Recently, high-profile investigations have brought tax evasion to the forefront of the public consciousness. Paul Manafort and Michael Cohen, confidantes of President Donald Trump, were found guilty on counts of tax fraud and evasion, among other crimes. These investigations raise questions about why these individuals thought they could get away with tax evasion and why they only got caught after becoming entangled in separate investigations. One reason seems to be that when it comes to policing high-end tax evasion, there are nowhere near enough cops on the beat.
Indeed, the IRS has faced a near decadelong retrenchment; in fiscal years 2010–2017, its budget was cut by 17 percent in inflation-adjusted terms. Over the same period, the largest cuts to the IRS were to personnel tasked explicitly with performing examinations. In fact, the employees who saw their numbers reduced the most were revenue officers and tax technicians—by 44 percent and 43 percent, respectively—both of which support enforcement activities by analyzing financial statements, conducting research and interviews, and resolving examination issues. The third-most severe personnel cuts were to revenue agents, who, among other things, conduct onsite interviews, which are extremely important for audits of both high-income individuals and businesses. (see Figure 1)
From FY 2010 to FY 2017, IRS personnel declined by 23 percent. The fact that more than three-fourths of these personnel cuts were to employees responsible for enforcement activities should raise concern about how declines in funding from Congress have forced the agency to skimp on important functions. In FY 2017, the IRS examined only 0.54 percent of returns. Comparatively, in both FY 2010 and FY 2011, this percentage was 0.93 percent—indicating a decrease in audits of approximately 42 percent in the six years between FY 2011 and FY 2017.
View the complete April 11 article by Sara Estep on the Center for American Progress website here.