April 19, 2001 | Read Time: 1 minute
By JANET L. FIX
Enforcement efforts by the Internal Revenue Service against tax-exempt organizations have slowed considerably in the past decade, according to new data provided by the I.R.S. in response to questions from The Chronicle.
Only 8,611 of the 641,383 returns filed by tax-exempt organizations in 1998 were examined by revenue agents the following year, according to I.R.S. data that will be published later this year in the 1999 Internal Revenue Service Data Book. Of those, 4,170 involved Form 990 and Form 990-EZ filings, the informational returns most commonly filed by charities or other nonprofit groups.
In all, I.R.S. agents reviewed just 1.3 percent of tax-exempt returns in 1999 for errors, fraud, and other problems. The chances of a tax-exempt organization’s being audited in 1990 were greater, but still slim: 16,205 (or 3.3 percent) of the 491,100 tax-exempt returns filed were audited.
Those figures trouble both current and former I.R.S. officials. The relatively small number of audits means that unscrupulous individuals can “use a tax-exempt organization in ways that aren’t charitable,’’ said Marc Owens, a former director of the Internal Revenue Service’s Exempt Organizations Division who is now a Washington lawyer.
I.R.S. Commissioner Charles O. Rossotti expressed similar concern about the decline in audits to the Senate Finance Committee, which held a hearing this month to investigate the activities of tax scofflaws, particularly those using the Internet.
“Clearly, the declines we’ve seen in the past few years need to stop or the fairness and effectiveness of our tax system will be undermined,” Mr. Rossotti said.
Mr. Rossotti blamed the declines on a lack of manpower, saying the agency’s work force fell by 17 percent in eight fiscal years from 1992 to 2000 while the number of tax returns filed increased 13 percent to 230 million.
