The IRS uses many tools to identify and go after individuals to meet their tax obligations. Those with experience dealing with federal or Minnesota tax issues know that one of the most common is the audit. The error many people seem to make, though, is drawing the conclusion that an audit means the agency already believes the taxpayer is guilty of doing something illegal.
An audit is only an early step in a process of inquiry. Small things, including math errors, missing forms, overstating personal expenses or charitable donations or understating income, can trigger them. Often, adopting a cooperative attitude can get disputes resolved. If coming to terms on a payment arrangement is possible or a case needs litigating in court, it is wise to contact a skilled attorney.
Another source of intelligence the IRS is relying on more these days to advance its enforcement efforts is whistleblowers. There is an entire office dedicated to managing the inflow of tips. Each year, the agency issues a report to Congress on how well the whistleblower program is doing. This year's report puts a positive spin on the results and pundits say it suggests efforts will continue to increase.
The reason why is clear. The latest report states whistleblower tips helped the IRS collect $3.4 billion in revenue in the past nine years. Not only does government benefit. Whistleblowers did well too. Lasts year, awards totaling $61 million were paid out to whistleblowers – an increase of 322 percent over 2015. Interestingly, while payouts were up, the total dollars spent fell year to year. The IRS paid $103 million in 2015.
Officials credit a streamlining of the process it uses for handling whistleblower claims. That helped the agency clear up a backlog of past claims to near zero and set the stage for speedier action on future claims. And some observers suggest the decline in payouts could mean the IRS is going after small er fish. That's something to be aware of if you have audit concerns.