Compliance presence

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This section of the IRS Data Book highlights the IRS’s compliance efforts. Examinations (audits) of most types of tax returns, information reporting and verification, math error notices, and criminal investigations are critical tools to determine if income, expenses, and credits are being accurately reported and to identify and resolve taxpayer er?rors and to identify fraud. These tools en?sure that the IRS has a presence across taxpayers of all income and asset levels.

For the past decade, the IRS has seen an increase in the number of returns filed paired with a decrease in resources available for examinations. The Service is constantly adapting and improving its processes to identify errors, detect fraudulent activity, and ensure resources are allocated as efficiently and effec?tively as possible. While the IRS accepts most returns as filed, some are selected for examination using various methods, including random sampling and com?puterized screening. Most IRS exami?nations are conducted through the mail (correspondence) or face-to-face (field).

The IRS also offers programs that encourage a more proactive approach to ensuring tax compliance for large and international businesses. Tax cer?tainty programs, including the Advance Pricing Agreement (APA) Program and the Compliance Assurance Process (CAP) Program, help taxpayers improve their federal tax compliance via coop?eration with the IRS prior to the filing of tax returns.

The IRS gathers independent infor?mation about income received and taxes withheld from information re?turns, such as Forms W–2 and 1099 filed by employers and other third parties. The IRS uses this information to verify self-reported income and tax on returns filed by taxpayers. With its Automated Underreporter Program, the IRS matches these information returns to tax returns and contacts taxpayers to resolve discrepancies. In the Automated Substitute for Return Program, the IRS uses information returns from third par?ties to identify nonfilers; construct tax returns for certain nonfilers based on that third-party information; and assess tax, interest, and penalties based on the substitute returns. To further verify the accuracy of reported information, the IRS also checks for mathematical and clerical errors before refunds are paid.

IRS’s Criminal Investigation function conducts investigations of alleged crimi?nal violations of the tax code and related financial statutes, which may in turn lead to prosecution, fines, and imprisonment.

Graphic on the left shows the number of compliance activities completed during fiscal year 2024. The IRS completed more than 3.8 million compliance activities, including sending over 1.0 million math error notices. Graphic on the right shows the amount of recommended additional tax and assessments for fiscal year 2024, totaling $36.8 billion. Field exams accounted for $23.0 billion of this total.

View chart details XLSX. For additional graphs from this section, download the PDF of this year’s Data Book PDF.

Highlights of the data

The exam coverage rate for TY 2019 (the most recent year outside the statute of limitations period) of indi?vidual taxpayers reporting total positive income (TPI) of $10 million or more was 11.0 percent. The rate for taxpayers with TPI of $5 million–$10 million was 3.1 percent, and 1.6 percent for those with TPI of $1 million–$5 million (Table 17).
In FY 2024, the IRS closed 505,514 tax return audits, resulting in over $29.0 billion in recommended ad?ditional tax (Table 18 XLSX).
The IRS closed 1.2 mil?lion cases under the Automated Underreporter Program in FY 2024, resulting in $7.7 billion in additional assessments. In addi?tion, the IRS closed 442,633cases under its Automated Substitute for Return Program, resulting in nearly $82.0 million in additional as?sessments (Table 24 XLSX).
In FY 2024, the IRS completed 2,481 criminal investigations in three areas—896 legal-source tax crime cases, which involve activities, industries, and occupa?tions that generate legitimate in?come or threats to the tax system; 983 illegal-source financial crime cases, which relate to proceeds derived from unlawful sources such as money laundering; and 602 narcotics-related financial crime cases, which involve in?vestigating narcotics-related tax and money-laundering crimes. These cases are often investigated in cooperation with the Justice Department and other law enforce?ment agencies (Table 26 XLSX).