IRS Enforcement Activities: Past, Present, and Future

• Since the IRS Restructuring and Reform Act of 1998, the IRS has reduced the percentage of field (i.e., face-to-face) audits and increased the number of correspondence audits that it conducts.
• Although the number of face-to-face audits has decreased, the average assessment per audit has steadily increased.
• The percentage of criminal investigations and indictments has decreased since 1997, but the Justice Department’s conviction rate in cases it prosecutes remains high, and the sentences for convicted offenders have increased.
• The IRS has largely abandoned asset seizures as a collection method in favor of liens and levies.

In the early 1990s, IRS enforcement activities were fairly aggressive. Several individual taxpayers lost their homes and livelihoods to the IRS as a result of their unpaid taxes. Public sentiment turned against the agency, and congressional hearings were held to address the problem. In 1998, Congress responded by passing the IRS Restructuring and Reform Act of 1998, P.L. 105-206 (Reform Act).

One goal of the Reform Act was to put “service” back into the Internal Revenue Service.¹ To achieve that goal, Congress directed the IRS to focus more on serving the public and meeting the needs of taxpayers. In response, the IRS changed its mission statement, which now states: “The mission of the IRS is to provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.”²

This mission statement differs significantly from the one that existed before the Reform Act, which stated: “The purpose of the Internal Revenue Service is to collect the proper amount of tax revenue at the least cost; serve the public by continually improving the quality of our products and services; and perform in a manner warranting the highest degree of public confidence in our integrity and fairness” (emphasis added).³ Note that the old mission statement focused on collection and the new one focuses on service.

In the Reform Act’s aftermath, IRS enforcement strategies changed with respect to individual taxpayers. Enforcement activities are less visible and collection activities are less intrusive. This article reviews IRS enforcement activities since 1997 that relate to individual taxpayers. We explain how IRS strategies have changed and what to look for in the future.

The change in IRS enforcement activities is not all good news for taxpayers. The use of liens and levies has increased. Document-matching activities are up, average dollar amounts of penalties have grown, and sentences for tax-related matters have lengthened. This article suggests a few strategies for tax advisers to contemplate in light of the changes in enforcement activities. For discussion purposes, enforcement activities are broken down into three categories: (1) discovery programs; (2) penalty programs; and (3) collection programs.

Discovery Programs

The IRS uses three major discovery programs (audit, document matching, and math error) to enforce the federal tax laws.⁴ These programs are used to verify the accuracy of tax returns and assure that returns comply with existing laws.⁵ Under the audit program (also known as the examination program), tax returns are reviewed to make sure that they comply with internal revenue laws. The document-matching program (also known as the automated underreporting program) electronically confirms that the data reported on information returns such as Forms W-2 and 1099 match the data reported by taxpayers on their returns. Under the math error program, computer checks are performed on returns for mathematical errors and inconsistencies. Each of these programs has gone through significant changes in the aftermath of the Reform Act.

Audits

Audit methodology has changed. The majority of audits no longer involve face-to-face meetings with taxpayers or their representatives. Most audits are now conducted by written correspondence. As reflected in Exhibit 1, over the past 11 years face-to-face audits have decreased by over 50%.⁶ During the same period, correspondence audits increased more than 33%. This shows a major shift in audit methodology and strategy.

Face-to-face audits are conducted in person and can lead to confrontation between the IRS and the taxpayer. In the initial phase of a face-to-face audit, an IRS agent will generally interview the taxpayer. After the interview, the agent will formulate the issues that relate to the return and request documents to resolve the issues. In many cases, the agent will attempt to resolve the issues in person with the taxpayer. The examination can quickly spin out of control if personality conflicts develop between the agent and the taxpayer.

Correspondence audits, on the other hand, are less confrontational and less intrusive. The correspondence audit is conducted by mail rather than in person. The areas of inquiry are identified in the correspondence to the taxpayer, and the document requests are generally limited to those areas. The taxpayer responds to the correspondence audit by mail. There is little, if any, direct contact between IRS personnel and the taxpayer during the examination process. As a consequence, direct confrontation and the potential for personality conflicts are eliminated.

In addition, the overall audit rate has decreased over the past 11 years. In 1997, approximately 1.3 out of every 100 individual tax returns were selected for audit.⁷ In 2007, approximately 1 out of every 100 individual returns were selected.⁸ This represents a decrease of more than 20% over the study period.

Even though the overall audit rate has decreased, rates have increased for some groups of taxpayers. Individual taxpayers who reported more than $1 million of income saw an increase in examination activity. In 2004, the first year that audit rates for this group of taxpayers are available, the audit rate for taxpayers who reported more than $1 million of income was 5.03%.⁹ In 2007, that audit rate increased to 9.3%.¹⁰ In addition, the audit rate for sole proprietors with incomes greater than $100,000 significantly increased.¹¹ For 2001, about 1.2 out of every 100 sole proprietors with incomes of $100,000 or more were selected for audit.¹² In 2007, about 4 out of every 100 sole proprietors were selected for audit, an increase of more than 200%.¹³

The decrease in the audit rate and the move toward faceless (i.e., correspondence) audits should be welcome news for most individual taxpayers. Correspondence audits generally produce lower tax assessments than face-to-face audits. For individual taxpayers, the average additional tax assessed from a correspondence audit was about 60% less than the assessment associated with a face-to-face audit in 2007.¹⁴ For individual taxpayers whose returns included farm activities, the average additional tax assessed from a correspondence audit was about 45% less than the assessment from a face-to-face audit.¹⁵

The difference in average assessments is equally dramatic for individual taxpayers whose returns reported $1 million or more of income. The correspondence audit resulted in an average assessment of about $161,000 per return.¹⁶ The face-to-face audit generated an average assessment of about $259,000.¹⁷

Document Matching

The second major change to IRS discovery activities involves the document-matching program. Activities under this program equate to an indirect examination of the taxpayer’s return because the IRS compares third-party information with the taxpayer’s return to confirm that the data match.¹⁸ In 1997, contacts with taxpayers under the document-matching program were fewer than 1 out of every 100 returns filed.¹⁹ Eleven years later, approximately 2.5 out of every 100 taxpayers are contacted as a result of the program, representing an increase of more than 150%.²⁰ The review that occurs under the document-matching program is invisible to the taxpayer, and discrepancies found under this program are resolved through the mail, not in person. By increasing activities under the program, the IRS has reduced the risk of direct confrontation between its personnel and taxpayers and has increased its examination capabilities. This greater emphasis on the document-matching program is consistent with the shift in audit methodology toward faceless examinations.

Math Error

The math error program addresses simple math errors that can appear in tax returns. If the return contains mathematical errors, the Service contacts the taxpayer by phone or written correspondence to resolve the issue. Over the past 11 years, the number of taxpayers contacted as a result of the math error program has decreased. In 1997, approximately 5 out of every 100 individual income tax returns were adjusted under the program.²¹ In 2007, approximately 2 out of 100 individual returns were adjusted.²² The increase in computer-generated income tax returns is probably the main reason that fewer taxpayers are being contacted by the IRS to correct math errors. In addition, the math error program recently underwent changes to improve taxpayer understanding of notices and of their appeal rights.²³

Practice tip: As the IRS uses correspondence more often to resolve tax return issues, tax advisers may want to remind their clients of the need to properly manage all correspondence related to IRS matters. IRS correspondence should not be ignored, and procedures should be established to address the correspondence immediately. Failure to properly respond to a correspondence audit could lead to a face-to-face audit, which on average results in approximately twice as much additional tax being assessed. As a backup, tax advisers may want to make it standard practice to fill out the third-party designee data on the individual income tax return in the event that the client’s document handling capabilities are questionable.

In addition, tax advisers may want to apprise their clients that activities under the document-matching program are increasing. Document-matching activities equate to an examination of the tax return.²⁴ Therefore, all third-party information return correspondence (e.g., Forms W-2, Forms 1099, charitable contribution data, etc.) should be accounted for before the return is filed to minimize the issues that can develop with this type of examination activity.

Penalty Programs

The two major penalty programs used by the IRS are the civil and the criminal penalty programs. According to the IRS, penalties should be severe enough to deter noncompliance, encourage noncompliant taxpayers to comply, be objectively proportioned to the offense, be used to educate taxpayers, and encourage future compliance.²⁵ Consistent with the discovery programs, the activities under the penalty programs have changed in the aftermath of the Reform Act.

Civil Penalties

The percentage of individual tax returns that were subjected to civil penalties gradually decreased from 1997 to 2004 and then increased from 2005 through 2007. In 1997, an average of 18 penalties were assessed for every 100 individual income tax returns filed with the IRS, whereas in 2004 an average of 14 penalties were assessed for every 100 returns filed.²⁶ This represents a decrease of more than 22% from 1997 to 2004. Thereafter, the assessments gradually increased to 20 penalties for every 100 income tax returns filed.²⁷ A good portion of these increases is attributable to the estimated tax, failure-to-pay, and failure-to-file penalties.

Overall, the average dollar amount of civil penalties assessed against individual taxpayers increased from 1997 to 2007. In 1997, the average dollar amount of civil penalties assessed was $194.²⁸ In 2007, that amount increased to $544.²⁹ The overall increase relates primarily to the failure to pay tax and the failure to file penalties. Exhibit 2 shows the average dollar amount of the civil penalties assessed against individual taxpayers (i.e., total penalties assessed/total individual returns filed) from 1997 to 2007.³⁰

Exhibit 2 shows that the average dollar amount of penalty assessments against individual taxpayers steadily increased from 1997 to 2007. Over the past 11 years, the average dollar amount of the penalty for the failure to pay tax increased from a little more than $100 to almost $400.³¹ The average dollar amount for the estimated tax penalty has remained relatively constant during the same period. More dramatic increases occurred for the failure-to-file and civil fraud penalties, which both increased more than 100%.³² Part of the increase in penalty assessments can be attributed to penalty rate increases, resulting in larger penalties being assessed against taxpayers.

The Government Accountability Office (GAO) recently released a report on the negligence penalty, in which it found that the penalty was seldom applied in audit cases.³³ The penalty was applied to 6% of non–sole proprietor returns and 11% of sole proprietor returns for tax changes of less than $1,000.³⁴ For returns with tax changes from $1,000 to $9,999, the penalty was applied to 22% of non–sole proprietor cases and 39% of sole proprietors.³⁵ For returns with tax changes of $10,000 and greater, the penalty was applied to 49% of non–sole proprietors and 62% of sole proprietors.³⁶

IRS policy permits penalty abatements due to IRS errors, reasonable cause, discharge in bankruptcy, and partial payment in settlement of balances due.³⁷ The Service recognizes that assessments followed by abatements due to IRS errors have a negative impact on compliance. The Internal Revenue Manual requires IRS employees to “strive to make a good decision in the first instance. A wrong decision, even though eventually corrected, has a negative impact on voluntary compliance.”³⁸

Penalty abatements varied during the study period. Some types of penalties were abated more than others. In 1997, 8 out of every 100 penalty assessments were abated.³⁹ In 2007, 11 out of every 100 penalty assessments were abated.⁴⁰ The change in overall abatements was driven by the failure-to-pay penalties. All other penalties show a decrease in abatements over the years of study. The results are consistent with the IRS taking a stronger stance regarding assessments (exclusive of the failure-to-pay penalty).

Not only did the penalty abatement rates increase during the study period, but the dollar amount of the abatements also increased. Exhibit 3 depicts the average dollar amount of penalty abatements for all individual returns filed (i.e., total abatements ÷ total individual returns filed) from 1997 to 2007.⁴¹

The most significant increases in penalty abatements relate to the failure-to-file and estimated tax penalties. From 1997 to 2007, the average abatement for the penalty associated with the failure to file a tax return increased from $723 to $2,901. During the same period, the average dollar amount of estimated tax penalty abatements increased from $365 to $1,174. The dollar amounts for civil fraud abatements vary widely by year, with the lowest in 1999 and the highest in 2005. This wide variation in civil fraud abatements is likely attributable to taxpayers’ motivation to aggressively challenge large dollar penalties and the relatively long time periods between the assessment date and the resolution of such penalties.

Criminal Penalties

Criminal investigations and prosecutions for tax-related matters have decreased since the Reform Act, but the average sentence for a conviction has increased.⁴² Exhibits 4 and 5 depict the gradual changes that have occurred in the criminal program since the Reform Act.

Exhibit 4 illustrates the number of criminal investigations relating to tax matters from 1997 to 2007. As shown, such investigations have decreased. In 1997, there were about 3,000 investigations.⁴³ They reached a low at the turn of the century and have gradually increased since then.⁴⁴ Overall, criminal investigations have decreased by approximately 17% since the Reform Act.

Indictments show a much larger decline. In 1997, there were approximately 1,700 indictments; in 2007, there were approximately 1,100, a decrease of over 30%.⁴⁵ The number of sentences follows the same pattern (30% decline) as indictments, based mainly on the fact that there were fewer prosecutions. On the other hand, the length of the sentences for tax-related matters increased over the study period (see Exhibit 5).

In 1997, the average sentence for tax-related matters was 15 months.⁴⁶ The length of sentence has gradually increased since the Reform Act to 22 months.⁴⁷ In addition, the Justice Department achieved a conviction rate of approximately 90% in its criminal prosecutions from 2001 to 2007.⁴⁸ It should be noted that the government only reports criminal enforcement statistics related to tax matters on an aggregate basis and that the data depicted in Exhibits 4 and 5 relate to all types of taxpayers, not just individuals.

The data on penalty programs (i.e., both civil and criminal) send taxpayers and their tax advisers an ominous message: Although fewer taxpayers are being subjected to criminal penalties, taxpayers who get caught violating the internal revenue laws face larger economic and noneconomic penalties since the Reform Act.

Practice tip: Penalties generally emanate from IRS examination activities. Therefore, tax advisers and their clients should minimize exposure to examination activities as much as possible, which leads back to the discussion of managing IRS-related correspondence. By properly accounting for third-party information and resolving IRS correspondence issues (e.g., correspondence audits) in an acceptable manner, the exposure to penalties will be mitigated. In the event civil penalties are assessed, the tax adviser may want to consider whether grounds exist to abate the penalties (e.g., reasonable cause) because the dollar amount of most penalty abatements has increased.

Collection Programs

The most significant changes to the IRS enforcement programs have occurred in the collection programs. Exhibit 6 delineates the number of seizures filed.⁴⁹ Exhibit 7 depicts the number of federal tax liens filed, and Exhibit 8 illustrates the number of federal tax levies filed against third parties.⁵⁰

Seizures have taken a nosedive since passage of the Reform Act, dropping from 10,000 in 1997 to fewer than 700 in 2007, and the trends do not indicate that they will increase anytime soon. Seizures can be very confrontational and visible. In a seizure, the government confiscates the taxpayer’s property to satisfy an IRS claim. In the context of real property, such as a home, this means that the property is barricaded or boarded up to prevent anyone from entering. Thereafter, nothing can be retrieved from the property without IRS permission. If the debt to the IRS is not paid, the government will sell the property. This type of collection activity is very disruptive to taxpayers, their families, and their neighbors and can lead to negative consequences for all parties involved. The use of seizures earned the IRS a dubious reputation in the 1990s, and public opinion turned against the agency.⁵¹

Instead of seizures, the IRS has changed its collection focus to liens and levies. Each of these collection activities reached a low point at the turn of the millennium, but since that time they have increased significantly.

The changes to the collection programs are consistent with the changes to the discovery programs. In the latter, faceless audits do not lead to direct confrontation with taxpayers. In the collection programs, liens and levies likewise do not lead to direct confrontation. Liens are generally recorded in the official public records or with the secretary of state. The property is not barricaded or boarded up, nor is the taxpayer prevented from entering the property after the lien has been recorded. Other than a blemish in the public records, the process of recording the lien will be invisible to the taxpayer’s family and neighbors. If the property is later sold, the IRS lien will be satisfied, with interest, from the proceeds of the sale.

Levies, such as a wage garnishment, are generally made against persons or entities holding property for the benefit of the taxpayer. A wage garnishment is imposed by court order and the taxpayer’s employer is served with the garnishment. The taxpayer is subsequently given an opportunity to contest the garnishment because in certain states wages are exempt from garnishment. Much like liens, levies achieve the same outcome as seizures (i.e., collection) but are much less visible and confrontational.

Practice tip: The changes in IRS collection activities are significant. However, the increase in lien activity could have some unanticipated consequences. Some mortgages and other security instruments contain fairly broad default provisions, and in some cases an IRS lien can trigger a default under such documents. In addition, IRS liens accrue interest and can quickly erode asset equity. Therefore, the tax adviser may want to analyze the client’s assets and liabilities long before the collection activities begin to minimize the economic impact of those activities.

Future Trends

As reflected by the statistics in the above discussion, IRS enforcement activities have changed significantly over the past 11 years. If a taxpayer was selected for audit in 1997, there was a 47% chance that the audit would be resolved with an IRS auditor face to face. Eleven years later, there is only roughly a 22% chance that the taxpayer will actually see an auditor because more audits are resolved through the mail. The end result is that direct confrontation between the taxpayer and the IRS is minimized. Reducing confrontation appears to be a common strategy for all the enforcement programs analyzed in this study.

According to the IRS, the enforcement changes seem to have been successful. In a 2007 report on reducing the federal tax gap, the Service indicated that its enforcement activities have produced a steady climb in revenues since 2001.⁵² Enforcement revenues have grown by nearly 45% since that year.⁵³ As can be seen from the figures included in the collection program discussion (Exhibits 6, 7, and 8), liens and levies are a driving force behind the revenue increase. Since 2001, liens and levies have increased exponentially, while seizures have largely become a thing of the past. This trend will likely continue.

In addition, the changes to enforcement activities have not adversely affected the voluntary compliance rate, which has remained relatively constant—above 80%—over the past 20 years.⁵⁴ However, the IRS Oversight Board and the Senate Finance Committee chairman want the IRS to increase the compliance rate with the hope of reducing the tax gap. Currently, the gross tax gap is estimated to be about $345 billion; after IRS enforcement activities, the tax gap was reduced to $290 billion.⁵⁵ The Oversight Board has adopted an 86% compliance rate goal for 2009.⁵⁶ The goal established by the Senate Finance Committee is 90%, which must be achieved by 2017.⁵⁷

In an effort to increase the voluntary compliance rate, the IRS intends to expand its enforcement activities in the coming years. For fiscal year 2008, the Service requested an additional $410 million for new enforcement initiatives.⁵⁸ Part of the money will be used for “[i]ncreasing front line enforcement resources,” which will probably translate into more audits. The IRS notes that examinations of individual income tax returns increased by almost 90% from 2001 to 2007.⁵⁹ During the most recent period (2007) the IRS examined over 1.3 million income tax returns.⁶⁰ However, it does not appear that front-line enforcement activities will translate into more face-to-face audits or an increase in seizures. Rather, correspondence audits and penalties will likely be expanded. Some of these mechanisms were put into place last year with the Small Business and Work Opportunity Tax Act of 2007, when preparer penalties and erroneous refund claim penalties were enacted.⁶¹ Other mechanisms will require an expansion of third-party information return reporting for security sales and broker transactions, such as reporting stock basis data to the IRS or reporting proceeds generated from auctions or consignments by brokers.⁶² The document-matching program is designed to analyze third-party information return data. As a consequence, the examination activities under this program will likely be expanded.

Conclusion

In the Reform Act’s aftermath, the IRS has changed its enforcement activity strategies concerning individuals. Audits are becoming faceless; more than 75% of the audits are now correspondence audits. This should be good news for individual taxpayers because correspondence audits generally produce lower tax assessments than face-to-face audits. In addition, civil penalty abatements have increased, and criminal investigations and prosecutions have decreased since the Reform Act. Collection activities have become less confrontational as the number of seizures has decreased by more than 90% from 1997 to 2007.

In spite of all the good news, do not forget that liens and levies are on the rise, the conviction rate for tax crimes is about 90%, and the average time period for incarceration has increased from 15 to 22 months since the Reform Act’s passage. In addition, the government is allocating more resources to the IRS to increase the voluntary compliance rate. As a result, IRS enforcement activities will expand. If trends from the past 11 years are indicative of the enforcement activities that will follow, expect to see fewer confrontational methods for collecting tax revenue but more aggressive activities to increase the compliance rate and ultimately reduce the tax gap.

For more information about this article, contact Prof. Placid at rplacid@fgcu.edu.

Notes

¹ Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in 1998 (Blue Book), Part II, Title 1, A, 1 (November 24, 1998).

² Internal Revenue Manual, Section 1.1.1.1.

³ 1998 Blue Book, Part II, Title 1, A, 1.

⁴ See IRS, Report to Congress: IRS Tax Compliance Activities (July 2003): 5 (where the IRS discusses other compliance activity programs that are not addressed herein).

⁵ U.S. General Accounting Office, Tax Administration—IRS Should Continue to Expand Reporting on Its Enforcement Efforts, GAO-03-378 (January 2003).

⁶ IRS Data Books, Publication 55B, 1997–2007, and IRS, “Fiscal Year 2006 Enforcement and Service Results,” p. 3. But see TracIRS, About the Data, Data Limitations, Trac Reports, Inc. (January 2008) (where the reliability of IRS data is questioned), available at http://trac.syr.edu/tracirs/aboutData/dataLimitations.html.

⁷ IRS Data Book 1997, Table 11, Returns Filed, Examination Coverage.

⁸ IRS Data Book 2007, Table 9, Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return, Fiscal Year 2007.

⁹ IRS, Reducing the Federal Tax Gap: A Report on Improving Voluntary Compliance (August 2, 2007): 33.

¹⁰ IRS Data Book 2007, Table 9.

¹¹ IRS Data Books, 2001–2007.

¹² IRS Data Book 2001, Table 10, Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return.

¹³ IRS Data Book 2007, Table 9.

¹⁴ Id.

¹⁵ Id.

¹⁶ Id.

¹⁷ Id.

¹⁸ But see Rev. Proc. 2005-32, 2005-23 IRB 1206 (where the IRS states that document-matching activities are not examinations).

¹⁹ IRS, Report to Congress: IRS Tax Compliance Activities, Table 9b, Underreporter Program Coverage by Examination Class, Fiscal Years 1996–2002 (July 2003), available at www.irs.gov/pub/irs-soi/rtctab9b.xls.

²⁰ IRS Data Book 2007, Table 9 (showing 134,542,879 individual returns filed); and Table 14, Information Reporting Program, Fiscal Year 2007 (showing 3,403,000 contacts related to underreporting under the document-matching program).

²¹ IRS, Report to Congress, IRS Tax Compliance Activities, Table 2, Summary of IRS Compliance Activities, Individual Income Taxpayers, Fiscal Years 1996–2002 (July 2003), available at www.irs.gov/pub/irs-soi/rtctab2.xls.

²² IRS Data Book 2007, Table 15, Number of Math Errors, by Type of Error, Calendar Year 2007.

²³ Treasury Inspector General for Tax Administration, “The Clarity of Math Error Notices Has Improved, but Further Changes Could Enhance Notice Clarity and Reduce Unnecessary Notices,” 2005-30-154 (September 2005).

²⁴ But see Rev. Proc. 2005-32, 2005-23 IRB 1206 (where the IRS states that document-matching activities are not examinations).

²⁵ Internal Revenue Manual, Part 20.

²⁶ IRS Data Book 1997, Table 7, Number of Returns Filed (1997), and Table 15, Civil Penalties Assessed and Abated (1997); IRS Data Book 2004, Table 10, Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return, Fiscal Year 2004, and Table 27, Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Year 2004.

²⁷ IRS Data Book 2005, Table 27, Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Year 2005 (revised September 2007), available at www.irs.gov/pub/irs-soi/05db27cc.xls; IRS Data Books 2006 and 2007, Tables 17, Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty, Fiscal Years 2006 and 2007.

²⁸ IRS Data Books, 1997–2007. See, e.g., Table 17 for 2007.

²⁹ Id.

³⁰ Id.

³¹ Id.

³² Id.

³³ U.S. Government Accountability Office, Report to the Committee on Finance, U.S. Senate, Tax Gap: A Strategy for Reducing the Gap Should Include Options for Addressing Sole Proprietor Noncompliance, GAO-07-1014 (July 2007).

³⁴ Id. at 30.

³⁵ Id.

³⁶ Id.

³⁷ IRS Data Book 2007, Table 17, Notes. See also U.S. GAO, Report to the Joint Committee on Taxation, Tax Administration, IRS’ Abatement Process in Selected Locations, GAO/GDD 99-98 (July 1999).

³⁸ Internal Revenue Manual, Section 20.1.1.1.3.

³⁹ IRS Data Book 1997, Table 15.

⁴⁰ IRS Data Book 2007, Table 17.

⁴¹ Id.

⁴² IRS, “Fiscal Year 2007 Enforcement and Service Results,” available at www.irs.gov/newsroom/article/0,,id=177701,00.html.

⁴³ IRS, “Enforcement Statistics—Criminal Investigation” (1997–2006 and 1998–2007). Cf. Treasury Inspector General for Tax Administration, “Statistical Portrayal of the Criminal Investigation Function’s Enforcement Activities from Fiscal Year 2000 Through Fiscal Year 2006,” 2007-10-083 (June 6, 2007), available at www.ustreas.gov/tigta/auditreports/2007reports/200710083fr.pdf (Treasury Inspector General Enforcement Activities). But see TracIRS, Trac Reports, Inc. (January 2008) (serious problems in the data systems that the IRS uses to track criminal enforcement activities are well documented and cannot be relied on).

⁴⁴ Id. See also Treasury Inspector General Enforcement Activities, p. 31.

⁴⁵ Id.

⁴⁶ IRS, “Fiscal Year 2006 Enforcement and Service Results,” p. 9.

⁴⁷ IRS, “Fiscal Year 2007 Enforcement and Service Results,” p. 10.

⁴⁸ Id.

⁴⁹ IRS, “Fiscal Year 2006 Enforcement and Service Results,” p. 8; IRS, “Fiscal Year 2007 Enforcement and Service Results,” p. 10.

⁵⁰ Id.

⁵¹ See, e.g., Mintz, “Senate Panel to Hear Alleged IRS Abuse of Taxpayers,” Washington Post, September 20, 1997, p. A1; Johnston, “Senate Committee Is Told of a Vast Range of Abuses by I.R.S.,” New York Times, April 29, 1998.

⁵² IRS, Reducing the Federal Tax Gap, p. 33.

⁵³ Id. at 33.

⁵⁴ Id. at 18.

⁵⁵ Id. at 10.

⁵⁶ Id. at 18.

⁵⁷ Id. at 1.

⁵⁸ Id. at 2.

⁵⁹ IRS Data Book 2001, Table 10; IRS Data Book 2007, Table 9.

⁶⁰ IRS Data Book 2007, Table 9. This includes approximately 503,000 returns selected for examination based on the earned income tax credit.

⁶¹ Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28. See also Secs. 6694 and 6676.

⁶² IRS, Reducing the Federal Tax Gap, p. 20.