NEW YORK (CNN/Money) -
The Internal Revenue Service is preparing to resume random audits of taxpayers, a once controversial practice that is gaining more acceptance even from critics.
About 50,000 taxpayers could be facing audits of their 2001 taxes, even though there is no indication that they did anything wrong. About 2,000 of those would face intensive line-by-line examination of their taxes that could force them to hire a tax professional to help represent them.
IRS Commissioner Charles Rossotti told the Wall Street Journal that the random audits, last done in 1988, are necessary so that it can better determine what kind of warning signs should trigger targeted audits. The IRS uses data from the audits on compliance with different tax laws to update a secret formula it will use to pick audit targets, the paper reports. The economy has changed enough since the late 1980s that the audit selection process needs updating, the paper quotes IRS officials as saying.
Congress and taxpayer groups have objected to random audits in the past, but the paper said that in the wake of the Enron scandal and a series of accounting scandals involving a variety of other corporations, there seems to be more acceptance even by critics of the agency's need to crack down on businesses and individuals who seek to avoid paying the taxes they owe.
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The paper quotes Sen. Charles Grassley, R-Iowa, a sharp critic of IRS practices in the past, as saying, "The information from these audits will allow the IRS to target its limited resources on examining those taxpayers who most likely to be up to no good, while leaving honest taxpayers alone."
Regular IRS audits have declined in recent years due to budget pressures. The IRS said it conducted 731,756 audits in the fiscal year ended Sept. 30, 2001, down from 1.9 million in fiscal 1995.
The random audits are initially planned for only one year, but the IRS hopes to resume conducting them every few years.