Washington (May 3, 2004) -- Examinations of corporate tax returns fell again in fiscal 2003, continuing a decline that has seen the number of reviews plummet a total of 67 percent since 1997, the Treasury Inspector General for Tax Administration reported.

While individual returns were slightly more likely to be reviewed in fiscal 2003 than in FY 2002, examinations of all corporation tax returns, which have decreased continuously since FY 1997, fell from one out of 52 returns filed in FY 1997 to one out of 182 returns filed in FY 2003, the TIGTA said. The exception to the trend was examinations of corporate returns filed with no balance sheets, the number of which increased from 1,823 in FY 2000 to 3,682 in FY 2003.

The overall percentage of tax returns examined -- which jumped 11 percent from fiscal 2002 to fiscal 2003 -- has increased by 25 percent since FY 2000. However, that's still 57 percent lower than the rate in fiscal 1988. TIGTA, which rated the Internal Revenue Service overall compliance efforts last year as "mixed," attributed the 25 percent overall increase to an increase in examinations of individual tax returns.

TIGTA noted that combined collection and examination functions enforcement staff dropped 36 percent, from 25,000 at the beginning of FY 1996 to 16,000 at the end of FY 2003. And, while TIGTA said that there has been hiring in recent years, it hasn't kept pace with attrition. The FY 2004 budget and President Bush’s FY 2005 proposed budget provide for increases of 13 percent and 9 percent, respectively, for tax law enforcement, according to the report.

-- WebCPA staff

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