WASHINGTON — The tax-audit rates of the largest companies are less than half what they were 20 years ago while more small and midsize businesses are coming under scrutiny, according to an organization that monitors the Internal Revenue Service.
The Syracuse University-based Transactional Rec ords Access Clearinghouse described what it said was a “historic collapse” in audits for corporations holding assets of $250 million or more.
About 26 percent of them were audited in the 2007 budget year compared with 34 percent in 2006 and 43 percent in 2005.
The IRS did not dispute the numbers, based on agency data. But it strongly disagreed with suggestions it was easing oversight of the biggest corporations.
Enforcement revenues from large companies rose by one-third in 2007 from the previous year, from $10.6 billion to $14.2 billion, said IRS Deputy Commissioner Barry Shott, who heads the Large and Mid-Size Business Division.
While the number of examinations has declined, “what we are doing is focusing our resources better on where the noncompliance is,” Shott said.
Shott said the focus in recent years has been on tax shelters and “extraordinarily complicated” partnerships and S corporations where shareholders, rather than the company, must report income or losses. Last year the IRS examined 17,700 S corporations, compared with 14,000 the previous year, and 12,200 partnerships, compared with 9,800.
But the TRAC report concluded that the IRS also was concentrating on regular small and midsized companies to boost audit numbers.
Dean Zerbe, national managing director for Houston-based alliantgroup, which provides tax services for medium-sized companies, said his fear was that “in the IRS’ zeal to show Congress improved numbers in corporate audit, it is America’s small and medium businesses that are taking it on the chin.”
