Washington — Aiming to target its audits better, the IRS intends a special random check this year of about 50,000 individual tax returns but will subject fewer people to the intense, face-to-face questioning that drew heavy criticism in the past.
IRS Commissioner Charles Rossotti said Wednesday the goal is to collect an up-to-date snapshot of the taxpaying public so that audits get better results. Almost a quarter of Internal Revenue Service audits now done turn out to have been unnecessary; the new information could reduce the number of no-change audits by 15,000 a year.
"We don't want to audit somebody who doesn't need to be audited," Rossotti told reporters. "We have an opportunity to reduce the burden on the honest taxpayer."
The project, officially called the National Research Program, was last done in 1988. When IRS officials tried a repeat in 1994, it was withdrawn in a hail of criticism.
Those past efforts required each selected taxpayer in 1988, it was 54,000 to undergo a rigid, time-consuming, line-by-line audit of the tax return, even down to bringing birth certificates to prove the identities of their children. A taxpayer's accountant or lawyer wasn't allowed to participate.
This time, officials promise it will be different. Rossotti said about 2,000 taxpayers will face line-by-line examinations that will be less detailed than in the past. The biggest group, about 30,000 taxpayers, will undergo a more limited in-person audit, but those will be less intrusive than in the past and can be attended by a professional tax preparer.
An additional 9,000 taxpayers can expect a correspondence audit through the mail, with the remaining 8,000 likely to have no contact at all from the IRS.
The audits are expected to begin in the fall on individual returns from the 2001 tax year, for which returns are due April 15.
Treasury Secretary Paul O'Neill, who approved the program, said information gleaned will "put us back on the right track" in targeting who is complying and who isn't complying with the law. The IRS estimated the "tax gap" the difference between all federal taxes owed and those paid at $278 billion for the 1998 tax year.
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