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IRS Disputes Watchdog's Audit Report

By Albert B. Crenshaw
Washington Post Staff Writer
Tuesday, November 2, 2004; Page A02

Internal Revenue Service Commissioner Mark W. Everson has been saying that the long slide in tax enforcement is at an end and the agency is turning up the heat on businesses and high-income taxpayers. A watchdog group said yesterday that the latest IRS numbers don't support Everson's contention.

For the first half of fiscal 2004, audits of corporations continued to decline, as did the amount of additional tax IRS agents recommended collecting from them, according to the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

There were about 21,000 corporate audits in fiscal 2003; the new IRS numbers show 7,794 businesses were audited in the first six months of fiscal 2004. TRAC compared the latest figures with half of last year's totals and concluded the number was down 26 percent. It calculated the amount of additional tax recommended was down 36 percent -- to $4.3 billion.

Audits of larger businesses, those with assets over $100 million, were down only slightly in number, but the number of hours IRS agents spent on those audits dropped sharply, the group said.

The IRS countered that it is not meaningful to compare six months of data with a full year because of seasonal shifts and other changes.

"You can't simply take the numbers and double them," said IRS spokesman Terry Lemons. "We have a lot of audits that closed in the third and fourth quarter" that wouldn't appear in the first half-year's data, he said. In fact, Lemons added, the agency is expecting a record year in enforcement collections, $40 billion.

TRAC co-director Susan B. Long countered that when Everson spoke of the improvements last April, he "said they had turned the corner" and the numbers don't really show that.

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