State taxpayers face slim chance of IRS audit

INDIANAPOLIS -- Indiana residents who filed their tax returns at the last minute have plenty of company nationwide, although they face comparatively slim chances of facing an audit.\nA new report from Syracuse University ranks Indiana's Southern District 79th out of 90 Internal Revenue Service districts nationwide in per capita criminal convictions by the IRS in 2002.\nThe Northern District ranked 75th.\nThe report also found that only 14 out of every 10,000 Indiana taxpayers had face-to-face IRS audits in 2000, the most recent year for which such data were available.\nIn contrast, 48 out of every 10,000 taxpayers in Los Angeles that same year were audited -- the highest rate in the nation.\nNationwide in 2000, 20 out of every 10,000 taxpayers faced audits, giving Indiana a ranking of 25th out of 33 IRS districts.\nTransactional Records Access Clearinghouse, a Syracuse University watchdog group that monitors federal data, found the odds of attracting face-to-face audits depend on where you live.\nLos Angeles residents were the most likely to be audited, while the luckiest taxpayers were in New Jersey, Ohio and Michigan.\nAlthough the number of tax returns in Indiana has remained at 2.8 million for four years, the number of tax returns nationally has grown 12 percent.\nAnd overall, national audit rates, and criminal tax prosecutions, are half of what they were a decade ago.\n"All the reports of financial shenanigans -- you'd have thought there'd be some attention to the whole corporate fraud issue," said Susan Long, a Syracuse University professor who co-directs TRAC.\nIRS officials said TRAC's numbers for criminal enforcement differed from their data. But their own statistics also showed a decline in recommendations for tax crime prosecutions.\nThe agency said fewer special agents and an increased focus on counterterrorism after the Sept. 11 terrorist attacks have contributed to the drop in numbers.\n"The resources are down; the total number of employees are down. I feel it here in Indiana," said Roger Wirth, special agent in charge of criminal investigation for the IRS in Indiana.\nWith 158 revenue agents, according to TRAC, Indiana ranks near the bottom when it comes to staffing. There are 39 criminal investigators in the state, down from 55 in 1997.\nIn 1992, four-fifths of all Indiana corporations with at least $250 million in assets could expect an audit, the watchdog group found. In 2000, it was just more than one-fourth.\nYet that doesn't mean Indiana has become an enclave for tax cheaters.\n"The Midwest historically is more honest in reporting income," said John Striewe, president of Fiscal Tax Co. in Indianapolis.\nThere are also fewer Hoosiers who are self-employed, which can attract the attention of the IRS because that income isn't easily double-checked, he said.