IRS Audits of Small Businesses Soar Under Obama

The Internal Revenue Service (IRS) recoups $702 in taxes for every hour it spends auditing small businesses, versus $9,173 an hour for auditing large corporations. But under Barack Obama, audits of small and medium-sized businesses have skyrocketed.  

So says Peter Schweizer, President of the Government Accountability Institute:

According to IRS statistics, from 2009 to 2011, the coverage rate (number of audits as a percentage of total returns filed) for corporations with assets between $10 million and $50 million has increased 32 percent. The coverage rate for corporations with assets between $50 million and $100 million has increased at the same rate. Some businesspeople file individual returns, and those with incomes higher than $1 million have experience a 94 percent increase in their coverage rate, and a 29 percent increase in the actual number of exams since 2009. Those with incomes $200,000 and higher have seen a 36 percent increase in their coverage rate.

Meanwhile, even as the Obama Administration goes after the job creators, it has instructed enforcement officials to turn a blind eye toward cracking down on IRS tax fraud by low-income recipients of the $1,000 federal stimulus child tax credit:

According to a July 2012 report by the TIGTA, “IRS management created an environment which discourages tax examiners responsible for reviewing ITIN applications from identifying questionable applications; eliminated successful processes used to identify questionable ITIN application fraud patterns and schemes; and established processes and procedures that are inadequate to verify each applicant’s identity and foreign status.”

For example, the review found 154 individual mailing addresses were used 1,000 or more times on an ITIN application, but the IRS failed to use information in its computer systems to identify potential fraud schemes. Robust fraud controls are extremely important since $6.8 billion in tax refunds were paid out to 2.9 million ITIN tax returns for processing year 2011.

Another report by the TIGTA in July of 2011 found that individuals using ITINs made claims for $4.2 billion in Additional Child Tax Credit (ACTC) funds, a four-fold increase from the $924 million submitted in 2005.

As Mr. Schweizer concludes, “the Internal Revenue Service is morphing into the Internal Redistribution Service.”