Timeliness and Accuracy of IRS Audits Questioned in Report

If the Internal Revenue Service puts someone through the stress and round-up-the-records work of an audit, you’d think the agency would conduct the audit in a timely and accurate manner. Unfortunately, according to a new report, that is often not the case.

The report was released last week by the Inspector General for Tax Administration at the Treasury Department. It was based on the results of an audit of the audit process itself, as handled by the Small Business / Self-Employed Division of the IRS.

The inspector general’s review was intended not only to evaluate whether audits are being done on time and with accuracy. The other concern that prompted the review was to make sure that the IRS follows the time period set by statute for assessing taxes.

Analyzing audit closures from Fiscal Year 2011, the inspector general found over 200 audits that, by statute, should have been handled through expedited processing based on their short expiration dates. In all, the exact number of audits that should have been processed this way was 229.

The inspector general also found delays in processing audits involving taxpayers who had agreed they owed $100,000 or more to the IRS. Expedited procedures were not followed in 891 out of 1,377 of these large-dollar audits.

To be sure, sometimes it seems like the IRS moves too fast, not too slowly. No one wants a long, protracted process when there is a question or dispute about tax compliance. But the agency should seek to resolve the issues, not let them become protracted.

The inspector general said as much in a statement released with his report. “The IRS has a responsibility to conduct its audit work in a way that is both accurate and timely,” the inspector general, J. Russell George, said. “Any failure to do so can create an unnecessary burden on taxpayers and compromise the integrity of the system.”

Source: “Report Finds Problems with Accuracy of IRS Audits,” Accounting Today, Michael Cohn, 10-18-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our IRS audits  page.