Q: How many audits are conducted each year by the IRS?
A: According to statistics reported by the Internal Revenue Service, the federal tax collection agency conducted 715,000 service center audits and 366,000 face-to-face audits in 1999. A February announcement by the IRS Commissioner regarding the agency's declining audits created headlines right at the start of the 2000 tax filing season, leaving the impression in the minds of many that enforcement at the IRS is on a downhill slide. Many used this information to build demand for more money from Congress to beef up enforcement resources at the IRS and also to blame Congress for directing more resources aimed at improving service relations with American taxpayers. In my view, the IRS provides a distorted picture of reality. That's because it fails to include the review procedures conducted automatically by its computer systems. These invisible audits check income information provided by taxpayers and matches it with that reported by third parties, as an example. Billions of tax dollars have been spent by the IRS to modernize its computer technology. The IRS needs to fully account for all of its human and technological resources employed to cross-check for accuracy and compliance. That's why I have requested the IRS to "audit" its own procedures for categorizing systematic reviews and audits. This information should shed light on this issue and provide a more complete picture on IRS enforcement measures.
Q: Are you concerned enforcement procedures are too lax at the IRS?
A: At first glance, the 1999 auditing statistics and news reports that followed raised my eyebrows. But upon closer review, I became more concerned that the IRS may be under-reporting its enforcement activities to justify budget and staff increases. Unfortunately, the IRS's highly publicized audit rate could trigger unintended consequences and actually erode a tax system based on voluntary compliance. While millions of law-abiding taxpayers dutifully pay their taxes on time down to the last penny, news accounts that less than 1 in 200 would face an audit may tempt some to get creative with their tax returns. Detailing all aspects of its enforcement arsenal certainly would help discourage such creativity among tax filers. Three years ago, I led the charge for a more user-friendly IRS and helped enact sweeping legislation designed to change systemic mismanagement problems, end mistreatment of American taxpayers and modernize its technology infrastructure. While working to implement these improvements, it's hard to believe the IRS would water down its collection and enforcement efforts. American taxpayers are fully aware that the Internal Revenue Service is in business to make sure everyone pays their fair share. As chairman of the Senate Finance Committee, which has oversight authority over the IRS, I'll be watching closely to make sure the IRS makes the best use of its resources and has what it needs to serve taxpayers and enforce the tax laws.