IRS examination personnel have decreased by nearly 5,000 employees—or 38 percent—over seven years. IRS revenue officers have decreased by over 1,600 employees, or 42 percent, during the same period.
With fewer officers, the Treasury fails to collect billions of dollars each year. In fact, the chance that any of us will be audited by the Internal Revenue Service has fallen to just one half of 1%.
That’s left a major gap between the amount of taxes owed and those actually collected—an annual gross gap running at about $460 billion, according to IRS estimates.
Treasury and agency officials explained the problem to lawmakers during a meeting of the House Ways and Means Committee on Thursday.
The Gap Favors The Wealthy
This gap furthermore seems to favor the wealthy, who have more resources for tax avoidance. Despite years of blueprints and mandates from Congress and the General Accounting Office on ways the IRS can improve collections and close the gap, “high-income taxpayers have the most opportunity to engage in tax avoidance planning,” said Ways and Means Committee Chairman Richard Neal, a Massachusetts Democrat.
“However, the IRS is not focusing on these [wealthy] taxpayers,” Neal said. “Instead, in 2017, the IRS targeted low-income, earned income tax credit taxpayers.”
He put that question to J. Russell George, inspector general for tax administration at the Treasury Department.
“Many question why the IRS is using its limited resources in this manner rather than deploying them on high-income taxpayers and corporations where the return is greater per hour of a revenue agent’s time,” Neal said.
“Taxpayers are more compliant when they may be audited. But the overall audit rate has plummeted below one-half of 1 percent,” he added.