The Internal Revenue Service has released its annual data book, which it describes as a “snapshot of agency activities for the fiscal year.” The time period covered in the FY 2012 Data Book is October 1, 2011, through September 30, 2012.
Among the data presented in the FY 2012 Data Book are audit rates for the past year. The overall audit rate for individual tax returns was 1.03 percent, which is generally consistent with prior years. The audit rates for wealth taxpayers, however, saw a slight decrease. The following chart nonetheless illustrates that the audit risk dramatically increases for taxpayers reporting large amounts of adjusted gross income:
|IRS Audit Rates||FY 2010||FY 2011||FY 2012|
|AGI $1 to $25,000||1.18%||1.22%||1.05%|
|AGI $200,000 to $500,000||1.92%||2.66%||1.96%|
|AGI $500,000 to $1 million||3.37%||5.38%||3.57%|
|AGI $1 million to $5 million||6.67%||11.80%||8.90%|
|AGI $5 million to $10 million||11.55%||20.75%||17.94%|
|AGI over $10 million||18.38%||29.93%||27.37%|
The overall audit rate for estate tax returns is nearly 30 percent, with 12,582 estate tax returns filed during calendar year 2011. The audit rate for estate tax returns where the size of the gross estate is between $5 million and $10 million is 58.6 percent.
On the enforcement front, the IRS assessed nearly $26.9 billion in civil penalties during FY 2012, and initiated 5,125 new criminal tax investigations. 2,466 taxpayers were convicted of a tax crime during FY 2012, and 2,009 of those individuals (or 81.5 percent) received a sentence of incarceration. The number of IRS Special Agents (who are responsible for conducting criminal investigations) employed by the agency is down, from 2,730 in FY 2011 to 2,657 in FY 2012.
On the international enforcement front, Acting Commissioner Steven T. Miller offers the following assessment:
The IRS in 2012 made significant progress on international enforcement, specifically in our efforts against the practice of illegally hiding assets and income in offshore accounts. We have continued our two-pronged approach: offering a voluntary disclosure program for those who want to come in and get right with the government, while at the same time pursuing tax evaders and the promoters and banks assisting them.
Although not discussed in the FY 2012 Data Book, the IRS Offshore Voluntary Disclosure Program remains open and provides a mechanism for taxpayers with undisclosed foreign bank accounts and unreported income from such accounts to obtain amnesty from criminal prosecution through the payment of back taxes, interest, and penalties. To date, more than 35,000 individuals have enrolled in the OVDP since 2009 and more than $5 billion in additional revenue for the U.S. Treasury has been generated. Details on how to enroll in the OVDP are available here.