United States

IRS 2017 Data Book released showing rates of activities

2017 Data Book shows 15-year low for IRS examination activity

INSIGHT ARTICLE  | 

The IRS published its 2017 Data Book, which covered the fiscal year ending Sept. 30, 2017, and described various activities conducted by the Internal Revenue Service. The report showed that IRS collected more than $3.4 trillion in gross taxes and processed 245.4 million tax returns. Of the 245.4 million tax returns, 150.7 million were individual returns. Approximately half of the individual returns were filed by practitioners.

The information that many taxpayers may find most interesting is contained in the enforcement section. During fiscal year 2017, the IRS examined approximately 1.1 million tax returns, which is 0.5 percent of all returns and 0.6 percent of individual returns filed in the same time period. The report also compares the number of returns examined beginning with fiscal year 2012 to 2017. During that time, the number of returns examined, both total returns and individual returns, steadily declined. Reports about the data release state that the overall audit rate reached a 14-year low in fiscal year 2017.

Of the audits occurring during fiscal year 2017, 70.8 percent were conducted via correspondence and 29.2 percent were conducted in the field. The audits resulted in approximately $29 billion additional tax assessed to taxpayers and $6 billion of additional refunds to taxpayers.

The rate of examinations of individual returns across the spectrum of adjusted gross income levels show that the highest examination rate of 14.52 percent was of those individuals who earn $10 million or more, although such returns account for only 0.01 percent of all individual returns filed. For most other adjusted gross income categories, the rate of examination was approximately 0.48 percent. The rate of examination began increasing for filed returns showing adjusted gross income of $200,000 to $500,000 with 0.70 percent examined.

Despite the reduced rate of examinations, the report does make clear that when an examination occurs, it may result in an increased tax liability for a taxpayer. For this reason it is important that a taxpayer is represented by a highly experienced tax advisor during the process.


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