IRS criticized over companies it doesn’t audit

WASHINGTON – The Internal Revenue Service audits far fewer of the biggest financial services companies – banks, brokerages, accountants, lenders and others – than it does other large corporations, according to an analysis of government data.

The IRS disputed the findings by Syracuse University’s Transactional Records Access Clearinghouse and emphasized that the agency audits returns with a high risk of tax evasion regardless of the industry.

“The conclusions drawn by the TRAC analysis are not accurate,” said Deborah Nolan, IRS commissioner for the large- and midsize-business division.

Using information provided by the IRS, researchers measured disparities in audit rates of corporations with $250 million or more in assets.

The report, being released today, found that about 15 percent of financial services companies were audited between 2002 and 2004. In contrast, virtually every corporation in agriculture, mining, construction, heavy machinery and transportation was audited.

The audit rates for other companies fell in the middle.

The IRS said its statistics show that more financial services and heavy manufacturing companies are audited each year than are other businesses.

The tax agency said many more banks and other financial institutions are included in the category of largest companies because their deposits are viewed by the IRS as assets, even though those institutions view the deposits as liabilities owed to depositors. That makes small banks appear much bigger and drives down the audit rate in the sector.