Friday, May 02, 2008

Focus on the Smaller Sources of Revenue

In general, such a focus is not good strategy. You're usually better off concentrating on the people who can write big checks, assuming that you have a good shot at getting one of those big checks. Clearly, the IRS thinks that they are better off auditing more small companies than big companies.

In FY2007 the IRS audited half as many big companies (those with assets of $250,00,000 and above) than they did twenty years ago. And it's getting worse; in 1988 62% of these companies were audited by the IRS, in 2007 it was down to 26%. Not only are there fewer audits, but less time is being spent on the audit (1210 hours per audit in 2002, 973 in 2007). As you would expect, these audits are generating fewer dollars; in 2005 these audits generated $30,000,000 in extra taxes, two years later the number was down 20% to $24,000,000.

Apparently the IRS is somewhat sensitive about this issue as it is trying to create rules to prevent the public's access to audit statistics. Further, they have brought suit to bar someone from even requesting this information.

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