To summarize trends in the number and rate of individual taxpayer audits  and other enforcement contacts in total and by taxpayer income, we  analyzed available IRS data from fiscal year 1993 to fiscal year 2002 on  each type of contact. For the math error program, we based the contact rate on  the proportion of math error notices to the returns filed in that year  because the notices are sent to taxpayers as IRS processes tax returns. We also interviewed responsible IRS officials. Because this number is preliminary, the final math error contact  rate for fiscal year 2002 may differ somewhat from what we report. In addition, the Internal  Revenue Service Restructuring and Reform Act (RRA) of 1998 (P.L. In our discussions, these officials agreed that both types of errors  are identified under the same math error authority, are indistinguishable to  taxpayers being contacted, and should be similarly counted and reported. As a result, we did not  include this information in figure 2. IRS’s Public Reporting on Its Enforcement Programs Is Incomplete

IRS’s public reporting on its enforcement programs for individual  taxpayers does not provide a complete perspective on its efforts to  enforce tax laws because that reporting heavily focuses on audits. However, over time the audit rate has become increasingly less complete  as a measure of IRS’s efforts to enforce tax laws because IRS’s other  enforcement programs have expanded their coverage of issues once  covered under audits. Limited Public Reporting on IRS’s Enforcement Programs

IRS publishes extensive data on audits but only limited data on other  enforcement programs in its Data Book. However, the Commissioner said that he did not believe the audit rate  needed to increase to the same level as a number of years ago because IRS  has other programs to enforce the tax laws that were not available, or as  broad in scope, in past years. However, policymakers and taxpayers could be better informed about of  the extent of IRS’s efforts to enforce the tax laws without combining data  on all of IRS’s enforcement programs into one set of aggregate measures. However, the readily available data for the nonaudit programs is  incomplete compared to data reported on audits. IRS Audit Rates: Rate for Individual  Taxpayers Has Declined But Effect on Compliance Unknown.
Why GAO Did This Study

Reported declines in the rate at which the Internal Revenue Service (IRS) audits (also referred to as "examines") individual income tax returns have raised concerns that taxpayers may have a false perception of the true level of IRS's tax enforcement efforts. In addition, many observers are concerned these reported declines may reduce taxpayers' motivation to voluntarily pay their taxes. Because of these concerns, GAO was asked to review a number of issues surrounding IRS's enforcement efforts. GAO determined the trends in the percent of returns filed that are audited (contact rate) compared with similar data on taxpayer contacts through other enforcement programs for fiscal years 1993 through 2002. In addition, GAO reviewed whether IRS's reporting on its enforcement programs should be expanded.

What GAO Found

IRS's often-cited audit rate has been declining for several years, as shown below. However, the audit rate portrays only a portion of IRS's efforts to enforce tax laws and not all of those efforts have been declining. For IRS's three nonaudit enforcement programs, the contact rates in 2002 compared to 1993, after year to year variations, declined for one, essentially remained the same for one, and significantly increased for one--math error. A complete math error contact trend is unavailable because IRS did not capture one type of data on a substantial number of contacts prior to 1997. For years where complete data are available, IRS has not included all math errors in external reports. IRS officials agreed that all types of errors are identified under the same math error authority and should be similarly counted and reported. IRS annually reports extensive data on audits but only limited, or no, data on its other enforcement programs. This limited reporting does not provide policymakers or taxpayers information on the full extent of IRS's enforcement efforts. To the extent that taxpayers do, as is widely believed, take the level of enforcement into account when self-reporting their tax obligations, the audit rate alone may mislead them. IRS officials believe that more reporting is desirable and intend to report readily available, but incomplete, information on nonaudit programs in future reports.