IRS Statement — Examination coverage rates in the 2022 Data Book


April 14, 2023

The 2022 Data Book reports examination coverage rates by type and size of return for examinations in process or closed as of September 30, 2022. It is important to recognize that fiscal year-end statistics, or any other interim statistics, do not represent final examination results for recent tax years since new examinations can be initiated up to at least three years after a tax return is filed, known as the statutory period. For the 2022 Data Book, 2018 is the most recent tax year outside the statutory period, meaning that in most cases no new audits will be started.

The statistics in the 2022 Data Book demonstrate that continued resource constraints have limited the agency's ability to address high-end noncompliance. Tax Year 2018 audit rates for taxpayers with more than $10 million total positive income were 9.2%, down from 13.6% for Tax Year 2012. Over the same period, the overall corporate audit rate fell from 1.3% to .6% and the audit rate for partnerships fell from .3% to .1%.

The Inflation Reduction Act provided the IRS with resources to expand enforcement in areas where our current audits rates have been too low to address systematic noncompliance, encouraging some taxpayers to take greater risks given such low audit rates. IRS will focus the new IRA enforcement resources on identifying and addressing non-compliance among high-income and high-wealth individuals, large partnerships, and large corporations. Improved analytics will better support risk-based enforcement decisions and inform opportunities to expand use of existing resources to address high-risk noncompliance.

The IRS will focus the Inflation Reduction Act enforcement resources on hiring the accountants, attorneys, engineers, economists and data scientists needed to pursue high-income and high-wealth individuals, complex partnerships, and large corporations that are not paying the taxes they owe. Given the increase in filing populations over time, the complex nature of the tax filings and the IRS' inability to keep pace due to lack of resources, it makes sense to focus initial Inflation Reduction Act implementation efforts exclusively on increasing our capacity to assess compliance of high-income and high-wealth individuals, complex partnerships, and large corporations. The IRS has no plans to increase the audit rate for households making less than $400,000.

The 2018 information is the most recent year we have final audit rate data because it is the most recent tax year for which the statutory period has closed, meaning in most cases no new audits will be started and the audit coverage rates should be final.

Typically, audit rates for higher-income categories increase over time as new audits are opened during the statutory period. This means the audit numbers for higher-income taxpayers listed in the 2022 Data Book Table 17 will increase over time for tax years within the statutory period; the final exam rates for these taxpayers will be significantly higher in future years.

The examination coverage rates presented in the annual IRS Data Book, represent a "snapshot" as of the end of each fiscal year, but the data will continue to change as open examinations close and new ones are opened.