Enforcement: Information Reporting & Verification
Section 3 of the IRS Data Book presents data on information reporting and verification, which, in addition to examinations, are critical tools for identifying and resolving taxpayer errors. In addition to receiving information on self-reported income and tax on returns filed by taxpayers, the IRS gathers independent information about income received and taxes withheld from information returns, such as Forms W–2 and 1099 filed by employers and other third parties. 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 parties 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.
Highlights of the Data
- In Fiscal Year 2015, the IRS received over 2.6 billion third-party information returns, almost 87.2 percent of which were filed electronically (Table 14).
- The IRS closed more than 3.7 million cases under the Automated Underreporter Program resulting in more than $6.3 billion in additional assessments (Table 14).
- The IRS closed 614,000 cases under its Automated Substitute for Return Program resulting in over $2.7 billion in additional assessments (Table 14).
- For Tax Year (TY) 2014 individual income tax returns processed during Calendar Year 2015, IRS sent almost 1.7 million notices to taxpayers for almost 2.2 million math errors identified on their returns (Table 15).
- For TY 2014, math errors associated with calculation of income or other taxes made up almost 34.0 percent of total math errors. For TY 2013 and prior years, misreporting the number and amount of exemptions was the most common error, making up 24.8 percent of the total (Table 15).