On September 11, 2017, the Treasury Inspector General for Tax Administration (TIGTA) issued its final report discussing IRS compliance activities through fiscal year 2016 (the federal government’s fiscal year begins on October 1 and ends on September 30). TIGTA compiles statistical information reported by the IRS and issues the report annually in response to continuing stakeholder interest in the analysis and trends in IRS Collection and Examination function activities. Here are the highlights:

  • IRS Budget Increased, but Staffing Declined. Although the IRS budget increased in 2016, IRS staffing continued to decline. The budget increase was intended to improve customer service, prevent fraud and identity theft, and enhance cybersecurity to safeguard taxpayer data.
  • The Number of Tax Returns Examined Declined. The number of tax returns examined in 2016 decreased approximately nine percent compared to 2015. The number of examinations conducted in 2016 is approximately 32 percent lower than the number conducted during 2012. The report attributes the significant reduction in the number of examinations over that time period to a continued decline in examination staffing, which reached a 20-year low in 2016.

Percentage Change in the Number of Field Examiners and Examinations Since FY 2012

Source: IRS Data Book and Table 37 Examination Program Monitoring

 

  • IRS Issued Fewer Liens and Levies. The number of liens and levies issued continued to decline in 2016. The IRS issued its fewest amount of liens and levies since 2002.
  • Payment Alternatives – Increase in Direct Debit Installment Agreements. The number of direct debit installment agreements (a payment option available to certain taxpayers who cannot fully pay their tax obligations on time) has increased by 128 percent since 2012. The increased use of this payment option is likely attributable to reductions in enforcement personnel and the need to efficiently and effectively collect outstanding tax liabilities.
  • Legislative Initiatives. In December 2015, Congress enacted the Fixing America’s Surface Transportation Act. The law contains two measures designed to assist the IRS in collecting delinquent taxes: (1) authorizing the use of private debt collectors for the collection of outstanding inactive tax receivables, and (2) authorizing the State Department to revoke, or deny, passports to taxpayers with seriously delinquent tax debt. The IRS began assigning cases to private debt collection agencies in April 2017. The IRS also worked to coordinate with the State Department to implement the passport revocation program. You can read more about the passport revocation program here and here.

You can read the full report here.

On September 8, 2016, the IRS issued its final report on taxpayer compliance through fiscal year 2015 (the federal government’s fiscal year begins on October 1 and ends on September 30). The report is a compilation of statistical information collected by the IRS and provides taxpayers with information about how the IRS focuses its compliance resources and the impact of those resources on revenue and compliance over time.

For fiscal year 2015, the IRS continued to experience losses in the number of employees available to provide services to taxpayers and those needed to enforce the tax laws. In addition, after an increase in the in the IRS’s budget in 2014, the IRS’s budget for 2015 decreased $345 million (3 percent), from $11.3 billion to $10.9 billion. Despite fewer resources, however, total tax revenues received and collected climbed to $3.3 trillion, an increase of 8 percent from 2014. On the other hand, enforcement revenue collected decreased from $57.1 billion in 2014 to $54.2 billion in 2015, a decline of 5 percent. Unpaid assessments increased to $412 billion.

Total Tax Revenue by Type of Tax

Revenue

Source: TIGTA analysis of the IRS Data Book.


Amount of Enforcement Revenue Collected
Compared to Unpaid Assessments

 Enforcement Revenue

Source: Offices of Research, Analysis, and Statistics and the Chief Financial Officer.

For 2015, while some areas of compliance declined, collections on delinquent accounts increased in every collection program except Field Collection (which consists of revenue officers who handle face-to-face contacts with taxpayers to collect delinquent accounts or secure unfiled returns). However, the number of liens, levies, and seizures by the IRS all declined in 2015. In addition, although the number of offers in compromise and installment agreements decreased in 2015, the amount of delinquent taxes collected through these payment options increased.

Notably, examinations continued to decline in 2015, with 28 percent fewer tax returns examined than in 2011. The report attributes the decline in the number of examinations to the 24 percent decrease in revenue agents and tax compliance officers during the same period.

Percentage Change from FY 2011 of All
Tax Returns Filed and Examined

Percent Change

Source: TIGTA analysis of the IRS Data Book.


Number of Revenue Officers in the Field Assigned
Delinquent Cases at the End of Each Fiscal Year

Revenue Officers

Source: Collection Activity Report 5000-23.