Chances of Getting Audited by IRS Lowest in Years
By Stephen Ohlemacher, Associated Press
WASHINGTON (AP) -- As millions of Americans race to meet Tuesday's tax deadline, their chances of getting audited are lower than they have been in years.
Budget cuts and new responsibilities are straining the Internal Revenue Service's ability to police tax returns. This year, the IRS will have fewer agents auditing returns than at any time since at least the 1980s.
Taxpayer services are suffering, too, with millions of phone calls to the IRS going unanswered.
"We keep going after the people who look like the worst of the bad guys," IRS Commissioner John Koskinen said in an interview. "But there are going to be some people that we should catch, either in terms of collecting the revenue from them or prosecuting them, that we're not going to catch."
Better technology is helping to offset some budget cuts.
If you report making $40,000 in wages and your employer tells the IRS you made $50,000, the agency's computers probably will catch that. The same is true for investment income and many common deductions that are reported to the IRS by financial institutions.
But if you operate a business that deals in cash, with income or expenses that are not independently reported to the IRS, your chances of getting caught are lower than they have been in years.
Last year, the IRS audited less than 1 percent of all returns from individuals, the lowest rate since 2005. This year, Koskinen said, "The numbers will go down."
Koskinen was confirmed as IRS commissioner in December. He took over an agency under siege on several fronts.
Last year, the IRS acknowledged agents improperly singled out conservative groups for extra scrutiny when they applied for tax-exempt status from 2010 to 2012. The revelation has led to five ongoing investigations, including three by congressional committees, and outraged lawmakers who control the agency's budget.
The IRS also is implementing large parts of President Barack Obama's health law, including enforcing the mandate that most people get health insurance. Republicans in Congress abhor the law, putting another bull's-eye on the agency's back.
The animosity is reflected in the IRS budget, which has declined from $12.1 billion in 2010 to $11.3 billion in the current budget year.
Obama has proposed a 10 percent increase for next year; Republicans are balking.
Rep. Ander Crenshaw, R-Fla., chairman of the House subcommittee that oversees the IRS budget, called the request "both meaningless and pointless" because it exceeds spending caps already set by Congress.
Koskinen said he suspects some people think that if they cut funds to the IRS, the agency won't be able to implement the health law. They're wrong, he said.
The IRS is legally obligated to enforce the health law, Koskinen said. That means budget savings will have to be found elsewhere.
Koskinen said he can cut spending in three areas: enforcement, taxpayer services and technology. Technology upgrades can only be put off for so long, he said, so enforcement and taxpayer services are suffering.
Last year, only 61 percent of taxpayers calling the IRS for help got it. This year, Koskinen said he expects the numbers to be similar. To help free up operators, callers with complicated tax questions are directed to the agency's website.
"The problem with complicated questions is they take longer," Koskinen said.
Your chances of getting audited vary greatly, based on your income. The more you make, the more likely you are to get a letter from the IRS.
Only 0.9 percent of people making less than $200,000 were audited last year. That's the lowest rate since the IRS began publishing the statistic in 2006.
By contrast, 10.9 percent of people making $1 million or more were audited. That's the lowest rate since 2010.
Only 0.6 percent of business returns were audited, but the rate varied greatly depending on the size of the business. About 16 percent of corporations with more than $10 million in assets were audited.
Most people don't have much of an opportunity to cheat on their taxes, said Elizabeth Maresca, a former IRS lawyer who now teaches law at Fordham University.
Your employer probably reports your wages to the IRS, your bank reports interest income, your broker reports investment income and your lender reports the amount of interest you paid on your mortgage.
"Anybody who's an employee, who gets paid by an employer, has a limited ability to take risks on their tax returns," Maresca said. "I think people who own their own business or are self-employed have a much greater opportunity (to cheat), and I think the IRS knows that, too."
One flag for the IRS is when your deductions or expenses don't match your income, said Joseph Perry, the partner in charge of tax and business services at Marcum LLP, an accounting firm. For example, if you deduct $70,000 in real estate taxes and mortgage interest, but only report $100,000 in income.
"That would at least beg the question, how are you living?" Perry said.
Koskinen said the IRS could scrutinize more returns - and collect billions more in revenue - with more resources. The president's budget proposal says the IRS would collect an additional $6 for every $1 increase in the agency's enforcement budget.
Koskinen said he makes that argument all the time, but for some reason, it's not playing well in Congress.
"I say that and everybody shrugs and goes on about their business," Koskinen said. "I have not figured out either philosophically or psychologically why nobody seems to care whether we collect the revenue or not."
Follow Stephen Ohlemacher on Twitter: http://twitter.com/stephenatap
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Last Update on July 29, 2015 17:06 GMT
PENDING HOME SALES
WASHINGTON (AP) -- The number of signed contracts to buy homes fell in June, as limited supplies of homes on the market are holding back possible sales growth.
The National Association of Realtors says its seasonally adjusted pending home sales index declined 1.8 percent to 110.3 last month. Still, strong demand from would-be buyers has pushed the index up 8.2 percent during the past 12 months.
Solid hiring and relatively low mortgage rates have fueled the previous sales gains. But buying options are increasingly limited because the market contains just five months' supply of homes, compared to the historical average of six months in a healthier market.
Pending sales are a barometer of future purchases. A lag of a month or two usually exists between a contract and a completed sale.
PURCHASE, N.Y. (AP) -- MasterCard Inc. (MA) on Wednesday reported second-quarter net income of $921 million.
The Purchase, New York-based company said it had net income of 81 cents per share. Earnings, adjusted for non-recurring costs, were 85 cents per share.
The results met Wall Street expectations. The average estimate of 18 analysts surveyed by Zacks Investment Research was also for earnings of 85 cents per share.
The processor of debit and credit card payments posted revenue of $2.39 billion in the period, missing Street forecasts. Fourteen analysts surveyed by Zacks expected $2.42 billion.
MasterCard shares have risen 10 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed nearly 2 percent. The stock has risen 25 percent in the last 12 months.
ATHENS, Greece (AP) -- Greece's prime minister says he does not want early elections, but rebels within his radical left Syriza party could force his hand.
Alexis Tsipras said Wednesday that if he loses his parliamentary majority, which has been challenged by party hardliners who oppose Greece's talks for a new international bailout, he will have to call national elections.
Tsipras said in an interview with Syriza's Sto Kokkino radio station that he wants to hold a party congress in September, once the vital bailout deal is sealed, to decide on the party's future.
Tsipras' six-month-old government is negotiating the terms of the 85 billion euro bailout -- Greece's third in little more than five years -- with representatives of the country's international creditors. The deal must be concluded before Aug. 20.
WASHINGTON (AP) -- International Monetary Fund chief Christine Lagarde says the world economy is recovering but fragile and "faces some downside risks."
In an online press conference, Lagarde describes the United States "a strong performer" and China "resilient" despite a recent drop in Chinese stock prices.
She is also optimistic over the 19 countries that use the euro.
"The euro area is beginning to turn the corner ... We have a more upbeat forecast than we have in a long time," she said.
Lagarde called again for Greece's creditors to reduce its debt burden and said the IMF could work with Greece's left-wing government, which has criticized IMF policies.
"There are lots of things that you say (in politics)," she said. "What matters at the end of the day is what you do."
Insurer Anthem hikes 2015 forecast, 2Q earnings climb
Health insurer Anthem is raising its 2015 forecast again after earnings jumped more than 17 percent in its most recent quarter.
The Blue Cross-Blue Shield carrier now expects 2015 adjusted earnings to top $10 per share, up from a previous forecast for earnings of greater than $9.90 per share.
Analysts forecast, on average, earnings of $10.04 per share, according to FactSet.
Anthem's second-quarter net income jumped from $731.1 million to $859.1 million in the second quarter, helped by enrollment gains in state and federally funded Medicaid coverage.
The Indianapolis company's earnings report comes a few days after it laid out a $48 billion plan to purchase fellow insurer Cigna Corp., the latest multi-billion dollar deal to drop in an industry where the main players are scrambling to get bigger.
AKRON, Ohio (AP) -- The Goodyear Tire & Rubber Co. (GT) on Wednesday reported second-quarter earnings of $192 million.
The Akron, Ohio-based company said it had profit of 70 cents per share. Earnings, adjusted for non-recurring costs, were 84 cents per share.
The results topped Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of 74 cents per share.
The tire maker posted revenue of $4.17 billion in the period, which also beat Street forecasts. Three analysts surveyed by Zacks expected $4.08 billion.
Goodyear shares have increased 3.5 percent since the beginning of the year, while the Standard & Poor's 500 index has increased nearly 2 percent. The stock has increased nearly 7 percent in the last 12 months.
RICHMOND, Va. (AP) -- Altria Group (MO) on Wednesday reported second-quarter net income of $1.45 billion.
On a per-share basis, the Richmond, Virginia-based company said it had profit of 74 cents.
The results exceeded Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 72 cents per share.
The owner of Philip Morris USA, the nation's largest cigarette maker posted revenue of $4.88 billion in the period.
Altria expects full-year earnings in the range of $2.76 to $2.81 per share.
Altria shares have risen 12 percent since the beginning of the year, while the Standard & Poor's 500 index has risen almost 2 percent. The stock has risen 33 percent in the last 12 months.
FRANKFURT, Germany (AP) -- Automaker Volkswagen AG says profits slipped by 16 percent in the second quarter.
The bottom line was hit by 180 million euros ($198 million) in restructuring costs at its MAN truck division. The company also faces headwinds from troubled economies in China, Russia and Brazil.
Profit after tax fell to 2.73 billion euros from 3.25 billion euros in the prior-year quarter. Revenues rose 9.9 percent to 56.04 billion euros, largely boosted by favorable exchange rate changes.
Volkswagen said Wednesday that earnings from joint ventures with Chinese auto makers were roughly flat over the first half of the year.
CEO Martin Winterkorn said "Volkswagen remains very well positioned in an increasingly difficult market environment" and was keeping a "close watch" on global economic trends.
DETROIT (AP) -- Mini is recalling about 35,000 cars in the U.S. and Canada because they don't meet side-impact crash-test requirements.
The recall includes certain Cooper and Cooper S Hardtop two-door cars from 2014 and 2015, as well as the 2015 John Cooper Works Hardtop two-door.
The company owned by BMW says that if crash-test requirements aren't met, rear-seat passengers could have a higher risk of injury.
Dealers will install more energy absorption material between the rear interior side panels and the body starting Sept. 12.
The company says in documents filed with U.S. safety regulators that it knows of no crashes or injuries from the problem.
The recall includes 30,456 cars in the U.S. and another 4,130 in Canada.
BEIJING (AP) -- General Motors Co.'s $5 billion initiative to create cars for China and other emerging markets comes just as automakers face a collapse in the booming Chinese demand they were counting on to power their growth.
June sales in the biggest car market shrank by 3.4 percent from a year earlier as an economic slowdown deepened and smog-choked cities tried to curb growth in car ownership. Sales growth has cooled from 2009's explosive peak of 45 percent, but the latest figures surprised analysts who were forecasting a healthy 7 to 8 percent for this year.
This wrenching shift is especially significant because of China's outsize role in the global ambitions of U.S., European and Asian automakers.
Despite the slowdown, they are pushing ahead with multibillion-dollar plans to expand production and create models to suit Chinese tastes, adding to competition in a crowded market.
On Tuesday, GM said it will work with its main Chinese partner, Shanghai Automotive Industries Corp., to develop vehicles to be sold in China, Brazil, India and Mexico. GM said it aims for annual sales of 2 million vehicles beginning in 2019.
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