That compares with 3.93 percent of individuals with incomes between $200,000 and $1 million who were audited in fiscal 2011 (3.1 percent in 2010) and 1.02 percent of individuals making less than $200,000 (1.04 percent in 2010).
Yet the IRS started 2012 with about 3,000 fewer enforcement personnel than it had a year earlier, mainly due to hundreds of millions of dollars in budget cuts, said Steven Miller, IRS deputy commissioner for services and enforcement, during a January 5 conference call announcing the report. Total enforcement staff is down from more than 52,000 in late 2010 to about 49,000 in 2012, Miller said.
The IRS enforcement budget was $55.2 billion in 2011, down from $57.6 billion in 2010. The drop was due in part to the expiration of the estate tax in 2010, Miller said.
Benson S. Goldstein, senior technical manager at the American Institute of Certified Public Accountants, said that increased enforcement revenues -- up from $33.8 billion in 2001 -- came with essentially flat or declining staff levels.
Goldstein said the IRS's increased use of correspondence audits (1.17 million in fiscal 2011 compared with 529,241 in 2001) highlights its more resource-efficient tools for capturing increased enforcement revenues.
Practitioners and taxpayers may have a rougher time with correspondence audits, because those audits typically run on tighter deadlines than field audits and collecting and mailing or transmitting IRS-requested documents takes time, Goldstein said, adding that the more labor-intensive field audits tend to be more time-efficient.
Constrained resources -- including a 2.5 percent overall cut included in Congress's last continuing budget resolution in December -- mean the IRS will have to further prioritize its activities. The budget will have an impact on enforcement efforts, Miller said, adding that the IRS "will continue to focus resources on the higher end of the income spectrum."
Return preparer training, competency testing, and continuing education will also get increased attention, along with refund fraud and identity protection efforts, Miller said. More than 740,000 individuals have registered under the IRS's return preparer program, he said.
The e-filing rate rose to 77 percent through fiscal 2011, compared with 69 percent the previous year. That's closing in on the Service's goal of 80 percent of returns being e-filed in fiscal 2012.
