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IRS audits on decline as budget keeps shrinking
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The treasury's inspector general has urged the IRS to audit only the wealthiest taxpayers. The agency's budget is at a 10-year low and is turning to unconventional methods to bring in revenue. - photo by Daniel Bendtsen
Tax protesters get frustrated about the idea of the federal government taking their money away.

The Internal Revenue Service is feeling that pain, seeing its budget cut by 18 percent since 2010. Its 2016 budget is $10.6 billion $2.8 billion less than what the White House requested, according to The Washington Post.

Democrats have argued the cuts are draconian and ultimately hurt taxpayers because of lost revenue.

For every dollar the majority cut last year, the estimates are that our nation lost six dollars owed to it that should have been collected, said Rep. Jose Serrano, a Democrat from New York.

Audits are now at a 11-year low as agents have been laid off, and the IRS is now adopting unorthodox new practices to increase revenue. Forbes reported that the IRS will now be able to revoke passports for tax delinquencies its an earmark (buried in a recently finalized highway funding bill) that provides a disincentive for foreign tax evasion.

American Citizens Abroad has urged a revision to that bill, with chairman Jonathan Lachowitz noting potential consequences for expatriates who cannot do things like open a bank account, arrange for direct debit of utility bills, travel, or do many other everyday things, without their passport.

Meanwhile, the risk for a conventional audit by the IRS is likely to keep shrinking.

In September, J. Russell George, the Treasurys inspector general urged the IRS to change its auditing practices to focus only on the wealthiest individuals.

Most of the IRSs present audits are for individuals with incomes between $200,000 and $399,999. The inspector general, however, says that the IRS can bring in more revenue with fewer resources by focusing on those who earn more than $600,000 a year.

The higher the income, the more complex and time-consuming the audit. Still, the amount of money that is recouped makes it worth it.

During audits of incomes that top $5 million, the IRS recovers $4,545 per hour, compared to just $605 per hour in audits of incomes less than $400,000.

"It is that much more important that the IRS selects audits that have the highest compliance impact," the inspector general's report said.

Following the inspector general's report, the IRS said in November that it is reconsidering the $200,000 level as a "high-income" baseline, The Wall Street Journal reported.

The Center for Budget and Policy Priorities has urged Congress the reverse the trend of declining budgets. The IRS has cut 14 percent of staff since 2010, which the CBPP says continues to hurt compliance and taxpayers services as the tax agency's responsibilities have expanded.