Big Brother is watching Businesses and individuals alike should be prepared for increased scrutiny by the IRS in 2012 as the federal government, as well as states, look to increase collections as a means to bolster revenue. A survey of 890 corporate tax executives released in November by KPMG, an audit, tax and advisory firm, found that nearly two-thirds (61%) of respondents said federal tax dispute activity had increased in the past 12 months, while more than one-third (37%) said the total number of state tax audits in jurisdictions in which they do business increased. The majority of respondents expect this to continue. Over the next 12 months, 67% of the respondents said they expect federal tax dispute activity to increase; 53% expect the same on the state level. "Federal, state and local governments are all taking extra measures to ensure that they are not leaving any corporate tax revenue on the table, as many are facing budget shortfalls," Frank Lavadera, principal-in-charge of KPMG's Tax Dispute Resolution Services Network, said in a statement. "Tax directors, CFOs and corporate boards should keep the increased likelihood of an audit by taxing authorities high on their priority lists, as it presents a significant tax risk. It is clear that taxing authorities are demanding greater transparency and imposing more complex reporting requirements, while the IRS and various states are adding tax audit personnel to increase the number of exams they can conduct." According to government statistics, IRS enforcement revenue increased by 18%, to $57.6 billion, and corporate examinations increased by 5% in fiscal year 2010. The new year will also see a continued focus by federal officials on overseas accounts through new requirements for reporting foreign assets. The taxman taketh While big and broad tax changes remain uncertain, taxpayers will nevertheless start seeing a variety of exemptions pulled away, meaning that many will need to plan on paying more unless Congress decides to reinstate them retroactively. According to the California Society of CPAs, 67 tax benefits were set to expire with 2011. Two separate provisions affecting the alternative minimum tax will expire at the end of 2011 that together "saved 26 million middle-class Americans from the clutches of the dreaded alternative minimum tax," the society said in a recent run-down of tax changes. For 2012 and future years, tax credits will offset the regular income tax, but not any alternative minimum tax.