04 May IRS Automated Audit Programs Working Well Programs aid in $2.9 Trillion 2015 tax revenue
Each year the IRS releases a Data Book that recaps Internal Revenue Service activities for the prior fiscal year ending in September. The 2015 Data Book was recently published which recaps the 2014 tax year. Here is what you need to know:
- The $2.9 trillion in gross revenue collected was up 7.8% from the prior year
- $1.4 trillion of the revenue collected came from individual income tax returns
- 1.7 million notices were sent out involving 2.2 million math errors on tax returns
- Approximately 0.84% of all individual tax returns were examined by the IRS
- Automated programs yielded over $9 billion in additional tax assessments
Of specific interest is the recap of two automated programs in place at the IRS; the Automated Under Reporter Program and the Automated Substitute for Return Program.
Automated Under Reporter Program
Description: This is the IRS computer program that compares information returns (W-2s and 1099s) provided by third parties with the information provided by taxpayers on their tax return. If there is a mis-match, the program automatically sends out a form to have you explain the difference.
Results: The 2.6 billion information returns received by the IRS identified 3.7 million discrepancies resulting in $6.3 billion additional tax assessments.
Trend: This program appears to be working for the IRS. In 2015 there were 800,000 fewer discrepancies identified and $800 million less tax assessments than in the 2012 report.
Action: This program is an efficient way for the IRS to find missing revenue. Make sure you receive all your information forms and that the information stated on them is correct. Errors can be corrected on your tax return, but it is always best to get your employer or provider (bank, brokerage or customer) to issue a corrected 1099 or W-2 form.
Automated Substitute for Return Program
Description: This is the IRS computer program that uses third party information and automatically creates a tax return with that information if you do not file one.
Results: This program identified 614,000 non-filed tax returns. The created returns yielded an additional $2.7 billion in tax assessments.
Trend: The Substitute Return Program appears to be working as well. There were 189,000 fewer substitute returns created by the IRS versus 2012. Tax assessments from this program have dropped $4 billion versus the 2012 reporting period.
Action: If 1099s or W-2s (and other informational tax forms) have been issued, the IRS expects you to file a tax return or will do it for you if you don’t. While it is possible that this might create a refund, do not expect the IRS to grant you all your available deductions. It is best to file a return or request an extension to provide time to get your information to them.
The IRS Data Book is loaded with useful information. Unfortunately, even with a 7.8% increase in revenue, the Federal Government annual spending is still over $400 billion more than it projects to take in for the year.