IRS: Business audits taking a tumble

The IRS audit rate for businesses dropped to its lowest rate in eight years, the agency said Monday. 

{mosads}John Koskinen, the IRS commissioner, blamed the drop on the agency’s shrinking budget.

The IRS audited 0.57 percent of American businesses – 57,211 in all – in fiscal 2014, down from 0.61 percent in 2013 and 0.71 percent in 2012. The audit rate for businesses was last at 0.57 percent in 2005.

“These declines coincide with a drop in the IRS budget and enforcement staffing,” Koskinen said in a statement. “Like overall IRS staffing, the number of compliance employees who conduct audits has also fallen sharply during this period.”

The IRS said last week that audit rates for individuals had also fallen off in recent years, dropping to 1.2 million last year, its lowest level in a decade.

Large corporations – those with at least $10 million in assets – were far less likely to face an audit in 2014, fueling the overall decline in business audits. The audit rate for those corporations dropped from 15.8 percent in 2013 to 12.2 percent in 2014, with 2,000 fewer corporations getting audited. In 2005, fully one in five large corporations faced an audit.

The audit rate for smaller corporations stayed level, while 0.36 percent of S corporations, which pay taxes through the individual system, were audited. That’s down from 0.42 percent in 2013.

Koskinen has made increasing the IRS’s budget, which has fallen $1.2 billion over the last five years, one of the central goals of his term as commissioner. But congressional Republicans, angered by the agency’s Tea Party controversy, have been in no mood to give the agency more money, and have publicized their ability to slash the IRS budget.