Sheila Billingsley writes:
I have a controversial suggestion for Congress: audit tax returns every year.
I prepare tax returns for a large tax company. One of the biggest sources of stress for taxpayers is whether or not they will get audited. Many of them do everything right but are still very scared of an audit because they have heard horror stories about the IRS.
In some other countries, the government does a quick audit of the tax returns every year, matching up wages with reported income, etc. This is a great idea. It gives immediate closure to taxpayers who are doing the right thing and speeds up payment of taxes. Because audits would be done for every person, it would help catch tax cheats.
As a tax preparer, I think it would also help eliminate fraud at the tax prep level. When you read about tax fraud committed by preparers, it is clear that it is the same people doing it over and over. Most of us do a good job. But some preparers make their money by making promises that they can save money or get bigger refunds by cheating a little bit. If taxpayers knew that this would be more difficult, they would not want to participate so there would be less business for fraudulent preparers. And if those preparers knew there was a bigger chance of getting caught, they would probably think twice before proposing a fraud scheme.
I realize that this would result in an increase in administrative costs up front to the IRS. But I think the savings in the long run would be worth it.
I also know that some people will not like the idea at first because it’s scary to be audited. But if the IRS checked everyone’s return every year, there would be no reason to worry later.
Other countries do this successfully. I think we should give it a try.
{ 2 comments… read them below or add one }
SB-
You say – “In some other countries, the government does a quick audit of the tax returns every year, matching up wages with reported income, etc.”
Where have you been?
The IRS has been matching info reported on 1040s and 1040As to W-2s, 1099-INTs, 1099-DIVs, 1099-Rs, and K-1s for many years now.
IRS first started matching interest and dividends reported on Schedule B to 1099s back when I first started doing taxes – in 1972!
So, in effect, every return is already somewhat “audited” as you suggested.
TWTP
I actually worked a detail for a season in the Automated Underreporter Program at the IRS, it was definitely illuminating. The computers identified returns that generally didn’t match the information returns submitted for that SSN and then we physically compared each and every one kicked out to see if we could find where it had been reported or if the information returns were in error before corresponding. The have made some improvements since then, I know because we were two years behind (this was in 1991, we were looking at 1988 returns) and they aren’t that far behind anymore, I don’t think.