In a recent report on IRS compliance activities, the Treasury Inspector General for Tax Administration (TIGTA) revealed that the IRS has achieved an impressive milestone. In fiscal year 2022, the IRS collected an unprecedented $4.9 trillion of total tax revenue from return filings. This remarkable achievement highlights the effectiveness of the IRS in ensuring tax compliance.
According to a report by TIGTA, the total revenue collected in FY 2022 exceeded the previous year by approximately $790 billion (TIGTA Rep’t No. 2024-300-011, Dec. 20, 2023).
According to a report, the number of individual and business income tax returns filed by U.S. taxpayers in FY 2022 exceeded 161 million and 12 million respectively. Additionally, over 31 million employment tax returns, over 1 million excise tax forms, and just over 297,000 estate and gift tax forms were also filed. The amount of income taxes collected from individuals has seen a significant increase of 47% since FY 2019, reaching nearly $1 trillion.
According to the report, the IRS collected $72 billion in enforcement revenue in FY 2022, which was slightly below the previous year’s record of $75 billion.
Enforcement revenue has seen a substantial increase over the years. By contrast, the total enforcement revenue collected from FY 2013 to FY 2020 never exceeded $59 billion.
The IRS concluded FY 2022 with a slight decrease in full-time-equivalent employees compared to FY 2019, as automated collection processes played a significant role in driving revenue collection. Approximately 74% of the enforcement revenue for FY 2022 was collected through the collection notice stream and automated collection methods. According to TIGTA, the decline in examinations can be attributed to a decrease in staffing. In FY 2022, the IRS conducted a slightly lower number of correspondence examinations and significantly fewer field examinations compared to FY 2019.
However, in FY 2022, there was a significant 37% increase in revenue from field collection, which involves IRS revenue officers directly contacting taxpayers and their representatives. The IRS credited this increase, at least in part, to their emphasis on addressing high-dollar employment tax cases with balances of $250,000 or more. According to TIGTA, field collection management has prioritized the assignment of cases involving individual taxpayers who owe over $1 million.
The IRS has announced its intention to allocate funds from the Inflation Reduction Act of 2022, P.L. 117-169, towards targeting high-income individuals and addressing challenging business cases, including those involving large or complex passthrough entities.
According to TIGTA, the IRS has projected the gross tax gap for tax year 2021 to be $688 billion. This represents the difference between the estimated true tax liability for the period and the actual amount of tax paid on time.
“The IRS’s examination function continued its declining enforcement trend in terms of the number of examinations; however, there was a general increase from $17.3 billion in FY 2019 to $30.2 billion in FY 2022 for proposed additional taxes after examinations,” the report said. “The trending decline in the number of examinations is likely contributing to expansion in the overall tax gap as taxpayers that appear to present a compliance risk are less likely to have an examination conducted.”
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