Article: Major New IRS Study Of The "Tax Gap" Signals Increased Audits For S Corporations, Partnerships And High-Income Taxpayers

A recently-completed IRS National Research Program examined 46,000 tax returns to measure individual taxpayer reporting compliance. The study revealed a "tax gap" of over $300 billion consisting of:

1. Underreporting.

2. Underpayment.

3. Non-filing by individual taxpayers.

A major result of the study will be updated statistical formulas that the IRS uses in selecting returns for audit. Initial implications of the report suggest that audits may increase for flow-through entities (S corporations and partnerships), high-income taxpayers, and schedule C sole proprietors. A related result will be the likelihood that those with accurate tax returns will receive a lower level of scrutiny.

New IRS ...

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