IRS examinations of individual tax returns increased nearly 10 percent for fiscal year 2007. This increased audit activity did not prevent uncollected tax liabilities from soaring to a record $290 billion. The explanation? “Correspondence audits” account for 83 percent of all IRS examinations. Such audits typically are far less productive than field (face-to-face) audits. A correspondence audit is a computer-generated letter sent to a taxpayer because an IRS computer detected a discrepancy (often an arithmetical error). The General Accounting Office noted recently that “the increase in total audit rates of individual filers has been driven mostly by correspondence audits, while more complex field audits continue to decline.”

The GAO also points out that the resources the IRS has dedicated to enforcing the tax laws have declined over the past several years, including the number of revenue agents, reaching a low in 2003. However, over the past few years the number of revenue agents has increased slightly.

This article first appeared in Church Finance Today, August 2008.