IRS doing fewer corporate audits

WASHINGTON — The pace of corporate audits by the Internal Revenue Service continued to decline in the first six months of fiscal 2004, despite IRS pledges to crack down on tax violators, an analysis of government data shows. The IRS differed with the findings.

Syracuse University’s Transactional Records Access Clearinghouse said Monday that the IRS carried out 7,794 corporate audits from October 2003 through March 2004, down 26 percent from the pace set in fiscal 2003.

It said actual hours spent on examining corporate tax returns were running 30 percent below the 2003 rate.

IRS spokesman Terry Lemons questioned the findings, saying it was “wrong to make any kind of sweeping projections” based on the first six months of the year.

Many audits of large corporations are closed during the third and fourth quarters of the year, Lemons said, predicting the total audit rate will be up this year, “in stark contrast to what TRAC has.”

The Syracuse researchers said their findings conflict “with a series of statements made by IRS Commissioner Mark W. Everson asserting that the IRS had halted the long decline in the government’s effort to police corporate tax noncompliance.”

“There are clearly resource issues,” said Susan B. Long, co-director of the clearinghouse, referring to the money and manpower issues the IRS faces in increasing its auditing efforts.

The Bush administration this year sought $4.6 billion for IRS enforcement efforts in 2005, up from $4.2 billion in the 2004 budget year. The House and the Senate, still working on the legislation, both reduced the White House number, with the House approving $4.28 billion and the Senate $4.56 billion.

The midyear report dealt only with corporate audits. The report on 2003, issued last April, found the audit rate for all businesses was 2.1 per 1,000 businesses, down slightly from the previous year, while the audit rate for individuals was 6.5 audits for every 1,000 taxpayers, up 14 percent.