Editorial: Poorer Americans hammered by audits

Friday, April 12, 2002 | 4:42 a.m.

Last Sunday The New York Times reported on the results of its examination into how the federal government looks for tax cheaters. The story wasn't reassuring: The newspaper's analysis found that people with modest incomes are much more likely to be audited than wealthier Americans. The working poor who apply for the Earned Income Tax Credit, a benefit that can provide up to $4,000 for a family, had a 1 in 47 chance of being audited during 2001. In contrast, people making more than $100,000 a year had a 1 in 145 chance of getting audited. The likelihood grows even less for lawyers, doctors and other professionals who file under an S-1 Corp. -- 1 in 233 were audited last year.

Some tax experts estimate that there might be $9 billion in cheating on the Earned Income Tax Credit while the overall cheating on taxes in the United States is projected at $300 billion a year. A retired IRS expert interviewed by the Times said that if the IRS spent just $9 million on additional resources, the agency could recover $1.8 billion on partnerships alone, income that currently goes unreported.

With April 15 tomorrow, there's no better time for Congress to reassess its priorities on tax policy. The IRS appears to be open to redirecting its energies on who gets audited, but the head of the IRS has indicated this will require more funding. If Congress doesn't devote greater resources to catch tax cheats who are wealthy, not only will it further erode confidence in the tax system's fairness, but it also will mean that honest taxpayers will have to assume even more of the burden for financing governmental programs.