Tardy Taxes

Playing audit roulette

The Internal Revenue Service urges people to file their tax returns as early as possible, but is this really good advice? Paul N. Strassels, a former IRS legal specialist and author of All You Need to Know About the IRS, maintains that the best time to send in a return is around April 10. This is very close to the April 15 deadline, but it still provides a safety margin for slow mails. Strassels says that the rush to tax judgment in mid-April is so heavy that there is less chance that a last-minute return will be plucked out for special scrutiny.

Whether or not Strassels is right, enough people apparently believe him to cause headaches for the IRS. A year ago, for example, when All You Need to Know was high on the bestseller list, taxpayers filed last-minute returns in greater numbers than the IRS had expected. Partly as a result of that, the agency last year audited 94,000 fewer returns than it had the year before. The IRS lamely explains that the lower number of audits was because its staff concentrates on the more complicated and time-consuming cases.

Strassels is not alone in advising people to avoid filing early unless they have a refund coming. The new Dictionary of 1040 Deductions, which is published by Mathew Bender & Co., also suggests that taxpayers delay their returns until near or on the due date. Says Bender Tax Lawyer Michael Buxbaum: "This is a matter of statistics, not law. Last-minute filing is advantageous, but whether it helps one or two people or a few hundred thousand we really don't know."

The IRS denies that eleventh-hour filing can help beat the odds in audit roulette. Says Spokesman Larry Batdorf:"The computer does not select tax forms for audit at random. It is programmed to pick out certain kinds of forms regardless of who files them or when they are filed." The IRS also says that it does not make any effort to gear up for an unusual mid-April landslide.

But the IRS could scarcely afford to admit that last-minute filing makes a difference. Such a confession would undoubtedly cause an even greater avalanche of last-minute returns and make the agency's task Herculean. Nonetheless, last year the IRS audited only 2.02% of the 93 million individual returns it received, well below the 3.6% it checked in 1968. Two weeks ago, Secretary of the Treasury Donald Regan decided to help restore fear as the foundation of the tax system by shifting an additional 548 IRS employees into the audit and collection divisions.

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