Robo-Audit: The IRS Finds a New Way to Check Tax Returns
In prepared remarks before the New York State Bar Association Section of Taxation on February 24, 2015, IRS Commissioner John Koskinen noted that with the IRS budget falling by more than $1.2 billion in the last five years, and with 13,000 fewer full-time employees at the end of fiscal year 2014 compared to 2010, audits of individuals last year dropped to the lowest level in a decade. But taxpayers shouldn’t think they’re home free: The IRS has expanded its automated exam programs, which enable it to reach many more taxpayers than it could with “human” examiners.
Two important automated exam programs are the correspondence examination (“Corr exam”) and the automated underreporter (AUR) program. While there are fundamental differences between the two programs, both start with a computer notice asking about one or more entries or schedules on the tax return.
Corr exams typically focus on one or two simple issues, such as filing status, exemptions, itemized deductions, or tax credits.