IRS collections from audits fall in 2008

The IRS says its collections from audits and other reviews fell this year for the first time in a decade as the agency shifted some resources to ensure that people got their economic stimulus checks.

Overall, collections dropped to $56.4 billion for the fiscal year that just ended, a 4.7 percent decrease, the agency said Monday.

In addition to its regular duties, the agency issued 117 million payments totaling more than $95 billion as part of the federal economic stimulus program this spring.

"There was the challenge of doing stimulus and it was a tight budget year. Key enforcement resources declined slightly," said Linda E. Stiff, deputy commissioner for services and enforcement at the IRS. "The other key point to note is that 2007 was a record-breaking enforcement year, a high-water mark by any and all definitions."

Stiff said that when comparing 2008 to 2006 and earlier years, "you still have a healthy increase and a good trend even though we weren't able to repeat the anomalies of 2007."

The number of audits of individual returns increased slightly in 2008. Those who earned less than $200,000 had about a 1 percent chance of being audited. Those with incomes of $200,000 and more had about a 3 percent chance of being audited.

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Meanwhile, taxpayers with incomes of more than $1 million had a 5.6 percent chance of being audited, a drop from 6.8 percent the year before. The number of audits for millionaires dropped even though their ranks increased by nearly 54,000.

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"We were redirecting resources to support our stimulus activities," Stiff said.

On the business front, the overall number of audits rose slightly, but dropped as a percentage of businesses that submitted a tax return. More emphasis was placed on medium and large corporations, as audit rates increased slightly for those companies with more than $50 million in assets and dropped slightly for those with less than $50 million in assets.