IRS Increases Audits of Wealthy

The Internal Revenue Service has been increasing its audits and examinations of high-income individuals in the past year, examining nearly 30 percent of the tax returns of those earning $10 million and more, nearly twice the rate of a year earlier.

Last year, the IRS examined 29.93 percent of individual income tax returns, compared to about 18 percent the previous year, according to CNN Money. Taxpayers with incomes between $5 million and $10 million were examined at a rate of 20.75 percent, compared to about 12 percent in fiscal year 2010. Those with incomes between $1 million and $5 million were audited at a rate of 11.8 percent, compared to about 7 percent a year earlier. Overall, about 1.1 percent of taxpayers were audited in FY 2011, about the same rate as in FY 2010.

IRS Commissioner Doug Shulman warned Congress during a hearing about tax season on Thursday that if budget cuts at the agency continued, the service would be forced to cut down on its audits. The agency endured a $300 billion cut in its fiscal 2012 budget, leading to effects such as long waiting times for telephone assistance. Shulman predicted that tax compliance rates would likely go down as word spread that the audit rates were decreasing as a result of further budget cuts.

Other significant information in the IRS FY 2011 Data Book included the fact that the IRS collected $2.4 trillion and processed more than 234 million tax returns from Oct. 1, 2010, to Sept. 30, 2011. Taxpayers electronically filed more than 133 million business and individual income tax returns, including 77 percent of all individual income tax returns. More than 119 million individual income tax returns, about 83 percent of all individual returns, resulted in tax refunds, totaling almost $338 billion. The IRS examined 1.1 percent of all individual income tax returns and 1.5 percent of corporation income tax returns (excluding S corporation returns).  The IRS provided taxpayer assistance through 319 million visits to and assisted nearly 83 million taxpayers through its toll-free telephone helpline or at walk-in sites.

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