New audit priorities.

The IRS is realigning its audit resources to focus on key tax noncompliance areas, a new direction for the agency's compliance effort.

Following months of research and planning, the new approach will target high-risk noncompliance areas. The Service's effort will generally focus first on promoters, then on participants. The initiative will feature new and enhanced efforts in six priority areas:

* Offshore credit card users.

* High-risk, high-income taxpayers.

* Abusive schemes and promoter investigations.

* High-income nonfilers.

* Unreported income.

* The National Research Program.

Increased resources will be devoted to these projects in fiscal year 2003, which will be a year of transition and training as new audit cases move into the IRS system.

The Small Business/Self-Employed Division will handle the new effort in audit areas affecting individuals and businesses. Compliance efforts will continue in other parts of the agency (e.g., the tax-shelter initiative in the Large and Mid-Sized Business Division).

This initiative reflects part of a broader, agency-wide plan and places a top priority on pursuing promoters of abusive schemes, shelters and trusts and then identifying participants who evade taxes. To address these problems, the IRS has revamped its compliance programs. The Service will use tools such as summons enforcement, injunctions and criminal investigation of promoters and civil audits of participants.

The strategy reflects the new way of doing business at the IRS. The agency will direct more examination resources to address these issues in the six new areas. However, it will maintain a presence in other audit areas to maintain core tax administration responsibilities. Additional examination resources will help meet this requirement.