The Tax Man's Target Widens

05.10.2011
With the federal government scrambling to collect revenues, small- and medium-sized companies may not be quite as shielded from Internal Revenue Service enforcement as they had been in the past.

While much of the U.S. payroll is under deficit reduction pressure, personnel in the nation's tax-collection operation increased by 19% from 2006 through 2010, with half of that hiring coming in 2010 alone. The increase apparently has paid off; IRS enforcement revenue increased by 18% last fiscal year alone, to $57.6 billion, according to the office of the Treasury Inspector General for Tax Administration, or Tigta.

"Increased staffing has led to increased revenues for the service," Sharon Katz-Pearlman, national principal-in-charge of KPMG's Tax Controversy Services Network, said in this week. "The new type of agent they are bringing in has a substantial amount of outside experience."

These new agents are spending much of their time on middle-market companies. According to Tigta, while fiscal 2010 saw an overall 5% increase in corporate examinations, companies with assets of $10 million or greater have undergone 7% more examinations. For companies worth at least $250 million, that figure is 9%.

"Middle market companies that are historically not subject to examination are coming under examination," said Katz-Pearlman. "More agents are out there working on cases that are not large cases."