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IRS Releases Its 2012 Data Book - Some Interesting Facts and Statistics on IRS Activities

Tax

By Ron Kramer

Each year the Internal Revenue Service (IRS) releases its Data Book, which details IRS activities during the past fiscal year. The Data Book contains many statistical tables which provide useful and interesting information for tax practitioners and taxpayers. The tables generally include information on IRS activities with respect to:

  • Returns Filed, Taxes Collected and Refunds Issued
  • Enforcement through Examinations, Information Reporting, Collections and Criminal Investigation
  • Taxpayer Assistance
  • Tax Exempt Activities, and
  • IRS Budget and Workforce

The 2012 IRS Data Book contains a summary of IRS activities for the fiscal year beginning October 1, 2011 through September 30, 2012.

IRS Budget and Workforce

According to the 2012 Data Book, the IRS employed a total workforce of 97,941 full-time, part-time, and seasonal employees during fiscal year 2012. The IRS’ operating budget for its three core activities of taxpayer services, enforcement and operations support was $12.1 billion. According to the 2012 Data Book, the IRS collected more than $2.5 trillion in taxes. Therefore, per the Data Book, it costs taxpayers 48 cents, on average, for the IRS to collect $100 in tax revenues. Said another way, for every $1 the IRS spends, it collects $209.32 of tax revenues.

Returns Filed

During fiscal year 2012, the IRS processed more than 237.3 million Federal tax returns and supplemental documents. Nearly 81 percent of individual tax returns were filed electronically.

The table below summarizes the number of returns filed by type of return for fiscal year 2012 based on information obtained from the 2012 Data Book.

Number of Returns Filed by Type, Fiscal Year 2012

Income Taxes  
   C or Other Corporation 2,262,961
   S Corporation, Form 1120-S 4,579,669
   Partnerships, Form 1065 3,625,937
   Individuals, Form 1040 series 146,243,886
   Estate and Trust, Form 1041 3,061,029
   Individual Estimated Tax, Form 1040-ES 22,157,924
   Estate and Trust Estimated Tax, Form 1041-ES 400,464
       Total Income Tax Returns 182,331,870
 Employment Taxes  29,589,891
 Estate Tax, Form 706  26,859
 Gift Tax, Form 709  249,451
 Excise Taxes  1,196,789
 Tax Exempt Organizations  1,367,434
 Supplemental Forms and Documents  22,583,056
   
       TOTAL UNITED STATES TAX RETURNS FILED  237,345,350

Taxes Collected

As noted above, the IRS collected $2.5 trillion in gross tax revenue during fiscal year 2012 (unfortunately we spent $3.793 trillion). If you ever wonder where U.S. tax revenue comes from, the 2012 Data Book will provide you with detailed information as to the sources of U.S. tax receipts. The table below summarizes the detailed information concerning tax collections from the 2012 Data Book: 

Tax Collections and Refunds by Type of Tax, Fiscal Year 2012

  Gross Collections Refunds             Net Collections      % of Gross Collections
         

Business Income Taxes (Corporations and UBIT)

$ 281,461,580 $ 43,970,393     $ 237,491.187    11.15%
         
Individual and Estate and Trust Income Tax    1,387,836,515    324,060,446    1,063,776,069     54.98%
         
Employment Taxes    784,396,853    3,729,361     780,667,222     31.07%
         
Estate and Gift Taxes    14,450,249    504,831     13,945,418     0.57%
         
Excise Taxes    56,174,937    1,163,654     55,011,283     2.23%
         
Rounding      -201     201     0.00%
         
      UNITED STATES TOTALS $ 2,524,320,134 $ 373,428,754  $ 2,150,891,380     100.00%

By far, the largest source of tax receipts is from individual, estate and trust income taxes, accounting for nearly 55% of gross tax collections for fiscal year 2012.

Examination Activity

Perhaps the most useful and interesting information to both tax practitioners and taxpayers alike is the data on enforcement and examinations. The data gives some insight as to the odds of the “audit lottery” and to those taxpayers that the IRS tends to examine. The 2012 Data Book summarizes IRS examination activities for returns filed in calendar year 2011, which would generally be 2010 tax returns for calendar year taxpayers.

During fiscal year 2012, the IRS examined 0.9 percent of all tax returns filed in calendar year 2011 (generally 2010 tax returns). The table below summarizes the 2012 Data Book’s details of IRS examination coverage for various types of returns for fiscal year 2012 and indicates how the IRS conducted the examinations (i.e. by field examination or by correspondence). 

IRS Examination Coverage by Type of Return, Fiscal Year 2012

  Returns Filed in CY 2011       Number of Returns Examined % of Return Covered      Field Exams                       Correspondence Exams
           
Individual Income Tax Returns  143,399,737  1,481,966  1.03%  359,750  1,122,216
Corporation Income Tax Returns  1,999,266  32,701  1.64%  31,705  996
Estate and Trust Income Tax Returns  3,036,900  5,070  0.17%  632  4,438
Estate Tax Returns  12,582  3,762  29.90%  3,762  0
Gift Tax Returns  223,090  3,164  1.42%  3,164  0
Employment Tax Returns  29,371,428  66,997  0.23%  50,792  16,205
Excise Tax Returns  675,808  22,014  3.26%  19,979  2,035
Other Taxable Returns    1,054    187  867
Partnership Tax Returns  3,524,808  16,691  0.47%  11,852  4,839
S Corporation Tax Returns  4,469,329  21,658  0.48%  20,234  1,424
Other Non-Taxable Returns    2,621    123  2,498
           
  186,712,948 1,657,698 0.89% 502,180 1,155,518

The following are some observations with respect to the “audit lottery” information contained in the fiscal year 2012 examination data:

  • Overall, about 1.0 percent of individual income tax returns were examined in fiscal year 2012.
  • There were more than 3 times as many individual correspondence exams as field examinations.
  • Less than 1% of all individual tax returns reporting taxable incomes of between $25,000 and $200,000 were examined.
  • Individual returns reporting business income were 3 to 4 times more likely to be audited than returns without business income.
  • Returns reporting Earned Income Tax Credit (EITC) have a 2 or 3 times higher audit likelihood due to high levels of fraud in claiming the credit.
  • Returns reporting positive incomes of $1,000,000 or more are 12 times more likely to be audited than the average individual tax return.
  • Large C Corporations (balance sheets over $10 million) are nearly 18 times as likely as small corporations to be examined.
  • Estates over $5,000,000 but under $10,000,000 are examined nearly 60 percent of the time, and estates over $10,000,000 are usually examined 100% of the time.
  • A very small percentage (.5 percent) of partnership and S-corporation returns were examined in fiscal year 2012.

Information Reporting and Verification

The 2012 Data Book reports that the IRS received and processed 2.2 billion third party information returns during fiscal year 2012 (generally W-2 and 1099 forms). From these forms, the IRS initiated 4,525,000 contacts for underreported income that generated $7.12 billion in additional tax assessments. The IRS also used third party information returns to identify certain non-filers and to construct tax returns from third party information. During fiscal year 2012 under this program, the IRS closed 803,000 cases, resulting in $6.6 billion of additional tax assessments.

It should be noted that tax reform proposals from both the House and Senate include provisions to increase withholding and other third party reporting as a means of increasing tax compliance and reducing the Tax Gap. Thus, it appears Big Brother will be increasingly watching you!

Review the entire 2012 IRS Data Book

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