Office of Audit
TRENDS IN COMPLIANCE ACTIVITIES THROUGH FISCAL YEAR 2015
Final Report issued on September 8, 2016
Highlights of Reference Number: 2016-30-073 to the Internal Revenue Service Deputy Commissioner for Services and Enforcement.
IMPACT ON TAXPAYERS
This report is a compilation of statistical information reported by the IRS. The data presented in this report provide taxpayers and stakeholders with information about how the IRS focuses its compliance resources and the impact of those resources on revenue and compliance over time.
WHY TIGTA DID THE AUDIT
TIGTA conducts this review annually in response to continuing stakeholder interest in the analysis and trending of Collection and Examination function activities. The overall objective was to provide various statistical information regarding Collection and Examination function activities.
WHAT TIGTA FOUND
In April 2016, the IRS updated its estimate of the annual Net Tax Gap to $406 billion for Tax Years 2008 through 2010. The estimated Net Tax Gap for individual income tax was $291 billion, corporation income tax was $35 billion, employment tax was $79 billion, and estate and excise tax combined was $1 billion. In Fiscal Year (FY) 2015, 44 percent of the IRS’s appropriations were allocated to enforcement of tax laws.
In FY 2015, the IRS continued to experience losses in the numbers of employees available to provide services to taxpayers and those needed to enforce tax laws. In addition, after an increase in FY 2014, the IRS budget for FY 2015 decreased $345 million (3 percent), from $11.3 billion to $10.9 billion.
However, despite fewer resources, total tax revenues received and collected continued to climb to $3.3 trillion, an increase of 8 percent from FY 2014. On the other hand, enforcement revenue collected decreased from $57.1 billion in FY 2014 to $54.2 billion in FY 2015, a decline of 5 percent. Unpaid assessments increased to $412 billion.
Collection function activities showed mixed results in FY 2015. While some areas of compliance declined, collections on delinquent accounts increased in every collection program except Field Collection. The Collection function also continued to receive more delinquent accounts than it closed, although the number of accounts closed as uncollectible has decreased in recent years. Fewer enforcement actions were used during FY 2015, with the numbers of levies, seizures, and Notices of Federal Tax Lien all declining in the last year. Additionally, the use of payment options such as offers in compromise and installment agreements decreased, although the amount of delinquent taxes collected through these tools increased.
The Examination function conducted fewer examinations in FY 2015, with field examination conducting 28 percent fewer examinations than in FY 2011. Declines in the number of examinations are directly related to the 24 percent decline in the revenue agents and tax compliance officers available to perform them during that period. However, during FY 2015, the dollar yield per hour for most return types increased. Further, the no-change rates for revenue agent examinations of corporations increased, but it decreased for examinations of individuals.
WHAT TIGTA RECOMMENDED
TIGTA made no recommendations in this report. IRS officials were provided an opportunity to review the draft report and did not provide any comments.
READ THE FULL REPORT
To view the report, including the scope, methodology, and full IRS response, go to:
Phone Number / 202-622-6500
E-mail Address / TIGTACommunications@tigta.treas.gov
Website / https://www.treasury.gov/tigta