IRS will do fewer tax audits this year

Posted at 9:43 PM, Jan 16, 2015

NEW YORK (CNNMoney) — One million audits.

That’s how many audits the IRS plans to conduct this year, IRS Commissioner John Koskinen told reporters Thursday.

While 1 million is hardly small potatoes, it’s a lot less than the 1.4 million audits the agency conducted in 2013 and the 1.2 million it conducted last year.

The reason for the steady decline: Budget cuts that will leave the agency operating at a level that is 17% below where it was 5 years ago.

That is going to result in even more staff cuts, particularly in the agency’s enforcement division, Koskinen said.

But that doesn’t mean you should cut corners.

“It’s still not a good time to start cheating,” Koskinen said, noting that while the agency wants to work with filers who may have made mistakes on their returns, it doesn’t tolerate brazen cheaters.

The commissioner’s big concern: fewer audits will mean the agency will collect less of the money owed. He estimated that the IRS has been unable to collect $6 billion to $8 billion since 2010 because its enforcement division is operating with 5,000 fewer employees than it needs. He anticipates that another $2 billion will go uncollected this year as result of staff reductions.

This will all be happening during the first year that the agency will have to assess whether those filers who got health insurance subsidies under the Affordable Care Act were given the right amount based on their actual 2014 income, rather than the estimated income they used when applying for coverage.

It’s also the first year that all filers will have to check a box indicating whether they had health insurance coverage in 2014. If they don’t check it, they may be subject to a penalty.

Koskinen said that while the agency’s resources are constrained, leading to fewer audits, the ACA provisions will get the same scrutiny as any other provision on the 1040 return that taxpayers are expected to report accurately. “If there are any questions, we’ll contact the taxpayer,” he said.