Newspaper article The Christian Science Monitor

Audits Drop, Fraud Concern Rises ; R the IRS Is Striving to Lighten Its Image and Be Nicer. but Some Say Tax Compliance Is Slipping as a Result

Newspaper article The Christian Science Monitor

Audits Drop, Fraud Concern Rises ; R the IRS Is Striving to Lighten Its Image and Be Nicer. but Some Say Tax Compliance Is Slipping as a Result

Article excerpt

A few years ago, powerful members of Congress were painting the Internal Revenue Service as something akin to a terrorist organization, with taxpayers as the target.

Stop, the legislators demanded of the agency's nearly 100,000 employees. Be nice to taxpayers. Treat them as customers. Answer the phones. Help them with information needed for their returns. Don't be so nasty in your tax-collection efforts.

The drive to subdue the tax-collecting agency worked - perhaps too well.

Today some tax experts see the IRS as becoming more like a garden club, less able or willing to intimidate taxpayers into signing the checks that keep the wheels of government turning. While some critics still don't think the agency is doing enough to gently shepherd people through their 1040s, its diminished role as tax cop is raising fundamental questions about the level of fraud that may be going on.

"Enforcement activities have dropped to a dangerous level, giving the impression that it's easy to get away with cheating," Larry Levitan, chairman of a nine-member IRS Oversight Board that Congress set up in 1998, warned last week.

Next day, The New York Times reported that one-third of the 3 million Americans who are behind on paying their taxes have had their cases sent to an inactive file since June 1999. Short of staff, the IRS decided last year to in effect write off $2.5 billion in taxes owed.

Taxpayers are expected to file 130 million returns this year. About 36 million are pushing the deadline, trotting to the post office or tapping a computer keyboard to file electronically in the last two weeks.

Were they honest? Did they report all their income, not exaggerate their deductions?

Debate is building in Washington and among experts as to whether tax compliance is slipping as a result of a sharp decline in the number of audits and other enforcement measures of the Internal Revenue Service.

There's always those silicon watchdogs

Senate Finance Committee Chairman Charles Grassley (R) of Iowa believes the agency is being an effective watchdog. He argues the IRS's increased ability to use computers to match information on income-reporting documents with actual tax returns reduces the need for other tougher compliance measures. "Tax cheats should not rest easy - the IRS is on the job," he says.

But is it? "Clearly, the enforcement indicators are all down," says Susan Long, co-director of Transactional Records Access Clearinghouse, a research group at Syracuse University. "A huge question is what is the impact of this on taxpayer behavior?"

She and others cite a litany of numbers:

* For taxpayers with incomes of more than $100,000, the odds of a face-to-face audit is 1 in 204, down from 1 in 9 in 1989.

* In 2000, only 31 percent of corporations with $250 million or more in assets were audited. …

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