Earlier this month, the IRS announced that it was doing some hiring for the first time in more than five years. It will add up to 700 employees to fill key gaps in its enforcement division.
The Wall Street Journal reports that even after hiring new employees the Service will end the current fiscal year with 2000 fewer workers than it had at the start of the year. Struggling under budget constraints, positions have been left open when workers leave or retire. In 2015, audits of individuals reached an 11-year low.
More tax audits coming?
With staffing increases, there will likely be more audits. And small business and self-employed returns are probably the first that are going to receive closer review.
The recent pattern has been that as the number of returns filed has increased, the IRS had been losing enforcement officers. The number of employees doing tax enforcement in 2015 was down 24 percent from 2010.
IRS Commissioner John Koskinen said that the money to hire new employees comes from retirements, departures and unspecified "efficiencies." The concentration of the first hiring wave is going to be the small business and self-employed department.
For the first time in some years, Congress also increased the IRS budget by $290 million. But most of these funds were specifically directed to improve taxpayer service and address cybersecurity and identity theft threats.
Responding to a tax audit
While the IRS audits fewer than 1 out of 100 returns, if yours is selected prepare to document every deduction and expense. Requests for charitable taxation numbers or receipts that back up all gambling losses can take time to locate. Those are actually some of the easier issues that can come up in the tax audit process.
When you receive notice that the IRS is auditing your tax return, do not respond before getting advice. An experienced tax attorney can defend you throughout the process and often limit the negative consequences.