The U.S. Internal Revenue Service is the single largest collections agency in the world. We always find it kind of cool to analyze the collections data that is released every year. It always provides some insight into what is going on in the “delinquent” or “unfiled” tax return world. Since filing old tax returns is what this site is all about, here are some interesting tidbits from the most recent statistics available:
Budget & Personnel
In 2014 the IRS spent $11.6 billion and employed just over 84,000 to collect more than $3.1 trillion in tax revenue. Of those 84,000 personnel, over 18,000 are directly involved in enforced collections against taxpayers that owe back taxes. In 2013 the IRS spent $11.6 billion to collect $2.8 trillion in tax revenue, using just under 87,000 employees, of which 19,000 were involved in enforced collections.
Delinquent Tax Return Inventory
In 2014 the IRS began with 11.7 million delinquent accounts (unfiled returns). 7.6 million new cases were added to inventory while only 6.9 million were closed. This put the ending inventory at 12.4 million returns. In 2013 the IRS saw 7.7 million new cases added to inventory but they were able to close 7.5 million.
In 2013 there were 145.2 million individual tax returns filed, of which 1.2 million were selected for review (audit) in 2014. Thus the effective audit rate was 0.9%. Of those returns examined, the IRS proposed changes in 87% of them with an associated $11.8 billion increase in taxes owed. For the returns that were reviewed in 2013, the audit rate was 1%, the IRS proposed changes in 89% of what it reviewed with an associated tax increase of $14 billion.
In 2014 the IRS filed 535 million Federal tax liens against taxpayers. This was a 11% decline when compared to 2013. Likewise, 432,000 seizures were conducted, which was down 21% from the prior year. However, 1.9 billion levy notices were filed against taxpayers which was a 7.6% increase over 2013.
Offers In Compromise
In 2014 the IRS received 68,000 offers where taxpayers attempted to settle their tax debt for less than what was owed. Of that number, the IRS accepted 27,000, which was a 12.9% decline from what the agency accepted in 2013.
What Does This All Mean?
The summary version of the above is that:
- IRS budget cuts are forcing the agency to collect more tax revenue (current and delinquent) with a reduced staff
- While the number of “new” unfiled returns added to inventory is increasing, the IRS isn’t able to close the gap on the case load
- The IRS is examining fewer returns and enforced collections are down
- All those commercials touting that you can settle your taxes for “pennies on the dollar” apparently don’t want you to read the IRS Consumer Alert about such statements. They also don’t want you to know that the IRS only accepts less than approximately 45% of the offers it receives
We always tell our clients that while the IRS may be slow, they eventually do catch up with you. If you are facing a tax problem, please know that “hoping” it will go away is not the answer. The last thing you want is for the IRS to reach into your bank account on grocery day and take everything you’ve got in the account because you didn’t respond to the dozens of letters they sent you. Didn’t get the letter? The IRS doesn’t care because from their viewpoint, just because you didn’t get it, didn’t mean we didn’t send it!
We’re always here to help you out. So if you’d like to discuss your situation or want to file any of those “delinquent” returns you’re sitting on, feel free to give us a call at the number listed in the upper right or shoot us an email to the address listed in the footer of this page.