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IRS audited more millionaires in 2005

/ Source: The Associated Press

More than 5 percent of the nation’s millionaires faced tax audits last year, about five times the rate for the population as a whole, the Internal Revenue Service said Tuesday.

The tax agency released the statistic after researchers at Syracuse University’s Transactional Records Access Clearinghouse said an IRS publication showed that tax agents conducted traditional, face-to-face audits of only 30 tax returns filed by millionaires.

The IRS said its published data were incorrect and that more than 7,000 people who reported earning $1 million or more experienced such audits. Even more had their returns audited through correspondence with the tax agency.

Susan Long, co-director of the Transactional Records Access Clearinghouse, said the tax collectors produced those new statistics very quickly and under pressure.

“How do we know these figures are right?” she asked.

Overall, the IRS audited less than 1 percent of individual tax returns.

Last year marked the first time the tax collectors started tracking the number of audits among millionaires.

IRS spokesman Terry Lemons said the published data painted a misleading picture because millionaires only showed up in the correct category if the audit began and ended in the 2005 budget year. The information Syracuse University researchers studied also did not incorporate millionaires, such as self-employed taxpayers, who reported business income on their individual tax returns.

The revised data show the IRS audited 11,715 of roughly 225,000 millionaires last year, Lemons said, or 22 percent more than the year before.

“That’s a much different picture,” he said. “More wealthy people are being audited than in previous years, by far.”

The IRS data highlighted by TRAC, a data gathering, research and distribution organization associated with Syracuse University, also show that taxpayers reporting less than $25,000 in income face higher audit rates than middle-income taxpayers.

Lemons said the IRS, following instructions from Congress, keeps a close eye on mistakes and fraud among tax returns claiming the earned income tax credit, a benefit designed to reduce poverty among low-wage workers.