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IRS criticized for not fully implementing new audit system

On Behalf of | Oct 30, 2019 | Tax Audits

In 2016, the IRS announced that it would change the way it conducts corporate audits. Instead of examining a company’s entire tax return, it would simply examine any transactions it deemed to be risky in nature. The hope was that this would help to complete these audits in a timely manner. However, an agency watchdog said that the government has not fully implemented the new system.

A report found that only 15% of corporate audits are being conducted using the new system while the rest are being conducted using the old system. The IRS has also been accused of not using past results to guide its selection of future returns to examine. In response, the agency said that it was using data when choosing which returns to examine more closely. Budget cuts are partially to blame for the fact that the audit system hasn’t been rolled out as smoothly as the government would like.

In 2010, the IRS had 5,224 revenue agents. In 2018, that number had been reduced to 2,923 because of a lack of funding and hiring freezes. The IRS also said that it had to direct resources away from corporate audits as it attempted to implement changes to the tax code. According to the agency, initial problems with the new program should not be seen as a reason to scrap it altogether.

Individuals or business owners who are in a tax dispute with the IRS may wish to hire legal counsel to help resolve the matter. A tax attorney may be able to directly negotiate with the IRS on a taxpayer’s behalf. This may allow an individual or business to avoid paying additional fees or taxes. In some cases, taxpayers may be entitled to a refund at the conclusion of an audit.