Lemons noted that the new unit "is just a small segment of what's going on here at the IRS" -- and that overall, 12 percent of taxpayers reporting more than $1 million in income are audited either by mail or in person.
TRAC co-director David Burnham said the IRS deserves credit for at having taken on the challenge, long before groups like Occupy Wall Street helped focus national attention on the super rich. But he said the agency just hasn't delivered.
One reason could be that the super rich have the system so fixed in their favor that the IRS is simply stymied, he said.
"Maybe this is great evidence that the tax code is so complicated, the IRS can't unravel the tax returns of these very wealthy individuals. Maybe they can't do it," Burnham said. "It's a great argument for trying to simplify the tax system."
While average Americans feel fortunate if they can use TurboTax to identify a few tax breaks, there's a multibillion-dollar industry devoted to helping the very rich keep their money away from Uncle Sam. Northwestern University political economist Jeffrey Winters has coined a term to describe the army of lawyers, accountants, wealth management consultants, insurance providers, revolving-door lobbyists and think-tank debate framers who create, wield and defend tax avoidance strategies: He calls them the "income defense industry."
In December 2009, IRS Commissioner Douglas Shulman noted that "many high-wealth individuals make use of sophisticated financial, business, and investment arrangements with complicated legal structures and tax consequences. Many of these arrangements are entirely above board. Others mask aggressive tax strategies." He vowed that the new unit would "look at the entire web of business entities controlled by a high-wealth individual."
Burnham said Shulman overpromised. "You can be understanding that it's a hell of a challenge," Burnham said. "But it's dangerous to make that kind of speech and then not deliver on it. It encourages taxpayers to say the system's not on the level."
The TRAC report quotes from this year's IRS ombudsman report to Congress, which warned that "compliant taxpayers who see that the IRS is not able to pursue noncompliant taxpayers adequately begin to feel like 'tax chumps,' potentially making them less likely to comply in the future."