-sized firms don’t produce as much tax revenue, and about one-third of the time produce no change in taxes assessed, according to Mr. Zerbe. “They spend a lot of time doing root canals on people who are basically compliant,” he said.
The amount that the IRS collected from audits fell by about $3 billion this year. And while Goldman Sachs paid a 1 percent effective tax rate in 2008, the IRS thought its time would be better spent auditing the little guy and finding more ways to lower corporate taxes.