Irs Puts Off ‘Audits From Hell’ Until Dec. 1

Worried that its budget will be cut, the IRS will delay for at least 60 days the grueling “audits from hell” that it planned to begin Oct. 1 for 153,000 businesses and individuals, who would be required to prove everything on their tax return, including producing a marriage license to justify a joint return.

The delay will allow the service to evaluate how much its $2 billion Taxpayer Compliance Measurement Program will be affected by expected budget cuts, Tax Notes Today, the electronic edition of a weekly trade paper, reported last week.

Frank Keith, the senior IRS spokesman, confirmed the report, but added, “We intend to start on Dec. 1.”

The compliance audits, last done in 1988, collect data from randomly selected taxpayers within various income groups. The IRS uses the data to flag returns for audits.

President Clinton’s budget proposed $405 million for the first year of compliance audits, which the IRS says generate many times their costs through higher tax collections. House Republicans cut the 1996 budget for compliance audits to $266 million, while the Senate voted no financing.

Rep. Stephen Horn, R-Calif., the chairman of a subcommittee on government management, information and technology, vowed last week to hold hearings on recommendations by the Government Accounting Office on ways to improve IRS bookkeeping and debt collections.

Deputy IRS Commissioner Michael Dolan has said that the proposed budget cuts are so deep that they might cause tax collections to decline.