IRS targeting Small and Medium Sized Business?

By David Kocieniewski of The New York Times.

Despite the federal government’s repeated pledges to crack down on big businesses that underpay their taxes, the Internal Revenue Service has decreased in recent years the time it spends auditing the returns of the nation’s largest corporations, according to a new study.And in 2009, the government audited just one in four of the largest corporations, lower than any rate in more than 20 years, according to the analysis, released Sunday by the Transactional Records Access Clearinghouse a nonpartisan research group affiliated with Syracuse University

Researchers said the audit data and other memos, which had both been obtained from the government under the Freedom of Information Act, suggested that a “perverse quota system” within the I.R.S. may be pressuring auditors to focus on small and medium-size businesses and give less scrutiny to the largest corporations — those with $250 million or more in assets.

“The decision to audit the smaller companies does not help the government collect more taxes,” the study concluded. “This is because the data indicate that the larger the business, the larger the dollar amounts of tax underreporting and back taxes on average that they may owe.”

I.R.S. officials, who have for years disputed the methodology used by TRAC, were quick to rebut the study’s findings. Steven T. Miller, the I.R.S. director of enforcement, said the study was skewed because it failed to take into account a surge in hours that I.R.S. agents spent working with businesses before they filed their returns to prevent errors or underpayments.

For the complete article please visit http://www.nytimes.com/2010/04/12/business/12audit.html?ref=business&pagewanted=print