Individual Tax Return IRS Examination Coverage

There are several contributing factors which may ultimately trigger an audit of an Individual income tax return by the Internal Revenue Service ("IRS"). Each year, the IRS publishes a Data Book reporting tax statistics and figures on revenue collection, refunds, tax law enforcement, taxpayer assistance, and more. The Data Book includes information about returns selected for audit. The following Tableau visualization is a scatter plot produced using the 2019 Internal Revenue Service Data Book Publication 55B individual tax return data from Table 17b: Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return (source: https://www.irs.gov/pub/irs-pdf/p55b.pdf). Additionally, prior year data has been included for reference (source: 2018 Internal Revenue Service Data Book Publication 55B individual tax return data from Table 9a: Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return https://www.irs.gov/pub/irs-prior/p55b--2019.pdf).

The visualization is constructed as follows:

• Each plotted ring represents one of thirteen specific categories of individual income tax return:

  Returns with total positive income under $200,000:

  Nonbusiness returns without Earned Income Tax Credit:

  (1) Without Schedules C, E, F, or Form 2106

  (2) With Schedule E or Form 2106

  Business returns without Earned Income Tax Credit:

  Nonfarm business returns by size of total gross receipts:

  (3) Under $25,000

  (4) $25,000 under $100,000

  (5) $100,000 under $200,000

  (6) $200,000 or more

  (7) Farm returns

  Business and nonbusiness returns with Earned Income Tax Credit by size of total gross receipts:

  (8) Under $25,000

  (9) $25,000 or more

  Returns with total positive income of at least $200,000 and under $1,000,000:

  (10) Nonbusiness returns

  (11) Business returns

  (12) Returns with total positive income of $1,000,000 or more

  (13) International returns

• The ring size is based on the total number of returns examined for the category.

• The ring shading is based on the total recommended additional tax (in thousands) upon examination for the category.

• The X axis plots the total number of returns filed in the category.

• The Y axis plots the percentage of returns examined in the category.

With the 2018 selected in the Year of Data dropdown box at the top, mouse-over the visualization to reveal specific amounts for use in answering the following questions.

Select All in the Year of Data dropdown box at the top left of the dashboard. Now select any one Return Category from the top right dropdown box. Compare and contrast the year-to-year difference in IRS examination for the category. Discuss what factors may have impacted a change in the IRS examination data.

Year of Data 2018 Return Category All 2018 IRS Audit Data By Category 2.40% o 12 2.20% 2.00% 1.80% 13 1.60% 1.40% 0.00 Percentage of Returns Examined 1.20% 8 1.00% O 11 0.80% ooo 0.60% 3 2 0.40% 10 O 0.20% 7 1 0.00% OM 10M 20M 30M 40M 50M 60M 70M 80M Number of Returns Filed Year of Data (All) Return Category 12 ALLIRS Audit Data By Category 3.30% Year: 2017 Return Category: Return Category Description: Returns with total positive income of $1,000,000 or more Percentage of Returns Examined: 3.23% Number of Returns Examined: 16,290 Number of Returns Filed: 504,278 Recommended Additional Tax (in Thousands): 1,877,561 xamined 2.90% Percentage 2.70% Year: 2018 Return Category: Return Category Description: Returns with total positive income of $1,000,000 or more Percentage of Returns Examined: 2.40% Number of Returns Examined: 13,946 Number of Returns Filed: 582,008 Recommended Additional Tax (in Thousands): 1,315,130 2.40% O 12 500K 510K 520K 530K 540K 550K 560K 570K 580K Number of Returns Filed +++ - L1