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. Page 2 GAO/GGD-99-77 IRS’ Abatement of Assessments 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 B-280532 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 Contents 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 Contents 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 Contents 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 Contents 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 Contents 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. Page 41 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 42 GAO/GGD-99-77 IRS’ Abatement of Assessments Appendix IV 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. Page 43 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 44 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 47 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 58 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 59 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 60 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 61 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 62 GAO/GGD-99-77 IRS’ Abatement of Assessments 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. Page 63 GAO/GGD-99-77 IRS’ Abatement of Assessments 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 Ordering Information The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. Order by mail: U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 or visit: Room 1100 th th 700 4 St. NW (corner of 4 and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. 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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)