For the millions of Americans forced in this cruel season to sit down with tax forms and weigh legitimate deductions against the threat of audit, help may be on the way. Sociologist Susan Long of Syracuse University has lodged and won a dozen suits against the IRS under the Freedom of Information Act, forcing the supersecret agency to disgorge such sacrosanct material as its manual on policy and procedures. Her biggest battle, which has reached the Supreme Court, is for a mother lode of 58 computer tapes that will reveal, among other things, the effectiveness of the IRS enforcement program. Last week, in the clutter of IRS papers she and her businessman husband, Philip, have managed to accumulate over the years, Dr. Long discussed what she has learned with PEOPLE correspondent Richard K. Rein.
What is your purpose in getting all of these IRS documents?
A major research interest of mine is the mechanism of legal control: How effective are IRS audits? What effect do audits have on subsequent behavior? The data also interest me in terms of looking at the evenhandedness of IRS tax administration.
What have you found?
The agency has essentially decided on a big-stick policy, which means spending two-thirds to three-quarters of its budget and staff on tax enforcement—mostly on audits. It places very low priority on taxpayer education, assistance and programs to make the law easier to comply with. But the IRS data I have already indicate that the primary problem is not with tax cheaters, but with the complex tax law—and with a system that gives IRS agents large amounts of discretion in interpreting that law.
What triggers an audit?
About 99 different things can. All individual returns are screened by computers programmed to judge audit potential. Some are automatically selected, for example, because of high income level, or because some other government agency has expressed an interest, or because an informer, such as an irate ex-spouse, has contacted the IRS and suggested that someone be audited.
What are the odds of being audited?
The average nationally for individuals is about one in 50. But surprisingly, in the last decade those making between $10,000 and $50,000 and filing a long form actually have had a smaller chance of being audited than those making less than $10,000. Those with the highest incomes, above $50,000 for wage earners, have the greatest audit chance—about one in 10. The odds also depend on where you live. In one year people in parts of Texas, Nevada and Alaska had five times the chance of being audited as those in Indiana, Iowa and West Virginia. The IRS has more auditors per taxpayer in some states—and more auditors produced more audits.
What’s the outcome of most IRS audits?
In the vast majority of cases IRS wants more money and most taxpayers don’t appeal the findings. Those who do usually have large sums at stake. Overall, the IRS settles for an average of 30 cents on the dollar.
Why don’t more taxpayers contest their audits?
Unfortunately, the taxpayer has to bear the cost of doing it. Unless a sizable amount of money is involved, it’s going to cost you more to contest than to simply pay up and shut up. The major tax law firms will not even look at a case involving less than $200,000. Contesting an audit is not a piece of cake, believe me. My husband was audited in 1969, and it took eight years to go through the appeal process. We ended up getting a refund, but it cost us—and the taxpayers—far more than that to resolve the issue.
Does IRS’s enforcement policy work?
If the aim is to create fear, it’s very effective, especially among less sophisticated lower-or middle-bracket taxpayers. A lot of people entitled to take deductions do not because they are afraid it would bring their return to the attention of the IRS. It’s really unfortunate that a conscientious taxpayer should have to dread an agency of the government.
What effect do you think this has?
The tax system depends on the goodwill of the taxpaying public, and there is a lot of ill will because the IRS has had a monopoly on information about tax administration. This is power the IRS does not want to relinquish. But in a democracy it’s important to have this information available to analyze how the present tax system is working.
What reforms would you like to see?
Effective sanctions to hold the IRS accountable. Its policies and activities should be publicly accessible, as the law requires. We also need provisions so that taxpayers do not bear the costs of the IRS’s mistakes. Today only taxpayers with high incomes or a great deal of money at stake can afford the price of first-class justice.