Trends in Compliance Activities Through Fiscal Year 2002
March 2003
Reference
Number: 2003-30-078
This report has cleared the Treasury Inspector
General for Tax Administration disclosure review process and information
determined to be restricted from public release has been redacted from this
document.
March
31, 2003
MEMORANDUM FOR
ACTING COMMISSIONER WENZEL
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report - Trends in Compliance
Activities Through Fiscal Year 2002
(Audit # 200330006)
This
report presents the results of our review of statistical information that
reflects activities of the Collection and Examination functions. The overall objective of this review was to
provide statistical information requested by the Internal Revenue Service (IRS)
Oversight Board and provide trend analyses of that information.
In
summary, the IRS’ overall Fiscal Year (FY) 2002 compliance efforts and results
were mixed, but showed some continuing positive changes that started in FY
2001. Specifically, the level of
compliance activities and the results obtained in many Collection areas in FY
2002 showed a continuing increase, although some measurements decreased
slightly in FY 2002 after increasing in FY 2001. Even though they have not returned to pre-1998 levels,
enforcement actions were higher or about the same in FY 2002 compared to the
numbers in FY 2001. While enforcement
revenue collected increased in FY 2002, the inventory of delinquent accounts
and the total amount of uncollected liabilities have continued to grow.
The
number of examinations of tax returns increased in FY 2002, but the overall
percentage of tax returns examined stayed about the same due to increases in
the number of tax returns filed. While
there was a slight decrease in the number of examinations of individuals
earning less than $100,000, there was a larger increase in the coverage of
individuals earning $100,000 and over.
The numbers and percentages of examinations of corporate and other
business returns (except partnerships and very large corporations) continued to
decrease or stay at about the same level.
There were also slight increases in the numbers of examinations of
fiduciary income, employment, and excise tax returns.
We
made no recommendations in this report.
However, key IRS management officials reviewed it prior to
issuance.
Copies of this
report are also being sent to the IRS managers affected by it. Please contact me at (202) 622-6510 if you
have questions, or your staff may call Philip Shropshire, Acting Assistant
Inspector General for Audit (Small Business and Corporate Programs), at (215)
516-2341.
Summary of Statistical Information
Appendix I – Detailed Objective, Scope and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Glossary of Terms
Appendix V – Detailed Charts of Statistical Information
We initiated this review of nationwide compliance statistics pertaining to examination and collection activities at the request of the Internal Revenue Service (IRS) Oversight Board. The overall objective of the review was to provide statistical information and trend analyses of that information based on our agreement with the Board. Our data analyses were done in January and February 2003 using national reports prepared by the IRS Headquarters office. The audit was performed in accordance with Government Auditing Standards. However, we relied on information accumulated by the IRS in established reports and did not verify its accuracy.
Much of the data included in this report is a follow-up to Treasury Inspector General for Tax Administration reports issued in May 2000, September 2001, and September 2002. While Appendix V shows many statistics for the past 7 years, and some for the past 15 years, the purpose of this report is to highlight the changes in compliance activities during Fiscal Year (FY) 2002.
Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to this report are listed in Appendix II. A glossary of terms used is included in Appendix IV. Detailed charts and tables referred to in the body of this report are included in Appendix V.
For some time, the number of tax returns filed and the total dollars the IRS has received annually have been increasing with the growing economy. Specifically, in 15 years the number of returns filed has grown by 22 percent, from 140 million in 1987 to 171 million in 2001. From FYs 1988 to 2001, the amount of revenue received by the IRS grew from $935 billion to $2.1 trillion, but then fell by 5 percent to $2.0 trillion in FY 2002. (This was the first time since FY 1983 that total revenue decreased.)
For FYs 1998 to 2000, compliance activity decreased due to several factors, including budgetary constraints, the desire to provide increased customer service, and the need to implement and provide additional taxpayer protections and rights mandated by the IRS Restructuring and Reform Act of 1998 (RRA 98). In FY 2001, the IRS began to reverse some of these downward trends. In FY 2002, some of these indicators continued to increase while some fell slightly from the prior year.
With increased budgets and hiring authority, the staffing level of revenue officers in the field collection offices increased from 3,601 in FY 2000 to 3,792 in FY 2001, but then fell to 3,495 in FY 2002. Even with hiring authority, staffing in field examination programs continued to decrease because retirements and other departures exceeded the number of new employees. During FY 2002, the total number of revenue agents and tax auditors/tax compliance officers decreased again, from 13,226 to 13,046, for a total loss of nearly 6,000 examiners since the beginning of FY 1996. Furthermore, replacing experienced employees with new hires results in less examination time available because of the need for training and coaching the new people and the need to work a greater mix of less complex cases until the new employees gain experience. In spite of this, the Examination and Collection functions both increased the percentage of time categorized as direct time spent examining tax returns or collecting taxes, to 51 percent and 57 percent, respectively. This included a significant reduction in the amount of time detailed to Customer Service activities during FYs 2001 and 2002.
While collection statistics have not returned to their pre‑1998 levels, most of the downward trends were reversed in the last 2 years. Enforcement revenue collected increased slightly in FY 2000 to $33.8 billion, stayed about the same in FY 2001, and increased to $34.09 billion in FY 2002. The use of collection enforcement tools including liens, levies, and seizures all increased substantially from FY 2000 to FY 2001 and again in FY 2002:
|
|
FY 2000 |
FY 2001 |
FY 2002 |
|
Liens |
287,517 |
428,376 |
491,709 |
Levies
|
219,778 |
674,080 |
1,283,742 |
|
Seizures |
74 |
234 |
296 |
The average dollars collected for each staff year in the Collection Field function increased for the third consecutive year, to about $362,000 in FY 2002, returning from the lows reached in FYs 1999 and 2000 to nearly the level of FY 1997. The number of delinquent accounts closed each year and the number closed by full payment had both been steadily decreasing since FY 1997, but they increased slightly in FY 2001 and then decreased slightly again in FY 2002.
Since FY 1997, the gap had been widening between the number of new delinquent accounts received and the number closed. In FY 2001, that gap was closed slightly, but it widened again in FY 2002. In addition, the number of delinquent accounts and investigations for unfiled tax returns that the IRS is unable to work continued to grow. During FY 2001, management removed approximately 7.1 million unfiled return investigations and 1.7 million unpaid tax periods from the Collection inventory to eliminate potentially less productive cases. During FY 2002, another approximately 1.7 million unfiled return investigations and 1.6 million unpaid tax periods were removed. These cases may never be worked. In addition, other cases are placed in the “Queue,” which is an inactive inventory of cases that may or may not be worked in the future. At the end of FY 2002, the unassigned Queue inventory contained approximately 515,000 taxpayers with 1.7 million unpaid tax periods totaling $20.3 billion, and approximately 767,000 taxpayers with 2.5 million unfiled tax returns.
When analyzing Examination coverage rates, it is important to recognize differences in the types of contacts that are counted in Examination statistics. Examinations range from an IRS notice asking for clarification of a single tax return item that appears to be incorrect, to a full face-to-face interview and review of the taxpayer’s records. Face-to-face examinations are generally more comprehensive and time-consuming for the IRS and the taxpayers, and they typically result in higher dollar adjustments to the tax amount. Thus, caution should be used when combining statistics from the various Examination programs and tax classes into overall Examination rates. In addition, the IRS uses several computer-matching and automated error-checking routines in the computing centers to check the accuracy of tax returns. Many of these result in adjustments to tax liabilities but are not included in the traditional “audit rates” and are not generally reported separately as enforcement efforts. Because the General Accounting Office (GAO) just issued a report in January 2003 recommending the IRS expand its reporting on these other compliance efforts, we did not include them in our analyses of this year’s data.
The overall percentage of tax returns examined increased slightly in FY 2001 and stayed about the same in FY 2002, even with an increase of almost 12,000 examinations in FY 2002. The increase in FY 2001 was primarily due to increases in the number of correspondence examinations of individual income tax returns, mainly for verification of the Earned Income Tax Credit. The increase in the overall number of returns examined in FY 2002 was primarily in field office examinations of individual income tax returns. The numbers and percentages of examinations of corporate and other business returns (except partnerships and very large corporations) continued to decrease or stay about the same level. There were also continuing decreases in the numbers of examinations of estate and gift tax returns. However, there were slight increases in the numbers of examinations of fiduciary income, employment, and excise tax returns.
Individual Income Taxes – Overall, the number of examinations of all types of individual income tax returns had been decreasing from FY 1997 through FY 2000. However, the downward trend was reversed in FYs 2001 and 2002, when the number of examinations in most categories increased slightly from the prior years:
· The number of individual income tax returns examined increased from 618,000 in FY 2000 to 732,000 in FY 2001 and to 744,000 in FY 2002, with approximately 543,000 of those examined in FY 2002 done by correspondence.
· The number of examinations of individual returns with incomes under $100,000 increased from 518,218 in FY 2000 to 640,206 in FY 2001, but then fell to 631,618 in FY 2002, with 495,344 (78 percent) of those in FY 2002 done by correspondence.
· The number of examinations of individual returns with income of $100,000 or more decreased from 99,547 in FY 2000 to 91,550 in FY 2001, but then increased to 112,263 in FY 2002, with 47,946 (43 percent) of those done by correspondence.
Corporate Income Taxes – The number of examinations of Corporation and S Corporation returns has continued to decrease. The total number of U.S. Corporation Income Tax Returns (Form 1120) examined decreased 18 percent in FY 2001 and another 2 percent in FY 2002, from 43,383 in FY 2000 to 35,056 in FY 2002. The exception to this downward trend was in the examinations of very large corporations with assets over $250 million and in corporate returns filed with no balance sheets. The number of examinations of corporations with assets over $250 million increased in FYs 2001 and 2002, from 3,080 in FY 2000 to 3,749 in FY 2002. The number of examinations of corporate returns filed without balance sheets increased from 1,923 in FY 2000 to 1,935 in FY 2001 and to 2,729 in FY 2002. The number of partnership returns examined continued its decline in FY 2001 but recovered slightly in FY 2002, going from 6,539 in FY 2000 to 5,070 in FY 2001, and to 5,543 in FY 2002.
Other Tax Types (Fiduciary, Employment, Excise, Estate, and Gift Taxes) – The overall number of examinations in these 5 classes also continued to decline, falling from 47,807 in FY 2000 to 42,114 in FY 2001 to 41,934 in FY 2002. However, there were increases in FY 2002 in the number of examinations of fiduciary, employment, and excise tax returns.
Appendix I
The overall objective of this review was to provide agreed-upon statistical information and trend analyses of the nationwide compliance statistics pertaining to examination and collection activities requested by the Internal Revenue Service (IRS) Oversight Board.
To accomplish our objective, we analyzed the IRS’ management information reports to determine the trends and changes in the major areas of compliance. We relied on information accumulated by the IRS in established reports and did not verify its accuracy. The major issues we focused on included:
· Enforcement Revenue and Gross Accounts Receivable.
· Collection and Examination staffing.
· Collection and Examination direct time.
· Collection delinquent account inventories and unfiled return investigations.
· Collection enforcement actions (liens, levies, and seizures.)
· Examination coverage of individual and business tax returns compared to the number of returns filed in each category.
Appendix II
Major Contributors to This Report
Philip Shropshire, Acting Assistant Inspector
General for Audit (Small Business and Corporate Programs)
Parker
F. Pearson, Director
Amy L. Coleman, Audit Manager
Joseph F. Cooney, Senior Auditor
Dale E. Schulz, Senior Auditor
Appendix III
Commissioner, Large
and Mid-Size Business Division LM
Commissioner, Small
Business/Self-Employed Division S
Commissioner, Wage and Investment Division W
Deputy Commissioner, Large and Mid-Size Business Division LM
Deputy Commissioner, Small Business/Self-Employed Division S
Deputy Commissioner, Wage and Investment Division W
Director, Compliance, Small Business/Self-Employed Division S:C
Director, Compliance, Wage and Investment Division W:CP
Chief Counsel CC
National Taxpayer Advocate TA
Director, Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis N:ADC:R:O
Office of Management Controls N:CFO:AR:M
Audit Liaisons:
Commissioner, Large and Mid-Size Business
Division LM
Commissioner, Small Business/Self-Employed
Division S
Commissioner, Wage and Investment Division W
Appendix IV
ACS – The Automated Collection System (ACS) is a telephone contact system where telephone assistors collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices.
Balance Sheet – A statement of the financial assets and liabilities of a business at a given date filed with corporate income tax returns; used by the Internal Revenue Service (IRS) to group businesses by the size of their assets.
CFf – The Collection Field function (CFf) is the unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns.
Currently Not Collectible (CNC) – The taxpayer still has an outstanding balance due, but it was removed from active collection inventory. Accounts are still subject to refund offsets and may be reactivated under certain conditions.
CNC closing code 39 (see also “shelved accounts”) – These are cases closed as excess inventory.
Corporate Income Tax Returns – United States (U.S.) Corporation Income Tax Returns (Form 1120) are returns used by corporations to report the corporate income tax.
Employment Tax Returns – Various Form 940 return series (primarily Form 940 and Form 941) filed by businesses to report things such as Employer’s Federal Unemployment Taxes and Federal Taxes Withheld.
Enforcement revenue – This is any tax, penalty, or interest received from a taxpayer as a result of an IRS enforcement action (usually an examination or a collection action).
Estate Tax Return – U.S. Estate Tax Return (Form 706) is the form to be filed on certain estates of a deceased person.
Examination (Face-to-Face) – Field audits of individuals, partnerships, and corporations that occur either at the taxpayer’s place of business or through interviews at an IRS office.
Excise Tax Return – Quarterly Federal Excise Tax Return (Form 720) is used to report and pay excise taxes on a quarterly basis.
Fiduciary Tax Return – Income tax returns filed for estates and trusts.
Filing Season – The period from January through mid-April when most individual income tax returns are filed.
Gift Tax Return – U.S. Gift Tax Return (Form 709) is used to report transfers subject to the Federal gift taxes and to figure the tax due on those transfers.
Gross accounts receivable – Includes all unpaid tax, with accrued penalties and interest, on taxpayers’ delinquent accounts.
Individual Income Tax Returns – U.S. Individual Income Tax Returns (Form 1040 series) are annual income tax returns filed by citizens or residents of the U.S.
Partnership Returns – U.S. Return of Partnership Income (Form 1065) is used to report the income of domestic partnerships.
Queue – An automated holding file for unassigned inventory of lower priority delinquent cases that the Collection function does not have enough resources to immediately assign for contact.
Revenue Agent – Employees in the Examination function that conduct face-to-face examinations of more complex returns such as businesses, partnerships, corporations, and specialty taxes, e.g., excise tax returns.
Revenue Officer – Employees in the CFf who attempt to contact taxpayers and resolve collection matters that have not been resolved through notices sent by the Compliance sites at the IRS Campuses (formerly known as service centers) or the ACS.
S Corporation Tax Return – U.S. Income Tax Return for an S Corporation (Form 1120S) is a return filed by a qualifying small business corporation.
SCCB – The Service Center Collection Branch mails the balance due and return delinquency notices to taxpayers and analyzes and responds to taxpayer correspondence.
Shelved or surveyed accounts – These are delinquent unpaid accounts or investigations of unfiled returns that have been taken out of Collection inventory because they are lower priority.
TDA – Taxpayer Delinquent Account is a balance due account of a taxpayer.
TDI – Taxpayer Delinquency Investigation is an unfiled tax return for a taxpayer.
TGR – Total Gross Receipts are the categories used for Individual Income Tax Returns with business (Schedule C) or farm (Schedule F) income based on the total receipts reported.
Tax Auditor – Employees in the Examination function that conduct mostly examinations of individual taxpayers through interviews at IRS field offices. The position title was changed in 2002 to tax compliance officer.
Appendix V
Figure 1 – Internal Revenue Service Gross Collections, by Type of Tax
Figure 2 –
Change in Enforcement Revenue and Gross Accounts Receivable Since FY 1996
Figure 3 – Amounts of Enforcement Revenue Collected
Compared to Growth in Gross Accounts Receivable
Figure 4 – Examination Staffing at the End of
Each Fiscal Year
Figure 5 – Collection Revenue
Officer Staffing
Figure 6 – Staff Years
Detailed to Customer Service
Figure 7 – Changes in Direct
Time Percentages
Figure 8 – Average Dollars
Collected per Staff Year in the Collection Field function
Figure 9 – Delinquent Accounts
in the Queue
Figure 10 – Delinquent
Accounts and Unfiled Return Investigations Shelved or Surveyed Each Year
Figure 11 – Gap Between New
Delinquent Accounts and Account Closures
Figure 12 – Number of
Taxpayers and Amounts Owed in the Queue
Figure 13 – Number of
Delinquent Accounts Closed Each Year, Not Including Shelved Accounts
Figure 14 – Number of
Delinquent Accounts Closed by Full Payment
Figure 15 – Liens Filed by
the ACS and the CFf
Figure 16 – Levies Issued by the ACS and the CFf
Figure 17 – Number of Seizures Made Each
Year
Figure 18 – Examination Coverage of All Tax Returns –
Percentage Change From FY 1988 to FY 2002
Figure 20 – Percentage of Forms 1040 Examined
Face-to-Face or Through Correspondence
Figure 21 – Number of Forms 1040 Examined
by Compliance Center Correspondence
Figure 22 – Number of Forms 1040 Examined by Field
Offices
Figure 23 – Percentage of Forms 1040
Examined
Figure 24 – Percentage Examined – Forms 1040 With No
Business or Farm Income
Figure 25 – Examination Coverage of
Non-business Forms 1040 Under $100,000
Figure 26 – Examination Coverage of Non-business
Forms 1040 Over $100,000
Figure 27 – Examination Coverage of Forms
1040 With Business Income (Excluding Farms)
Figure 28 – Examination Coverage of Forms 1040 With
Farm Income
Figure 32 – Examination Coverage of Corporations With
Assets Under $10 Million
Figure 33 – Examination Coverage of
Corporations With Assets Over $10 Million
Figure 34 – Examination Coverage of S Corporations
(Form 1120S)
Figure 35 – Examination Coverage of
Partnership Income Tax Returns
Figure 36 – Examination Coverage of Fiduciary Income
Tax Returns
Figure 37 – Examination Coverage of Employment
Tax Returns
Figure 38 – Examination Coverage of Excise Tax
Returns
Figure 39 – Examination Coverage of Estate
Tax Returns
Figure 40 – Examination Coverage of Gift Tax Returns
Figure 41 – Numbers and Percentages of
Business Returns Examined
Figure 1 was removed due to its size.
To see Figure 1, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 2 was removed due to its size.
To see Figure 2, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 3 was removed due to its size.
To see Figure 3, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 4. Examination Staffing at the End of Each
Fiscal Year. Although new revenue agents and tax auditors/tax compliance
officers were hired in FYs 2001 and 2002, there has still been a net decrease
in total staff due to retirements and other attrition.
Figure 4 was removed due to its size.
To see Figure 4, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 5. Collection
Revenue Officer Staffing. After the IRS received funding and
authorization to hire in FY 2001, the steady decline in the number of revenue
officers working delinquent accounts was reversed in FY 2001, but the staffing
level dropped again in FY 2002.
Figure 5 was removed due to its size.
To see Figure 5, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 6. Staff Years
Detailed to Customer Service. What had been a steadily increasing use of Collection and
Examination function personnel detailed to Customer Service during the filing
seasons was significantly reduced in FYs 2001 and 2002, as compared to the
prior years.
Figure 6 was removed due to its size.
To see Figure 6, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 7. Changes in
Direct Time Percentages. The Collection and Examination functions both increased the
percentage of overall time spent collecting taxes and examining returns in FYs
2001 and 2002.
Figure 7 was removed due to its size.
To see Figure 7, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.
Figure 8 was removed due to its size. To see Figure 8, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 9 was removed due to its size. To see Figure 9, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 10. Delinquent Accounts and Unfiled Return Investigations Shelved or Surveyed Each Year. In FYs 1999 through 2002, the IRS used special closing codes to remove millions of unpaid tax periods and unfiled return investigations from the Queue.
Figure 10 was removed due to its size. To see Figure 10, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 11 was removed due to its size. To see Figure 11, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 12. Number of Taxpayers and Amounts Owed in the Queue. While the number of taxpayers with accounts in the Queue stayed about the same in FY 2001 and decreased in FY 2002, the total value of the accounts increased significantly. The average amount owed by taxpayers whose accounts were in the Queue increased from $9,300 in FY 1996 to $39,500 in FY 2002.
Figure 12 was removed due to its size. To see Figure 12, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 13. Number of Delinquent Accounts Closed Each Year, Not Including Shelved Accounts. The number of delinquent unpaid accounts closed by the Automated Collection System (ACS) increased during FY 2001 and then dropped slightly in FY 2002, but the downward trend continued in the CFf. As more accounts are left in the Queue, there are more closed after voluntary action by taxpayers while in that unassigned status.
Figure 13 was removed due to its size. To see Figure 13, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 14 was removed due to its size. To see Figure 14, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 15. Liens
Filed by the ACS and the CFf. While the total number of liens filed in FY 2002 is still
substantially less than the number filed in FY 1996, the number filed by the
ACS has returned to pre-1998 levels. The
numbers filed by the CFf have increased in each of the past 3 years but have
not returned to pre-1998 levels mainly because of the lower numbers and types
of accounts being pursued.
Figure 15 was removed due to its size. To see Figure 15, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 16 was removed due to its size. To see Figure 16, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 17. Number of
Seizures Made Each Year. While the number of seizures made in FY
2002 is only 3 percent of the number made in FY 1996, it is an increase of 300
percent from FY 2000.
Figure 17 was removed due to its size. To see Figure 17, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Figure 18 was
removed due to its size. To see Figure
18, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 19 was
removed due to its size. To see Figure
19, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 20 was
removed due to its size. To see Figure
20, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 21.
Number of Forms 1040 Examined by Compliance Site Correspondence. The
number of individual income tax returns examined by the Compliance sites
fluctuated widely from year to year, based largely on the emphasis placed on
Earned Income Tax Credit claims. These
fluctuations greatly affected the overall examination rate because of the large
numbers that can be done through correspondence (Corr) compared to the numbers
that can be done through regular field techniques. FY 2002 data for this analysis were not available at the time
this report was prepared.
Figure 21 was
removed due to its size. To see Figure
21, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 22 was
removed due to its size. To see Figure
22, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 23 was
removed due to its size. To see Figure
23, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 24 was
removed due to its size. To see Figure
24, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 25.
Examination Coverage of
Non-business Forms 1040 Under $100,000. The
number of these returns filed with income under $100,000 has increased
steadily, except for a slight drop in FY 1994, while the number examined has
fluctuated. There was a significant
decline in the number of examinations from FYs 1996 through 2000, but there was
an increase in FY 2001 and a slight drop in FY 2002.
Figure 25 was
removed due to its size. To see Figure
25, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 26 was
removed due to its size. To see Figure
26, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 27. Examination Coverage of Forms 1040 With Business Income (Excluding Farms). While the number of individual income tax returns filed with business income has steadily increased to over 8 million, the examination coverage dropped significantly after FY 1995, until increasing slightly to 128,062 returns in FY 2001 and 138,254 in FY 2002. (In the chart, the coverage is separated by the “total gross receipts” (TGR) reported.)
Figure 27 was
removed due to its size. To see Figure
27, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 28.
Examination Coverage of Forms 1040 With Farm Income. The number of returns filed with farm income has steadily
decreased to about 650,000 returns. The
examination coverage fluctuated from FY 1988 to 1996 and then dropped
significantly until FY 2000, with a slight increase to 5,315 returns
examined in FY 2001 and a drop to 3,641 returns examined in FY 2002.
Figure 28 was
removed due to its size. To see Figure
28, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 29. Examination Coverage of All Corporate Income Tax Returns – Percentage Change From FY 1988 to FY 2002. While the total number of corporate income tax returns has steadily increased, the total number of examinations has dropped significantly since FY 1997.
Figure 29 was
removed due to its size. To see Figure
29, please go to the Adobe PDF version of the report on the TIGTA Public Web
Page.
Figure 30. Percentage
of Corporate Income Tax Returns Examined – Corporations with Assets Under $5
Million. The percentage of
corporate returns examined in all asset classes under $5 million has decreased
over the past several years. However,
the coverage in the No Balance Sheet and Assets from $1 million - $5 million
categories increased slightly in FY 2002.
Source: TIGTA
Analysis of IRS Data Book Information.
Figure 30 was removed due
to its size. To see Figure 30, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 31. Percentage
of Corporate Income Tax Returns Examined – Corporations With Assets Over $5
Million. The percentage of
corporate returns examined in the majority of asset classes over $5 million has
steadily declined in the last decade.
However, the coverage in the largest class (over $250 million in
assets) showed a slight increase in FYs 2001 and 2002.
Figure 31 was removed due
to its size. To see Figure 31, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 32. Examination Coverage of Corporations With Assets Under $10 Million. The number of corporate returns filed with assets under $10 million has decreased to about 2.3 million returns, but the number examined has declined at a higher rate and dropped to 14,665 in FY 2002.
Figure 32 was removed due
to its size. To see Figure 32, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 33. Examination Coverage of Corporations With Assets Over $10 Million. The number of corporate returns filed with assets over $10 million has increased to almost 60,000 returns, but the number examined has declined significantly since FY 1997, dropping to 8,443 returns examined in FY 2002.
Figure 33 was removed due
to its size. To see Figure 33, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 34. Examination Coverage of S Corporations (Form 1120S). The number of Forms 1120S filed has increased to over 3 million returns, and the number examined was also increasing until FY 1998. However, the number of examinations has dropped significantly since then, falling to 11,646 returns examined in FY 2002.
Figure 34 was removed due
to its size. To see Figure 34, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 35.
Examination Coverage of Partnership Income Tax Returns. While the number of partnership returns has grown in recent
years to over 2.1 million filed, the number examined decreased to 5,070 returns
in FY 2001 and then increased to 5,543 in FY 2002.
Figure 35 was removed due
to its size. To see Figure 35, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 36. Examination Coverage of Fiduciary Income Tax Returns. The number of income tax returns filed by estates and trusts has steadily increased each year, from about 2.3 million in FY 1988 to over 3.9 million returns in FY 2002. However, the number of examinations has fluctuated from about 4,500 in the mid-1990s to 7,318 in FY 2000, dropping to 7,070 in FY 2001 and increasing to 7,206 in FY 2002, maintaining a coverage rate of about 0.2 percent.
Figure 36 was removed due
to its size. To see Figure 36, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 37. Examination Coverage of Employment Tax Returns. While the number of employment tax returns filed has been relatively steady at around 29 million, the number of those returns examined has decreased 69 percent since FY 1996, dropping to 17,252 returns examined in FY 2002.
Figure 37 was removed due
to its size. To see Figure 37, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 38. Examination Coverage of Excise Tax Returns. While the number of excise tax returns filed has been relatively steady, the number of those returns examined has decreased 74 percent since FY 1996, falling to 8,169 in FY 2001, but with a slight increase in FY 2002.
Figure 38 was removed due
to its size. To see Figure 38, please go
to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 39. Examination Coverage of Estate Tax Returns. While the number of estate tax returns filed has steadily increased each year, from less than 60,000 in 1988 to over 120,000 in 2001, the number of examinations stayed relatively steady until it began to decline in FY 1997, dropping to 7,151 in FY 2002.
Figure 39 was removed due
to its size. To see Figure 39, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Figure 40. Examination Coverage of Gift Tax Returns. The number of gift tax returns filed has tripled since FY 1988 to over 300,000 returns, while the number of examinations has increased moderately until declining in the last 3 years to 1,899 returns in FY 2002.
Figure 40 was removed due
to its size. To see Figure 40, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
|
|
FY 1996 |
FY 1997 |
FY 1998 |
FY 1999 |
FY 2000 |
FY 2001 |
FY 2002 |
|
Corporations < $10 Million |
46,568 |
56,323 |
41,818 |
28,268 |
18,623 |
14,332 |
14,655 |
|
Coverage Rate |
1.88% |
2.22% |
1.67% |
1.16% |
0.77% |
0.60% |
0.63% |
|
Corporations $10 Million & Over |
12,891 |
12,972 |
11,830 |
10,537 |
9,212 |
8,718 |
8,443 |
|
Coverage Rate |
25.33% |
24.29% |
21.43% |
19.05% |
16.30% |
15.08% |
14.17% |
|
1120S |
19,490 |
23,898 |
25,522 |
21,169 |
15,200 |
12,437 |
11,646 |
|
Coverage Rate |
0.92% |
1.04% |
1.04% |
0.81% |
0.55% |
0.43% |
0.39% |
|
Partnerships |
7,636 |
9,811 |
10,082 |
7,991 |
6,539 |
5,070 |
5,543 |
|
Coverage Rate |
0.49% |
0.59% |
0.58% |
0.43% |
0.33% |
0.25% |
0.26% |
|
Fiduciaries |
4,701 |
5,753 |
6,890 |
6,382 |
7,318 |
7,070 |
7,206 |
|
Coverage Rate |
0.15% |
0.18% |
0.21% |
0.19% |
0.22% |
0.20% |
0.18% |
|
Employment |
56,195 |
60,799 |
40,595 |
28,898 |
20,074 |
17,163 |
17,252 |
|
Coverage Rate |
0.20% |
0.21% |
0.14% |
0.10% |
0.07% |
0.06% |
0.06% |
|
Excise |
32,900 |
24,701 |
19,858 |
12,562 |
10,294 |
8,169 |
8,426 |
|
Coverage Rate |
4.17% |
3.14% |
2.48% |
1.53% |
1.25% |
0.96% |
1.03% |
|
Estates |
11,794 |
11,686 |
10,451 |
9,319 |
8,024 |
7,707 |
7,151 |
|
Coverage Rate |
14.47% |
12.90% |
10.22% |
8.46% |
6.89% |
6.24% |
5.84% |
|
Gift |
1,934 |
2,085 |
2,010 |
2,369 |
2,097 |
2,005 |
1,899 |
|
Coverage Rate |
0.89% |
0.90% |
0.79% |
0.91% |
0.72% |
0.65% |
0.63% |
Source: April 2002 IRS Report to the Congress as Requested in
the House Report Accompanying the Treasury and General Government
Appropriations Act, 2002, Pub.L. No. 107-67, 115 Stat 514 (2001), with 2002
data from TIGTA Analysis of IRS Data Book Information.
Figure 42. Numbers of Individual Income Tax Returns Examined Through Field or Correspondence Examinations and Compliance Center Contacts. This IRS-prepared table shows the numbers of returns included in “examination” statistics and the numbers of returns included in other compliance contacts for math errors, underreported income issues, and automated substitute for returns due to non-filing. The decline in the numbers of these other contacts has not been at the same rate as the decline in examinations. However, when added to examinations, the total number of compliance contacts compared to the number of returns filed shows an overall decline in the percentage of returns covered by compliance checks. This table also shows the wide variances in types of coverage from year to year in compliance center contacts. The data analysis for FY 2002 was not available at the time this report was prepared.
Figure 42 was removed due
to its size. To see Figure 42, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.