The Internal Revenue Service does not always recognize and properly investigate signs of tax fraud, according to a new report, foregoing at least millions of dollars in potential fraud penalties.

The report, from the Treasury Inspector General for Tax Administration, found that the IRS may be missing opportunities to further promote voluntary compliance and enhance revenue. For its report, TIGTA reviewed a statistical sample of 100 office audits, closed between October 2009 and September 2010 that involved high-income and sole proprietor taxpayers agreeing they owed additional taxes of at least $10,000. Of the 100 office audits reviewed, TIGTA identified 26 audits with fraud indicators that were not recognized and investigated in accordance with some key IRS procedures and guidelines.

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