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2019 DATA BOOK AND IRS ENFORCEMENT ACTIVITIES

July 09, 2020

By Joshua Ashman, CPA & Nathan Mintz, Esq.

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Data Book Gives Insight into the Extent of Past Year’s IRS Enforcement Activities

This past week, the IRS published its annual Data Book, which offers a bird’s-eye view of the IRS’s activities during the past year, with a particular emphasis on enforcement activities, including audits and civil tax penalties.

For expats, the long arm of the IRS should be incentive enough to keep in compliance with the basic requirement to file on an annual basis.

Scope of IRS Enforcement Activities

According to the 2019 Data Book, during the examined fiscal year (October 1, 2018 to September 30, 2019), the IRS collected more than $3.56 trillion in gross taxes and issued almost 122 million refunds, amounting to more than $452 billion. It processed more than 253 million U.S. income tax returns and supplemental documents.

In terms of enforcement, the IRS audited 771,095 tax returns during fiscal year 2019, resulting in nearly $17.3 billion in recommended additional tax. This represented an overall audit rate of 0.4%, a rate slightly lower than the 0.5% rate recorded in last year’s Data Book.

IRS Enforcement Activities Elevated for These Two Taxpayer Profiles

In comparison to the overall audit rate of 0.4%, the IRS Data Book shows a higher audit rate of 2.4% for wealthier taxpayers – more specifically, individuals with total positive income of $1,000,000 or more.

According to the report, international returns were audited at a rate of 1.9%, a percentage also significantly higher than the overall rate.

IRS Enforcement Through Civil Penalties

Similar to past years, this year’s IRS Data Book shows that penalty abatements were afforded only in a minority of cases.

During the examined fiscal year, 40.1 million civil penalties were assessed, while 4.2 million of those penalties were abated.

A similar percentage of abatements were given with respect to so called non-return penalties, as only 29,057 abatements were allowed out of 291,001 penalty assessments. The Data Book defines “non-return penalties” broadly to include a wide range of noncompliant behaviors, such as noncompliance related to tax return preparers and to information returns (e.g., Forms 1099, W–2, 3520–A, 8027, and 8300), as well as aiding and abetting, and frivolous return filings.

What We Can Learn

While the likelihood of being audited remains generally low, U.S. citizens living abroad would be wise to remain on top of their annual tax return obligations, given the special attention that the IRS gives to international forms and cross-border issues.

At Expat Tax Professionals, our team will carefully prepare your tax return, so that if you end up getting audited, your return will withstand the scrutiny of the IRS. If you are a U.S. expat who needs help with tax return preparation, contact us to get started on your way to full compliance with the IRS.

 

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