Tax Administration:

Audit Trends and Results for Individual Taxpayers

GGD-96-91: Published: Apr 26, 1996. Publicly Released: May 22, 1996.

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Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) audits of individual taxpayers, focusing on: (1) IRS audit rates for individual returns; and (2) the overall results of IRS most recent audits of individual returns.

GAO found that: (1) while the audit rate for individuals decreased between fiscal years (FY) 1988 and 1993 from 1.57 percent to .92 percent, it increased to 1.67 percent by FY 1995; (2) between FY 1992 and FY 1994, the number of audited computer-selected returns and returns with potential tax shelters declined by half, while the number of audited returns with potential nonfilers and returns with unallowable items tripled; (3) audit rates varied by region and district office; (4) between FY 1988 and FY 1995, audit rates were highest in the western region of the country and lowest in the central United States; (5) between FY 1988 and FY 1995, audit rates increased among those in the lowest-income group and decreased among those in the highest-income group; (6) audits of the highest-income group yielded the most recommended additional tax per return; and (7) between FY 1992 and 1994, additional taxes recommended for each direct audit hour increased for business individuals in the lowest and highest-income groups and nonbusiness individuals in the lowest-income group, and decreased for nonbusiness individuals in the highest-income group.

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