Small Business Taxes & ManagementTM--Copyright 2014, A/N Group, Inc.
The IRS has released statistics on staffing, audits, enforcement, liens, etc. The results cover a 10-year period from fiscal 2004 through fiscal 2013. We'll give you some of the raw data and percentage increases or decreases for some of the more interesting numbers.
Staffing. In staffing, the biggest decrease was in Revenue Officers. The smallest decrease was in the number of Special Agents.
Individual examinations. Both field and correspondence audits decreased from 2012 to 2013. The total decline amounted to some 5%. The percentage of returns audited decreased from 1.03% to 0.96%. Only in 2004 and 2005 was the overall audit percentage lower. Here are the numbers for 2011, 2012, and 2013.
FY2011 FY2012 FY2013
Field Exams 391,621 359,750 344,152
Correspondence 1,173,069 1,122,216 1,060,779
Total Exams 1,564,690 1,481,966 1,404,931
Returns filed (prior CY) 140,837,499 134,399,737 145,819,388
Coverage 1.11% 1.03% 0.96%
The audit percentages vary widely by income grouping. For example, those taxpayers with income under $200,000 had a 0.88% chance of an audit in 2013. Those with income of $1 million or more had a 10.85% chance. Audits of returns with income of $200,000 or more increased from 2012 to 2013, but because the number of returns filed increased by a higher percentage, the percentage of returns in both of these income groups decline.
Examination--Individual Return Closures and Coverage Rates
Income Under $200,000
FY2011 FY2012 FY2013
Field Exams 313,229 290,015 270,636
Correspondence 1,076,607 1,012,898 962,336
Total Exams 1,389,836 1,302,913 1,232,972
Returns filed (prior CY) 136,387,547 138,554,470 140,537,584
Coverage 1.02% 0.94% 0.88%
Income $200,000 and higher
FY2011 FY2012 FY2013
Field Exams 78,392 69,735 73,516
Correspondence 96,462 109,318 98,443
Total Exams 174,854 179,053 171,959
Returns filed (prior CY) 4,449,952 4,845,267 5,281,804
Coverage 3.93% 3.70% 3.26%
Income $1 Million and higher
FY2011 FY2012 FY2013
Field Exams 20,475 17,826 19,157
Correspondence 15,947 23,139 20,254
Total Exams 36,422 40,965 39,421
Returns filed (prior CY) 291,831 337,477 363,386
Coverage 12.48% 12.14% 10.85%
Business Returns. The audit rate dropped on business returns overall dropped, as did the rate for small corporations (assets under $10 million). The rate for large corporations (assets greater than $10 million) also dropped, but still remained at a much higher level of some 15.84%. The overall business returns include C corporations, S corporations, and partnerships.The audit rate for S corporation returns declined only slightly and still remained at more than double the rate in fiscal year 2004. The same was true for partnership returns.
Audit rates are higher on larger corporations. The rate on corporations with assets of $250 million or more for fiscal year 2013 was 33.88%, up from 29.41%.
Examination--Business Return Closures and Coverage Rates
FY2011 FY2012 FY2013
Total Returns Examined 62,445 70,265 61,020
Returns Filed in Prior CY 9,869,358 9,950,784 9,938,483
Coverage 0.63% 0.71% 0.61%
Small Corporation Returns (Assets Under $10 Million)
FY2011 FY2012 FY2013
Total Returns Examined 19,697 21,164 17,604
Returns Filed in Prior CY 1,931,008 1,896,158 1,849,758
Coverage 1.02% 1.12% 0.95%
Sub S Returns
FY2011 FY2012 FY2013
Total Returns Examined 18,519 21,658 18,670
Returns Filed in Prior CY 4,444,154 4,469,329 4,476,307
Coverage 0.42% 0.48% 0.42%
Partnership Returns
FY2011 FY2012 FY2013
Total Returns Examined 13,770 16,691 14,870
Returns Filed in Prior CY 3,434,905 3,524,808 3,550,071
Coverage 0.40% 0.47% 0.42%
Exempt Organizations. After doubling from 2004, the audit rate for exempt organizations has remained relatively static.Exempt Organizations
FY2011 FY2012 FY2013
Total Returns Examined 11,699 10,743 10,575
Returns Filed in Prior CY 858,865 798,903 771,675
Coverage 1.36% 1.34% 1.37%
Collection. The number of levies, liens, and seizures has declined significant between fiscal year 2011 and fiscal year 2013. While we won't reproduce the numbers here, the number of tax related criminal prosecutions recommended increased from 1,622 in fiscal year 2011 to 2,500 in fiscal year 2013. The conviction rate for those prosecutions has remained steady at some 93%. The average sentence has increased from 25 to 31 months.Levies, Liens and Seizures
FY2011 FY2012 FY2013
Levies 3,748,884 2,961,162 1,855,095
Liens 1,042,230 707,768 602,005
Seizures 776 733 547
Copyright 2014 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Articles in this publication are not intended to be used, and cannot be used, for the purpose of avoiding accuracy-related penalties that may be imposed on a taxpayer. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 01/16/14