Internal Revenue Service agents are spending more time conducting face-to-face corporate audits that produce no revenue, according to a report released by the tax division of Syracuse University’s Transactional Records Access Clearinghouse.
The IRS data analyzed by TRAC also discovered that the targeting of the agency's correspondence audits for individuals is improving.
The year-to-year growth in nonproductive audit time -- defined by the IRS as face-to-face examination hours that produced what it calls "no change" results -- occurred for corporations in every asset class.
TRAC said that the relative growth in the unproductive hours also tended to rise as the size of the corporations increased. In the last five years, for example, the nonproductive audit time for the largest corporations -- those with assets of $250 million or above -- has more than doubled. Although audit dollar recommendations for the largest corporations increased substantially from fiscal years 2001 to 2005, they declined by about 15 percent, to $25.5 billion last year, a drop of $4.6 billion in potential audit revenue.
Historically, TRAC said that the largest corporations produce the lion's share of all audit dollars.
TRAC also noted that the agency is auditing many fewer corporate returns than it did a decade ago. The overall corporate audit rate in 2006 (1.2 percent) was only half what it was in 1996 (2.4 percent).
