But it will sharply reduce audits of the other 16 million businesses in America, the vast majority of them privately owned, and of the rapidly increasing ranks of high-income Americans, who tend to file complex returns. The percentage of corporate returns that are audited is expected to fall to just above 1 percent for the current fiscal year from just under 3 percent in 1992. The effort to find tax cheating is being reduced even more than these numbers suggest, according to more than four dozen I.R.S. employees. In interviews they described pressure from managers to avoid upsetting taxpayers, to overlook complex issues and to close audits quickly. The credit was created to offset the sharp rise in Social Security tax rates that began two decades ago.
Some people make false claims to increase their payment from the government.
The credit has been a target of Republican Congressional leaders for the last five years. The I.R.S. also plans a major new hunt for people who failed to file tax returns. Tax workers said the last such search, early in this decade, focused on people of modest means, and they expect the same this time. The I.R.S. says it intends to focus this search on people who owe substantial amounts. More than one-fifth of I.R.S. employees, the equivalent of nearly 21,000 people working full time, will be assigned to customer service, up from 12,000 four years ago by one measure and nearly 18,000 by another.