oversight

Tax Administration: IRS' Abatement of Assessments in Fiscal Years 1995-98

Published by the Government Accountability Office on 1999-06-04.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Joint Committee on
                Taxation



June 1999
                TAX
                ADMINISTRATION
                IRS’ Abatement of
                Assessments in Fiscal
                Years 1995-98




GAO/GGD-99-77
GAO       United States
          General Accounting Office
          Washington, D.C. 20548

          General Government Division



          B-280532

          June 4, 1999

          The Honorable Bill Archer
          Chairman
          The Honorable William V. Roth, Jr.
          Vice Chairman
          Joint Committee on Taxation

          Each year, the Internal Revenue Service (IRS) abates tens of billions of
                                                            1
          dollars in tax, penalty, and interest assessments. That is, IRS reduces
          these assessments on taxpayers’ accounts. Abatements are important
          because they can correct tax, penalty, and interest amounts that have been
          overassessed due to errors by IRS or taxpayers. For some types of
          abatements, however, the assessments are correct, but IRS abates them for
          various other reasons. For example, penalties are abated for taxpayers
          who can prove they had reasonably relied on written advice from IRS.

          Because IRS has not developed comprehensive information on the number
          and amount of various types of past abatements, you asked us to provide
          such information, which might help the Committee fulfill a requirement in
          the IRS Restructuring and Reform Act of 1998 that it report on the
          administration of penalty and interest assessments by July 22, 1999. On the
          basis of your February 2, 1999, request, our objectives were to determine
          for individual and business tax returns (1) the number and amount of
          various types of tax, penalty, and interest abatements made during fiscal
          years 1995 through 1998 and (2) selected characteristics of the abatements,
          such as the tax years of abated assessments, taxpayers’ use of paid tax
          preparers, and IRS’ actions--such as audit or collection actions--before
                                2
          abating assessments.

          Our analysis of IRS records on individual and business abatements in fiscal
Results   years 1995 through 1998 showed that the number and amount of
          abatements of tax, penalty, and interest assessments stayed fairly
          constant. Each year, IRS abated, on average, about 10 million assessments
          worth about $30 billion. (See tables in app. I; unless noted otherwise,


          1
           Taxpayers essentially assess themselves when they voluntarily report the amount of taxes owed on a
          tax return. IRS may assess additional taxes owed, as well as penalty and interest amounts, as a result
          of an enforcement program, such as auditing tax returns that appear to have misreported income,
          deductions, credits, exemptions, or other tax issues.
          2
           As also requested in this letter, we are developing a separate report on IRS’ basic abatement processes
          and any IRS efforts to improve these processes.




          Page 1                                           GAO/GGD-99-77 IRS’ Abatement of Assessments
  B-280532




  tables in the appendixes include abatements of tax, penalty, and interest
  assessments.)

  To illustrate the types of analysis we did on individual and business
  abatements, for just the individual taxpayers, IRS abated 7.1 million
                                   3
  assessments in fiscal year 1998 —2.5 million tax, 2.4 million penalty, and
  2.2 million interest assessments. These abatements totaled about $7.8
  billion—$5.5 billion in tax, $1.5 billion in penalty, and $0.8 billion in
                         4
  interest assessments. For the 2.4 million penalty abatements, 1.4 million
  were failure-to-pay penalties. Of the $1.5 billion in penalty abatements,
                                                         5
  $676 million were miscellaneous civil tax penalties.

  A variety of characteristics were associated with the abatements for
  individuals and businesses during fiscal years 1995-98. For example, the 7.1
  million individual abatements in fiscal year 1998 were associated with the
  following characteristics:

• About 80 percent of the 7.1 million abatements (as well as the abated
  amounts) involved individuals who predominantly reported nonbusiness
  income, such as wages, rather than business income from self-
  employment.
• The 7.1 million abatements were associated with 4.3 million filed returns.
  Of these returns, 52 percent were joint returns and 54 percent used a paid
  preparer.
• Of the 7.1 million abatements, about 19 percent were associated with a tax
  return with an additional assessment after the one originally reported and
  about 78 percent were associated with a previous collection action.
• Of the 7.1 million abatements, 64 percent involved assessments for tax
  years after 1995, while 9 percent involved assessments for tax years before
  1992.

  Appendixes II and III provide detailed information for all 4 years on the
  number and amount of abatements for individual and business returns.
  Appendixes IV and V provide information about the characteristics of
  abatements for individual and business returns during fiscal years 1995

  3
   It is important to recognize that an individual taxpayer could receive multiple abatements in a fiscal
  year, such as when an abated tax assessment also leads to abated penalty and interest assessments.
  4
   IRS data extracts that we used did not allow us to link specific abatements to related assessments. As
  a result, we could not determine how much of the various types of assessments had been abated.
  5
   These miscellaneous penalties include the trust fund penalty that applies when a business does not
  properly deposit its employment taxes. IRS is to assess the penalty against all responsible individuals
  associated with that business until these taxes are deposited.




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               B-280532




               through 1998. Appendixes VI and VII provide information about
               abatements on tax returns associated with one of two IRS activities—
               creating substitute returns for nonfilers and making additional
               assessments.

               Section 6404 of the Internal Revenue Code (IRC) authorizes IRS to abate
Background     an assessment under certain conditions. For example, IRS can abate an
               erroneous assessment, which can be caused by either IRS or the taxpayer.
               IRS does not have automated data available on the root causes of these
               errors. Some examples of errors follow.

             • A taxpayer made an error on the original return, such as underreporting a
               deduction, and filed an amended return. If IRS verified the correctness of
               the amended return, it would abate the overassessed portion of the
               original tax reported.
             • In an audit, IRS did not find adequate support for certain deductions and
               ultimately assessed additional taxes. Afterward, the taxpayer challenged
                                                                                          6
               this assessment by providing documentation to support the deductions. If
               IRS found the documentation valid, IRS would abate the overassessment.
             • IRS might assess taxes on the basis of evidence that IRS had received
               about income paid to an individual who had not filed an income tax return.
               IRS would then notify the taxpayer of the assessment. If the taxpayer then
               filed a return with a lower tax liability and IRS confirmed this new liability,
               IRS would abate any overassessment.

               In addition, IRS can abate unnecessary assessments of the correct amount
               in special situations. That is, IRS has made the assessment multiple times,
               knowing that any unnecessary assessments will eventually be abated. In
               these situations, IRS knows that a tax is owed from among multiple
               taxpayers. IRS would assess each of these taxpayers and then abate any
               unnecessary assessments after the tax is paid.

               IRS also abates correct assessments for other reasons. For example, IRS
               abates certain penalties when a taxpayer provides a reasonable cause
               (such as a nonfinancial hardship, or incorrect IRS written advice) for not
               meeting a tax responsibility, such as paying an assessment. Or, a taxpayer
               6
                Before IRS assesses additional taxes that an audit recommends, a taxpayer can dispute the
               recommended assessment through IRS’ Office of Appeals. Also, upon receiving notice of a proposed
               assessment, a taxpayer has 90 days (150 days if outside the United States) to file a petition with the Tax
               Court for a redetermination of the proposed adjustment. Some taxpayers, for whatever reasons,
               bypass these options, which result in the recommended taxes being assessed, along with any related
               penalty and interest amounts.




               Page 3                                            GAO/GGD-99-77 IRS’ Abatement of Assessments
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              can claim a deduction by carrying back net operating losses incurred in
              other tax years to reduce the liability for a previous tax year. And IRS may
              abate an assessment for unpaid taxes that involved the correct amount but
              was made after the time period allowed for assessing additional tax
              liabilities.

              Regardless of the reason, when IRS abates a tax or penalty assessment, its
              computers generally abate any other associated penalty and interest
              assessments. IRS records data on abatements (as well as other tax activity,
              such as assessments and payments) in a taxpayer’s account on IRS’
              masterfile. IRS maintains both an individual and a business masterfile.

              For both objectives, we requested data extracts from IRS’ individual and
Scope and     business masterfiles to identify the abatements received during fiscal years
Methodology   1995 through 1998 by individuals and businesses. These IRS data identified
              the number and dollar amounts for each type of tax, penalty, or interest
              abatement. The data included specific characteristics about each
              abatement, such as the type and year of the tax return, the income level
              and filing status of the taxpayer, the taxpayer’s use of a paid preparer, and
              the IRS actions taken on the tax return that had an assessment abated,
              such as an audit or collection action.

              The masterfile data extracts we received had 43 million abatement
              transactions that totaled $120 billion for the 4 fiscal years. Using the
              results of our various analyses, we created a series of tables on the number
              and amount of abatements as well as the characteristics associated with
              the abatements. The tables for these 4 fiscal years are provided in
                                                       7
              appendixes I through VII to this report.

              We did not attempt to verify the reliability of the masterfile data. However,
              we talked to IRS National Office officials on data abnormalities we found.
              To the extent that these abnormalities affected our analyses, we identified
              them in footnotes to the tables in this report. Further, IRS’ data extracts
              did not allow us to link specific abatements to the related assessments in
              various years. As a result, we could not determine how much of the
              various types of assessments had been abated, particularly by year. Nor


              7
               We also did limited analyses on transactions that we did not include in our abatement totals but that
              reduced the taxes owed. In general, these transactions forgave or eliminated an unpaid tax amount
              even though the assessment was correct. These transactions included eliminating a tax debt because
              the statutory period (generally 10 years) for collecting the debt had expired or because the taxpayer
              had gone through bankruptcy. Our analyses of these “other” transactions are separate from our
              abatement analyses and are reported in app. VIII.




              Page 4                                           GAO/GGD-99-77 IRS’ Abatement of Assessments
                  B-280532




                  could we analyze why an assessment was abated or whether the
                  abatement was valid.

                  We performed our audit at IRS headquarters in Washington, D.C., and IRS’
                  Kansas City Service Center. Our work was done between January and May
                  1999 in accordance with generally accepted government auditing
                  standards.

                  We requested comments on a draft of this report from the Commissioner
Agency Comments   of Internal Revenue. On May 21, 1999, we received written comments from
                  IRS’ Chief Operations Officer. (See app. IX.)

                  IRS’ letter indicated an agreement with our draft report. The letter said
                  that the statistical tables in our report were consistent with IRS’ abatement
                  data. Further, the letter commented that the report provides good
                  information on aspects of abatements.

                  We are sending copies of this report to Representative Charles B. Rangel,
                  Ranking Minority Member, House Committee on Ways and Means, and
                  Senator Daniel P. Moynihan, Ranking Minority Member, Senate Committee
                  on Finance. We are also sending copies to the Honorable Jacob Lew,
                  Director, Office of Management and Budget; the Honorable Robert E.
                  Rubin, Secretary of the Treasury; the Honorable Charles O. Rossotti,
                  Commissioner of Internal Revenue; and other interested parties. We will
                  also send copies to those who request them.

                  The major contributors to this report are listed in appendix X. If you or
                  your staff have any questions concerning this report, please contact me or
                  Tom Short, Assistant Director, on (202) 512-9110.




                  Cornelia M. Ashby
                  Associate Director, Tax Policy and
                    Administration Issues




                  Page 5                               GAO/GGD-99-77 IRS’ Abatement of Assessments
Contents



Letter                                                                    1


Appendix I                                                               16

Overview of
Abatements of Tax,
Penalty, and Interest
Assessments on
Individual and
Business Returns
Appendix II                                                              18

Abatements of Tax,
Penalty, and Interest
Assessments on
Individual Returns
Appendix III                                                             23

Abatements of Tax,
Penalty, and Interest
Assessments on
Business Returns
Appendix IV                                                              29

Abatements of Penalty
and Interest
Assessments on
Individual and
Business Tax Returns




                        Page 6   GAO/GGD-99-77 IRS’ Abatement of Assessments
                         Contents




Appendix V                                                                  72

Abatements of Tax
Assessments on
Individual and
Business Tax Returns
Appendix VI                                                                 77

Abatements
Associated With Tax,
Penalty, and Interest
Assessments on
Substitute for Returns
Appendix VII                                                                79

Abatements of Tax,
Penalty, and Interest
Assessments
Associated With Tax
on Original Return
Appendix VIII                                                               84

Other Types of
Abatements
Associated With
Unpaid Assessments
on Individual and
Business Tax Returns
Appendix IX                                                                 86

Comments From the
Internal Revenue
Service
                         Page 7     GAO/GGD-99-77 IRS’ Abatement of Assessments
                        Contents




Appendix X                                                                                         87

Major Contributors to
This Report
Tables                  Table I.1: Number and Amount of Abatements by Fiscal                       16
                          Year of Abatement–Individual and Business Tax
                          Returns
                        Table I.2: Number and Amount of Abatements by Type of                      16
                          Return and Fiscal Year of Abatement–Individual and
                          Business Tax Returns
                        Table I.3: Number of Returns and Taxpayers Receiving                       17
                          Abatements by Fiscal Year of Abatement–Individual
                          and Business Tax Returns
                        Table II.1: Number and Amount of Abatements by Fiscal                      18
                          Year of Abatement–Individual Tax Returns
                        Table II.2: Number and Amount of Abatements by Income                      18
                          Level and Fiscal Year of Abatement–Individual Tax
                          Returns
                        Table II.3: Number of Abatements by Tax Year and Fiscal                    19
                          Year of Abatement–Individual Tax Returns
                        Table II.4: Amount of Abatements by Tax Year and Fiscal                    19
                          Year of Abatement–Individual Tax Returns
                        Table II.5: Distribution of Returns With Abatements by                     20
                          Filing Status and Fiscal Year of Abatement–Individual
                          Tax Returns
                        Table II.6: Distribution of Returns With Abatements by                     20
                          Selected Characteristic and Fiscal Year of Abatement–
                          Individual Tax Returns
                        Table II.7: Distribution of Abatements on Returns                          21
                          Associated With Selected IRS Activity by Fiscal Year of
                          Abatement–Individual Tax Returns
                        Table II.8: Distribution of Amount of Abatements on                        22
                          Returns Associated With Selected IRS Activity by
                          Fiscal Year of Abatement–Individual Tax Returns
                        Table III.1: Number and Amount of Abatements by Fiscal                     23
                          Year of Abatement–Business Tax Returns
                        Table III.2: Number and Amount of Abatements by Fiscal                     23
                          Year of Abatement–Corporate Income Tax Returns
                        Table III.3: Number and Amount of Abatements by Fiscal                     24
                          Year of Abatement–Employment Tax Returns



                        Page 8                             GAO/GGD-99-77 IRS’ Abatement of Assessments
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Table III.4: Number and Amount of Abatements by Fiscal                    24
  Year of Abatement–Other Business Tax Returns
Table III.5: Number and Amount of Abatements by Asset                     25
  Size and Fiscal Year of Abatement–Corporate Income
  Tax Returns
Table III.6: Number of Abatements by Tax Year and                         26
  Fiscal Year of Abatement–Business Tax Returns
Table III.7: Amount of Abatements by Tax Year and Fiscal                  26
  Year of Abatement–Business Tax Returns
Table III.8: Distribution of Abatements on Returns With                   27
  Selected IRS Activity by Fiscal Year of Abatement–
  Business Tax Returns
Table III.9: Distribution of Amounts of Abatements on                     28
  Returns With Selected IRS Activity by Fiscal Year of
  Abatement–Business Tax Returns
Table IV.1: Number and Percent of Penalty and Interest                    29
  Abatements by Fiscal Year of Abatement—Individual
  and Business Tax Returns
Table IV.2: Amount and Percent of Penalty and Interest                    30
  Abatements by Fiscal Year of Abatement—Individual
  and Business Tax Returns
Table IV.3: Percent of Penalty and Interest Abatements                    31
  Computed Manually and by Computer by Fiscal Year of
  Abatement—Individual and Business Tax Returns
Table IV.4: Percent of Amount of Penalty and Interest                     32
  Abatements Computed Manually and by Computer by
  Fiscal Year of Abatement—Individual and Business
  Tax Returns
Table IV.5: Number and Percent of Penalty and Interest                    33
  Abatements by Fiscal Year of Abatement—Individual
  Tax Returns
Table IV.6: Amount and Percent of Penalty and Interest                    34
  Abatements by Fiscal Year of Abatement—Individual
  Tax Returns
Table IV.7: Percent of Penalty and Interest Abatements                    35
  Computed Manually and by Computer by Fiscal Year of
  Abatement—Individual Tax Returns
Table IV.8: Percent of Amount of Penalty and Interest                     36
  Abatements Computed Manually and by Computer by
  Fiscal Year of Abatement—Individual Tax Returns
Table IV.9: Number and Amount of Penalty Abatements                       37
  by Income Level and by Fiscal Year of Abatement—
  Individual Tax Returns



Page 9                            GAO/GGD-99-77 IRS’ Abatement of Assessments
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Table IV.10: Number and Amount of Interest Abatements                      38
  by Income Level and by Fiscal Year of Abatement—
  Individual Tax Returns
Table IV.11: Number of Penalty Abatements by Tax Year                      39
  and Fiscal Year of Abatement—Individual Tax Returns
Table IV.12: Amount of Penalty Abatements by Tax Year                      39
  and Fiscal Year of Abatement—Individual Tax Returns
Table IV.13: Number of Interest Abatements by Tax Year                     40
  and Fiscal Year of Abatement—Individual Tax Returns
Table IV.14: Amount of Interest Abatements by Tax Year                     40
  and Fiscal Year of Abatement—Individual Tax Returns
Table IV.15: Distribution of Returns With Penalty and                      41
  Interest Abatements by Filing Status and Fiscal Year of
  Abatement—Individual Tax Returns
Table IV.16: Distribution of Returns With Penalty and                      41
  Interest Abatements by Selected Characteristic and
  Fiscal Year of Abatement—Individual Tax Returns
Table IV.17: Distribution of Returns With Penalty                          42
  Abatements by Selected Characteristic and Fiscal Year
  of Abatement—Individual Tax Returns
Table IV.18: Distribution of Returns With Interest                         42
  Abatements by Selected Characteristic and Fiscal Year
  of Abatement—Individual Tax Returns
Table IV.19: Distribution of Returns With Failure to File                  43
  Penalty Abatements by Selected Characteristic and
  Fiscal Year of Abatement—Individual Tax Returns
Table IV.20: Distribution of Returns With Estimated                        43
  Payment Penalty Abatements by Selected
  Characteristic and Fiscal Year of Abatement—
  Individual Tax Returns
Table IV.21: Distribution of Returns With Failure to Pay                   43
  Penalty Abatements by Selected Characteristic and
  Fiscal Year of Abatement—Individual Tax Returns
Table IV.22: Distribution of Number of Penalty and                         44
  Interest Abatements on Returns Associated With
  Selected IRS Activity by Fiscal Year of Abatement—
  Individual Tax Returns
Table IV.23: Distribution of Amount of Penalty and                         45
  Interest Abatements on Returns Associated With
  Selected IRS Activity by Fiscal Year of Abatement—
  Individual Tax Returns




Page 10                            GAO/GGD-99-77 IRS’ Abatement of Assessments
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Table IV.24: Distribution of Number of Penalty                            46
  Abatements on Returns Associated With Selected IRS
  Activity by Fiscal Year of Abatement—Individual Tax
  Returns
Table IV.25: Distribution of Amount of Penalty                            47
  Abatements on Returns Associated With Selected IRS
  Activity by Fiscal Year of Abatement—Individual Tax
  Returns
Table IV.26: Distribution of Number of Interest                           48
  Abatements on Returns Associated With Selected IRS
  Activity by Fiscal Year of Abatement—Individual Tax
  Returns
Table IV.27: Distribution of Amount of Interest                           49
  Abatements on Returns Associated With Selected IRS
  Activity by Fiscal Year of Abatement—Individual Tax
  Returns
Table IV.28: Number and Percent of Penalty and Interest                   50
  Abatements by Fiscal Year of Abatement—Business
  Tax Returns
Table IV.29: Amount and Percent of Penalty and Interest                   51
  Abatements by Fiscal Year of Abatement–Business Tax
  Returns
Table IV.30: Percent of Penalty and Interest Abatements                   52
  Computed Manually and by Computer by Fiscal Year of
  Abatement—Business Tax Returns
Table IV.31: Percent of Amount of Penalty and Interest                    53
  Abatements Computed Manually and by Computer by
  Fiscal Year of Abatement—Business Tax Returns
Table IV.32: Number and Percent of Penalty and Interest                   54
  Abatements by Fiscal Year of Abatement—Corporate
  Income Tax Returns
Table IV.33: Amount and Percent of Penalty and Interest                   55
  Abatements by Fiscal Year of Abatement—Corporate
  Income Tax Returns
Table IV.34: Number and Percent of Penalty and Interest                   56
  Abatements by Fiscal Year of Abatements—
  Employment Tax Returns
Table IV.35: Amount and Percent of Penalty and Interest                   57
  Abatements by Fiscal Year of Abatement—
  Employment Tax Returns
Table IV.36: Number and Percent of Penalty and Interest                   58
  Abatements by Fiscal Year of Abatement—Other
  Business Tax Returns



Page 11                           GAO/GGD-99-77 IRS’ Abatement of Assessments
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Table IV.37: Amount and Percent of Penalty and Interest                   59
  Abatements by Fiscal Year of Abatement–Other
  Business Tax Returns
Table IV.38: Number and Amount of Penalty Abatements                      60
  by Asset Size and Fiscal Year of Abatement—
  Corporate Income Tax Returns
Table IV.39: Number and Amount of Interest Abatements                     61
  by Asset Size and Fiscal Year of Abatement–Corporate
  Income Tax Returns
Table IV.40: Number of Penalty Abatements by Tax Year                     62
  and Fiscal Year of Abatement—Business Tax Returns
Table IV.41: Amount of Penalty Abatements by Tax Year                     62
  and Fiscal Year of Abatement—Business Tax Returns
Table IV.42: Number of Interest Abatements by Tax Year                    63
  and Fiscal Year of Abatements—Business Tax Returns
Table IV.43: Amount of Interest Abatements by Tax Year                    63
  and Fiscal Year of Abatement—Business Tax Returns
Table IV.44: Number of Penalty Abatements by Tax Year                     64
  and Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table IV.45: Amount of Penalty Abatements by Tax Year                     64
  and Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table IV.46: Number of Interest Abatements by Tax Year                    65
  and Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table IV.47: Amount of Interest Abatements by Tax Year                    65
  and Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table IV.48: Number of Penalty Abatements by Tax Year                     66
  and Fiscal Year of Abatement—Employment Tax
  Returns
Table IV.49: Amount of Penalty Abatements by Tax Year                     67
  and Fiscal Year of Abatement—Employment Tax
  Returns
Table IV.50: Number of Interest Abatements by Tax Year                    68
  and Fiscal Year of Abatement—Employment Tax
  Returns
Table IV.51: Amount of Interest Abatements by Tax Year                    69
  and Fiscal Year of Abatement—Employment Tax
  Returns




Page 12                           GAO/GGD-99-77 IRS’ Abatement of Assessments
Contents




Table IV.52: Number of Penalty Abatements by Tax Year                    70
  and Fiscal Year of Abatement—Other Business Tax
  Returns
Table IV.53: Amount of Penalty Abatements by Tax Year                    70
  and Fiscal Year of Abatement—Other Business Tax
  Returns
Table IV.54: Number of Interest Abatements by Tax Year                   71
  and Fiscal Year of Abatement—Other Business Tax
  Returns
Table IV.55: Amount of Interest Abatements by Tax Year                   71
  and Fiscal Year of Abatement—Other Business Tax
  Returns
Table V.1: Number and Distribution of Tax Abatements                     72
  by Fiscal Year of Abatement—Individual and Business
  Tax Returns
Table V.2: Amount and Distribution of Tax Abatements                     72
  by Fiscal Year of Abatement—Individual and Business
  Tax Returns
Table V.3: Number and Amount of Tax Abatements by                        73
  Fiscal Year of Abatement—Individual Tax Return
Table V.4: Number and Amount of Tax Abatements by                        73
  Fiscal Year of Abatement—Business Tax Returns
Table V.5: Number and Amount of Tax Abatements by                        74
  Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table V.6: Number and Amount of Non-Examination Tax                      74
  Abatements by Asset Size and Fiscal Year of
  Abatement—Corporate Income Tax Returns
Table V.7: Number and Amount of Examination Tax                          75
  Abatements by Asset Size and Fiscal Year of
  Abatement—Corporate Income Tax Returns
Table V.8: Number and Amount of Tax Abatements Due                       76
  to Net Operating Loss Carryback by Asset Size and
  Fiscal Year of Abatement—Corporate Income Tax
  Returns
Table VI.1: Number and Amount of Abatements                              77
  Associated With Assessments on Substitute for Returns
  by Fiscal Year of Abatement–Individual and Business
  Tax Returns
Table VI.2: Number and Amount of Abatements                              77
  Associated With Assessments on Substitute for Returns
  by Fiscal Year of Abatement–Individual Tax Returns




Page 13                          GAO/GGD-99-77 IRS’ Abatement of Assessments
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Table VI.3: Number of Abatements Associated With                         78
  Assessments on Substitute for Returns by Tax Year and
  Fiscal Year of Abatement–Individual Tax Returns
Table VI.4: Amount of Abatements Associated With                         78
  Assessments on Substitute for Returns by Tax Year and
  Fiscal Year of Abatement–Individual Tax Returns
Table VII.1: Number and Amount of Abatements                             79
  Associated With Tax on Original Return by Fiscal Year
  of Abatement–Individual and Business Tax Returns
Table VII.2: Number and Amount of Abatements                             79
  Associated With Tax on Original Return by Fiscal Year
  of Abatement–Individual Tax Returns
Table VII.3: Number and Amount of Abatements                             80
  Associated With Tax on Original Return by Income
  Level and Fiscal Year of Abatement–Individual Tax
  Returns
Table VII.4: Number of Abatements Associated With Tax                    81
  on Original Return by Tax Year and Fiscal Year of
  Abatement–Individual Tax Returns
Table VII.5: Amount of Abatements Associated With Tax                    81
  on Original Return by Tax Year and Fiscal Year of
  Abatement–Individual Tax Returns
Table VII.6: Distribution of Returns With Abatements                     82
  Associated With Tax on Original Return by Filing
  Status and Fiscal Year of Abatement–Individual Tax
  Returns
Table VII.7: Distribution of Returns With Abatements                     82
  Associated With Tax on Original Return by Selected
  Characteristic and Fiscal Year of Abatement–
  IndividualTax Returns
Table VII.8: Distribution of Number of Abatements                        83
  Associated With Tax on Original Return by Selected
  IRS Activity and Fiscal Year of Abatement–Individual
  Tax Returns
Table VII.9: Distribution of Amount of Abatements                        83
  Associated With Tax on Original Return by Selected
  IRS Activity and Fiscal Year of Abatement–Individual
  Tax Returns
Table VIII.1: Number and Amount of Other Types of                        84
  Abatements Associated With Unpaid Assessments–
  Individual and Business Tax Returns




Page 14                          GAO/GGD-99-77 IRS’ Abatement of Assessments
Contents




Table VIII.2: Number and Amount of Other Types of                               85
  Abatements Associated With Unpaid Assessments–
  Individual Tax Returns
Table VIII.3: Number and Amount of Other Types of                               85
  Abatements Associated With Unpaid Assessments–
  Business Tax Returns




Abbreviations

IRC          Internal Revenue Code
IRS          Internal Revenue Service




Page 15                                 GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix I

Overview of Abatements of Tax, Penalty, and
Interest Assessments on Individual and
Business Returns

Table I.1: Number and Amount of Abatements by Fiscal Year of Abatement–Individual and Business Tax Returns
Dollars in Millions                                       Abatement type
                                        Tax                   Penalty                Interest                Total
Fiscal year of abatement          Number Amount          Number Amount          Number       Amount     Number Amount
1995                             2,641,271 $20,820      4,386,838     $4,925   3,074,732       $2,647 10,102,841 $28,393
1996                             2,443,001   22,489     4,390,416      6,009   3,216,721        3,195 10,050,138   31,692
1997                             3,431,358   22,119     4,251,869      5,540   3,507,147        2,788 11,190,374   30,447
1998                             3,098,672   22,240     4,705,481      4,795   3,532,125        2,137 11,336,278   29,172
Total                           11,614,302 $87,668 17,734,604 $21,269 13,330,725              $10,767 42,679,631 $119,704
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




Table I.2: Number and Amount of Abatements by Type of Return and Fiscal Year of Abatement–Individual and Business Tax
Returns
Dollars in Millions                               Fiscal year of abatement
                              1995               1996                  1997              1998                Total
Type of return            Number Amount      Number Amount         Number Amount     Number Amount       Number Amount
Individual income
tax                      5,559,952 $6,773   5,410,556 $6,848      6,840,701 $7,433  7,088,933 $7,676 24,900,142 $28,731
Business
Corporate income tax       430,927 $12,753    435,554 $15,325       430,671 $13,142   432,161 $12,649  1,729,313 $53,870
                 a
Employment tax           3,499,256 4,783    3,272,151 5,693       3,145,880 6,472   3,173,406 5,812 13,090,693 22,760
Estate tax and gift tax     26,838     536     30,170     590        33,940     730    37,942     711    128,890    2,568
Excise tax                  39,698     586     31,834     197        28,035     346    26,477     343    126,044    1,471
                    b
Other business tax         546,170 2,962      869,873 3,039         711,147 2,323     577,359 1,980    2,704,549 10,303
 Subtotal                4,542,889 $21,619  4,639,582 $24,844     4,349,673 $23,014 4,247,345 $21,496 17,779,489 $90,973
Total                   10,102,841 $28,393 10,050,138 $31,692 11,190,374 $30,447 11,336,278 $29,172 42,679,631 $119,704
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                         Includes abatements on Form 940, Employer's Annual Federal Unemployment Tax Return; Form
                                         941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal Return for
                                         Household Employees (for tax periods prior to the requirement that these taxes be reported on
                                         Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         b
                                          Includes numerous types of returns, such as partnerships, fiduciaries, and returns used by taxpayers
                                         to report withholdings from revenues paid to nonemployees.
                                         Source: GAO compilation of IRS data.




                                         Page 16                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix I
                                          Overview of Abatements of Tax, Penalty, and Interest Assessments on Individual and
                                          Business Returns




Table I.3: Number of Returns and
Taxpayers Receiving Abatements by         Dollars in Millions                                Number of                          Amount of
Fiscal Year of Abatement–Individual and   Fiscal year of abatement                Returns    Taxpayers Abatements              abatements
Business Tax Returns                      Individuals
                                          1995                                3,199,052       2,738,481        5,559,952             $6,773
                                          1996                                3,097,806       2,677,106        5,410,556              6,848
                                          1997                                4,163,197       3,739,809        6,840,701              7,433
                                          1998                                4,333,950       3,881,536        7,088,933              7,676
                                          Total–individuals                  14,794,005      13,036,932       24,900,142            $28,731
                                          Businesses
                                          1995                                   2,198,715     1,535,164       4,542,889            $21,619
                                          1996                                   2,235,219     1,622,569       4,639,582             24,844
                                          1997                                   2,062,189     1,506,461       4,349,673             23,014
                                          1998                                   1,994,723     1,454,992       4,247,345             21,496
                                          Total–businesses                       8,490,846     6,119,186      17,779,489            $90,973
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                          include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                          master file.
                                          Amounts may not sum to totals because of rounding.
                                          Source: GAO compilation of IRS data.




                                          Page 17                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix II

Abatements of Tax, Penalty, and Interest
Assessments on Individual Returns


Table II.1: Number and Amount of Abatements by Fiscal Year of Abatement–Individual Tax Returns
Dollars in Millions                                         Abatement type
                                           Tax                  Penalty              Interest                              Total
Fiscal year of abatement              Number Amount           Number Amount        Number Amount                       Number Amount
1995                                1,906,198 $4,392         1,955,572 $1,454    1,698,182    $927                    5,559,952  $6,773
1996                                1,794,074    4,699       1,898,792 1,330     1,717,690     820                    5,410,556   6,848
1997                                2,848,535    5,266       1,888,977 1,352     2,103,189     816                    6,840,701   7,433
1998                                2,548,559    5,468       2,373,303 1,452     2,167,071     756                    7,088,933   7,676
Total                               9,097,366 $19,824        8,116,644 $5,588    7,686,132 $3,319                    24,900,142 $28,731
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.



Table II.2: Number and Amount of Abatements by Income Level and Fiscal Year of Abatement–Individual Tax Returns
Dollars in Millions                                  Fiscal year of abatement
Income level reported on           1995             1996                  1997             1998               Total
original return               Number Amount    Number Amount         Number Amount    Number Amount       Number Amount
Individual nonbusiness
1040A TPI<$25,000            1,481,991 $1,492 1,591,084 $1,663 1,823,081 $1,904 1,672,770 $1,849        6,568,926 $6,908
Non1040A TPI<$25,000           458,750    213   465,754      115     520,143     155   556,092    149   2,000,739     633
TPI $25,000<$50,000            980,674    450   942,286      490 1,498,650       662 1,542,657    708   4,964,267   2,311
TPI $50,000<$100,000           766,314    647   758,053      517 1,255,983       832 1,261,964    791   4,042,314   2,788
TPI $100,000 or more           640,105 1,929    575,294 2,124        594,952   2,253   678,185 2,403    2,488,536   8,710
 Subtotal                    4,327,834 $4,732 4,332,471 $4,911 5,692,809 $5,807 5,711,668 $5,900 20,064,782 $21,350
                    a
Individual business
C-TGR < $25,000                213,312    $75   196,803      $83     226,007     $46   274,196   $140     910,318   $344
C-TGR $25,000<$100,000         384,942    320   338,061      226     372,204     188   463,272    269   1,558,479   1,003
C-TGR $100,000 or more         295,709    697   262,473      687     253,573     558   316,995    612   1,128,750   2,554
F-TGR<$100,000                  34,198     22    30,081       15      23,220      13    22,569     12     110,068      63
F-TGR $100,000 or more          43,220     86    37,281      103      29,780      90    27,690     70     137,971     350
 Subtotal                      971,381 $1,200   864,699 $1,113       904,784    $896 1,104,722 $1,104   3,845,586 $4,314
                           b
Income level not available     260,737  $841    213,386     $824     243,108    $730   272,543   $672     989,774 $3,067
Total                        5,559,952 $6,773 5,410,556 $6,848 6,840,701 $7,433 7,088,933 $7,676 24,900,142 $28,731
                                         Legend
                                         1040A = Nonbusiness returns filed by individuals.
                                         TPI = Total positive income (income reported as a positive on tax return tables)
                                         C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts
                                         F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Returns with Schedules C or F may be categorized as nonbusiness rather than business if the
                                         reported primary source of income was wages, investments, and other nonbusiness income.
                                         b
                                         Income level was not always available on certain penalties.
                                         Source: GAO compilation of IRS data.




                                         Page 18                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix II
                                          Abatements of Tax, Penalty, and Interest Assessments on Individual Returns




Table II.3: Number of Abatements by Tax
Year and Fiscal Year of Abatement–                                                   Fiscal year of abatement
Individual Tax Returns                    Tax year of return                    1995         1996         1997     1998      Total
                                                      a
                                          Before 1980                          7,896        4,393        2,114     1,971    16,374
                                          1980-84                            144,898       75,544       47,387    39,141   306,970
                                          1985-89                            812,576      495,186      348,975   310,899 1,967,636
                                          1990                               384,622      227,516      163,028   132,451   907,617
                                          1991                               710,487      351,250      211,233   164,267 1,437,237
                                          1992                               754,631      749,391      407,611   240,113 2,151,746
                                          1993                             1,360,075      808,455      606,640   364,265 3,139,435
                                          1994                             1,383,326    1,362,464      633,248   470,812 3,849,850
                                          1995                                 1,441    1,334,059 1,432,095      828,471 3,596,066
                                                                                   b
                                          1996                                              2,298 2,985,836 2,028,495 5,016,629
                                                                                   b             b
                                          1997                                                           2,534 2,505,464 2,507,998
                                                                                   b             b            b
                                          1998                                                                     2,584     2,584
                                          Total                            5,559,952    5,410,556 6,840,701 7,088,933 24,900,142
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Totals are based on abatements, not returns.
                                          Amounts may not sum to totals because of rounding.
                                          a
                                          The earliest tax year is 1962.
                                          b
                                          Does not apply.
                                          Source: GAO compilation of IRS data.


Table II.4: Amount of Abatements by Tax
Year and Fiscal Year of Abatement–        Dollars in Millions                          Fiscal year of abatement
Individual Tax Returns                    Tax year of return                  1995            1996         1997          1998          Total
                                                      a
                                          Before 1980                          $119            $66          $37            $27          $249
                                          1980-84                               604            349          335            197         1,486
                                          1985-89                             1,699          1,327          842            630         4,498
                                          1990                                  794            471          342            255         1,863
                                          1991                                1,131            770          408            330         2,639
                                          1992                                  759          1,272          845            444         3,320
                                          1993                                  993            944        1,277            898         4,113
                                          1994                                  672            986          796          1,044         3,499
                                          1995                                    1            661        1,101            891         2,655
                                                                                   b
                                          1996                                                   1        1,449          1,356         2,805
                                                                                   b              b
                                          1997                                                                1          1,604         1,605
                                                                                   b              b              b
                                          1998                                                                               1             1
                                          Total                              $6,773        $6,848         $7,433        $7,676       $28,731
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Totals are based on abatement amounts, not return amounts.
                                          Amounts may not sum to totals because of rounding.
                                          a
                                          The earliest tax year is 1962.
                                          b
                                          Does not apply.
                                          Source: GAO compilation of IRS data.




                                          Page 19                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix II
                                           Abatements of Tax, Penalty, and Interest Assessments on Individual Returns




Table II.5: Distribution of Returns With Abatements by Filing Status and Fiscal Year of Abatement–Individual Tax Returns
                                                                          Filing status
                                Number of              Married, filing Married, filing     Head of    Widow(er) with
Fiscal year of abatement           returns    Single          jointly      separately household dependent child         Total
                                                     a                a                a           a                  a       a
1995                             3,199,052
                                                     a                a                a           a                  a       a
1996                             3,097,806
1997                             4,163,197      25.3%            54.5%             3.8%       16.4%               0.1% 100%
1998                             4,333,950      28.2             52.4              4.3        15.0                0.1    100
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages may not sum to 100 because of rounding.
                                           a
                                           IRS was unable to reconstruct the filing status data from its historical files within the time frames of
                                           our review.
                                           Source: GAO compilation of IRS data.




Table II.6: Distribution of Returns With Abatements by Selected Characteristic and Fiscal Year of Abatement–Individual Tax
Returns
                                                                       Selected characteristic
Fiscal year of                Number of    Primary taxpayer     Substitute for   Paid preparer on Earned income credit on
abatement                        returns        over age 65   return prepared       original return           original return
1995                           3,199,052               10.9%               7.5%                57.5%                      4.1%
1996                           3,097,806               10.8                8.7                 55.8                       4.6
1997                           4,163,197                8.6                5.9                 51.1                       4.4
1998                           4,333,950                8.9                4.4                 53.9                       5.2
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




                                           Page 20                                            GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix II
                                          Abatements of Tax, Penalty, and Interest Assessments on Individual Returns




Table II.7: Distribution of Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of Abatement–Individual
Tax Returns
                                                                                        a
                                                                  Selected IRS activity
Fiscal year of      Number of      Audit Substitute Additional tax d        Offer-in-                               Criminal
                                         b            c                               e           f            g             h
abatement          abatements indicator    for return   assessments    compromise Collection Litigation investigation
1995                  5,559,952      9.7%        13.6%          25.8%            1.7%        76.7%         5.4%          0.2%
1996                  5,410,556     10.8         15.6           27.8             0.8         78.4          3.3           0.1
1997                  6,840,701      8.7         10.8           20.6             0.2         75.0          1.8           0.1
1998                  7,088,933      9.6          7.6           18.6             0.1         78.3          2.2           0.1
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Percentages should not be totaled because abatements could occur on returns with more than one
                                          selected IRS activity.
                                          a
                                              IRS activity that occurred before the abatement.
                                          b
                                           Includes audits that are still open and audits closed with a change in tax assessments or no change
                                          in tax assessments.
                                          c
                                              Return prepared by IRS based on third party information of income paid to a nonfiler.
                                          d
                                          IRS makes additional tax assessments after the original tax assessment because of an IRS
                                          enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                          e
                                          IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                          would pay.
                                          f
                                          Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                          on full paid returns result in refunds to taxpayers and would not be in collection status.
                                          g
                                          Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                          and cases settled or closed before trial.
                                          h
                                           IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                          including those without further action by IRS.
                                          Source: GAO compilation of IRS data.




                                          Page 21                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix II
                                          Abatements of Tax, Penalty, and Interest Assessments on Individual Returns




Table II.8: Distribution of Amount of Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of
Abatement–Individual Tax Returns
                                                                                      a
Dollars in Millions                                              Selected IRS activity
Fiscal year of      Amount of      Audit Substitute Additional tax d      Offer-in-                                 Criminal
                                         b            c                             e           f            g               h
abatement          abatements indicator    for return   assessments   compromise Collection Litigation investigation
1995                    $6,773      30.9%        14.8%         37.6%            5.1%      74.4%         14.4%            2.7%
1996                    $6,848      35.1         17.8          40.6             2.2       74.1           9.8             3.0
1997                    $7,433      31.3         16.9          35.7             0.7       71.3           7.1             1.8
1998                    $7,676      32.1         15.0          31.6             0.4       70.6           5.8             1.0
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Percentages should not be totaled because abatements could occur on returns with more than one
                                          selected IRS activity.
                                          a
                                              IRS activity that occurred before the abatement.
                                          b
                                           Includes audits that are still open and audits closed with a change in tax assessments or no change
                                          in tax assessments.
                                          c
                                              Return prepared by IRS based on third party information of income paid to a nonfiler.
                                          d
                                          IRS makes additional tax assessments after the original tax assessment because of an IRS
                                          enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                          e
                                          IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                          would pay.
                                          f
                                          Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                          on full paid returns result in refunds to taxpayers and would not be in collection status.
                                          g
                                          Return was in some phase of the litigation process- open or closed. Would include bankruptcy cases,
                                          and cases settled or closed before trial.
                                          h
                                           IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                          including those without further action by IRS.
                                          Source: GAO compilation of IRS data.




                                          Page 22                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix III

Abatements of Tax, Penalty, and Interest
Assessments on Business Returns

                                         Tables in this appendix show information on the number and amount of
                                         tax, penalty, and interest abatements for business tax returns. Tables on
                                         corporate income tax, employment tax, and other business tax returns,
                                         generally, are subsets of the table titled business tax returns.




Table III.1: Number and Amount of Abatements by Fiscal Year of Abatement–Business Tax Returns
Dollars in Millions                                        Abatement type
                                         Tax                  Penalty                Interest                              Total
Fiscal year of abatement           Number Amount          Number Amount          Number Amount                        Number Amount
1995                                735,073 $16,428      2,431,266    $3,471    1,376,550     $1,720                 4,542,889 $21,619
1996                                648,927 17,790       2,491,624     4,680    1,499,031      2,375                 4,639,582   24,844
1997                                582,823 16,853       2,362,892     4,188    1,403,958      1,972                 4,349,673   23,014
1998                                550,113 16,772       2,332,178     3,343    1,365,054      1,381                 4,247,345   21,496
Total                             2,516,936 $67,843      9,617,960 $15,682      5,644,593     $7,448                17,779,489 $90,973
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




Table III.2: Number and Amount of Abatements by Fiscal Year of Abatement–Corporate Income Tax Returns
Dollars in Millions                                       Abatement type
                                        Tax                    Penalty               Interest               Total
Fiscal year of abatement            Number Amount         Number      Amount     Number Amount         Number Amount
1995                                176,869 $11,131       136,643       $379     117,415      $1,243    430,927 $12,753
1996                                174,559 12,560        140,810         881    120,185       1,883    435,554   15,325
1997                                175,228 11,501        137,183         342    118,260       1,299    430,671   13,142
1998                                171,244 11,260        138,160         477    122,757         912    432,161   12,649
Total                               697,900 $46,452       552,796      $2,079    478,617      $5,338  1,729,313 $53,870
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data




                                         Page 23                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix III
                                         Abatements of Tax, Penalty, and Interest Assessments on Business Returns




Table III.3: Number and Amount of Abatements by Fiscal Year of Abatement–Employment Tax Returns
Dollars in Millions                                        Abatement type
                                          Tax                  Penalty              Interest                                   Total
Fiscal year of abatement            Number Amount          Number Amount        Number Amount                             Number Amount
1995                                 504,336   $2,794     1,910,252    $1,770  1,084,668      $219                       3,499,256   $4,783
1996                                 389,604    3,014     1,822,060     2,381  1,060,487        298                      3,272,151    5,693
1997                                 352,694    3,772     1,759,338     2,264  1,033,848        436                      3,145,880    6,472
1998                                 326,281    4,082     1,786,956     1,491  1,060,169        239                      3,173,406    5,812
Total                              1,572,915 $13,662      7,278,606    $7,907  4,239,172     $1,192                     13,090,693 $22,760
                                         Notes: Includes abatements on Form 940, Employer's Annual Federal Unemployment Tax Return;
                                         Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal Return
                                         for Household Employees (for tax periods prior to the requirement that these taxes be reported on
                                         Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




Table III.4: Number and Amount of Abatements by Fiscal Year of Abatement–Other Business Tax Returns
Dollars in Millions                                         Abatement type
                                          Tax                  Penalty               Interest                                  Total
Fiscal year of abatement            Number Amount          Number Amount         Number Amount                            Number Amount
1995                                 53,868 $2,504          384,371    $1,322    174,467      $258                         612,706   $4,083
1996                                 84,764    2,216        528,754     1,417    318,359       193                         931,877    3,826
1997                                 54,901    1,580        466,371     1,582    251,850       237                         773,122    3,399
1998                                 52,588    1,430        407,062     1,374    182,128       230                         641,778    3,035
Total                               246,121 $7,729        1,786,558    $5,695    926,804      $918                       2,959,483 $14,343
                                         Notes: Includes numerous types of tax returns, such as estate, gift, partnerships, fiduciaries, and
                                         returns used by taxpayers to report withholdings from revenues paid to nonemployees.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




                                         Page 24                                          GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix III
                                        Abatements of Tax, Penalty, and Interest Assessments on Business Returns




Table III.5: Number and Amount of Abatements by Asset Size and Fiscal Year of Abatement–Corporate Income Tax Returns
Dollars in Millions                                 Fiscal year of abatement
                                 1995              1996                 1997              1998               Total
Asset size reported on
balance sheet               Number Amount     Number Amount         Number Amount    Number Amount       Number Amount
Small corporation
                  a
No balance sheet             13,318 $1,061      14,394     $543      16,179    $392   16,175    $710      60,066 $2,706
Assets < $250,000           199,034      155   209,144      196     209,476     214  209,255     218     826,909     782
$250,000 < $1 million       100,653      234   104,849      286     102,841     306  104,050     320     412,393   1,145
$1 million < $5 million      56,867      384    57,639      458      55,639     549   56,289     563     226,434   1,955
$5 million < $10 million     14,551      216    11,126      240      10,479     266   10,878     315      47,034   1,036
 Subtotal                   384,423 $2,050     397,152 $1,722       394,614 $1,726   396,647 $2,127    1,572,836 $7,625
Large corporation
$10 million < $50 million    12,446    $785     12,959     $794      12,705    $895   12,605    $937      50,715 $3,412
$50 million < $100 million    3,333      533     3,498      489       3,322     480     3,193    611      13,346   2,113
$100 million < $250 million   3,427      773     3,476      841       3,231     971     3,366    883      13,500   3,468
$250 million or more          5,765    7,971     6,098 11,121         5,912 8,557       5,968 7,963       23,743 35,612
 Subtotal                    24,971 $10,061     26,031 $13,246       25,170 $10,903   25,132 $10,393     101,304 $44,604
                         b
Asset size not available     21,533    $641     12,371     $357      10,887    $513   10,382    $129      55,173 $1,640
Total                       430,927 $12,753    435,554 $15,325      430,671 $13,142  432,161 $12,649   1,729,313 $53,870
                                        Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                        We could not provide the asset size for businesses on noncorporate business returns because the
                                        information is only available for corporate income tax returns.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        a
                                            Taxpayer did not provide, or it was missing.
                                        b
                                         Asset size was not available on returns transferred from IRS’ historical files or non-master file and on
                                        special types of assessments.
                                        Source: GAO compilation of IRS data.




                                        Page 25                                            GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix III
                                         Abatements of Tax, Penalty, and Interest Assessments on Business Returns




Table III.6: Number of Abatements by Tax Year and Fiscal Year of Abatement–Business Tax Returns
                                                         Fiscal year of abatement
Tax year of return                      1995                 1996                1997            1998                              Total
             a
Before 1980                           20,715               21,996               24,308          26,024                            93,043
1980-84                               11,823                6,873                4,678           2,515                            25,889
1985-89                              119,722               72,276               51,808          35,396                           279,202
1990                                  84,901               38,029               22,156          14,219                           159,305
1991                                 345,527               90,237               39,297          21,689                           496,750
1992                                 335,753              288,718               77,206          33,325                           735,002
1993                                 591,763              365,124              268,941          73,296                         1,299,124
1994                               2,630,280              690,742              306,757         187,091                         3,814,870
1995                                 402,405            2,603,722              652,783         294,065                         3,952,975
                                            b
1996                                                      461,865            2,440,383         677,947                         3,580,195
                                            b                    b
1997                                                                           461,356       2,331,806                         2,793,162
                                            b                    b                   b
1998                                                                                           549,972                           549,972
Total                              4,542,889            4,639,582            4,349,673       4,247,345                        17,779,489
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Earliest tax year is 1961.
                                         b
                                          Does not apply.
                                         Source: GAO compilation of IRS data.


Table III.7: Amount of Abatements by Tax Year and Fiscal Year of Abatement–Business Tax Returns
Dollars in Millions                                      Fiscal year of abatement
Tax year of return                      1995                1996                1997            1998                               Total
             a
Before 1980                           $1,098                 $776              $1,099            $653                             $3,626
1980-84                                1,975                1,450               1,578             736                              5,740
1985-89                                3,024                3,202               3,179           2,115                             11,520
1990                                   2,574                2,426               1,151             436                              6,588
1991                                   3,673                2,157                 472             611                              6,914
1992                                   2,146                3,957               1,147             564                              7,814
1993                                   2,889                2,437               3,592           1,324                             10,241
1994                                   3,202                2,371               2,437           3,372                             11,381
1995                                   1,039                5,340               3,352           3,038                             12,769
                                            b
1996                                                          728               4,647           3,751                              9,126
                                            b                    b
1997                                                                              360           4,024                              4,384
                                            b                    b                   b
1998                                                                                              871                                871
Total                                $21,619              $24,844             $23,014         $21,496                            $90,973
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatement amounts, not return amounts.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Earliest tax year is 1961.
                                         b
                                          Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 26                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
                                            Appendix III
                                            Abatements of Tax, Penalty, and Interest Assessments on Business Returns




Table III.8: Distribution of Abatements on Returns With Selected IRS Activity by Fiscal Year of Abatement–Business Tax
Returns
                                                                                           a
                                                                     Selected IRS activity
Fiscal year of      Number of      Audit            Additional tax         Offer-in-                                 Criminal
                                         b        c                d                 e            f            g               h
abatement         abatements indicator     6020b    assessments        compromise      Collection   Litigation   investigation
                                                                                                                               i
1995                 4,542,889       3.4%     3.7%             9.8%             0.1%         78.6%         1.3%
                                                                                                                               i
1996                 4,639,582       3.6      2.6              8.9              0.1          80.2          1.1
                                                                                     f                                         i
1997                 4,349,673       3.7      3.1              8.0                           81.4          1.0
                                                                                     f                                         i
1998                 4,247,345       3.7      3.6              5.9                           81.6          1.1
                                            Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                            of returns on IRS’ business master file.
                                            Percentages should not be totaled because the abatement could have been preceded by more than
                                            one selected IRS activity.
                                            a
                                                IRS activity that occurred before the abatement.
                                            b
                                             Includes audits that are still open and audits closed with a change in tax assessments or no change
                                            in tax assessments.
                                            c
                                                6020b, a substitute for return prepared by IRS for nonfilers of employment tax returns.
                                            d
                                            IRS makes additional tax assessments after the original tax assessment because of an IRS
                                            enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                            e
                                            IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                            would pay.
                                            f
                                            Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                            on full paid returns result in a refunds to taxpayers and would not be in collection status.
                                            g
                                            Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                            and cases settled or closed before trial.
                                            h
                                             IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                            including those without further action by IRS.
                                            i
                                            Less than one-tenth of 1 percent.
                                            Source: GAO compilation of IRS data.




                                            Page 27                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                            Appendix III
                                            Abatements of Tax, Penalty, and Interest Assessments on Business Returns




Table III.9: Distribution of Amounts of Abatements on Returns With Selected IRS Activity by Fiscal Year of Abatement–
Business Tax Returns
                                                                                           a
Dollars in Millions                                                   Selected IRS activity
Fiscal year of       Amount of     Audit             Additional tax         Offer-in-                                 Criminal
                                         b         c                d                 e            f            g               h
abatement           abatements indicator    6020b    assessments       compromise       Collection   Litigation   investigation
1995                    $21,619     60.7%      1.0%           35.9%              0.1%         47.1%         6.3%            0.4%
                                                                                      f
1996                    $24,844     62.3       0.8            30.7                            54.2         11.6             0.1
                                                                                      f
1997                    $23,014     57.4       1.1            35.8                            48.7          8.5             0.3
                                                                                      f
1998                    $21,496     59.7       1.4            25.1                            37.9          5.7             0.2
                                            Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                            of returns on IRS’ business master file.
                                            Percentages should not be totaled because the abatement could have been preceded by more than
                                            one selected IRS activity.
                                            a
                                                IRS activity that occurred before the abatement.
                                            b
                                             Includes audits that are still open and audits closed with a change in tax assessments or no change
                                            in tax assessments.
                                            c
                                                6020b, a substitute for return prepared by IRS for nonfilers of employment tax returns.
                                            d
                                            IRS makes additional tax assessments after the original tax assessment because of an IRS
                                            enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                            e
                                            IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                            would pay.
                                            f
                                            Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                            on full paid returns result in a refunds to taxpayers and would not be in collection status.
                                            g
                                            Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                            and cases settled or closed before trial.
                                            h
                                             IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                            including those without further action by IRS.
                                            Source: GAO compilation of IRS data.




                                            Page 28                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix IV

Abatements of Penalty and Interest
Assessments on Individual and Business Tax
Returns

Table IV.1: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual and Business Tax
Returns
                                                          Fiscal year of abatement
                                         1995             1996                1997             1998           Average
Penalty (IRC section)               Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))         825,233   18.8 822,298       18.7 835,604      19.7 821,156     17.5 826,073     18.6
Estimated tax (6654 and 6655)        278,063    6.3 261,128        5.9 244,436       5.7 244,042      5.2 256,917      5.8
Failure to make tax deposit (6656)   866,594   19.8 809,347       18.4 773,695      18.2 740,374     15.7 797,503     18.0
Failure to furnish taxpayer
                                                   a                  a                 a                a                a
identification number (6723)             504              432                 237              101              319
                                 b
Daily delinquency (6652(c)(2)(A))     39,644    0.9    39,829      0.9     38,905    0.9    58,106    1.2    44,121    1.0
Miscellaneous civil-trust fund
        c
(6672)                               229,630    5.2 187,250        4.3 222,502       5.2 255,453      5.4 223,709      5.0
Miscellaneous civil-other (6721(e)
              d
and others)                           86,833    2.0    81,081      1.8     61,747    1.5    71,880    1.5    75,385    1.7
Incomplete partnership return
                                                                                                         a
(6698)                                 4,661    0.1     3,321      0.1      3,077    0.1     2,339            3,350    0.1
Failure to pay (6651(a) (2)-(3))   1,991,945   45.4 2,138,238     48.7 2,034,711    47.9 2,475,955   52.6 2,160,212   48.7
Bad check (6657)                      13,170    0.3    13,331      0.3     13,766    0.3    20,024    0.4    15,073    0.3
                                                                                                         a
Tip income (6652(b))                   2,569    0.1     3,113      0.1      2,562    0.1     1,729            2,493    0.1
                                                   a                  a                 a                a                a
Fraud (6663)                           1,593            1,166               1,012              837            1,152
                       e
Negligence (6662(c))                  46,399    1.1    29,882      0.7     19,615    0.5    13,485    0.3    27,345    0.6
Total penalty abatements           4,386,838 100.0 4,390,416 100.0 4,251,869 100.0 4,705,481 100.0 4,433,651 100.0
Interest abatements                3,074,732 100.0 3,216,721 100.0 3,507,147 100.0 3,532,125 100.0 3,332,681 100.0
Total                              7,461,570 100.0 7,607,137 100.0 7,759,016 100.0 8,237,606 100.0 7,766,332 100.0
                                         Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         a
                                             Less than one-tenth of 1 percent.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          Abatements of penalties for intentional disregard of the information return filing requirements (section
                                         6721(e)) accounted for 54 percent of all other miscellaneous civil penalty abatements over the 4
                                         years. The remaining 46 percent of abatements were spread among numerous types of other
                                         miscellaneous civil penalties.
                                         e
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 29                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.2: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual and Business Tax
Returns
Dollars in Millions                                           Fiscal year of abatement
                                                1995          1996               1997           1998          Average
Penalty (IRC section)                      Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))                 $928    18.8 $1,278     21.3 $1,339       24.2 $1,363    28.4 $1,227     23.1
Estimated tax (6654 and 6655)                  182     3.7   208      3.5       188     3.4    282     5.9     215     4.0
Failure to make tax deposit (6656)           1,831   37.2 2,493      41.5     2,182    39.4  1,343    28.0 1,962      36.9
Failure to furnish taxpayer identification
                                                  a       b     a        b         a       b      a       b       a       b
number (6723)
                                    c
Daily delinquency (6652(c)(2)(A))               55     1.1    58      1.0        55     1.0    110     2.3      70     1.3
                                       d
Miscellaneous civil-trust fund (6672)          722   14.7    635     10.6       668    12.1    621    13.0     662    12.4
Miscellaneous civil-other (6721(e) and
       e
others)                                        631   12.8    607     10.1       590    10.7    596    12.4     606    11.4
Incomplete partnership return (6698)           125     2.5    67      1.1        22     0.4      7     0.2      55     1.0
Failure to pay (6651(a) (2)-(3))               322     6.5   576      9.6       389     7.0    380     7.9     417     7.8
                                                          b              b
Bad check (6657)                                 2             2                  4     0.1     10     0.2       5     0.1
                                                          b              b                 b              b               b
Tip income (6652(b))                             1             1                  1              1               1
Fraud (6663)                                    37     0.7    27      0.5        40     0.7     27     0.6      33     0.6
                       f
Negligence (6662(c))                            89     1.8    57      0.9        62     1.1     56     1.2      66     1.2
Total penalty abatements                    $4,925 100.0 $6,009 100.0 $5,540 100.0 $4,795 100.0 $5,317 100.0
Interest abatements                         $2,647 100.0 $3,195 100.0 $2,788 100.0 $2,137 100.0 $2,692 100.0
Total                                       $7,572 100.0 $9,204 100.0 $8,328 100.0 $6,932 100.0 $8,009 100.0
                                         Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         a
                                             Less than $1 million.
                                         b
                                             Less than one-tenth of 1 percent.
                                         c
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         d
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         e
                                          Abatements of penalties for intentional disregard of the information return filing requirements (section
                                         6721(e)) accounted for 78 percent of all other miscellaneous civil penalty abatement amounts over
                                         the 4 years. The remaining 22 percent of abatement amounts were spread among numerous types of
                                         other miscellaneous civil penalties.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 30                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.3: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—
Individual and Business Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997           1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               55.3     44.7   53.3      46.7     51.5     48.5  48.8     51.2
Estimated tax (6654 and 6655)                              87.1     12.9   84.8      15.2     83.2     16.8  82.0     18.0
Failure to make tax deposit (6656)                         57.7     42.3   55.1      44.9     50.8     49.2  49.4     50.6
Failure to furnish taxpayer identification number (6723)  100.0        0 100.0          0 100.0           0 100.0        0
                                    a
Daily delinquency (6652(c)(2)(A))                         100.0        0 100.0          0 100.0           0 100.0        0
                                       b
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0           0 100.0        0
                                               c
Miscellaneous civil-other (6721(e) and others)            100.0        0 100.0          0 100.0           0 100.0        0
Incomplete partnership return (6698)                          0    100.0      0     100.0        0    100.0     0    100.0
Failure to pay (6651(a) (2)-(3))                           15.4     84.6   12.4      87.6     12.1     87.9  13.9     86.1
Bad check (6657)                                           99.3      0.7   99.3       0.7     99.1      0.9  99.5      0.5
Tip income (6652(b))                                      100.0        0 100.0          0 100.0           0 100.0        0
Fraud (6663)                                              100.0        0 100.0          0 100.0           0 100.0        0
                       d
Negligence (6662(c))                                      100.0        0 100.0          0 100.0           0 100.0        0
Percent of total penalty abatements                        43.9     56.1   39.3      60.7     38.4     61.6  36.8     63.2
Percent of interest abatements                              4.9     95.1    2.7      97.3      1.3     98.7   4.2     95.8
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         b
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         c
                                          Abatements of penalties for intentional disregard of the information return filing requirements (section
                                         6721(e)) accounted for 54 percent of all other miscellaneous civil penalty abatements over the 4
                                         years. The remaining 46 percent of abatements were spread among numerous types of other
                                         miscellaneous civil penalties.
                                         d
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 31                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.4: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of
Abatement—Individual and Business Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997           1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               63.6     36.4   60.7      39.3     69.2     30.8  69.3     30.7
Estimated tax (6654 and 6655)                              94.6      5.4   93.1       6.9     92.2      7.8  93.9      6.1
Failure to make tax deposit (6656)                         83.7     16.3   84.9      15.1     77.7     22.3  72.0     28.0
Failure to furnish taxpayer identification number (6723)  100.0        0 100.0          0 100.0           0 100.0        0
                                    a
Daily delinquency (6652(c)(2)(A))                         100.0        0 100.0          0 100.0           0 100.0        0
                                       b
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0           0 100.0        0
                                               c
Miscellaneous civil-other (6721(e) and others)            100.0        0 100.0          0 100.0           0 100.0        0
Incomplete partnership return (6698)                          0    100.0      0     100.0        0    100.0     0    100.0
Failure to pay (6651(a) (2)-(3))                           39.2     60.8   56.0      44.0     40.7     59.3  39.8     60.2
Bad check (6657)                                           92.9      7.1   99.7       0.3     99.8      0.2  99.9      0.1
Tip income (6652(b))                                      100.0        0 100.0          0 100.0           0 100.0        0
Fraud (6663)                                              100.0        0 100.0          0 100.0           0 100.0        0
                       d
Negligence (6662(c))                                      100.0        0 100.0          0 100.0           0 100.0        0
Percent of total penalty abatement amounts                 80.4     19.6   79.8      20.2     78.9     21.1  78.1     21.9
Percent of interest abatements                             54.6     45.4   50.8      49.2     51.2     48.8  43.1     56.9
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         .b
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         c
                                          Abatements of penalties for intentional disregard of the information return filing requirements (section
                                         6721(e)) accounted for 78 percent of all other miscellaneous civil penalty abatement amounts over
                                         the 4 years. The remaining 22 percent of abatement amounts were spread among numerous types of
                                         other miscellaneous civil penalties.
                                         d
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 32                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix IV
                                          Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




                                          Tables IV.5-IV.27 show abatements of penalty and/or interest on individual
                                          tax returns, including returns with Schedule C, business income, and
                                          Schedule F, farm income.




Table IV.5: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual Tax Returns
                                                          Fiscal year of abatement
                                          1995            1996                1997             1998           Average
Penalty (IRC section)                Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))          436,914  22.3 446,479       23.5 443,776      23.5 445,699     18.8 443,217      21.8
Estimated tax (6654 and 6655)         251,326  12.9 232,023       12.2 212,444      11.2 207,312      8.7 225,776      11.1
                                             a     a         a        a          a      a         a      a         a       a
Failure to make tax deposit (6656)
Failure to furnish taxpayer
                                                   a                  a                 a                a                 a
identification number (6723)              504             432                 237              101              319
                                 b           a     a         a        a          a      a         a      a         a       a
Daily delinquency (6652(c)(2)(A))
Miscellaneous civil-trust fund
        c
(6672)                                229,630  11.7 187,250        9.9 222,502      11.8 255,453     10.8 223,709      11.0
Miscellaneous civil-other (6662(d)-
                  d
(h)) and others)                       23,015   1.2    18,666      1.0     18,273    1.0    23,853    1.0    20,952     1.0
Incomplete partnership return
                                             a     a         a        a          a      a         a      a         a       a
(6698)
Failure to pay (6651(a) (2)-(3))      953,200  48.7 969,139       51.0 958,255      50.7 1,413,773   59.6 1,073,592    52.9
Bad check (6657)                       11,133   0.6    11,354      0.6     10,887    0.6    11,359    0.5    11,183     0.6
Tip income (6652(b))                    2,569   0.1     3,113      0.2      2,562    0.1     1,729    0.1     2,493     0.1
                                                                      a                 a                a                 a
Fraud (6663)                            1,367   0.1       907                 795              749              955
                       e
Negligence (6662(c))                   45,914   2.3    29,429      1.5     19,246    1.0    13,275    0.6    26,966     1.3
Total penalty abatements            1,955,572 100.0 1,898,792 100.0 1,888,977 100.0 2,373,303 100.0 2,029,161        100.0
Interest abatements                 1,698,182 100.0 1,717,690 100.0 2,103,189 100.0 2,167,071 100.0 1,921,533        100.0
Total                               3,653,754 100.0 3,616,482 100.0 3,992,166 100.0 4,540,374 100.0 3,950,694         100.0
                                          Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          a
                                              Does not apply.
                                          b
                                              Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                          c
                                           Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                          IRS the taxes they withheld from employees’ earnings.
                                          d
                                           From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))
                                          accounted for an average of 89 percent of other miscellaneous civil penalty abatements. The
                                          remaining abatements, averaging 11 percent, were spread over numerous types of other
                                          miscellaneous civil penalties.
                                          e
                                          Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                          Code.
                                          Source: GAO compilation of IRS data.




                                          Page 33                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix IV
                                          Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.6: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual Tax Returns
Dollars in Millions                                           Fiscal year of abatement
                                                1995           1996               1997          1998           Average
Penalty (IRC section)                      Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))                 $322     22.2   $365     27.5     $362    26.8   $507    34.9    $389    27.9
Estimated tax (6654 and 6655)                  106     7.3     86      6.5        84     6.2    97     6.7      93      6.7
                                                  a        a      a       a         a       a     a       a       a        a
Failure to make tax deposit (6656)
Failure to furnish taxpayer identification
                                                  b        c      b       c         b       c     b       c       b        c
number (6723)
                                    d             a        a      a       a         a       a     a       a       a        a
Daily delinquency (6652(c)(2)(A))
                                       e
Miscellaneous civil-trust fund (6672)          722    49.6    635     47.8       668    49.4   621    42.8     662     47.4
Miscellaneous civil-other (6662(d)-(h) and
       f
others)                                         66      4.5    54      4.1        46     3.4    55     3.8      55      4.0
                                                  a        a      a       a         a       a     a       a       a        a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))               117      8.0   108      8.2       103     7.6   115     7.9     111      7.9
Bad check (6657)                                 1      0.1      2     0.1         2     0.1     3     0.2       2      0.1
                                                           c                                              c
Tip income (6652(b))                             1               1     0.1         1     0.1     1               1      0.1
Fraud (6663)                                    32      2.2    24      1.8        37     2.8    25     1.8      30      2.1
                       g
Negligence (6662(c))                            87      6.0    54      4.1        49     3.6    27     1.9      55      3.9
Total penalty abatements                    $1,454 100.0 $1,329 100.0 $1,353 100.0 $1,452 100.0 $1,397               100.0
Interest abatements                          $927 100.0      $820 100.0        $816 100.0     $756 100.0      $830   100.0
Total                                       $2,382 100.0 $2,150 100.0 $2,168 100.0 $2,208 100.0 $2,227               100.0
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Amounts may not sum to totals because of rounding.
                                          a
                                              Does not apply.
                                          b
                                              Less than $1 million.
                                          c
                                              Less than one-tenth of 1 percent.
                                          d
                                              Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                          e
                                           Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                          IRS the taxes they withheld from employees’ earnings.
                                          f
                                          From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))
                                          accounted for an average of 78 percent of abatement amounts for other miscellaneous civil penalty
                                          abatements. The remaining abatement amounts, averaging 22 percent, were spread over numerous
                                          types of other miscellaneous civil penalties.
                                          e
                                          Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                          Code.
                                          Source: GAO compilation of IRS data.




                                          Page 34                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.7: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—
Individual Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997          1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               62.1     37.9   58.9      41.1     51.7    48.3  47.7     52.3
Estimated tax (6654 and 6655)                              88.1     11.9   85.0      15.0     83.2    16.8  81.3     18.7
                                                               a        a      a         a        a       a     a        a
Failure to make tax deposit (6656)
Failure to furnish taxpayer identification number (6723)  100.0        0 100.0          0 100.0          0 100.0        0
                                    b                          a        a      a         a        a       a     a        a
Daily delinquency (6652(c)(2)(A))
                                       c
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0          0 100.0        0
                                                   d
Miscellaneous civil-other (6662(d)-(h) and others)        100.0        0 100.0          0 100.0          0 100.0        0
                                                               a        a      a         a        a       a     a        a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))                           19.3     80.7   15.8      84.2     14.4    85.6  16.1     83.9
Bad check (6657)                                          100.0        0 100.0          0 100.0          0 100.0        0
Tip income (6652(b))                                      100.0        0 100.0          0 100.0          0 100.0        0
Fraud (6663)                                              100.0        0 100.0          0 100.0          0 100.0        0
                       e
Negligence (6662(c))                                      100.0        0 100.0          0 100.0          0 100.0        0
Percent of total penalty abatements                        50.6     49.4   45.5      54.5     43.3    56.7  38.6     61.4
Percent of interest abatements                              7.4     92.6    3.9      96.1      1.4    98.6   6.0     94.0
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))
                                         accounted for an average of 89 percent of other miscellaneous civil penalty abatements. The
                                         remaining abatements, averaging 11 percent, were spread over numerous types of other
                                         miscellaneous civil penalties.
                                         e
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 35                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.8: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of
Abatement—Individual Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997          1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               73.4     26.6   72.0      28.0     68.0    32.0  76.7     23.3
Estimated tax (6654 and 6655)                              92.1      7.9   86.5      13.5     85.6    14.4  86.1     13.9
                                                               a        a      a         a        a       a     a        a
Failure to make tax deposit (6656)
Failure to furnish taxpayer identification number (6723)  100.0        0 100.0          0 100.0          0 100.0        0
                                    b
Daily delinquency (6652(c)(2)(A))                             0        0      0         0        0       0     0        0
                                       c
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0          0 100.0        0
                                                   d
Miscellaneous civil-other (6662(d)-(h) and others)        100.0        0 100.0          0 100.0          0 100.0        0
                                                               a        a      a         a        a       a     a        a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))                           53.6     46.4   49.6      50.4     46.1    53.9  48.5     51.5
Bad check (6657)                                          100.0        0 100.0          0 100.0          0 100.0        0
Tip income (6652(b))                                      100.0        0 100.0          0 100.0          0 100.0        0
Fraud (6663)                                              100.0        0 100.0          0 100.0          0 100.0        0
                       e
Negligence (6662(c))                                      100.0        0 100.0          0 100.0          0 100.0        0
Percent of total penalty abatement amounts                 89.8     10.2   87.3      12.7     86.4    13.6  86.9     13.1
Percent of interest abatements                             49.6     50.4   36.7      63.3     27.5    72.5  18.0     82.0
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings
                                         d
                                          From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))
                                         accounted for an average of 78 percent of abatement amounts for other miscellaneous civil penalty
                                         abatements. The remaining abatement amounts, averaging 22 percent, were spread over numerous
                                         types of other miscellaneous civil penalties.
                                         e
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 36                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix IV
                                        Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.9: Number and Amount of Penalty Abatements by Income Level and by Fiscal Year of Abatement—Individual Tax
Returns
Dollars in Millions                                   Fiscal year of abatement
Income level reported on             1995              1996               1997              1998             Total
original return                 Number Amount Number Amount Number Amount Number Amount Number Amount
Individual nonbusiness
1040A TPI < $25,000             588,579    $281 621,497       $304 574,650      $315 576,303     $339 2,361,029 $1,239
Non-1040A TPI < $25,000         131,526       17 144,810        12 138,390         17 182,419       13 597,145       59
TPI $25,000 < $50,000           249,616      36 251,466         28 268,271         26 389,746       36 1,159,099    126
TPI $50,000 < $100,000          182,982      43 194,341         36 213,875         39 295,568       43 886,766      161
TPI $100,000 or more            202,668     165 173,992        144 149,475       167 199,977       184 726,112      660
 Subtotal                     1,355,371    $542 1,386,106     $524 1,344,661    $563 1,644,013    $616 5,730,151 $2,245
                    a
Individual business
C-TGR < $25,000                   90,291    $13    82,830      $28     87,814      $7 125,285      $89 386,220     $138
C-TGR $25,000 < $100,000        153,361       55 131,533        37 127,896         27 198,049       36 610,839      156
C-TGR $100,000 or more          104,699      94    93,384       76     87,281      70 131,299       73 416,663      314
F-TGR < $100,000                   5,435       1    5,071         1     5,083       1     6,326      1    21,915      4
F-TGR 100,000 or more              7,023       5    5,291         4     8,443       4     7,111      4    27,868     16
 Subtotal                       360,809    $169 318,109       $146 316,517       110 468,070      $203 1,463,505   $628
                           b
Income level not available      239,392    $743 194,577       $659 227,799      $680 261,220      $633 922,988 $2,715
Total penalty abatements      1,955,572 $1,454 1,898,792 $1,330 1,888,977 $1,352 2,373,303 $1,452 8,116,644 $5,588
                                        Legend
                                        1040A = Nonbusiness returns filed by individuals
                                        TPI = Total positive income (income reported as a positive on tax return tables)
                                        C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts
                                        F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts
                                        Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                        with Schedule C, sole proprietor business income and Schedule F, farm income.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        a
                                         Returns with Schedules C or F may be categorized as nonbusiness rather than business if the
                                        reported primary source of income was wages, investments, and other nonbusiness income.
                                        b
                                        Income level was not available on certain miscellaneous civil penalties.
                                        Source: GAO compilation of IRS data.




                                        Page 37                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.10: Number and Amount of Interest Abatements by Income Level and by Fiscal Year of Abatement—Individual Tax
Returns
Dollars in Millions                                     Fiscal year of abatement
Income level reported on              1995              1996                1997             1998             Total
original return                  Number Amount Number Amount Number Amount Number Amount Number Amount
Individual nonbusiness
1040A TPI < $25,000              484,237     $349 514,806       $349 557,349     $383 509,310     $385 2,065,702 $1,467
Non-1040A TPI < $25,000          157,246       27 171,338         14 181,239       18 190,116        12 699,939        71
TPI $25,000 < $50,000            298,861       44 299,003         39 448,283       31 474,163        28 1,520,310     142
TPI $50,000 < $100,000           217,128       54 227,703         34 377,843       34 391,470        36 1,214,144     158
TPI $100,000 or more             232,091      214 206,216        168 186,352      225 210,826       158 835,485       765
 Subtotal                      1,389,563     $688 1,419,066     $604 1,751,066   $692 1,775,885    $619 6,335,580 $2,603
                    a
Individual business
C-TGR < $25,000                    76,600     $13    79,089      $11     98,780    $6 102,707        $8 357,176       $39
C-TGR $25,000 < $100,000         116,553       48 111,696         31 139,782       19 159,651        27 527,682       125
C-TGR $100,000 or more             88,756     124    83,745       88     87,724    68 104,220        73 364,445       353
F-TGR < $100,000                    6,442       3     5,808        1      6,790     1      7,177      1    26,217       6
F-TGR 100,000 or more               6,766       6     6,045        8      7,038     8      7,733      3    27,582      24
 Subtotal                        295,117     $195 286,383       $139 340,114     $101 381,488     $112 1,303,102     $546
                           b
Income level not available         13,502      45    12,241       77     12,009    23      9,698     25    47,450     169
Total interest abatements      1,698,182     $927 1,717,690     $820 2,103,189   $816 2,167,071   $756 7,686,132 $3,319
                                         Legend
                                         1040A = Nonbusiness returns filed by individuals
                                         TPI = Total positive income (income reported as a positive on tax return tables)
                                         C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts
                                         F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Returns with Schedules C or F may be categorized as nonbusiness rather than business if the
                                         reported primary source of income was wages, investments, and other nonbusiness income.
                                         b
                                         Income level was not available on certain miscellaneous civil penalties.
                                         Source: GAO compilation of IRS data.




                                         Page 38                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




                                         Tables IV.11-IV.14 show information on the number and amount of penalty
                                         and interest abatements by tax year of return.

Table IV.11: Number of Penalty
Abatements by Tax Year and Fiscal Year                                             Fiscal year of abatement
of Abatement—Individual Tax Returns      Tax year of return                     1995       1996       1997                 1998            Total
                                                     a
                                         Before 1980                           3,379      1,805        856                 1,074           7,114
                                         1980-84                              89,553    44,039      26,661                25,959         186,212
                                         1985-89                             443,094 277,406       202,511               219,915       1,142,926
                                         1990                                167,701 110,988        84,803                86,073         449,565
                                         1991                                229,634 152,397       104,899               102,122         589,052
                                         1992                                218,807 253,154       169,260               134,375         775,596
                                         1993                                409,116 258,460       194,973               174,236       1,036,785
                                         1994                                393,350 360,043       188,916               175,891       1,118,200
                                         1995                                    938 439,097       409,480               285,014       1,134,529
                                                                                    b
                                         1996                                             1,403    505,005               682,380       1,188,788
                                                                                    b          b
                                         1997                                                        1,613               484,471         486,084
                                                                                     b            b            b
                                         1998                                                                              1,793           1,793
                                         Total penalty abatements          1,955,572 1,898,792        1,888,977        2,373,303       8,116,644
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.

Table IV.12: Amount of Penalty
Abatements by Tax Year and Fiscal Year   Dollars in Millions                          Fiscal year of abatement
of Abatement—Individual Tax Returns      Tax year of return                         1995       1996       1997              1998          Total
                                                     a
                                         Before 1980                                  $9         $6         $5                $3            $23
                                         1980-84                                     151         81         71                40            343
                                         1985-89                                     522        357        259               210          1,348
                                         1990                                        162        131         95                82            469
                                         1991                                        184        153        121               107            565
                                         1992                                        155        188        157               118            618
                                         1993                                        217        161        194               150            722
                                         1994                                         53        165        156               146            521
                                         1995                                          1         86        209               150            447
                                                                                        b          c
                                         1996                                                               84               238            323
                                                                                        b          b
                                         1997                                                                1               208            209
                                                                                         b            b            b               c           c
                                         1998
                                         Total penalty abatements                 $1,454      $1,330       $1,352         $1,452         $5,588
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Does not apply.
                                         c
                                             Less than $1 million.
                                         Source: GAO compilation of IRS data.




                                         Page 39                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.13: Number of Interest
Abatements by Tax Year and Fiscal Year                                             Fiscal year of abatement
of Abatement—Individual Tax Returns      Tax year of return                     1995       1996        1997                  1998        Total
                                                     a
                                         Before 1980                           2,922      1,759         960                    670       6,311
                                         1980-84                              34,093     19,826      14,392                  8,877      77,188
                                         1985-89                             213,403   128,271       94,432                 57,102     493,208
                                         1990                                111,210     65,093      47,409                 28,565     252,277
                                         1991                                214,662   102,249       61,941                 37,114     415,966
                                         1992                                238,902   239,965      134,261                 64,442     677,570
                                         1993                                435,155   295,705      195,749                108,128   1,034,737
                                         1994                                447,362   380,853      195,589                134,077   1,157,881
                                         1995                                    473   483,121      410,139                265,857   1,159,590
                                                                                    b
                                         1996                                               848     947,431                660,200   1,608,479
                                                                                    b          b
                                         1997                                                           886                801,287     802,173
                                                                                     b             b             b
                                         1998                                                                                  752         752
                                         Total interest abatements         1,698,182      1,717,690    2,103,189         2,167,071   7,686,132
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.14: Amount of Interest
Abatements by Tax Year and Fiscal Year   Dollars in millions                            Fiscal year of abatement
of Abatement—Individual Tax Returns      Tax year of return                             1995      1996      1997            1998        Total
                                                     a
                                         Before 1980                                      $82       $43      $25             $19        $169
                                         1980-84                                          278       168      183             114          742
                                         1985-89                                          355       303      238             180        1,077
                                         1990                                              65        58       59              55          236
                                         1991                                              65        59       52              55          231
                                         1992                                              22        84       80              63          250
                                         1993                                              45        59       90              93          287
                                         1994                                              15        31       33              63          142
                                                                                             b
                                         1995                                                        15       33              40           89
                                                                                             c         b
                                         1996                                                                 21              55           77
                                                                                            c          c             b
                                         1997                                                                                 19           19
                                                                                            c          c             c          b              b
                                         1998
                                         Total interest abatements                       $927     $820       $816           $756       $3,319
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 40                                          GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




                                           Tables IV.15-IV.21 show information on selected return characteristics for
                                           penalties and/or interest abatements. Tables IV.19-IV.21 show the
                                           characteristics for abatements of three specific types of penalties.




Table IV.15: Distribution of Returns With Penalty and Interest Abatements by Filing Status and Fiscal Year of Abatement—
Individual Tax Returns
                                                                         Filing status
Fiscal year of penalty and Number of                 Married, filing Married, filing       Head of     Widow(er) with
interest abatement               returns    Single           jointly    separately      household dependent child       Total
                                         a         a                 a               a             a                  a       a
1995
                                         a         a                 a               a             a                  a       a
1996
1997                           2,319,461      29.1%             52.5%            4.9%         13.5%               0.1% 100%
1998                           2,721,264      31.6              50.9             5.3          12.2                0.1    100
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages may not sum to 100 because of rounding.
                                           a
                                           IRS was unable to reconstruct the filing status data from its historical files within the time frames of
                                           our review.
                                           Source: GAO compilation of IRS data.




Table IV.16: Distribution of Returns With Penalty and Interest Abatements by Selected Characteristic and Fiscal Year of
Abatement—Individual Tax Returns
                                                                       Selected characteristic
Fiscal year of penalty       Number of Primary taxpayer      Substitute for        Paid preparer on    Earned income credit
and interest abatement          returns       over age 65    return prepared         original return        on original return
1995                          1,918,078                8.5%                12.5%                52.1%                      3.9%
1996                          1,933,715                9.3                 13.8                 50.8                       4.3
1997                          2,319,461                8.5                 10.6                 48.2                       3.8
1998                          2,721,264                8.6                  7.0                 52.8                       4.9
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




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                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.17: Distribution of Returns With Penalty Abatements by Selected Characteristic and Fiscal Year of Abatement—
Individual Tax Returns
                                                                       Selected characteristic
Fiscal year of penalty       Number of Primary taxpayer         Substitute for     Paid preparer on    Earned income credit
abatement                       returns       over age 65     return prepared        original return        on original return
1995                          1,329,636               8.2%                16.7%                 51.7%                      2.9%
1996                          1,351,348               9.1                 18.5                  49.7                       3.1
1997                          1,331,583              10.0                 16.4                  49.1                       3.4
1998                          1,761,327               9.1                  9.6                  55.1                       4.9
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




Table IV.18: Distribution of Returns With Interest Abatements by Selected Characteristic and Fiscal Year of Abatement—
Individual Tax Returns
                                                                        Selected characteristic
 Fiscal year of interest     Number of Primary taxpayer          Substitute for     Paid preparer on    Earned income credit
 abatement                      returns        over age 65     return prepared        original return       on original return
 1995                         1,576,967                8.7%                12.5%                 53.0%                     2.4%
 1996                         1,595,320                9.5                 13.7                  51.7                      2.6
 1997                         1,954,573                8.4                 10.1                  48.3                      2.3
 1998                         2,000,680                9.0                  6.9                  51.6                      2.4
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




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                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.19: Distribution of Returns With Failure to File Penalty Abatements by Selected Characteristic and Fiscal Year of
Abatement—Individual Tax Returns
                                                                          Selected characteristic
Fiscal year of failure to    Number of Primary taxpayer            Substitute for     Paid preparer on   Earned income credit
file penalty abatement          returns        over age 65       return prepared        original return      on original return
1995                           429,811                   3.7%                46.9%                 30.0%                    1.2%
1996                           439,040                   4.3                 52.6                  27.1                     1.2
1997                           434,432                   5.1                 45.0                  31.0                     1.9
1998                           433,415                   5.7                 30.8                  39.5                     2.3
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.



Table IV.20: Distribution of Returns With Estimated Payment Penalty Abatements by Selected Characteristic and Fiscal Year of
Abatement—Individual Tax Returns
                                                                        Selected characteristic
Fiscal year of estimated         Number of Primary taxpayer       Substitute for   Paid preparer on Earned income credit
payment penalty abatement           returns       over age 65   return prepared      original return     on original return
1995                               249,270                8.8%              38.0%               41.5%                   0.4%
1996                               230,018                9.3               44.2                34.1                    0.4
1997                               210,414               12.3               39.8                36.9                    0.4
1998                               205,031               15.3               30.5                42.4                    0.3
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.



Table IV.21: Distribution of Returns With Failure to Pay Penalty Abatements by Selected Characteristic and Fiscal Year of
Abatement—Individual Tax Returns
                                                                         Selected characteristic
Fiscal year of failure to    Number of Primary taxpayer          Substitute for      Paid preparer on   Earned income credit
pay penalty abatement           returns        over age 65     return prepared         original return      on original return
1995                            914,793                9.5%                 4.5%                  63.3%                    3.1%
1996                            933,188               10.9                  5.0                   61.9                     3.5
1997                            920,358               11.6                  5.6                   58.9                     3.5
1998                          1,355,750                9.6                  4.1                   61.4                     5.1
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




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                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




                                           Tables IV.22-IV.27 show information on the number or amount of
                                           abatements by selected IRS activities for penalties and interest combined,
                                           or separately for penalty and interest on individual returns.




Table IV.22: Distribution of Number of Penalty and Interest Abatements on Returns Associated With Selected IRS Activity by
Fiscal Year of Abatement—Individual Tax Returns
                                                                                        a
Fiscal year of                                                    Selected IRS activity
penalty and
interest        Number of       Audit    Substitute Additional tax         Offer-in-                              Criminal
                                      b              c               d               e             f          g              h
abatement      abatements indicator       for return   assessments     compromise       Collection Litigation investigation
1995              3,653,754      10.5%          15.8%           30.1%           2.0%          97.6%       6.7%           0.2%
1996              3,616,482      11.1           17.7            31.1            0.9           97.7        4.0            0.1
1997              3,992,166      10.1           14.2            26.3            0.3           98.0        2.7            0.1
1998              4,540,374      10.7            9.2            22.5            0.2           97.7        3.0            0.1
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could be preceded by more than one
                                           selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                               Return prepared by IRS based on third party information of income paid to a nonfiler.
                                           d
                                           IRS makes additional tax assessments after the original tax assessment because of an IRS
                                           enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                           e
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           f
                                           Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                           on full paid returns result in refunds to taxpayers and would not be in collection status.
                                           g
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases
                                           and cases settled or closed before trial.
                                           h
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.




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                                          Appendix IV
                                          Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.23: Distribution of Amount of Penalty and Interest Abatements on Returns Associated With Selected IRS Activity by
Fiscal Year of Abatement—Individual Tax Returns
Dollars in Millions
                                                                                        a
Fiscal year                                                       Selected IRS activity
of penalty
and interest     Amount of      Audit    Substitute Additional tax d       Offer-in-                              Criminal
                                      b              c                               e             f          g              h
abatement       abatements indicator      for return   assessments    compromise        Collection Litigation investigation
1995                 $2,382      34.6%          16.4%           48.1%           9.2%          98.8%      25.2%           4.8%
1996                 $2,150      34.8           21.4            49.6            4.7           98.9       19.3            2.7
1997                 $2,168      35.8           22.7            50.7            1.9           98.9       15.9            4.1
1998                 $2,208      35.5           21.8            44.1            1.3           98.3       12.9            2.3
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Percentages should not be totaled because abatements could be preceded by more than one
                                          selected IRS activity.
                                          a
                                              IRS activity that occurred before the abatement.
                                          b
                                           Includes audits that are still open and audits closed with a change in tax assessments or no change
                                          in tax assessments.
                                          c
                                              Return prepared by IRS based on third-party information of income paid to a nonfiler.
                                          d
                                          IRS makes additional tax assessments after the original tax assessment because of an IRS
                                          enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                          e
                                          IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                          would pay.
                                          f
                                          Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                          on full paid returns result in refunds to taxpayers and would not be in collection status.
                                          g
                                          Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                          and cases settled or closed before trial.
                                          h
                                           IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                          including those without further action by IRS.
                                          Source: GAO compilation of IRS data.




                                          Page 45                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                          Appendix IV
                                          Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.24: Distribution of Number of Penalty Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of
Abatement—Individual Tax Returns
                                                                                       a
Fiscal year of                                                   Selected IRS activity
penalty         Number of       Audit    Substitute Additional tax d      Offer-in-                               Criminal
                                      b              c                              e             f          g              h
abatement      abatements indicator       for return   assessments   compromise        Collection Litigation investigation
1995              1,955,572      11.0%          18.6%         27.6%            2.5%          97.9%       8.5%           0.3%
1996              1,898,792      11.0           21.1          29.2             1.1           98.0        5.3            0.2
1997              1,888,977      10.3           18.4          25.8             0.4           97.3        3.9            0.1
1998              2,373,303      11.4           11.2          20.3             0.3           97.1        4.4            0.1
                                          Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                          with Schedule C, sole proprietor business income and Schedule F, farm income.
                                          Percentages should not be totaled because abatements could be preceded by more than one
                                          selected IRS activity.
                                          a
                                              IRS activity that occurred before the abatement.
                                          b
                                           Includes audits that are still open and audits closed with a change in tax assessments or no change
                                          in tax assessments.
                                          c
                                              Return prepared by IRS based on third-party information of income paid to a nonfiler.
                                          d
                                          IRS makes additional tax assessments after the original tax assessment because of an IRS
                                          enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                          e
                                          IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                          would pay.
                                          f
                                          Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                          on full paid returns result in refunds to taxpayers and would not be in collection status.
                                          g
                                          Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                          and cases settled or closed before trial.
                                          h
                                           IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                          including those without further action by IRS.
                                          Source: GAO compilation of IRS data.




                                          Page 46                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.25: Distribution of Amount of Penalty Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of
Abatement—Individual Tax Returns
Dollars in Millions
                                                                                        a
Fiscal year                                                       Selected IRS activity
of penalty      Amount of      Audit    Substitute    Additional tax d      Offer-in-                               Criminal
                                     b              c                                 e              f          g             h
abatement abatements indicator           for return   assessments      compromise         Collection Litigation investigation
1995                $1,454      20.6%          13.1%           28.7%             9.1%           98.7%      18.9%          2.9%
1996                 1,330      21.1           17.0            30.7              4.9            99.0       15.4           1.8
1997                 1,352      22.3           17.1            31.1              2.0            98.0       12.5           2.9
1998                 1,452      22.2           14.4            26.1              1.2            98.6       10.7           1.4
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could be preceded by more than one
                                           selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                               Return prepared by IRS based on third party information of income paid to a nonfiler.
                                           d
                                           IRS makes additional tax assessments after the original tax assessment because of an IRS
                                           enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                           e
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           f
                                           Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                           on full paid returns result in refunds to taxpayers and would not be in collection status.
                                           g
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                           and cases settled or closed before trial.
                                           h
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.




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                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.26: Distribution of Number of Interest Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of
Abatement—Individual Tax Returns
                                                                                       a
Fiscal year of                                                   Selected IRS activity
interest        Number of        Audit Substitute Additional tax d        Offer-in-                                Criminal
                                       b             c                              e             f          g               h
abatement      abatements indicator for return         assessments    compromise       Collection Litigation investigation
1995              1,698,182       10.0%         12.6%          33.0%           1.4%          97.4%       4.7%            0.2%
1996              1,717,690       11.2          13.8           33.2            0.6           97.4        2.7             0.1
1997              2,103,189        9.9          10.3           26.8            0.2           98.6        1.6             0.1
1998              2,167,071       10.1           7.1           24.8            0.1           98.3        1.4             0.1
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could be preceded by more than one
                                           selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                               Return prepared by IRS based on third party information of income paid to a nonfiler.
                                           d
                                           IRS makes additional tax assessments after the original tax assessment because of an IRS
                                           enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                           e
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           f
                                           Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                           on full paid returns result in refunds to taxpayers and would not be in collection status.
                                           g
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                           and cases settled or closed before trial.
                                           h
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.




                                           Page 48                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix IV
                                           Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.27: Distribution of Amount of Interest Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of
Abatement—Individual Tax Returns
Dollars in Millions
                                                                                       a
Fiscal year                                                      Selected IRS activity
of interest      Amount of      Audit    Substitute Additional tax d       Offer-in-                               Criminal
                                      b              c                               e              f          g             h
abatement       abatements indicator      for return   assessments    compromise         Collection Litigation investigation
1995                   $927      56.7%          21.4%          78.5%            9.6%           99.1%      35.1%          7.7%
1996                    820      57.1           28.6           80.3             4.3            98.8       25.5           4.2
1997                    816      58.2           32.1           83.3             1.8            99.0       21.5           6.2
1998                    756      61.1           36.0           78.8             1.3            97.7       17.3           4.1
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could be preceded by more than one
                                           selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                               Return prepared by IRS based on third party information of income paid to a nonfiler.
                                           d
                                           IRS makes additional tax assessments after the original tax assessment because of an IRS
                                           enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.
                                           e
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           f
                                           Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements
                                           on full paid returns result in refunds to taxpayers and would not be in collection status.
                                           g
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                           and cases settled or closed before trial.
                                           h
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.




                                           Page 49                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




                                         Tables IV.28-IV.55 show information on penalty and interest abatements on
                                         business tax returns. Tables on corporate income tax, employment tax,
                                         and other business tax returns, generally, are subsets of the tables titled
                                         business tax returns.


Table IV.28: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Business Tax Returns
                                                          Fiscal year of abatement
                                         1995             1996                1997            1998          Average
Penalty (IRC section)               Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))         388,319  16.0 375,819        15.1 391,828     16.6 375,457    16.1 382,856      15.9
Estimated tax (6654 and 6655)         26,737    1.1    29,105      1.2     31,992    1.4   36,730   1.6    31,141     1.3
Failure to make tax deposit (6656)   866,594  35.6 809,347        32.5 773,695     32.7 740,374    31.7 797,503      33.2
Failure to furnish taxpayer
                                            a      a         a        a          a      a        a     a         a       a
identification number (6723)
                                 b
Daily delinquency (6652(c)(2)(A))     39,644    1.6    39,829      1.6     38,905    1.6   58,106   2.5    44,121     1.8
Miscellaneous civil-trust fund
        c                                   a      a         a        a          a      a        a     a         a       a
(6672)
Miscellaneous civil-other (6721(e)
              d
and others)                           63,818    2.6    62,415      2.5     43,474    1.8   48,027   2.1    54,434     2.3
Incomplete partnership return
(6698)                                 4,661    0.2     3,321      0.1      3,077    0.1    2,339   0.1     3,350     0.1
Failure to pay (6651(a) (2)-(3))   1,038,745  42.7 1,169,099      46.9 1,076,456   45.6 1,062,182  45.5 1,086,621    45.2
Bad check (6657)                       2,037    0.1     1,977      0.1      2,879    0.1    8,665   0.4     3,890     0.2
                                            a      a         a        a          a      a        a     a         a       a
Tip income (6652(b))
                                                   e                  e                 e              e                 e
Fraud (6663)                             226              259                 217              88             198
                       f                           e                  e                 e              e                 e
Negligence (6662(c))                     485              453                 369             210             379
Total penalty abatements           2,431,266 100.0 2,491,624 100.0 2,362,892 100.0 2,332,178 100.0 2,404,490        100.0
Interest abatements                1,376,550 100.0 1,499,031 100.0 1,403,958 100.0 1,365,054 100.0 1,411,148        100.0
Total                              3,807,816 100.0 3,990,655 100.0 3,766,850 100.0 3,697,232 100.0 3,815,638        100.0
                                         Note: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the
                                         information return filing requirements (section 6721(e)) accounted for an average of 75 percent of
                                         other miscellaneous civil penalty abatements. The remaining abatements, averaging 25 percent, were
                                         spread over numerous types of other miscellaneous civil penalties.
                                         e
                                             Less than one-tenth of 1 percent.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 50                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.29: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement–Business Tax Returns
Dollars in Millions                                           Fiscal year of abatement
                                                1995            1996             1997           1998          Average
Penalty (IRC section)                      Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))                 $606      17.5   $913     19.5    $977    23.3   $855    25.6   $838     21.4
Estimated tax (6654 and 6655)                   76      2.2    122      2.6     103      2.5   184     5.5    122      3.1
Failure to make tax deposit (6656)           1,831     52.7 2,493      53.3 2,182      52.1 1,343     40.2 1,962      50.0
Failure to furnish taxpayer identification
                                                  a        a      a        a       a        a     a       a       a       a
number (6723)
                                    b
Daily delinquency (6652(c)(2)(A))               55      1.6     58      1.2      55      1.3   110     3.3      70     1.8
                                       c          a        a      a        a       a        a     a       a       a       a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
       d
others)                                        566     16.3    553     11.8     545    13.0    540    16.2    551     14.1
Incomplete partnership return (6698)           125      3.6     67      1.4      22      0.5     7     0.2      55     1.4
Failure to pay (6651(a) (2)-(3))               205      5.9    467     10.0     286      6.8   264     7.9    306      7.8
                                                           e               e                e
Bad check (6657)                                  1              1                2              7     0.2       3     0.1
                                                  a        a      a        a       a        a     a       a       a       a
Tip income (6652(b))
                                                                                                          e
Fraud (6663)                                     5      0.1      4      0.1       3      0.1     1               3     0.1
                       f
Negligence (6662(c))                             2      0.1      3      0.1      13      0.3    29     0.9      12     0.3
Total penalty abatements                    $3,471 100.0 $4,680 100.0 $4,188 100.0 $3,343 100.0 $3,920 100.0
Interest abatements                         $1,720 100.0 $2,375 100.0 $1,972 100.0 $1,381 100.0 $1,862 100.0
Total                                       $5,191 100.0 $7,054 100.0 $6,160 100.0 $4,724 100.0 $5,782 100.0
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Note: Amounts may not sum to totals because of rounding.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the
                                         information return filing requirements (section 6721(e)) accounted for an average of 86 percent of
                                         abatement amounts for other miscellaneous civil penalty abatements. The remaining abatement
                                         amounts, averaging 14 percent, were spread over numerous types of other miscellaneous civil
                                         penalties.
                                         e
                                             Less than one-tenth of 1 percent.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 51                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.30: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—
Business Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997           1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               47.7     52.3   46.6      53.4     51.3    48.7  50.1     49.9
Estimated tax (6654 and 6655)                              77.3     22.7   82.7      17.3     82.8    17.2   85.6    14.4
Failure to make tax deposit (6656)                         57.7     42.3   55.1      44.9     50.8    49.2   49.4    50.6
                                                               a        a      a         a        a       a     a        a
Failure to furnish taxpayer identification number (6723)
                                    b
Daily delinquency (6652(c)(2)(A))                         100.0        0 100.0          0 100.0          0 100.0        0
                                       c
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0          0 100.0        0
                                               d
Miscellaneous civil-other (6721(e) and others)            100.0        0 100.0          0 100.0          0 100.0        0
Incomplete partnership return (6698)                      100.0        0 100.0          0 100.0          0 100.0        0
Failure to pay (6651(a) (2)-(3))                           11.8     88.2    9.5      90.5      9.9    90.1   11.0    89.0
Bad check (6657)                                           95.2      4.8   95.2       4.8     95.6     4.4  98.8      1.2
                                                               a        a      a         a        a       a     a        a
Tip income (6652(b))
Fraud (6663)                                              100.0        0 100.0          0 100.0          0 100.0        0
                       e
Negligence (6662(c))                                      100.0        0 100.0          0 100.0          0 100.0        0
Percent of total penalty abatements                        38.4     61.6   34.6      65.4     34.4    65.6   35.0    65.0
Percent of interest abatements                              1.8     98.2    1.4      98.6      1.3    98.7    1.2    98.8
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the
                                         information return filing requirements (section 6721(e)) accounted for an average of 75 percent of
                                         other miscellaneous civil penalty abatements. The remaining abatements, averaging 25 percent, were
                                         spread over numerous types of other miscellaneous civil penalties.
                                         e
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 52                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.31: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of
Abatement—Business Tax Returns
                                                                             Fiscal year of abatement
                                                              1995            1996               1997          1998
Penalty (IRC section)                                    Manual Computer Manual Computer Manual Computer Manual Computer
Failure to file (6651(a)(1))                               58.4     41.6   56.2      43.8     69.6    30.4  64.8      35.2
Estimated tax (6654 and 6655)                              98.0      2.0   97.7       2.3     97.6     2.4  98.0       2.0
Failure to make tax deposit (6656)                         83.7     16.3   84.9      15.1     77.7    22.3  72.0      28.0
                                                               a        a      a         a        a       a     a         a
Failure to furnish taxpayer identification number (6723)
                                    b
Daily delinquency (6652(c)(2)(A))                         100.0        0 100.0          0 100.0          0 100.0         0
                                       c
Miscellaneous civil-trust fund (6672)                     100.0        0 100.0          0 100.0          0 100.0         0
                                               d
Miscellaneous civil-other (6721(e) and others)            100.0        0 100.0          0 100.0          0 100.0         0
Incomplete partnership return (6698)                      100.0        0 100.0          0 100.0          0 100.0         0
Failure to pay (6651(a) (2)-(3))                           31.1     68.9   57.4      42.6     38.7    61.3  36.0      64.0
Bad check (6657)                                           82.9     17.1   99.1       0.9     99.6     0.4  99.9       0.1
                                                               a        a      a         a        a       a     a         a
Tip income (6652(b))
Fraud (6663)                                              100.0        0 100.0          0 100.0          0 100.0         0
                       e
Negligence (6662(c))                                      100.0        0 100.0          0 100.0          0 100.0         0
Percent of total penalty abatements                        76.4     23.6   77.7      22.3     76.5    23.5  74.4      25.6
Percent of interest abatements                             57.3     42.7   55.7      44.3     61.1    38.9  56.9      43.1
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         IRS employees manually make decisions on abatements when taxpayers establish that penalty
                                         assessments are in error or they had reasonable cause for being delinquent. IRS computers
                                         automatically abate all or portions of penalty and interest assessments when IRS reduces associated
                                         tax or other penalty assessments or applies timely payments to taxpayers' accounts.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                          From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the
                                         information return filing requirements (section 6721(e)) accounted for an average of 86 percent of
                                         abatement amounts for other miscellaneous civil penalty abatements. The remaining abatement
                                         amounts, averaging 14 percent, were spread over numerous types of other miscellaneous civil
                                         penalties.
                                         e
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 53                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.32: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Corporate Income Tax
Returns
                                                                      Fiscal year of abatement
                                                1995            1996             1997            1998        Average
Penalty (IRC section)                      Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))                22,428    16.4 23,807      16.9 25,350      18.5 22,599   16.4 23,546    17.0
Estimated tax (6654 and 6655)               20,316    14.9 21,438      15.2 21,715      15.8 22,684   16.4 21,538    15.6
                                                  a       a       a       a        a       a       a     a       a       a
Failure to make tax deposit (6656)
Failure to furnish taxpayer identification
                                                  a       a       a       a        a       a       a     a       a       a
number (6723)
                                    b             a       a       a       a        a       a       a     a       a       a
Daily delinquency (6652(c)(2)(A))
                                       c          a       a       a       a        a       a       a     a       a       a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
       d
others)                                        142     0.1     186      0.1     229      0.2    204    0.1    190     0.1
                                                  a       a       a       a        a       a       a     a       a       a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))            93,552    68.5 95,213      67.6 89,670      65.4 92,345   66.8 92,695    67.1
Bad check (6657)                               105     0.1     101      0.1     142      0.1    286    0.2    159     0.1
                                                  a       a       a       a        a       a       a     a       a       a
Tip income (6652(b))
                                                          e               e                e             e               e
Fraud (6663)                                    30              24               29              16            25
                       f                                                  e                e             e               e
Negligence (6662(c))                            70     0.1      41               48              26            46
Total penalty abatements                   136,643 100.0 140,810 100.0 137,183 100.0 138,160 100.0 138,199          100.0
Interest abatements                        117,415 100.0 120,185 100.0 118,260 100.0 122,757 100.0 119,654          100.0
Total                                      254,058 100.0 260,995 100.0 255,443 100.0 260,917 100.0 257,853          100.0
                                         Note: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                         Because miscellaneous civil penalties account for less than 3 percent of all business penalties, we
                                         did not develop information on specific penalties below the level of all businesses.
                                         e
                                             Less than one-tenth of 1 percent.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 54                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.33: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Corporate Income Tax
Returns
Dollars in MiIlions                                                Fiscal year of abatement
                                            1995             1996              1997            1998          Average
Penalty (IRC section)                  Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))             $202     53.3    $434     49.2      $150     43.9   $190   39.8     $244    47.0
Estimated tax (6654 and 6655)               71    18.7      113    12.9        95     27.8    171   35.8      112    21.6
                                              a       a        a       a         a        a      a      a        a       a
Failure to make tax deposit (6656)
Failure to furnish taxpayer
                                              a       a        a       a         a        a      a      a        a       a
identification number (6723)
                                  b           a       a        a       a         a        a      a      a        a       a
Daily delinquency (6652(c)(2)(A))
                                     c        a       a        a       a         a        a      a      a        a       a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
        d
others)                                      2     0.5        2     0.2         3      0.8      2    0.5        2     0.4
                                              a       a        a       a         a        a      a      a        a       a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))           100    26.5     331     37.5        80     23.5     84   17.6      149    28.7
                                              e                e       f         e                               e
Bad check (6657)                                   0.1                                 0.1      1    0.3              0.1
                                              a       a        a       a         a        a      a      a        a       a
Tip income (6652(b))
Fraud (6663)                                 2     0.6        1     0.1         2      0.5      1    0.1        1     0.3
                       g
Negligence (6662(c))                         1     0.3        1     0.1        11      3.4     28    5.9       10     2.0
Total penalty abatements                 $379    100.0    $881    100.0      $342 100.0      $477 100.0      $520   100.0
Interest abatements                     $1,243   100.0 $1,883     100.0 $1,299 100.0         $912 100.0 $1,334      100.0
Total                                   $1,622   100.0 $2,765     100.0 $1,641 100.0 $1,389 100.0 $1,854            100.0
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                         Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did
                                         not develop information on specific penalties below the level of all businesses.
                                         e
                                             Less than $1 million.
                                         f
                                         Less than one-tenth of 1 percent.
                                         g
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 55                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.34: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatements—Employment Tax Returns
Dollars in Millions                                       Fiscal year of abatement
                                         1995             1996                1997            1998         Average
Penalty (IRC section)               Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))         266,206  13.9 241,556        13.3 228,085     13.0 229,001    12.8 241,212     13.3
                                            a      a         a        a          a      a        a     a        a       a
Estimated tax (6654 and 6655)
Failure to make tax deposit (6656)   824,772  43.2 779,226        42.8 745,366     42.4 716,595    40.1 766,490     42.1
Failure to furnish taxpayer
                                            a      a         a        a          a      a        a     a        a       a
identification number (6723)
                                 b          a      a         a        a          a      a        a     a        a       a
Daily delinquency (6652(c)(2)(A))
Miscellaneous civil-trust fund
        c                                   a      a         a        a          a      a        a     a        a       a
(6672)
Miscellaneous civil-other (6721(e)
              d                                    e                  e                 e              e                e
and others)                              705              665                 677             523            643
Incomplete partnership return
                                            a      a         a        a          a      a        a     a        a       a
(6698)
Failure to pay (6651(a) (2)-(3))     816,661  42.8 798,850        43.8 782,587     44.5 833,261    46.6 807,840     44.4
Bad check (6657)                       1,568    0.1     1,469      0.1      2,228    0.1    7,404   0.4    3,167     0.2
                                            a      a         a        a          a      a        a     a        a       a
Tip income (6652(b))
                                                   e                  e                 e              e                e
Fraud (6663)                              67               41                 140              42             73
                       f                           e                  e                 e              e                e
Negligence (6662(c))                     273              253                 255             130            228
Total penalty abatements           1,910,252 100.0 1,822,060 100.0 1,759,338 100.0 1,786,956 100.0 1,819,652       100.0
Interest abatements                1,084,668 100.0 1,060,487 100.0 1,033,848 100.0 1,060,169 100.0 1,059,793       100.0
Total                              2,994,920 100.0 2,882,547 100.0 2,793,186 100.0 2,847,125 100.0 2,879,445       100.0
                                         Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                         Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                         Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                         on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         a
                                             Does not apply.
                                         a
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         b
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         c
                                         Because miscellaneous civil penalties account for less than 3 percent of all business penalties, we
                                         did not develop information on specific penalties below the level of all businesses.
                                         e
                                             Less than one-tenth of 1 percent.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




                                         Page 56                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                             Appendix IV
                                             Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.35: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Employment Tax Returns
Dollars in Millions                                                                 Fiscal year of abatement

                                                     1995           1996           1997           1998          Average
Penalty (IRC section)                            Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))                       $134     7.6   $156     6.5   $243    10.7    117     8.3   $162     8.3
                                                         a           a        a         a          a         a          a         a         a           a
Estimated tax (6654 and 6655)
Failure to make tax deposit (6656)                  1,580      89.2      2,148      90.2      1,885      83.2     1,194       84.7    1,702       87.0
Failure to furnish taxpayer identification
                                                         a           a        a         a          a         a          a         a         a           a
number (6723)
                                    b                    a           a        a         a          a         a          a         a         a           a
Daily delinquency (6652(c)(2)(A))
                                       c                 a           a        a         a          a         a          a         a         a           a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
       d
others)                                                  1         0.1       5        0.2         2       0.1          2       0.2          3         0.1
                                                         a           a        a         a          a         a          a         a         a           a
Incomplete partnership return (6698)
Failure to pay (6651(a) (2)-(3))                       54          3.1      70        3.0      132        5.8        92        6.5        87          4.5
                                                         e           f        e          f                    f
Bad check (6657)                                                                                 1                    5        0.3         2          0.1
                                                         a           a        a         a          a         a          a         a         a           a
Tip income (6652(b))
                                                         e           f        e          f                    f         e         f         e           f
Fraud (6663)                                                                                      1
                       g                                 e           f                                        f         e         f                     f
Negligence (6662(c))                                                     1           0.1          1                                    1
Total penalty abatements                          $1,770      100.0 $2,381         100.0     $2,264    100.0 $1,410         100.0 $1,956         100.0
Interest abatements                                $219       100.0  $298          100.0      $436     100.0  $239          100.0  $298          100.0
Total                                             $1,989      100.0 $2,679         100.0     $2,701    100.0 $1,649         100.0 $2,254         100.0
                                             Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                             Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                             Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                             on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                             Agriculture Employees.
                                             Amounts may not sum to totals because of rounding.
                                             a
                                                 Does not apply.
                                             b
                                                 Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                             c
                                              Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                             IRS the taxes they withheld from employees’ earnings.
                                             d
                                             Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did
                                             not develop information on specific penalties below the level of all businesses.
                                             e
                                                 Less than $1 million.
                                             f
                                             Less than one-tenth of 1 percent.
                                             g
                                             Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                             Code.
                                             Source: GAO compilation of IRS data.




                                             Page 57                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.36: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Other Business Tax
Returns
                                                                      Fiscal year of abatement
                                                1995             1996            1997            1998         Average
Penalty (IRC section)                      Number Percent Number Percent Number Percent Number Percent Number Percent
Failure to file (6651(a)(1))                99,685     25.9 110,456    20.9 138,393    29.7 123,857   30.4 118,098    26.4
Estimated tax (6654 and 6655)                6,421      1.7 7,667       1.5 10,277       2.2 14,046    3.5 9,603       2.2
Failure to make tax deposit (6656)          41,822     10.9 30,121      5.7 28,329       6.1 23,779    5.8 31,013      6.9
Failure to furnish taxpayer identification
                                                  a        a       a       a       a        a      a      a       a       a
number (6723)
                                    b                                                                             a
Daily delinquency (6652(c)(2)(A))           39,644     10.3 39,829      7.5 38,905       8.3 58,106   14.3             9.9
                                       c          a        a       a       a       a        a      a      a       a       a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
       d
others)                                     62,971     16.4 61,564     11.6 42,568       9.1 47,300   11.6 53,601     12.0
Incomplete partnership return (6698)         4,661      1.2 3,321       0.6 3,077        0.7 2,339     0.6 3,350       0.7
Failure to pay (6651(a) (2)-(3))           128,532     33.4 275,036    52.0 204,199    43.8 136,576   33.6 186,086    41.7
Bad check (6657)                               364      0.1     407     0.1     509      0.1    975    0.2     564     0.1
                                                  a        a       a       a       a        a      a      a       a       a
Tip income (6652(b))
                                                           e               e                e             e               e
Fraud (6663)                                   129              194              48              30            100
                       f                                   e               e                e             e               e
Negligence (6662(c))                           142              159              66              54            105
Total penalty abatements                   384,371 100.0 528,754 100.0 466,371 100.0 407,062 100.0 446,640          100.0
Interest abatements                        174,467 100.0 318,359 100.0 251,850 100.0 182,128 100.0 231,701          100.0
Total                                      558,838 100.0 847,113 100.0 718,221 100.0 589,190 100.0 678,341          100.0
                                         Note: Other business tax returns include numerous types of returns, such as, estate, gift,
                                         partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                         paid to nonemployees.
                                         a
                                             Does not apply.
                                         b
                                             Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                         c
                                          Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                         IRS the taxes they withheld from employees’ earnings.
                                         d
                                         Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did
                                         not develop information on specific penalties below the level of all businesses.
                                         e
                                             Less than one-tenth of 1 percent.
                                         f
                                         Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                         Code.
                                         Source: GAO compilation of IRS data.




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                                          Appendix IV
                                          Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.37: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement–Other Business Tax Returns
Dollars in Millions                                                   Fiscal year of abatement
                                                1995           1996              1997            1998          Average
Penalty (IRC section)                      Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Failure to file (6651(a)(1))                 $270    20.4    $324    22.8      $584     36.9   $468   34.0    $411     28.9
Estimated tax (6654 and 6655)                    5    0.4       9      0.6        9      0.5     14    1.0       9      0.6
Failure to make tax deposit (6656)             251   19.0     345    24.3       297     18.8    149   10.8     260     18.3
Failure to furnish taxpayer identification
                                                  a      a       a        a        a        a      a      a       a        a
number (6723)
                                    b
Daily delinquency (6652(c)(2)(A))               55    4.2      58      4.1       55      3.5    110    8.0      70      4.9
                                       c          a      a       a        a        a        a      a      a       a        a
Miscellaneous civil-trust fund (6672)
Miscellaneous civil-other (6721(e) and
       d
others)                                        563   42.6     546    38.5       540     34.1    536   39.0     546     38.4
Incomplete partnership return (6698)           125    9.5      67      4.7       22      1.4      7    0.5      55      3.9
Failure to pay (6651(a) (2)-(3))                50    3.8      66      4.7       73      4.6     88    6.4      70      4.9
                                                  e      f       e        f        e        f                              f
Bad check (6657)                                                                                  1    0.1       1
                                                  a      a       a        a        a        a      a      a       a        a
Tip income (6652(b))
                                                                                   e        f             f
Fraud (6663)                                     2    0.2       2      0.2                        1              1      0.1
                       g                          e      f                                  f
Negligence (6662(c))                                            1      0.1        1               1    0.1       1      0.1
Total penalty abatements                    $1,322 100.0 $1,417 100.0 $1,582 100.0 $1,374 100.0 $1,424               100.0
Interest abatements                          $258 100.0       193 100.0         237 100.0       230 100.0      230   100.0
Total                                       $1,580 100.0 $1,610 100.0 $1,819 100.0 $1,605 100.0 $1,653               100.0
                                          Notes: Other business tax returns include numerous types of returns, such as, estate, gift,
                                          partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                          paid to nonemployees.
                                          Amounts may not sum to totals because of rounding.
                                          a
                                              Does not apply.
                                          b
                                              Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.
                                          c
                                           Trust fund penalties are assessed against responsible individuals of a business when they fail to pay
                                          IRS the taxes they withheld from employees’ earnings.
                                          d
                                          Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did
                                          not develop information on specific penalties below the level of all businesses.
                                          e
                                              Less than $1 million.
                                          f
                                          Less than one-tenth of 1 percent.
                                          g
                                          Negligence includes any failure to make a reasonable attempt to comply with the provisions of the
                                          Code.
                                          Source: GAO compilation of IRS data.




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                                        Appendix IV
                                        Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.38: Number and Amount of Penalty Abatements by Asset Size and Fiscal Year of Abatement—Corporate Income Tax
Returns
Dollars in Millions                                Fiscal year of abatement
Asset size reported on           1995              1996                1997                1998             Total
balance sheet               Number Amount Number Amount           Number Amount      Number Amount    Number Amount
Small corporation
                  a
No balance sheet              6,263     $49     6,916     $22       7,970     $35       7,793   $133    28,942     $239
Assets < $250,000            64,215       10   66,090       11     64,842      13      65,472     14   260,619       48
$250,000 < $1 million        32,973       11   33,266      14      31,566      14      32,021     15   129,826       54
$1 million < $5 million      17,865       15   19,287      19      17,991      23      17,948     24    73,091       81
$5 million < $10 million      3,231        8    3,459      10       3,379      14       3,558     13    13,627       45
 Subtotal                   124,547     $92 129,018       $76     125,748     $99     126,792   $199   506,105     $467
Large corporation
$10 million < $50 million     3,897       29    4,130      33       4,043      50       3,962     37    16,032      149
$50 million < $100 million      962       32    1,133      32       1,018      17         975     22     4,088      104
$100 million < $250 million     927       54      980      67         877      39         868     29     3,652      189
$250 million or more          1,032     153     1,097     665       1,133     132       1,097    185     4,359    1,134
 Subtotal                     6,818    $269     7,340    $796       7,071   $238        6,902   $273    28,131    1,577
                         b,
Asset size not available      5,278       18    4,452        9      4,364       5       4,466      5    18,560       36
Total penalty abatements    136,643    $379 140,810      $881     137,183   $342     138,160    $477   552,796 $2,079
                                        Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                        We could not provide the asset size for businesses on noncorporate returns because the information
                                        is only available for corporate income tax returns.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        a
                                        Taxpayer did not provide, or it is missing.
                                        b
                                         Asset size was not available on returns transferred from IRS' historical files or non-master file and on
                                        special types of assessments.
                                        Source: GAO compilation of IRS data.




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                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.39: Number and Amount of Interest Abatements by Asset Size and Fiscal Year of Abatement–Corporate Income Tax
Returns
Dollars in Millions                                  Fiscal year of abatement
Asset size reported on           1995               1996                 1997               1998               Total
balance sheet               Number Amount      Number Amount        Number Amount     Number Amount     Number Amount
Small corporation
                  a
No balance sheet              4,646     $33      4,949      $25       5,469    $52       5,751    $80     20,815      $190
Assets < $250,000            54,502        5    56,326         5     56,416     12      58,601      7    225,845        30
$250,000 < $1 million        27,116        6    27,746       12      26,674      8      27,762      7    109,298        32
$1 million < $5 million      14,892        9    16,061        9      14,836     11      15,523     12     61,312        41
$5 million < $10 million      2,961        4     2,891        4       2,882      7       3,011      6     11,745        22
 Subtotal                   104,117     $56    107,973      $56     106,277    $90    110,648    $113    429,015     $316
Large corporation
$10 million < $50 million     3,473      32      3,538       28       3,477     40       3,521     22     14,009       122
$50 million < $100 million      938      35        958       24         979     26         890     18       3,765      103
$100 million < $250 million   1,004      73        991       50         928     43         989     29       3,912      196
$250 million or more          2,124     981      2,240 1,678          2,179 1,007        2,250    714       8,793    4,380
 Subtotal                     7,539 $1,120       7,727 $1,781         7,563 $1,116       7,650   $783     30,479 $4,800
                         b
Asset size not available      5,759     $67      4,485      $47       4,420    $93       4,459    $16     19,123      $223
Total interest abatements   117,415 $1,243     120,185 $1,883       118,260 $1,299    122,757    $912    478,617 $5,338
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         We could not provide the asset size for businesses on noncorporate returns because the information
                                         is only available for corporate income tax returns
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Taxpayer did not provide, or it is missing.
                                         b
                                          Asset size was not available on returns transferred from IRS' historical files or non-master file and on
                                         special types of assessments.
                                         Source: GAO compilation of IRS data.




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                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.40: Number of Penalty
Abatements by Tax Year and Fiscal Year                                      Fiscal year of abatement
of Abatement—Business Tax Returns        Tax year of return            1995         1996       1997     1998                         Total
                                                     a
                                         Before 1980                  6,384        7,547      8,774    10,139                       32,844
                                         1980-84                      5,397        3,135      2,039     1,021                       11,592
                                         1985-89                     57,159      35,033      24,780    17,136                      134,108
                                         1990                        34,437      16,959      10,295     6,621                       68,312
                                         1991                       138,603      38,230      19,066    10,607                      206,506
                                         1992                       135,813     117,874      34,265    16,335                      304,287
                                         1993                       317,009     141,823     109,188    32,015                      600,035
                                         1994                     1,482,759     365,451     132,619    82,529                    2,063,358
                                         1995                       253,705 1,485,025       353,335   125,218                    2,217,283
                                                                           b
                                         1996                                   280,547 1,394,962     374,352                    2,049,861
                                                                           b            b
                                         1997                                               273,569 1,319,677                    1,593,246
                                                                           b            b          b
                                         1998                                                         336,528                      336,528
                                         Total penalty abatements 2,431,266 2,491,624 2,362,892 2,332,178                        9,617,960
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.41: Amount of Penalty
Abatements by Tax Year and Fiscal Year   Dollars in Millions                          Fiscal year of abatement
of Abatement—Business Tax Returns        Tax year of return                        1995        1996       1997         1998          Total
                                                     a
                                         Before 1980                                 $56        $87        $90         $114           $347
                                         1980-84                                      14         10          5            23            52
                                         1985-89                                      80         51         60            30           221
                                         1990                                         96        425         38            12           571
                                         1991                                        597        193         26            16           832
                                         1992                                        227        575         82            24           908
                                         1993                                        519        206        581            95         1,400
                                         1994                                      1,063        594        253           461         2,371
                                         1995                                        820      2,160      1,012           241         4,232
                                                                                        b
                                         1996                                                   380      1,944           976         3,300
                                                                                        b          b
                                         1997                                                               96           851           948
                                                                                        b            b           b
                                         1998                                                                            499           499
                                         Total penalty abatements                $3,471       $4,680      $4,188      $3,343       $15,682
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




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                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.42: Number of Interest
Abatements by Tax Year and Fiscal Year                                                Fiscal year of abatement
of Abatements—Business Tax Returns       Tax year of return                         1995       1996       1997    1998               Total
                                                     a
                                         Before 1980                               8,014      8,283      9,000    9,802             35,099
                                         1980-84                                   3,892      2,277      1,587      898              8,654
                                         1985-89                                  35,850     22,590     16,308   11,490             86,238
                                         1990                                     22,991     11,567      7,150    4,988             46,696
                                         1991                                     90,253     23,490     11,398    6,672            131,813
                                         1992                                     84,576     69,478     19,824    9,427            183,305
                                         1993                                    155,212     92,484     65,640   18,685            332,021
                                         1994                                    842,380 189,132        73,258   35,761          1,140,531
                                         1995                                    133,382 917,238 173,148         70,141          1,293,909
                                                                                        b
                                         1996                                              162,492 856,939      180,485          1,199,916
                                                                                        b          b
                                         1997                                                          169,706  824,356            994,062
                                                                                        b          b         b
                                         1998                                                                   192,349            192,349
                                         Total interest abatements              1,376,550 1,499,031 1,403,958 1,365,054          5,644,593
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1961.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.43: Amount of Interest
Abatements by Tax Year and Fiscal Year   Dollars in millions                            Fiscal year of abatement
of Abatement—Business Tax Returns        Tax year of return                             1995      1996      1997      1998           Total
                                                     a
                                         Before 1980                                     $274     $260      $398      $166          $1,097
                                         1980-84                                          418       321      323        219          1,282
                                         1985-89                                          362       665      449        337          1,813
                                         1990                                             268       297      111         82            757
                                         1991                                             170       297       66         63            596
                                         1992                                              48       264       80         52            444
                                         1993                                              95        55      194         65            409
                                         1994                                              76       111       73         68            327
                                         1995                                               9        97      140         65            311
                                                                                             b
                                         1996                                                         9      131        145            284
                                                                                             b         b
                                         1997                                                                  8        111            118
                                                                                            b         b          b
                                         1998                                                                             9              9
                                         Total interest abatements                  $1,720      $2,375    $1,972     $1,381         $7,448
                                         Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                         of returns on IRS’ business master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                         Earliest tax year was 1961.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




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                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.44: Number of Penalty
Abatements by Tax Year and Fiscal Year                                             Fiscal year of abatement
of Abatement—Corporate Income Tax        Tax year of return                   1995         1996       1997               1998          Total
                                                     a
Returns                                  Before 1980                            94           43         38                  25           200
                                         1980-84                               336          235        151                  78           800
                                         1985-89                             2,717        1,627      1,005                 579         5,928
                                         1990                                1,904        1,012        614                 376         3,906
                                         1991                                3,600        1,743        917                 539         6,799
                                         1992                                7,520        3,563      1,787                 842        13,712
                                         1993                               33,035        7,823      3,798               1,745        46,401
                                         1994                               81,106      54,100      10,047               4,172       149,425
                                         1995                                6,331      64,053      42,465               9,456       122,305
                                                                                  b
                                         1996                                             6,611     70,253              44,016       120,880
                                                                                  b            b
                                         1997                                                        6,108              69,458        75,566
                                                                                   b             b             b
                                         1998                                                                            6,874         6,874
                                         Total penalty abatements          136,643      140,810          137,183       138,160       552,796
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1964.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.45: Amount of Penalty
Abatements by Tax Year and Fiscal Year   Dollars in Millions                         Fiscal year of abatement
of Abatement—Corporate Income Tax        Tax year of return                        1995       1996       1997             1998         Total
                                                     a                                                       b                   b
Returns                                  Before 1980                                 $3         $1                                        $4
                                         1980-84                                      9          7          3               22            41
                                         1985-89                                     18         18         29               14            79
                                         1990                                        46        403         25                5           479
                                         1991                                       131        113          5                3           252
                                         1992                                        33        112          8                3           154
                                         1993                                        90         12          7                5           113
                                         1994                                        48        171         21                8           248
                                         1995                                         1         45        160               30           237
                                                                                       c
                                         1996                                                    1         82              291           374
                                                                                       c          c
                                         1997                                                               1               94            95
                                                                                        c            c             c
                                         1998                                                                                2             2
                                         Total penalty abatements                  $379        $881          $342         $477        $2,079
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1964.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 64                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.46: Number of Interest
Abatements by Tax Year and Fiscal Year                                                Fiscal year of abatement
of Abatement—Corporate Income Tax        Tax year of return                        1995         1996      1997              1998    Total
                                                     a
Returns                                  Before 1980                                308          237        209                59     813
                                         1980-84                                    737          598        397               257   1,989
                                         1985-89                                  3,743        2,425      1,596             1,145   8,909
                                         1990                                     2,914        1,389        869               585   5,757
                                         1991                                     4,782        2,404      1,258               784   9,228
                                         1992                                     7,865        4,751      2,585             1,280 16,481
                                         1993                                    26,365        8,090      5,038             2,548 42,041
                                         1994                                    65,585       43,957    10,443              5,749 125,734
                                         1995                                     5,116       50,952    33,878              9,754 99,700
                                                                                       b
                                         1996                                                  5,382    56,880             36,464 98,726
                                                                                       b            b
                                         1997                                                             5,107            58,237 63,344
                                                                                         b               b            b
                                         1998                                                                               5,895   5,895
                                         Total interest abatements              117,415            120,185   118,260      122,757 478,617
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1961.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.47: Amount of Interest
Abatements by Tax Year and Fiscal Year   Dollars in Millions                            Fiscal year of abatement
of Abatement—Corporate Income Tax        Tax year of return                             1995      1996      1997          1998      Total
                                                     a
Returns                                  Before 1980                                     $176     $163      $262           $40      $641
                                         1980-84                                          351       312      315           214      1,191
                                         1985-89                                          318       611      415           310      1,654
                                         1990                                             247       283       98            73        702
                                         1991                                              84       268       50            52        454
                                         1992                                              24       158       39            41        263
                                         1993                                              27        11       17            38         93
                                         1994                                              16        65       21            23        125
                                                                                             b
                                         1995                                                        13       57            25         95
                                                                                             c         b
                                         1996                                                                 24            77        102
                                                                                               c         c        b
                                         1997                                                                               18         18
                                                                                               c         c        c
                                         1998                                                                                1          1
                                         Total interest abatements                  $1,243          $1,883   $1,299       $912     $5,338
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1961.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 65                                             GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.48: Number of Penalty
Abatements by Tax Year and Fiscal Year                                      Fiscal year of abatement
of Abatement—Employment Tax              Tax year of return            1995         1996       1997     1998                          Total
                                                     a
Returns                                  Before 1980                    214           86        193        94                           587
                                         1980-84                      3,899        2,117      1,550       731                         8,297
                                         1985-89                     43,913      26,057      19,346    13,354                       102,670
                                         1990                        25,635      12,453       7,621     5,008                        50,717
                                         1991                        90,141      28,678      14,308     8,123                       141,250
                                         1992                        96,289      72,760      25,060    12,128                       206,237
                                         1993                       191,883     100,003      70,249    22,886                       385,021
                                         1994                     1,215,070     196,633      85,261    40,995                     1,537,959
                                         1995                       243,208 1,116,212       184,975    83,076                     1,627,471
                                                                           b
                                         1996                                   267,061 1,092,954     198,627                     1,558,642
                                                                           b            b
                                         1997                                               257,821 1,081,064                     1,338,885
                                                                           b            b          b
                                         1998                                                         320,870                       320,870
                                         Total penalty abatements 1,910,252 1,822,060 1,759,338 1,786,956                         7,278,606
                                         Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                         Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                         Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                         on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 66                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.49: Amount of Penalty
Abatements by Tax Year and Fiscal Year   Dollars in Millions                          Fiscal year of abatement
of Abatement—Employment Tax              Tax year of return                         1995       1996       1997            1998         Total
                                                     a                                             b          b                b
Returns                                  Before 1980                                  $2                                                  $2
                                                                                                                               b
                                         1980-84                                       2         $2         $1                             4
                                         1985-89                                      34         18         10              $7            69
                                         1990                                         12          8          5               3            27
                                         1991                                         55         21         10               6            93
                                         1992                                         52         75         26               8           161
                                         1993                                        160         63        135              20           378
                                         1994                                        637        195         84              45           961
                                         1995                                        816      1,623        355              89         2,883
                                                                                        c
                                         1996                                                   376      1,545             270         2,191
                                                                                        c          c
                                         1997                                                               94             547           641
                                                                                         c            c           c
                                         1998                                                                              496           496
                                         Total penalty abatements                 $1,770      $2,381       $2,264       $1,491        $7,907
                                         Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                         Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                         Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                         on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 67                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.50: Number of Interest
Abatements by Tax Year and Fiscal Year                                                Fiscal year of abatement
of Abatement—Employment Tax              Tax year of return                          1995       1996      1997    1998      Total
                                                     a
Returns                                  Before 1980                                  152         50         85      53       340
                                         1980-84                                    2,316      1,164        930     486     4,896
                                         1985-89                                   26,774     16,295    12,349    8,417    63,835
                                         1990                                      17,219      8,419      5,250   3,780    34,668
                                         1991                                      78,054     17,912      8,391   4,971 109,328
                                         1992                                      68,501     57,361    14,501    6,686 147,049
                                         1993                                     101,704     75,200    53,813   13,370 244,087
                                         1994                                     665,634 109,771       53,040   24,085 852,530
                                         1995                                     124,314 623,729 102,614        50,854 901,511
                                                                                         b
                                         1996                                               150,586 627,866     106,504 884,956
                                                                                         b          b
                                         1997                                                          155,009  663,091 818,100
                                                                                        b          b         b
                                         1998                                                                   177,872 177,872
                                         Total interest abatements              1,084,668 1,060,487 1,033,848 1,060,169 4,239,172
                                         Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                         Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                         Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                         on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 68                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.51: Amount of Interest
Abatements by Tax Year and Fiscal Year   Dollars in millions                            Fiscal year of abatement
of Abatement—Employment Tax              Tax year of return                             1995      1996      1997        1998           Total
                                                     a                                      b          b          b          b
Returns                                  Before 1980                                                                                      $1
                                         1980-84                                          $3         $4         $3        $2              11
                                         1985-89                                          31         36         23        16             106
                                         1990                                             17          9         10         5              42
                                         1991                                             81         27         10         8             126
                                         1992                                             19         99         34         9             162
                                         1993                                             24         40        171        20             255
                                         1994                                             34         25         39        38             136
                                         1995                                              8         49         59        29             146
                                                                                            c
                                         1996                                                         8         80        35             123
                                                                                            c          c
                                         1997                                                                    7        69              76
                                                                                            c          c          c
                                         1998                                                                              8               8
                                         Total interest abatements                      $219      $298       $436       $239          $1,192
                                         Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax
                                         Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal
                                         Return for Household Employees (for tax periods prior to the requirement that these taxes be reported
                                         on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for
                                         Agriculture Employees.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1962.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 69                                          GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.52: Number of Penalty
Abatements by Tax Year and Fiscal Year                                                 Fiscal year of abatement
of Abatement—Other Business Tax          Tax year of return                         1995       1996      1997    1998                  Total
                                                     a
Returns                                  Before 1980                               6,076      7,418     8,543   10,020                32,057
                                         1980-84                                   1,162        783       338      212                 2,495
                                         1985-89                                  10,529      7,349     4,429    3,203                25,510
                                         1990                                      6,898      3,494     2,060    1,237                13,689
                                         1991                                     44,862      7,809     3,841    1,945                58,457
                                         1992                                     32,004    41,551      7,418    3,365                84,338
                                         1993                                     92,091    33,997     35,141    7,384               168,613
                                         1994                                    186,583 114,718       37,311   37,362               375,974
                                         1995                                      4,166 304,760 125,895        32,686               467,507
                                                                                        b
                                         1996                                                 6,875 231,755 131,709                  370,339
                                                                                        b          b
                                         1997                                                           9,640 169,155                178,795
                                                                                        b          b         b
                                         1998                                                                    8,784                 8,784
                                         Total penalty abatements                384,371 528,754 466,371 407,062                   1,786,558
                                         Notes: Other business tax returns include numerous types of returns, such as, estate, gift,
                                         partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                         paid to nonemployees.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1963.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.53: Amount of Penalty
Abatements by Tax Year and Fiscal Year   Dollars in Millions                          Fiscal year of abatement
of Abatement—Other Business Tax          Tax year of return                         1995       1996       1997            1998         Total
                                                     a
Returns                                  Before 1980                                 $51        $86        $90            $114         $341
                                                                                                                               b
                                         1980-84                                       4          1          1                             7
                                         1985-89                                      28         15         21               9            73
                                         1990                                         38         14          9               4            64
                                         1991                                        410         58         11               7           487
                                         1992                                        142        389         48              13           592
                                         1993                                        270        132        439              69           909
                                         1994                                        377        228        149             408         1,161
                                         1995                                          2        492        497             122         1,112
                                                                                        c
                                         1996                                                     2        317             416           735
                                                                                        c          c
                                         1997                                                                1             211           212
                                                                                         c            c            c
                                         1998                                                                                1             1
                                         Total penalty abatements                 $1,322       $1,417       $1,582      $1,374        $5,695
                                         Notes: Other business tax returns include numerous types of returns, such as, estate, gift,
                                         partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                         paid to nonemployees. Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1963.
                                         b
                                             Less than $1 million.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 70                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix IV
                                         Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns




Table IV.54: Number of Interest
Abatements by Tax Year and Fiscal Year                                                  Fiscal year of abatement
of Abatement—Other Business Tax          Tax year of return                          1995        1996       1997    1998               Total
                                                     a
Returns                                  Before 1980                                7,554       7,996       8,706   9,690             33,946
                                         1980-84                                      839         515         260     155              1,769
                                         1985-89                                    5,333       3,870       2,363   1,928             13,494
                                         1990                                       2,858       1,759       1,031     623              6,271
                                         1991                                       7,417       3,174       1,749     917             13,257
                                         1992                                       8,210       7,366       2,738   1,461             19,775
                                         1993                                      27,143       9,194       6,789   2,767             45,893
                                         1994                                     111,161      35,404       9,775   5,927            162,267
                                         1995                                       3,952    242,557       36,656   9,533            292,698
                                                                                         b
                                         1996                                                   6,524     172,193 37,517             216,234
                                                                                         b           b
                                         1997                                                               9,590 103,028            112,618
                                                                                         b           b           b
                                         1998                                                                       8,582              8,582
                                         Total interest abatements                174,467    318,359      251,850 182,128            926,804
                                         Notes: Other business tax returns include numerous types of returns, such as, estate, gift,
                                         partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                         paid to nonemployees.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1963.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table IV.55: Amount of Interest
Abatements by Tax Year and Fiscal Year   Dollars in millions                            Fiscal year of abatement
of Abatement—Other Business Tax          Tax year of return                             1995      1996      1997         1998           Total
                                                     a
Returns                                  Before 1980                                      $97       $97     $135         $126           $455
                                         1980-84                                           65         5        6            3             79
                                         1985-89                                           13        18       11           11             54
                                         1990                                               3         4        2            4             13
                                         1991                                               5         2        6            3             16
                                         1992                                               4         6        6            2             19
                                         1993                                              44         4        6            7             62
                                         1994                                              25        21       13            7             66
                                         1995                                               1        35       24           11             70
                                                                                             b         c
                                         1996                                                                 27           33             59
                                                                                            b          b           c
                                         1997                                                                              23             24
                                                                                            b          b           b
                                         1998                                                                               1               1
                                         Total interest abatements                      $258      $193        $237       $230           $918
                                         Notes: Other business tax returns include numerous types of returns, such as, estate, gift,
                                         partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues
                                         paid to nonemployees.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                             Earliest tax year was 1963.
                                         b
                                             Does not apply.
                                         c
                                             Less than $1 million.
                                         Source: GAO compilation of IRS data.




                                         Page 71                                          GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix V

Abatements of Tax Assessments on Individual
and Business Tax Returns


Table V.1: Number and Distribution of Tax Abatements by Fiscal Year of Abatement—Individual and Business Tax Returns
                                                     Fiscal year of abatement
                                  1995               1996                1997              1998               Total
Abatement type               Number Percent     Number Percent       Number Percent   Number Percent      Number Percent
Abatement of prior tax
assessment—non-
Examination                 2,320,900     87.9 2,129,665     87.2 3,132,257    91.3 2,818,688     91.0 10,401,510    89.6
Abatement of prior tax
assessment—Examination         65,928      2.5    73,305      3.0     65,556    1.9     58,847     1.9    263,636     2.3
Abatements due to net
operating loss carryback      254,443      9.6   240,031      9.8    233,545    6.8   221,137      7.1    949,156     8.2
Total                       2,641,271 100.0 2,443,001 100.0 3,431,358 100.0 3,098,672 100.00 11,614,302 100.0
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Columns may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




Table V.2: Amount and Distribution of Tax Abatements by Fiscal Year of Abatement—Individual and Business Tax Returns
Dollars in Millions                                      Fiscal year of abatement
                                          1995            1996               1997            1998             Total
Abatement type                      Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Abatement of prior tax
assessment—non-Examination           $9,249    44.4 $10,005     44.5 $10,384      46.9 $10,172     45.7 $39,810     45.4
Abatement of prior tax
assessment—Examination                 3,176   15.3   3,608     16.0      3,140   14.2    3,317    14.9   13,241    15.1
Abatements due to net
operating loss carryback               8,395   40.3   8,875     39.5      8,595   38.9    8,751     39.4 34,617     39.4
Total                               $20,820 100.0 $22,489 100.0 $22,119 100.0 $22,240 100.0 $87,668 100.0
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




                                         Page 72                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix V
                                        Abatements of Tax Assessments on Individual and Business Tax Returns




                                        Tables V.3-V.5 show information on the three types of tax abatements for
                                        individual returns, business tax returns, and corporate income tax returns.




Table V.3: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Individual Tax Return
Dollars in Millions                                Fiscal year of abatement
                                 1995              1996                1997               1998                              Total
Abatement type              Number Amount      Number Amount       Number Amount     Number Amount                       Number Amount
Abatement of prior tax
assessment—non-
Examination               1,751,338 $2,987 1,648,301 $3,056 2,710,881 $3,738 2,426,144 $3,938                          8,536,664 $13,720
Abatement of prior tax
assessment—Examination        52,146     410    53,936      464     51,624   468       45,915    435                     203,621      1,777
Abatements due net
operating loss carryback    102,714      995    91,837 1,178        86,030 1,060       76,500 1,095                      357,081 4,327
Total                     1,906,198 $4,392 1,794,074 $4,699 2,848,535 $5,266 2,548,559 $5,468                          9,097,366 $19,824
                                        Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                        with Schedule C, sole proprietor business income and Schedule F, farm income.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        Source: GAO compilation of IRS data.




Table V.4: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Business Tax Returns
Dollars in Millions                                 Fiscal year of abatement
                                   1995              1996                1997          1998                               Total
Abatement type               Number Amount Number Amount Number Amount Number Amount                                   Number Amount
Abatement of prior tax
assessment—non-Examination 569,562 $6,262 481,364 $6,949 421,376 $6,646 392,544 $6,234                                1,864,846 $26,090
Abatement of prior tax
assessment—Examination         13,782 2,766     19,369     3,144     13,932 2,672 12,932     2,881                       60,015      11,463
Abatements due to net
operating loss carryback      151,729 7,401 148,194        7,697 147,515 7,535 144,637       7,657                      592,075 30,290
Total                         735,073 $16,428 648,927 $17,790 582,823 $16,853 550,113 $16,772                         2,516,936 $67,843
                                        Notes: Business tax returns include corporate income tax, various employment taxes, and other types
                                        of returns on IRS’ business master file.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        Source: GAO compilation of IRS data.




                                        Page 73                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix V
                                        Abatements of Tax Assessments on Individual and Business Tax Returns




Table V.5: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Corporate Income Tax Returns
Dollars in Millions                                     Fiscal year of abatement
                                        1995              1996              1997           1998           Total
Abatement type                      Number Amount Number Amount Number Amount Number Amount NumberAmount
Abatement of prior tax
assessment—non-Examination           23,661 $1,554 23,489 $2,175 24,420 $1,742 23,551 $1,098          95,121 $6,568
Abatement of prior tax
assessment—Examination                5,025 2,205      5,661 2,716       5,785 2,252    5,566 2,539 22,037 9,713
Abatements due to net
operating loss carryback            148,183 7,372 145,409 7,670 145,023 7,507 142,127 7,623 580,742 30,172
Total                               176,869 $11,131 174,559 $12,560 175,228 $11,501 171,244 $11,260 697,900 $46,452
                                        Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        Source: GAO compilation of IRS data.

                                        Tables V.6-V.8 show one of the three types of tax abatements by corporate
                                        asset size.


Table V.6: Number and Amount of Non-Examination Tax Abatements by Asset Size and Fiscal Year of Abatement—Corporate
Income Tax Returns
 Dollars in Millions                             Fiscal year of abatement
 Asset size reported on           1995            1996                1997              1998               Total
 balance sheet               Number Amount   Number Amount Number Amount          Number Amount       Number Amount
 Small corporation
                   a
 No balance sheet              1,151   $153    1,276       $48     1,577    $97      1,448    $204      5,452     $503
 Assets < $250,000             9,851     27   10,205        26    10,574     33     10,277       36    40,907      121
 $250,000 < $1 million         5,029     30    4,782        36     4,967     40      4,855       39    19,633      145
 $1 million < $5 million       3,414     44    3,326        47     3,400     62      3,322       58    13,462      212
 $5 million < $10 million        794     23      759        20       738     24        784       33     3,075      101
  Subtotal                    20,239   $277   20,348      $178    21,256   $256     20,686    $370     82,529 $1,081
 Large corporation
 $10 million < $50 million     1,183    $60    1,193       $80     1,104   $137      1,002      $95     4,482     $372
 $50 million < $100 million      396     98      390        64       393     41        344       97     1,523      299
 $100 million < $250 million     425    180      346       102       366    105        388      105     1,525      493
 $250 million or more            540    816      460     1,729       494 1,152         480      414     1,974    4,110
  Subtotal                     2,544 $1,153    2,389 $1,974        2,357 $1,436      2,214    $711      9,504 $5,274
                          b
 Asset size not available        878   $124      752       $22       807    $49        651      $17     3,088     $212
 Total                        23,661 $1,554   23,489 $2,175       24,420 $1,742     23,551 $1,098      95,121 $6,568
                                        Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                        We could not provide the asset size for businesses on noncorporate returns because the information
                                        is only available for corporate income tax returns.
                                        Totals are based on abatements, not returns.
                                        a
                                         Taxpayer did not provide ,or it was missing.
                                        b
                                         Asset size was not available on returns transferred from IRS’ historical files or non-master file and on
                                        special types of assessments.
                                        Source: GAO compilation of IRS data.




                                        Page 74                                           GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix V
                                        Abatements of Tax Assessments on Individual and Business Tax Returns




Table V.7: Number and Amount of Examination Tax Abatements by Asset Size and Fiscal Year of Abatement—Corporate
Income Tax Returns
 Dollars in Millions                              Fiscal year of abatement
 Asset size reported on           1995             1996                1997              1998              Total
 balance sheet               Number Amount   Number Amount Number Amount            Number Amount     Number Amount
 Small corporation
                   a
 No balance sheet                167     $36      171       $67       204    $76        183    $171       725    $350
 Assets < $250,000               417       2      611         4       794     11        581      14     2,403       30
 $250,000 < $1 million           493       5      667         6       874     11        767       8     2,801       30
 $1 million < $5 million         703      12      808        16       992     25        990      22     3,493       75
 $5 million < $10 million        309       9      294        11       354     15        414      15     1,371       50
  Subtotal                     2,089     $64    2,551     $104      3,218   $138      2,935    $230    10,793    $535
 Large corporation
 $10 million < $50 million       750     $95      892       $79       748    $74        739     $67     3,129     $315
 $50 million < $100 million      318      59      279        45       245     51        266     101     1,108      257
 $100 million < $250 million     372     134      423       105       322    120        373     103     1,490      462
 $250 million or more          1,018   1,738    1,122     2,295     1,024 1,804       1,072 2,005       4,236    7,842
  Subtotal                     2,458 $2,027     2,716 $2,524        2,339 $2,049      2,450 $2,276      9,963 $8,876
                          b
 Asset size not available        478   $114       394       $88       228    $65        181     $34     1,281     $302
 Total                         5,025 $2,205     5,661 $2,716        5,785 $2,252      5,566 $2,539     22,037 $9,713
                                        Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                        We could not provide the asset size for businesses on noncorporate returns because the information
                                        is only available for corporate income tax returns.
                                        Totals are based on abatements, not returns.
                                        a
                                        Taxpayer did not provide, or it was missing.
                                        b
                                         Asset size was not available on returns transferred from IRS’ historical files or non-master file and on
                                        special types of assessments.
                                        Source: GAO compilation of IRS data.




                                        Page 75                                           GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix V
                                         Abatements of Tax Assessments on Individual and Business Tax Returns




Table V.8: Number and Amount of Tax Abatements Due to Net Operating Loss Carryback by Asset Size and Fiscal Year of
Abatement—Corporate Income Tax Returns
Dollars in Millions                                 Fiscal year of abatement
Asset size reported on              1995             1996               1997             1998                Total
balance sheet                 Number Amount Number Amount Number Amount Number Amount Number Amount
Small corporation
                  a
No balance sheet                 1,091   $791     1,082    $380        959   $131     1,000    $122      4,132 $1,424
Assets < $250,000               70,049    111    75,912     149     76,850    145    74,324     148 297,135          553
$250,000 < $1 million           35,042    183    38,388     217     38,760    233    38,645     251 150,835          885
$1 million < $5 million         19,993    305    18,157     366     18,420    427    18,506     447     75,076     1,546
$5 million < $10 million         7,256    171     3,723     195      3,126    206     3,111     247     17,216       819
 Subtotal                      133,431 $1,560 137,262 $1,308 138,115 $1,143 135,586 $1,215 544,394 $5,227
Large corporation
$10 million < $50 million        3,143   $569     3,206    $575      3,333   $594     3,381    $716     13,063 $2,454
$50 million < $100 million         719    309       738     323        687    345       718     373      2,862     1,350
$100 million < $250 million        699    332       736     517        738    663       748     616      2,921     2,128
$250 million or more             1,051 4,283      1,179 4,756        1,082 4,462      1,069 4,646        4,381 18,146
 Subtotal                        5,612 $5,493     5,859 $6,171       5,840 $6,064     5,916 $6,350      23,227 $24,078
                         b
Asset size not available         9,140   $319     2,288    $191      1,068   $300       625     $57     13,121      $867
Total                          148,183 $7,372 145,409 $7,670 145,023 $7,507 142,127 $7,623 580,742 $30,172
                                         Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.
                                         We could not provide the asset size for businesses on noncorporate returns because the information
                                         is only available for corporate income tax returns.
                                         Totals are based on abatements, not returns.
                                         a
                                         Taxpayer did not provide, or it was missing.
                                         b
                                          Asset size was not available on returns transferred from IRS’ historical files or non-master file and on
                                         special types of assessments.
                                         Source: GAO compilation of IRS data.




                                         Page 76                                           GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix VI

Abatements Associated With Tax, Penalty,
and Interest Assessments on Substitute for
Returns
                                         The Internal Revenue Service uses third-party information to prepare a
                                         substitute for return for nonfilers. IRS prepares the return without
                                         knowledge of filing status, exemptions, and other deductions. When the
                                         notice of deficiency is received, some taxpayers file a corrected return. IRS
                                         will then abate any overassessed portion of tax, penalty, and interest.

                                         In this appendix, we have excluded tables on return characteristics
                                         because the data are unreliable, such as filing status and exemptions, or do
                                         not apply, such as paid preparer.


Table VI.1: Number and Amount of Abatements Associated With Assessments on Substitute for Returns by Fiscal Year of
Abatement–Individual and Business Tax Returns
Dollars in Millions                                     Abatement type
                                       Tax                   Penalty              Interest                  Total
Fiscal year of abatement          Number Amount          Number Amount        Number Amount            Number Amount
1995                              215,315     $756       454,182      $249    255,100        $219       924,597    $1,225
1996                              234,138       878      466,613        274   267,216         256       967,967     1,408
1997                              203,262       910      419,399        319   250,433         288       873,094     1,516
1998                              152,440       869      347,449        283   191,494         306       691,383     1,457
Total                             805,155    $3,412    1,687,643     $1,125   964,243      $1,069     3,457,041    $5,606
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.



Table VI.2: Number and Amount of Abatements Associated With Assessments on Substitute for Returns by Fiscal Year of
Abatement–Individual Tax Returns
Dollars in Millions                                     Abatement type
                                        Tax                  Penalty              Interest                  Total
Fiscal year of abatement          Number    Amount       Number Amount        Number Amount            Number Amount
1995                              179,375      $614      364,291     $191     214,396        $199       758,062    $1,003
1996                              207,410       757      401,402       225    236,961         235       845,773     1,217
1997                              174,187       763      348,275       232    217,238         261       739,700     1,256
1998                              119,660       667      265,036       209    153,931         272       538,627     1,148
Total                             680,632    $2,801    1,379,004     $856     822,526        $967     2,882,162    $4,624
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




                                         Page 77                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix VI
                                         Abatements Associated With Tax, Penalty, and Interest Assessments on Substitute for
                                         Returns




Table VI.3: Number of Abatements Associated With Assessments on Substitute for Returns by Tax Year and Fiscal Year of
Abatement–Individual Tax Returns
                                                        Fiscal year of abatement
Tax year of return                    1995                1996                   1997            1998                 Total
             a
Before 1980                              20                   6                      5              10                   41
1980-84                              17,355             13,383                 10,291            7,563              48,592
1985-89                             287,750            199,687                148,612           97,983             734,032
1990                                169,127            116,575                 86,082           53,566             425,350
1991                                226,368            176,137                108,462           65,480             576,447
1992                                 56,805            284,205                217,535          104,086             662,631
1993                                    624             55,500                159,219          138,389             353,732
1994                                     13                265                   9,194          53,885              63,357
1995                                      0                 15                     291          14,041              14,347
                                           b
1996                                                          0                      9           3,620                3,629
                                           b                   b
1997                                                                                 0               4                    4
                                           b                   b                      b
1998                                                                                                 0                    0
Total                               758,062            845,773                739,700          538,627           2,882,162
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1978.
                                         b
                                             Does not apply.
                                         Source: GAO compilation of IRS data.


Table VI.4: Amount of Abatements Associated With Assessments on Substitute for Returns by Tax Year and Fiscal Year of
Abatement–Individual Tax Returns
Dollars in Thousands                               Fiscal year of abatement
Tax year of return                     1995                1996               1997             1998                  Total
            a                                                                                       b
Before 1980                            $124                 $16                  $1                                   $142
1980-84                               26,503             18,153              12,012           $8,693               65,361
1985-89                              419,778            349,063             294,944          243,017            1,306,801
1990                                 205,038            162,111             142,247          121,652              631,048
1991                                 288,068            229,396             168,765          140,057              826,286
1992                                  63,245            382,587             301,334          189,936              937,103
1993                                     299             75,586             307,724          274,721              658,330
1994                                      15                182              28,664          124,380              153,240
1995                                       0                  8                 325           33,104               33,436
                                            c
1996                                                          0                   4           12,315               12,319
                                            c                  c
1997                                                                              0               37                    37
                                            c                  c                   c
1998                                                                                               0                     0
Total                             $1,003,069         $1,217,101         $1,256,020        $1,147,912           $4,624,103
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                             Earliest tax year was 1978.
                                         b
                                             Less than $1,000.
                                         c
                                             Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 78                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix VII

Abatements of Tax, Penalty, and Interest
Assessments Associated With Tax on Original
Return
                                         Original tax assessments are from returns filed by taxpayers. All
                                         abatements of tax, penalty, and interest shown in this appendix are
                                         associated with the tax assessment on the original return because IRS had
                                         not assessed additional taxes before these abatements. We have excluded
                                         substitute for return data fields from this set of tables as these types of
                                         returns do not show an original tax assessment amount and would not
                                         result in an abatement without an intervening tax assessment.




Table VII.1: Number and Amount of Abatements Associated With Tax on Original Return by Fiscal Year of Abatement–
Individual and Business Tax Returns
Dollars in Millions                                      Abatement type
                                           Tax               Penalty                 Interest                 Total
Fiscal year of abatement             Number Amount        Number Amount          Number Amount           Number Amount
1995                                2,182,626 $13,353    3,711,340 $4,135       2,327,540       $598    8,221,506 $18,086
1996                                1,955,283 15,049     3,708,611    5,138     2,471,001      1,104    8,134,895   21,291
1997                                2,981,590 14,058     3,655,941    4,835     2,797,727        656    9,435,258   19,549
1998                                2,732,542 16,452     4,149,059    4,276     2,881,971        630    9,763,572   21,357
Total                               9,852,041 $58,912   15,224,951 $18,383 10,478,239         $2,988 35,555,231 $80,284
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                         include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                         master file.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




Table VII.2: Number and Amount of Abatements Associated With Tax on Original Return by Fiscal Year of Abatement–
Individual Tax Returns
Dollars in Millions                                     Abatement type
                                        Tax                  Penalty                 Interest                 Total
Fiscal year of abatement           Number Amount         Number Amount           Number Amount           Number Amount
1995                             1,568,051   $2,990     1,416,584    $1,036     1,138,472      $199     4,123,107   $4,226
1996                             1,417,480    2,983     1,343,692       921     1,147,064       162     3,908,236    4,066
1997                             2,490,285    3,710     1,402,363       932     1,540,613       136     5,433,261    4,778
1998                             2,247,338    4,014     1,890,811     1,073     1,629,120       160     5,767,269    5,247
Total                            7,723,154 $13,696      6,053,450    $3,963     5,455,269      $657 19,231,873 $18,317
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         Source: GAO compilation of IRS data.




                                         Page 79                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix VII
                                         Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original
                                         Return




Table VII.3: Number and Amount of Abatements Associated With Tax on Original Return by Income Level and Fiscal Year of
Abatement–Individual Tax Returns
Dollars in Millions                                  Fiscal year of abatement
Income level reported on           1995             1996                 1997             1998               Total
original return               Number Amount    NumberAmount          Number Amount  Number Amount        Number Amount
Individual nonbusiness
1040A TPI<$25,000              479,996    $94   497,377      $98     817,873  $227   824,288    $290    2,619,534     $708
Non1040A TPI<$25,000           392,182    143   406,915       71     463,456    99   490,487     105    1,753,040      418
TPI $25,000<$50,000            847,430    335   821,056      311 1,374,619     572 1,394,568     609    4,437,673    1,827
TPI $50,000<$100,000           676,169    522   670,788      427 1,167,764     741 1,156,208     687    3,670,929    2,378
TPI $100,000 or more           580,293 1,498    513,593 1,644        535,692 1,772   613,133   2,057    2,242,711    6,971
 Subtotal                    2,976,070 $2,592 2,909,729 $2,551 4,359,404 $3,411 4,478,684 $3,747 14,723,887 $12,301
                    a
Individual business
C-TGR < $25,000                197,782    $56   181,239      $56     210,037   $32   254,462    $123      843,520    $266
C-TGR $25,000<$100,000         353,048    248   309,568      174     345,651   150   429,640     208    1,437,907      780
C-TGR $100,000 or more         268,134    441   236,314      496     229,983   401   289,371     450    1,023,802    1,789
F-TGR<$100,000                  31,527     15    27,318       12      21,041    11    20,375        9     100,261       47
F-TGR $100,000 or more          39,693     69    33,586       80      26,795    68    24,578      59      124,652      276
 Subtotal                      890,184  $828    788,025    $818      833,507  $662 1,018,426    $849    3,530,142 $3,157
                           b
Income level not available     256,853  $805    210,482    $697      240,350  $705   270,159    $651      977,844 $2,858
Total                        4,123,107 $4,226 3,908,236 $4,066 5,433,261 $4,778 5,767,269 $5,247 19,231,873 $18,316
                                         Legend
                                         1040A = Nonbusiness returns filed by individuals
                                         TPI = Total positive income (income reported as a positive on tax return tables)
                                         C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts
                                         F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         Amounts may not sum to totals because of rounding.
                                         a
                                          Returns with Schedules C or F may be categorized as nonbusiness rather than business if the
                                         reported primary source of income was wages, investments, and other nonbusiness income.
                                         b
                                          Income level was not always available on certain penalties.
                                         Source: GAO compilation of IRS data.




                                         Page 80                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
                                         Appendix VII
                                         Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original
                                         Return




Table VII.4: Number of Abatements
Associated With Tax on Original Return                                           Fiscal year of abatement
by Tax Year and Fiscal Year of           Tax year of return                 1995         1996        1997     1998                    Total
                                                     a
Abatement–Individual Tax Returns         Before 1980                       2,601        1,269         709       630                   5,209
                                         1980-84                          69,766      28,878       15,199    12,525                 126,368
                                         1985-89                         356,621     193,456      128,612   137,329                 816,018
                                         1990                            145,812      75,507       52,973    54,676                 328,968
                                         1991                            313,788     111,529       69,530    69,177                 564,024
                                         1992                            584,699     291,201      120,295    93,487               1,089,682
                                         1993                          1,301,600     649,974      307,825   150,126               2,409,525
                                         1994                          1,346,786   1,260,282      504,366   301,476               3,412,910
                                         1995                              1,434   1,293,844 1,314,666      589,266               3,199,210
                                                                               b
                                         1996                                           2,296 2,916,556 1,910,184                 4,829,036
                                                                               b             b
                                         1997                                                       2,530 2,445,813               2,448,343
                                                                               b             b           b
                                         1998                                                                 2,580                   2,580
                                         Total                         4,123,107   3,908,236 5,433,261 5,767,269                 19,231,873
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




Table VII.5: Amount of Abatements
Associated With Tax on Original Return   Dollars in Millions                        Fiscal year of abatement
by Tax Year and Fiscal Year of           Tax year of return                1995            1996         1997         1998             Total
                                                     a
Abatement–Individual Tax Returns         Before 1980                        $11              $5            $3           $4              $23
                                         1980-84                            140              73            42           40              295
                                         1985-89                            713             407           229          176            1,526
                                         1990                               436             214           111           71              833
                                         1991                               657             380           147          110            1,294
                                         1992                               637             707           380          148            1,872
                                         1993                               966             688           757          435            2,846
                                         1994                               665             938           655          711            2,968
                                         1995                                 1             652         1,040          681            2,375
                                                                                b
                                         1996                                                  1        1,414        1,285            2,699
                                                                                b               b
                                         1997                                                               1        1,584            1,585
                                                                                b              b             b
                                         1998                                                                            1                1
                                         Total                           $4,226          $4,066       $4,778        $5,247          $18,317
                                         Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                         with Schedule C, sole proprietor business income and Schedule F, farm income.
                                         Totals are based on abatements, not returns.
                                         a
                                         Earliest tax year was 1962.
                                         b
                                         Does not apply.
                                         Source: GAO compilation of IRS data.




                                         Page 81                                          GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix VII
                                           Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original
                                           Return




Table VII.6: Distribution of Returns With Abatements Associated With Tax on Original Return by Filing Status and Fiscal Year of
Abatement–Individual Tax Returns
                                                                        Filing Status
Fiscal year of                Number of              Married, filing Married, filing     Head of     Widow(er) with
abatement                        returns    Single          jointly      separately household dependent child           Total
                                         a         a                a                a            a                  a        a
1995
                                         a         a                a                a            a                  a        a
1996
1997                           3,545,398      24.1%            56.6%             3.5%        15.7%               0.1% 100%
1998                           3,688,582      27.3             54.1              4.0         14.5                0.1     100
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages may not sum to 100 because of rounding.
                                           a
                                            IRS was unable to reconstruct the filing status data from its historical files within the time frame of our
                                           review.
                                           Source: GAO compilation of IRS data.




Table VII.7: Distribution of Returns With Abatements Associated With Tax on Original Return by Selected Characteristic and
Fiscal Year of Abatement–IndividualTax Returns
                                                                          Selected characteristic
Fiscal year of                Number of            Primary taxpayer over      Paid preparer on    Earned income credit on
abatement                        returns                          age 65        original return             original return
1995                           2,600,897                             12.3%                 63.7%                        3.6%
1996                           2,479,891                             12.5                  62.2                         3.9
1997                           3,545,398                              9.3                  54.5                         3.8
1998                           3,688,582                              9.5                  57.0                         4.3
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because abatements could occur on returns with more than one
                                           selected characteristic.
                                           Source: GAO compilation of IRS data.




                                           Page 82                                            GAO/GGD-99-77 IRS’ Abatement of Assessments
                                           Appendix VII
                                           Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original
                                           Return




Table VII.8: Distribution of Number of Abatements Associated With Tax on Original Return by Selected IRS Activity and Fiscal
Year of Abatement–Individual Tax Returns
                                                                                                      a
                                                                                Selected IRS activity
Fiscal year of                           Number of                Audit             Offer-in-                       Criminal
                                                                        b                     c             d                e
abatement                               abatements            indicator        compromise       Litigation    investigation
1995                                      4,123,107                 4.1%                 1.6%           4.6%             0.1%
1996                                      3,908,236                 4.4                  0.7            2.7              0.1
1997                                      5,433,261                 2.7                  0.2            1.3              0.0
1998                                      5,767,269                 2.6                  0.1            1.7              0.0
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because the abatement could have been preceded by more than
                                           one selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           d
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                           and cases settled or closed before trial.
                                           e
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.



Table VII.9: Distribution of Amount of Abatements Associated With Tax on Original Return by Selected IRS Activity and Fiscal
Year of Abatement–Individual Tax Returns
                                                                                                   a
Dollars in Millions                                                          Selected IRS activity
Fiscal year of                         Amount of            Audit              Offer-in-                           Criminal
                                                                  b                      c               d                  e
abatement                             abatements        indicator         compromise         Litigation      investigation
1995                                       $4,226            15.6%                  4.7%             8.7%               0.6%
1996                                        4,066            19.4                   2.4              5.7                0.4
1997                                        4,778            16.0                   0.7              3.1                0.4
1998                                        5,247            14.8                   0.4              3.2                0.2
                                           Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                           with Schedule C, sole proprietor business income and Schedule F, farm income.
                                           Percentages should not be totaled because the abatement could have been preceded by more than
                                           one selected IRS activity.
                                           a
                                               IRS activity that occurred before the abatement.
                                           b
                                            Includes audits that are still open and audits closed with a change in tax assessments or no change
                                           in tax assessments.
                                           c
                                           IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer
                                           would pay.
                                           d
                                           Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,
                                           and cases settled or closed before trial.
                                           e
                                            IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,
                                           including those without further action by IRS.
                                           Source: GAO compilation of IRS data.




                                           Page 83                                                GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix VIII

Other Types of Abatements Associated With
Unpaid Assessments on Individual and
Business Tax Returns
                                        This appendix provides abatement information on the unpaid balance of
                                        assessments that cannot be identified separately as tax, penalty, or
                                        interest. The information shown in this appendix is not shown or
                                        duplicated in any way in appendixes I through VII.




Table VIII.1: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Individual and
Business Tax Returns
Dollars in Millions                                  Fiscal year of abatement
                                   1995              1996               1997             1998               Total
Reason for abatement         Number Amount Number Amount Number Amount              Number Amount      Number Amount
Determined currently not
collectible                      484        $6     451      $11        771     $7       903      $4      2,609      $28
Bankruptcy or offer-in-
             a
compromise                    19,547       446 113,752    1,021 174,867 1,673       191,675   1,697    499,841    4,837
Collection statute expired   243,260     1,848 376,048    2,724 427,843 3,199       745,517   4,833 1,792,668 12,603
                           b
Trust fund recovery credit   140,189        89 160,052      135 227,385       199   308,237     250    835,863      673
Total                        403,480 $2,389 650,303 $3,891 830,866 $5,077 1,246,332 $6,783 3,130,981 $18,140
                                        Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                        with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns
                                        include corporate income tax, various employment taxes, and other types of returns on IRS’ business
                                        master file.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        a
                                         Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be
                                        separated.
                                        b
                                        The balance due on a business return that results from employers’ not paying IRS withholdings from
                                        employees’ earnings is abated when credit (payment) is recovered through trust fund penalties
                                        assessed on the individual accounts of responsible officers.
                                        Source: GAO compilation of IRS data.




                                        Page 84                                        GAO/GGD-99-77 IRS’ Abatement of Assessments
                                        Appendix VIII
                                        Other Types of Abatements Associated With Unpaid Assessments on Individual and Business
                                        Tax Returns




Table VIII.2: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Individual Tax Returns
Dollars in Millions                                  Fiscal year of abatement
                                  1995              1996                1997            1998                Total
Reason for abatement       Number Amount Number Amount              Number Amount   Number Amount      Number Amount
Determined currently not
collectible                     452       $6       400      $11         729     $6      851     $4       2,432      $27
Bankruptcy or offer-in-
             a                     b        b          b        b
compromise                                      87,770      869     146,128 1,397   164,284 1,521      398,182    3,787
Collection statute expired   45,815      684 132,288 1,315          150,630 1,543   340,643 2,251      669,376    5,792
Total                        46,267     $690 220,458 $2,195         297,487 $2,946  505,778 $3,775   1,069,990 $9,606
                                        Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                        with Schedule C, sole proprietor business income and Schedule F, farm income.
                                        Totals are based on abatements, not returns.
                                        a
                                         Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be
                                        separated.
                                        b
                                        During fiscal year 1996 on individual returns, IRS began abating the balance due rather than specific
                                        assessments on bankruptcy and offer-in-compromise cases as it had done in prior years. Abatements
                                        on these types of cases before this procedural change are included in the appropriate tables in
                                        appendixes I through VII.
                                        Source: GAO compilation of IRS data.



Table VIII.3: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Business Tax Returns
Dollars in Millions                                  Fiscal year of abatement
                                  1995              1996                1997            1998              Total
Reason for abatement         Number Amount Number Amount            Number Amount   Number Amount    Number Amount
Determined currently not
                                            a                  a                  a               a           a
collectible                       32                51                   42              52               177
Bankruptcy or offer-in-
             b
compromise                    19,547    $446    25,982     $152      28,739   $276   27,391   $176    101,659 $1,050
Collection statute expired   197,445   1,164 243,760 1,408          277,213 1,656   404,874 2,582   1,123,292    6,811
                           c
Trust fund recovery credit   140,189      89 160,052        135     227,385    199  308,237    250    835,863      673
Total                        357,213 $1,699 429,845 $1,696          533,379 $2,131  740,554 $3,008  2,060,991 $8,534
                                        Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those
                                        with Schedule C, sole proprietor business income and Schedule F, farm income.
                                        Totals are based on abatements, not returns.
                                        Amounts may not sum to totals because of rounding.
                                        a
                                            Less than $1 million.
                                        b
                                         Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be
                                        separated.
                                        c
                                        The balance due on a business return that results from employers’ not paying IRS withholdings from
                                        employees’ earnings is abated when credit (payment) is recovered through trust fund penalties
                                        assessed on the individual accounts of responsible officers.
                                        Source: GAO compilation of IRS data.




                                        Page 85                                         GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix IX

Comments From the Internal Revenue Service




              Page 86      GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix X

Major Contributors to This Report


                        Rodney F. Hobbs, Senior Evaluator
General Government      Elizabeth W. Scullin, Communications Analyst
Division, Washington,
D.C.
                        Royce L. Baker, Evaluator-in-Charge
Kansas City Field       Thomas N. Bloom, Senior Computer Specialist
Office                  Julie A. Cahalan, Evaluator




                        Page 87                          GAO/GGD-99-77 IRS’ Abatement of Assessments
Page 88   GAO/GGD-99-77 IRS’ Abatement of Assessments
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