The Internal Revenue Service said yesterday it plans to audit 5,000 businesses to measure tax evasion and refine the agency’s estimate of annual unpaid taxes.
The examinations follow similar research among individuals completed this year, which led the tax collectors to estimate that taxpayers owed $312 billion to $353 billion in unpaid taxes in 2001.
The research results also will help the agency better detect tax evasion during future business audits, the IRS said.
The research will target randomly selected S-corporations, enterprises that do not pay corporate income tax, but instead pass income and taxes through the business to individual shareholders. The audits will include those shareholders.
S-corporations have become the most common type of corporation, accounting for nearly 60 percent of all corporate tax returns in 2002, the most recent statistic available.
“The use of S-corporations has exploded,” said IRS Commissioner Mark Everson. “The IRS needs a better understanding of what this means for tax compliance.”
It could be two to three years before the IRS completes the study.