The IRS has released Publication 5382, “Internal Revenue Service Progress Update / Fiscal Year 2019 – Putting Taxpayers First.” This new annual report describes the agency’s accomplishments and highlights the work of IRS employees during the past year. It covers a variety of taxpayer service efforts, including development of the new Taxpayer Withholding Estimator, as well as operations support efforts on areas involving information technology modernization, human capital office initiatives, and others. “This report is about more than what happened during the past year,” IRS Commissioner Chuck Rettig wrote in the report’s opening message to taxpayers. “It is also designed to provide insight into the people serving this country on behalf of the IRS, and provide a glimpse into the future,” he added.
The publication also focuses on criminal investigation results and efforts involving civil enforcement. Also discussed are ongoing compliance areas, including micro-captives, syndicated conservation easements, and virtual currency. The report further covers the IRS’s implementation of new tax laws, and the IRS’s ongoing work on the new Taxpayer First Act of 2019.
Individual Audits Down
Taxpayers are now half as likely to be audited by the IRS for their individual income tax returns as they were a decade ago. As described in IRS Pub. 5382, the IRS audited 0.45% of individual (1040) income tax returns during fiscal year (FY) 2019. This number is down from 1.1% of tax returns audited in 2010. The IRS’s ongoing loss to its total workforce is largely to blame for the consistent decline in IRS audits, according to the report.
“The IRS lost more than 29,618 full-time positions between FY 2010 and FY 2019, which includes Information Technology, Operations Support, Taxpayer Service and Enforcement personnel. These losses directly correlate with a steady decline in the number of individual audits during the past nine years,” the report notes.
Although individual audits have significantly decreased, Democratic lawmakers on Capitol Hill are criticizing the fact that the IRS continues to conduct more examinations on lower-income individual taxpayers than it does on higher-income taxpayers or corporations. However, the IRS has said previously that audits on higher-income individuals and businesses are significantly more complex and require more resources.
“IRS audit rates are at their lowest levels in 40 years, allowing the wealthy and well-connected to steal from taxpayers with no consequences,” Senate Finance Committee ranking member Ron Wyden (D – Oregon), said. “The bulk of tax avoidance and fraud comes from corporations, pass-through business and those at the top. Ensuring the wealthy and corporations pay what they owe takes the most resources and manpower, and I’m working with the IRS to get a clear picture on funding and staffing levels needed to audit top earners at 2010 levels,” Wyden added.
Currently, the IRS anticipates that up to 31% of its workforce (nearly 19,719 full-time employees) will retire within the next five years. The IRS’s workforce decline is expected to create a “significant risk of a large knowledge and experience gap for the nation’s tax agency,” according to the IRS report.
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