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Its because the IRS, for a long time, has its hands full auditing people with incomes $25,000 or less as opposed to those with incomes $100,000+ as was the case in 1999. Enforcement budgets hace been slashed. Only recently, as in the past few years, have the IRS stepped up (modest) visibility.
Audit rates are even uglier for small business. Companies reporting $100 million or more in assets saw audits rates fall 30%, its approaches %40 when we talk about companies with $250 million or more. Small business (5 million in assets or less) on the other hand, saw a 40% increase in audit rates from 2005 to 07. How do we know the rich are paying their taxes if no one is checking?
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