TAX

ADMINISTRATION

IRS’ Abatement of

Assessments in Fiscal

Years 1995-98

United States General Accounting Office

GAO Report to the Joint Committee on

Taxation

June 1999

GAO/GGD-99-77

United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-280532

Page 1 GAO/GGD-99-77 IRS’ Abatement of Assessments

GAO

June 4, 1999

The Honorable Bill Archer

Chairman

The Honorable William V. Roth, Jr.

Vice Chairman

Joint Committee on Taxation

Each year, the Internal Revenue Service (IRS) abates tens of billions of

dollars in tax, penalty, and interest assessments.1

 That is, IRS reduces

these assessments on taxpayers’ accounts. Abatements are important

because they can correct tax, penalty, and interest amounts that have been

overassessed due to errors by IRS or taxpayers. For some types of

abatements, however, the assessments are correct, but IRS abates them for

various other reasons. For example, penalties are abated for taxpayers

who can prove they had reasonably relied on written advice from IRS.

Because IRS has not developed comprehensive information on the number

and amount of various types of past abatements, you asked us to provide

such information, which might help the Committee fulfill a requirement in

the IRS Restructuring and Reform Act of 1998 that it report on the

administration of penalty and interest assessments by July 22, 1999. On the

basis of your February 2, 1999, request, our objectives were to determine

for individual and business tax returns (1) the number and amount of

various types of tax, penalty, and interest abatements made during fiscal

years 1995 through 1998 and (2) selected characteristics of the abatements,

such as the tax years of abated assessments, taxpayers’ use of paid tax

preparers, and IRS’ actions--such as audit or collection actions--before

abating assessments.2

Our analysis of IRS records on individual and business abatements in fiscal

years 1995 through 1998 showed that the number and amount of

abatements of tax, penalty, and interest assessments stayed fairly

constant. Each year, IRS abated, on average, about 10 million assessments

worth about $30 billion. (See tables in app. I; unless noted otherwise,

 

1

Taxpayers essentially assess themselves when they voluntarily report the amount of taxes owed on a

tax return. IRS may assess additional taxes owed, as well as penalty and interest amounts, as a result

of an enforcement program, such as auditing tax returns that appear to have misreported income,

deductions, credits, exemptions, or other tax issues.

2

As also requested in this letter, we are developing a separate report on IRS’ basic abatement processes

and any IRS efforts to improve these processes.

Results
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Page 2 GAO/GGD-99-77 IRS’ Abatement of Assessments

tables in the appendixes include abatements of tax, penalty, and interest

assessments.)

To illustrate the types of analysis we did on individual and business

abatements, for just the individual taxpayers, IRS abated 7.1 million

assessments in fiscal year 19983—2.5 million tax, 2.4 million penalty, and

2.2 million interest assessments. These abatements totaled about $7.8

billion—$5.5 billion in tax, $1.5 billion in penalty, and $0.8 billion in

interest assessments.4

 For the 2.4 million penalty abatements, 1.4 million

were failure-to-pay penalties. Of the $1.5 billion in penalty abatements,

$676 million were miscellaneous civil tax penalties.5

A variety of characteristics were associated with the abatements for

individuals and businesses during fiscal years 1995-98. For example, the 7.1

million individual abatements in fiscal year 1998 were associated with the

following characteristics:

• About 80 percent of the 7.1 million abatements (as well as the abated

amounts) involved individuals who predominantly reported nonbusiness

income, such as wages, rather than business income from selfemployment.

• The 7.1 million abatements were associated with 4.3 million filed returns.

Of these returns, 52 percent were joint returns and 54 percent used a paid

preparer.

• Of the 7.1 million abatements, about 19 percent were associated with a tax

return with an additional assessment after the one originally reported and

about 78 percent were associated with a previous collection action.

• Of the 7.1 million abatements, 64 percent involved assessments for tax

years after 1995, while 9 percent involved assessments for tax years before

1992.

Appendixes II and III provide detailed information for all 4 years on the

number and amount of abatements for individual and business returns.

Appendixes IV and V provide information about the characteristics of

abatements for individual and business returns during fiscal years 1995

 

3

It is important to recognize that an individual taxpayer could receive multiple abatements in a fiscal

year, such as when an abated tax assessment also leads to abated penalty and interest assessments.

4

IRS data extracts that we used did not allow us to link specific abatements to related assessments. As

a result, we could not determine how much of the various types of assessments had been abated.

5

These miscellaneous penalties include the trust fund penalty that applies when a business does not

properly deposit its employment taxes. IRS is to assess the penalty against all responsible individuals

associated with that business until these taxes are deposited.
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Page 3 GAO/GGD-99-77 IRS’ Abatement of Assessments

through 1998. Appendixes VI and VII provide information about

abatements on tax returns associated with one of two IRS activities—

creating substitute returns for nonfilers and making additional

assessments.

Section 6404 of the Internal Revenue Code (IRC) authorizes IRS to abate

an assessment under certain conditions. For example, IRS can abate an

erroneous assessment, which can be caused by either IRS or the taxpayer.

IRS does not have automated data available on the root causes of these

errors. Some examples of errors follow.

• A taxpayer made an error on the original return, such as underreporting a

deduction, and filed an amended return. If IRS verified the correctness of

the amended return, it would abate the overassessed portion of the

original tax reported.

• In an audit, IRS did not find adequate support for certain deductions and

ultimately assessed additional taxes. Afterward, the taxpayer challenged

this assessment by providing documentation to support the deductions.6

 If

IRS found the documentation valid, IRS would abate the overassessment.

• IRS might assess taxes on the basis of evidence that IRS had received

about income paid to an individual who had not filed an income tax return.

IRS would then notify the taxpayer of the assessment. If the taxpayer then

filed a return with a lower tax liability and IRS confirmed this new liability,

IRS would abate any overassessment.

In addition, IRS can abate unnecessary assessments of the correct amount

in special situations. That is, IRS has made the assessment multiple times,

knowing that any unnecessary assessments will eventually be abated. In

these situations, IRS knows that a tax is owed from among multiple

taxpayers. IRS would assess each of these taxpayers and then abate any

unnecessary assessments after the tax is paid.

IRS also abates correct assessments for other reasons. For example, IRS

abates certain penalties when a taxpayer provides a reasonable cause

(such as a nonfinancial hardship, or incorrect IRS written advice) for not

meeting a tax responsibility, such as paying an assessment. Or, a taxpayer

 

6

Before IRS assesses additional taxes that an audit recommends, a taxpayer can dispute the

recommended assessment through IRS’ Office of Appeals. Also, upon receiving notice of a proposed

assessment, a taxpayer has 90 days (150 days if outside the United States) to file a petition with the Tax

Court for a redetermination of the proposed adjustment. Some taxpayers, for whatever reasons,

bypass these options, which result in the recommended taxes being assessed, along with any related

penalty and interest amounts.

Background
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Page 4 GAO/GGD-99-77 IRS’ Abatement of Assessments

can claim a deduction by carrying back net operating losses incurred in

other tax years to reduce the liability for a previous tax year. And IRS may

abate an assessment for unpaid taxes that involved the correct amount but

was made after the time period allowed for assessing additional tax

liabilities.

Regardless of the reason, when IRS abates a tax or penalty assessment, its

computers generally abate any other associated penalty and interest

assessments. IRS records data on abatements (as well as other tax activity,

such as assessments and payments) in a taxpayer’s account on IRS’

masterfile. IRS maintains both an individual and a business masterfile.

For both objectives, we requested data extracts from IRS’ individual and

business masterfiles to identify the abatements received during fiscal years

1995 through 1998 by individuals and businesses. These IRS data identified

the number and dollar amounts for each type of tax, penalty, or interest

abatement. The data included specific characteristics about each

abatement, such as the type and year of the tax return, the income level

and filing status of the taxpayer, the taxpayer’s use of a paid preparer, and

the IRS actions taken on the tax return that had an assessment abated,

such as an audit or collection action.

The masterfile data extracts we received had 43 million abatement

transactions that totaled $120 billion for the 4 fiscal years. Using the

results of our various analyses, we created a series of tables on the number

and amount of abatements as well as the characteristics associated with

the abatements. The tables for these 4 fiscal years are provided in

appendixes I through VII to this report.7

We did not attempt to verify the reliability of the masterfile data. However,

we talked to IRS National Office officials on data abnormalities we found.

To the extent that these abnormalities affected our analyses, we identified

them in footnotes to the tables in this report. Further, IRS’ data extracts

did not allow us to link specific abatements to the related assessments in

various years. As a result, we could not determine how much of the

various types of assessments had been abated, particularly by year. Nor

 

7

We also did limited analyses on transactions that we did not include in our abatement totals but that

reduced the taxes owed. In general, these transactions forgave or eliminated an unpaid tax amount

even though the assessment was correct. These transactions included eliminating a tax debt because

the statutory period (generally 10 years) for collecting the debt had expired or because the taxpayer

had gone through bankruptcy. Our analyses of these “other” transactions are separate from our

abatement analyses and are reported in app. VIII.

Scope and

Methodology
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Page 5 GAO/GGD-99-77 IRS’ Abatement of Assessments

could we analyze why an assessment was abated or whether the

abatement was valid.

We performed our audit at IRS headquarters in Washington, D.C., and IRS’

Kansas City Service Center. Our work was done between January and May

1999 in accordance with generally accepted government auditing

standards.

We requested comments on a draft of this report from the Commissioner

of Internal Revenue. On May 21, 1999, we received written comments from

IRS’ Chief Operations Officer. (See app. IX.)

IRS’ letter indicated an agreement with our draft report. The letter said

that the statistical tables in our report were consistent with IRS’ abatement

data. Further, the letter commented that the report provides good

information on aspects of abatements.

We are sending copies of this report to Representative Charles B. Rangel,

Ranking Minority Member, House Committee on Ways and Means, and

Senator Daniel P. Moynihan, Ranking Minority Member, Senate Committee

on Finance. We are also sending copies to the Honorable Jacob Lew,

Director, Office of Management and Budget; the Honorable Robert E.

Rubin, Secretary of the Treasury; the Honorable Charles O. Rossotti,

Commissioner of Internal Revenue; and other interested parties. We will

also send copies to those who request them.

The major contributors to this report are listed in appendix X. If you or

your staff have any questions concerning this report, please contact me or

Tom Short, Assistant Director, on (202) 512-9110.

Cornelia M. Ashby

Associate Director, Tax Policy and

Administration Issues

Agency Comments
Page 6 GAO/GGD-99-77 IRS’ Abatement of Assessments

Contents

1 Letter

Appendix I 16

Overview of

Abatements of Tax,

Penalty, and Interest

Assessments on

Individual and

Business Returns

Appendix II 18

Abatements of Tax,

Penalty, and Interest

Assessments on

Individual Returns

Appendix III 23

Abatements of Tax,

Penalty, and Interest

Assessments on

Business Returns

Appendix IV 29

Abatements of Penalty

and Interest

Assessments on

Individual and

Business Tax Returns
Contents

Page 7 GAO/GGD-99-77 IRS’ Abatement of Assessments

Appendix V

Abatements of Tax

Assessments on

Individual and

Business Tax Returns

72

Appendix VI 77

Abatements

Associated With Tax,

Penalty, and Interest

Assessments on

Substitute for Returns

Appendix VII 79

Abatements of Tax,

Penalty, and Interest

Assessments

Associated With Tax

on Original Return

Appendix VIII 84

Other Types of

Abatements

Associated With

Unpaid Assessments

on Individual and

Business Tax Returns

Appendix IX

Comments From the

Internal Revenue

Service

86
Contents

Page 8 GAO/GGD-99-77 IRS’ Abatement of Assessments

Appendix X

Major Contributors to

This Report

87

Table I.1: Number and Amount of Abatements by Fiscal

Year of Abatement–Individual and Business Tax

Returns

16

Table I.2: Number and Amount of Abatements by Type of

Return and Fiscal Year of Abatement–Individual and

Business Tax Returns

16

Table I.3: Number of Returns and Taxpayers Receiving

Abatements by Fiscal Year of Abatement–Individual

and Business Tax Returns

17

Table II.1: Number and Amount of Abatements by Fiscal

Year of Abatement–Individual Tax Returns

18

Table II.2: Number and Amount of Abatements by Income

Level and Fiscal Year of Abatement–Individual Tax

Returns

18

Table II.3: Number of Abatements by Tax Year and Fiscal

Year of Abatement–Individual Tax Returns

19

Table II.4: Amount of Abatements by Tax Year and Fiscal

Year of Abatement–Individual Tax Returns

19

Table II.5: Distribution of Returns With Abatements by

Filing Status and Fiscal Year of Abatement–Individual

Tax Returns

20

Table II.6: Distribution of Returns With Abatements by

Selected Characteristic and Fiscal Year of Abatement–

Individual Tax Returns

20

Table II.7: Distribution of Abatements on Returns

Associated With Selected IRS Activity by Fiscal Year of

Abatement–Individual Tax Returns

21

Table II.8: Distribution of Amount of Abatements on

Returns Associated With Selected IRS Activity by

Fiscal Year of Abatement–Individual Tax Returns

22

Table III.1: Number and Amount of Abatements by Fiscal

Year of Abatement–Business Tax Returns

23

Table III.2: Number and Amount of Abatements by Fiscal

Year of Abatement–Corporate Income Tax Returns

23

Tables

Table III.3: Number and Amount of Abatements by Fiscal

Year of Abatement–Employment Tax Returns

24
Contents

Page 9 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table III.4: Number and Amount of Abatements by Fiscal

Year of Abatement–Other Business Tax Returns

24

Table III.5: Number and Amount of Abatements by Asset

Size and Fiscal Year of Abatement–Corporate Income

Tax Returns

25

Table III.6: Number of Abatements by Tax Year and

Fiscal Year of Abatement–Business Tax Returns

26

Table III.7: Amount of Abatements by Tax Year and Fiscal

Year of Abatement–Business Tax Returns

26

Table III.8: Distribution of Abatements on Returns With

Selected IRS Activity by Fiscal Year of Abatement–

Business Tax Returns

27

Table III.9: Distribution of Amounts of Abatements on

Returns With Selected IRS Activity by Fiscal Year of

Abatement–Business Tax Returns

28

Table IV.1: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Individual

and Business Tax Returns

29

Table IV.2: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Individual

and Business Tax Returns

30

Table IV.3: Percent of Penalty and Interest Abatements

Computed Manually and by Computer by Fiscal Year of

Abatement—Individual and Business Tax Returns

31

Table IV.4: Percent of Amount of Penalty and Interest

Abatements Computed Manually and by Computer by

Fiscal Year of Abatement—Individual and Business

Tax Returns

32

Table IV.5: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Individual

Tax Returns

33

Table IV.6: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Individual

Tax Returns

34

Table IV.7: Percent of Penalty and Interest Abatements

Computed Manually and by Computer by Fiscal Year of

Abatement—Individual Tax Returns

35

Table IV.8: Percent of Amount of Penalty and Interest

Abatements Computed Manually and by Computer by

Fiscal Year of Abatement—Individual Tax Returns

36

Table IV.9: Number and Amount of Penalty Abatements

by Income Level and by Fiscal Year of Abatement—

Individual Tax Returns

37
Contents

Page 10 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table IV.10: Number and Amount of Interest Abatements

by Income Level and by Fiscal Year of Abatement—

Individual Tax Returns

38

Table IV.11: Number of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Individual Tax Returns

39

Table IV.12: Amount of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Individual Tax Returns

39

Table IV.13: Number of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Individual Tax Returns

40

Table IV.14: Amount of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Individual Tax Returns

40

Table IV.15: Distribution of Returns With Penalty and

Interest Abatements by Filing Status and Fiscal Year of

Abatement—Individual Tax Returns

41

Table IV.16: Distribution of Returns With Penalty and

Interest Abatements by Selected Characteristic and

Fiscal Year of Abatement—Individual Tax Returns

41

Table IV.17: Distribution of Returns With Penalty

Abatements by Selected Characteristic and Fiscal Year

of Abatement—Individual Tax Returns

42

Table IV.18: Distribution of Returns With Interest

Abatements by Selected Characteristic and Fiscal Year

of Abatement—Individual Tax Returns

42

Table IV.19: Distribution of Returns With Failure to File

Penalty Abatements by Selected Characteristic and

Fiscal Year of Abatement—Individual Tax Returns

43

Table IV.20: Distribution of Returns With Estimated

Payment Penalty Abatements by Selected

Characteristic and Fiscal Year of Abatement—

Individual Tax Returns

43

Table IV.21: Distribution of Returns With Failure to Pay

Penalty Abatements by Selected Characteristic and

Fiscal Year of Abatement—Individual Tax Returns

43

Table IV.22: Distribution of Number of Penalty and

Interest Abatements on Returns Associated With

Selected IRS Activity by Fiscal Year of Abatement—

Individual Tax Returns

44

Table IV.23: Distribution of Amount of Penalty and

Interest Abatements on Returns Associated With

Selected IRS Activity by Fiscal Year of Abatement—

Individual Tax Returns

45
Contents

Page 11 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table IV.24: Distribution of Number of Penalty

Abatements on Returns Associated With Selected IRS

Activity by Fiscal Year of Abatement—Individual Tax

Returns

46

Table IV.25: Distribution of Amount of Penalty

Abatements on Returns Associated With Selected IRS

Activity by Fiscal Year of Abatement—Individual Tax

Returns

47

Table IV.26: Distribution of Number of Interest

Abatements on Returns Associated With Selected IRS

Activity by Fiscal Year of Abatement—Individual Tax

Returns

48

Table IV.27: Distribution of Amount of Interest

Abatements on Returns Associated With Selected IRS

Activity by Fiscal Year of Abatement—Individual Tax

Returns

49

Table IV.28: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Business

Tax Returns

50

Table IV.29: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement–Business Tax

Returns

51

Table IV.30: Percent of Penalty and Interest Abatements

Computed Manually and by Computer by Fiscal Year of

Abatement—Business Tax Returns

52

Table IV.31: Percent of Amount of Penalty and Interest

Abatements Computed Manually and by Computer by

Fiscal Year of Abatement—Business Tax Returns

53

Table IV.32: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Corporate

Income Tax Returns

54

Table IV.33: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Corporate

Income Tax Returns

55

Table IV.34: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatements—

Employment Tax Returns

56

Table IV.35: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—

Employment Tax Returns

57

Table IV.36: Number and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement—Other

Business Tax Returns

58
Contents

Page 12 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table IV.37: Amount and Percent of Penalty and Interest

Abatements by Fiscal Year of Abatement–Other

Business Tax Returns

59

Table IV.38: Number and Amount of Penalty Abatements

by Asset Size and Fiscal Year of Abatement—

Corporate Income Tax Returns

60

Table IV.39: Number and Amount of Interest Abatements

by Asset Size and Fiscal Year of Abatement–Corporate

Income Tax Returns

61

Table IV.40: Number of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Business Tax Returns

62

Table IV.41: Amount of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Business Tax Returns

62

Table IV.42: Number of Interest Abatements by Tax Year

and Fiscal Year of Abatements—Business Tax Returns

63

Table IV.43: Amount of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Business Tax Returns

63

Table IV.44: Number of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Corporate Income Tax

Returns

64

Table IV.45: Amount of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Corporate Income Tax

Returns

64

Table IV.46: Number of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Corporate Income Tax

Returns

65

Table IV.47: Amount of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Corporate Income Tax

Returns

65

Table IV.48: Number of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Employment Tax

Returns

66

Table IV.49: Amount of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Employment Tax

Returns

67

Table IV.50: Number of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Employment Tax

Returns

68

Table IV.51: Amount of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Employment Tax

Returns

69
Contents

Page 13 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table IV.52: Number of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Other Business Tax

Returns

70

Table IV.53: Amount of Penalty Abatements by Tax Year

and Fiscal Year of Abatement—Other Business Tax

Returns

70

Table IV.54: Number of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Other Business Tax

Returns

71

Table IV.55: Amount of Interest Abatements by Tax Year

and Fiscal Year of Abatement—Other Business Tax

Returns

71

Table V.1: Number and Distribution of Tax Abatements

by Fiscal Year of Abatement—Individual and Business

Tax Returns

72

Table V.2: Amount and Distribution of Tax Abatements

by Fiscal Year of Abatement—Individual and Business

Tax Returns

72

Table V.3: Number and Amount of Tax Abatements by

Fiscal Year of Abatement—Individual Tax Return

73

Table V.4: Number and Amount of Tax Abatements by

Fiscal Year of Abatement—Business Tax Returns

73

Table V.5: Number and Amount of Tax Abatements by

Fiscal Year of Abatement—Corporate Income Tax

Returns

74

Table V.6: Number and Amount of Non-Examination Tax

Abatements by Asset Size and Fiscal Year of

Abatement—Corporate Income Tax Returns

74

Table V.7: Number and Amount of Examination Tax

Abatements by Asset Size and Fiscal Year of

Abatement—Corporate Income Tax Returns

75

Table V.8: Number and Amount of Tax Abatements Due

to Net Operating Loss Carryback by Asset Size and

Fiscal Year of Abatement—Corporate Income Tax

Returns

76

Table VI.1: Number and Amount of Abatements

Associated With Assessments on Substitute for Returns

by Fiscal Year of Abatement–Individual and Business

Tax Returns

77

Table VI.2: Number and Amount of Abatements

Associated With Assessments on Substitute for Returns

by Fiscal Year of Abatement–Individual Tax Returns

77
Contents

Page 14 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table VI.3: Number of Abatements Associated With

Assessments on Substitute for Returns by Tax Year and

Fiscal Year of Abatement–Individual Tax Returns

78

Table VI.4: Amount of Abatements Associated With

Assessments on Substitute for Returns by Tax Year and

Fiscal Year of Abatement–Individual Tax Returns

78

Table VII.1: Number and Amount of Abatements

Associated With Tax on Original Return by Fiscal Year

of Abatement–Individual and Business Tax Returns

79

Table VII.2: Number and Amount of Abatements

Associated With Tax on Original Return by Fiscal Year

of Abatement–Individual Tax Returns

79

Table VII.3: Number and Amount of Abatements

Associated With Tax on Original Return by Income

Level and Fiscal Year of Abatement–Individual Tax

Returns

80

Table VII.4: Number of Abatements Associated With Tax

on Original Return by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns

81

Table VII.5: Amount of Abatements Associated With Tax

on Original Return by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns

81

Table VII.6: Distribution of Returns With Abatements

Associated With Tax on Original Return by Filing

Status and Fiscal Year of Abatement–Individual Tax

Returns

82

Table VII.7: Distribution of Returns With Abatements

Associated With Tax on Original Return by Selected

Characteristic and Fiscal Year of Abatement–

IndividualTax Returns

82

Table VII.8: Distribution of Number of Abatements

Associated With Tax on Original Return by Selected

IRS Activity and Fiscal Year of Abatement–Individual

Tax Returns

83

Table VII.9: Distribution of Amount of Abatements

Associated With Tax on Original Return by Selected

IRS Activity and Fiscal Year of Abatement–Individual

Tax Returns

83

Table VIII.1: Number and Amount of Other Types of

Abatements Associated With Unpaid Assessments–

Individual and Business Tax Returns

84
Contents

Page 15 GAO/GGD-99-77 IRS’ Abatement of Assessments

Table VIII.2: Number and Amount of Other Types of

Abatements Associated With Unpaid Assessments–

Individual Tax Returns

85

Table VIII.3: Number and Amount of Other Types of

Abatements Associated With Unpaid Assessments–

Business Tax Returns

85

Abbreviations

IRC Internal Revenue Code

IRS Internal Revenue Service
Appendix I

Overview of Abatements of Tax, Penalty, and

Interest Assessments on Individual and

Business Returns

Page 16 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 2,641,271 $20,820 4,386,838 $4,925 3,074,732 $2,647 10,102,841 $28,393

1996 2,443,001 22,489 4,390,416 6,009 3,216,721 3,195 10,050,138 31,692

1997 3,431,358 22,119 4,251,869 5,540 3,507,147 2,788 11,190,374 30,447

1998 3,098,672 22,240 4,705,481 4,795 3,532,125 2,137 11,336,278 29,172

Total 11,614,302 $87,668 17,734,604 $21,269 13,330,725 $10,767 42,679,631 $119,704

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Type of return Number Amount Number Amount Number Amount Number Amount Number Amount

Individual income

tax 5,559,952 $6,773 5,410,556 $6,848 6,840,701 $7,433 7,088,933 $7,676 24,900,142 $28,731

Business

Corporate income tax 430,927 $12,753 435,554 $15,325 430,671 $13,142 432,161 $12,649 1,729,313 $53,870

Employment taxa

3,499,256 4,783 3,272,151 5,693 3,145,880 6,472 3,173,406 5,812 13,090,693 22,760

Estate tax and gift tax 26,838 536 30,170 590 33,940 730 37,942 711 128,890 2,568

Excise tax 39,698 586 31,834 197 28,035 346 26,477 343 126,044 1,471

Other business taxb

546,170 2,962 869,873 3,039 711,147 2,323 577,359 1,980 2,704,549 10,303

 Subtotal 4,542,889 $21,619 4,639,582 $24,844 4,349,673 $23,014 4,247,345 $21,496 17,779,489 $90,973

Total 10,102,841 $28,393 10,050,138 $31,692 11,190,374 $30,447 11,336,278 $29,172 42,679,631 $119,704

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Includes abatements on Form 940, Employer's Annual Federal Unemployment Tax Return; Form

941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal Return for

Household Employees (for tax periods prior to the requirement that these taxes be reported on

Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

b

Includes numerous types of returns, such as partnerships, fiduciaries, and returns used by taxpayers

to report withholdings from revenues paid to nonemployees.

Source: GAO compilation of IRS data.

Table I.1: Number and Amount of Abatements by Fiscal Year of Abatement–Individual and Business Tax Returns

Table I.2: Number and Amount of Abatements by Type of Return and Fiscal Year of Abatement–Individual and Business Tax

Returns
Appendix I

Overview of Abatements of Tax, Penalty, and Interest Assessments on Individual and

Business Returns

Page 17 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Number of

Fiscal year of abatement Returns Taxpayers Abatements

Amount of

abatements

Individuals

1995 3,199,052 2,738,481 5,559,952 $6,773

1996 3,097,806 2,677,106 5,410,556 6,848

1997 4,163,197 3,739,809 6,840,701 7,433

1998 4,333,950 3,881,536 7,088,933 7,676

Total–individuals 14,794,005 13,036,932 24,900,142 $28,731

Businesses

1995 2,198,715 1,535,164 4,542,889 $21,619

1996 2,235,219 1,622,569 4,639,582 24,844

1997 2,062,189 1,506,461 4,349,673 23,014

1998 1,994,723 1,454,992 4,247,345 21,496

Total–businesses 8,490,846 6,119,186 17,779,489 $90,973

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table I.3: Number of Returns and

Taxpayers Receiving Abatements by

Fiscal Year of Abatement–Individual and

Business Tax Returns
Appendix II

Abatements of Tax, Penalty, and Interest

Assessments on Individual Returns

Page 18 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 1,906,198 $4,392 1,955,572 $1,454 1,698,182 $927 5,559,952 $6,773

1996 1,794,074 4,699 1,898,792 1,330 1,717,690 820 5,410,556 6,848

1997 2,848,535 5,266 1,888,977 1,352 2,103,189 816 6,840,701 7,433

1998 2,548,559 5,468 2,373,303 1,452 2,167,071 756 7,088,933 7,676

Total 9,097,366 $19,824 8,116,644 $5,588 7,686,132 $3,319 24,900,142 $28,731

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Income level reported on 1995 1996 1997 1998 Total

original return Number Amount Number Amount Number Amount Number Amount Number Amount

Individual nonbusiness

1040A TPI<$25,000 1,481,991 $1,492 1,591,084 $1,663 1,823,081 $1,904 1,672,770 $1,849 6,568,926 $6,908

Non1040A TPI<$25,000 458,750 213 465,754 115 520,143 155 556,092 149 2,000,739 633

TPI $25,000<$50,000 980,674 450 942,286 490 1,498,650 662 1,542,657 708 4,964,267 2,311

TPI $50,000<$100,000 766,314 647 758,053 517 1,255,983 832 1,261,964 791 4,042,314 2,788

TPI $100,000 or more 640,105 1,929 575,294 2,124 594,952 2,253 678,185 2,403 2,488,536 8,710

 Subtotal 4,327,834 $4,732 4,332,471 $4,911 5,692,809 $5,807 5,711,668 $5,900 20,064,782 $21,350

Individual businessa

C-TGR < $25,000 213,312 $75 196,803 $83 226,007 $46 274,196 $140 910,318 $344

C-TGR $25,000<$100,000 384,942 320 338,061 226 372,204 188 463,272 269 1,558,479 1,003

C-TGR $100,000 or more 295,709 697 262,473 687 253,573 558 316,995 612 1,128,750 2,554

F-TGR<$100,000 34,198 22 30,081 15 23,220 13 22,569 12 110,068 63

F-TGR $100,000 or more 43,220 86 37,281 103 29,780 90 27,690 70 137,971 350

 Subtotal 971,381 $1,200 864,699 $1,113 904,784 $896 1,104,722 $1,104 3,845,586 $4,314

Income level not availableb 260,737 $841 213,386 $824 243,108 $730 272,543 $672 989,774 $3,067

Total 5,559,952 $6,773 5,410,556 $6,848 6,840,701 $7,433 7,088,933 $7,676 24,900,142 $28,731

Legend

1040A = Nonbusiness returns filed by individuals.

TPI = Total positive income (income reported as a positive on tax return tables)

C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts

F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Returns with Schedules C or F may be categorized as nonbusiness rather than business if the

reported primary source of income was wages, investments, and other nonbusiness income.

b

Income level was not always available on certain penalties.

Source: GAO compilation of IRS data.

Table II.1: Number and Amount of Abatements by Fiscal Year of Abatement–Individual Tax Returns

Table II.2: Number and Amount of Abatements by Income Level and Fiscal Year of Abatement–Individual Tax Returns
Appendix II

Abatements of Tax, Penalty, and Interest Assessments on Individual Returns

Page 19 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 7,896 4,393 2,114 1,971 16,374

1980-84 144,898 75,544 47,387 39,141 306,970

1985-89 812,576 495,186 348,975 310,899 1,967,636

1990 384,622 227,516 163,028 132,451 907,617

1991 710,487 351,250 211,233 164,267 1,437,237

1992 754,631 749,391 407,611 240,113 2,151,746

1993 1,360,075 808,455 606,640 364,265 3,139,435

1994 1,383,326 1,362,464 633,248 470,812 3,849,850

1995 1,441 1,334,059 1,432,095 828,471 3,596,066

1996 b 2,298 2,985,836 2,028,495 5,016,629

1997 b b 2,534 2,505,464 2,507,998

1998 b bb 2,584 2,584

Total 5,559,952 5,410,556 6,840,701 7,088,933 24,900,142

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

The earliest tax year is 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $119 $66 $37 $27 $249

1980-84 604 349 335 197 1,486

1985-89 1,699 1,327 842 630 4,498

1990 794 471 342 255 1,863

1991 1,131 770 408 330 2,639

1992 759 1,272 845 444 3,320

1993 993 944 1,277 898 4,113

1994 672 986 796 1,044 3,499

1995 1 661 1,101 891 2,655

1996 b 1 1,449 1,356 2,805

1997 b b 1 1,604 1,605

1998 b bb 1 1

Total $6,773 $6,848 $7,433 $7,676 $28,731

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatement amounts, not return amounts.

Amounts may not sum to totals because of rounding.

a

The earliest tax year is 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Table II.3: Number of Abatements by Tax

Year and Fiscal Year of Abatement–

Individual Tax Returns

Table II.4: Amount of Abatements by Tax

Year and Fiscal Year of Abatement–

Individual Tax Returns
Appendix II

Abatements of Tax, Penalty, and Interest Assessments on Individual Returns

Page 20 GAO/GGD-99-77 IRS’ Abatement of Assessments

Filing status

Fiscal year of abatement

Number of

returns Single

Married, filing

jointly

Married, filing

separately

Head of

household

Widow(er) with

dependent child Total

1995 3,199,052 a a a a aa

1996 3,097,806 a a a a aa

1997 4,163,197 25.3% 54.5% 3.8% 16.4% 0.1% 100%

1998 4,333,950 28.2 52.4 4.3 15.0 0.1 100

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages may not sum to 100 because of rounding.

a

IRS was unable to reconstruct the filing status data from its historical files within the time frames of

our review.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of

abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit on

original return

1995 3,199,052 10.9% 7.5% 57.5% 4.1%

1996 3,097,806 10.8 8.7 55.8 4.6

1997 4,163,197 8.6 5.9 51.1 4.4

1998 4,333,950 8.9 4.4 53.9 5.2

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Table II.5: Distribution of Returns With Abatements by Filing Status and Fiscal Year of Abatement–Individual Tax Returns

Table II.6: Distribution of Returns With Abatements by Selected Characteristic and Fiscal Year of Abatement–Individual Tax

Returns
Appendix II

Abatements of Tax, Penalty, and Interest Assessments on Individual Returns

Page 21 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected IRS activitya

Fiscal year of

abatement

Number of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 5,559,952 9.7% 13.6% 25.8% 1.7% 76.7% 5.4% 0.2%

1996 5,410,556 10.8 15.6 27.8 0.8 78.4 3.3 0.1

1997 6,840,701 8.7 10.8 20.6 0.2 75.0 1.8 0.1

1998 7,088,933 9.6 7.6 18.6 0.1 78.3 2.2 0.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table II.7: Distribution of Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of Abatement–Individual

Tax Returns
Appendix II

Abatements of Tax, Penalty, and Interest Assessments on Individual Returns

Page 22 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Selected IRS activitya

Fiscal year of

abatement

Amount of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 $6,773 30.9% 14.8% 37.6% 5.1% 74.4% 14.4% 2.7%

1996 $6,848 35.1 17.8 40.6 2.2 74.1 9.8 3.0

1997 $7,433 31.3 16.9 35.7 0.7 71.3 7.1 1.8

1998 $7,676 32.1 15.0 31.6 0.4 70.6 5.8 1.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process- open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table II.8: Distribution of Amount of Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of

Abatement–Individual Tax Returns
Appendix III

Abatements of Tax, Penalty, and Interest

Assessments on Business Returns

Page 23 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables in this appendix show information on the number and amount of

tax, penalty, and interest abatements for business tax returns. Tables on

corporate income tax, employment tax, and other business tax returns,

generally, are subsets of the table titled business tax returns.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 735,073 $16,428 2,431,266 $3,471 1,376,550 $1,720 4,542,889 $21,619

1996 648,927 17,790 2,491,624 4,680 1,499,031 2,375 4,639,582 24,844

1997 582,823 16,853 2,362,892 4,188 1,403,958 1,972 4,349,673 23,014

1998 550,113 16,772 2,332,178 3,343 1,365,054 1,381 4,247,345 21,496

Total 2,516,936 $67,843 9,617,960 $15,682 5,644,593 $7,448 17,779,489 $90,973

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 176,869 $11,131 136,643 $379 117,415 $1,243 430,927 $12,753

1996 174,559 12,560 140,810 881 120,185 1,883 435,554 15,325

1997 175,228 11,501 137,183 342 118,260 1,299 430,671 13,142

1998 171,244 11,260 138,160 477 122,757 912 432,161 12,649

Total 697,900 $46,452 552,796 $2,079 478,617 $5,338 1,729,313 $53,870

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data

Table III.1: Number and Amount of Abatements by Fiscal Year of Abatement–Business Tax Returns

Table III.2: Number and Amount of Abatements by Fiscal Year of Abatement–Corporate Income Tax Returns
Appendix III

Abatements of Tax, Penalty, and Interest Assessments on Business Returns

Page 24 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 504,336 $2,794 1,910,252 $1,770 1,084,668 $219 3,499,256 $4,783

1996 389,604 3,014 1,822,060 2,381 1,060,487 298 3,272,151 5,693

1997 352,694 3,772 1,759,338 2,264 1,033,848 436 3,145,880 6,472

1998 326,281 4,082 1,786,956 1,491 1,060,169 239 3,173,406 5,812

Total 1,572,915 $13,662 7,278,606 $7,907 4,239,172 $1,192 13,090,693 $22,760

Notes: Includes abatements on Form 940, Employer's Annual Federal Unemployment Tax Return;

Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal Return

for Household Employees (for tax periods prior to the requirement that these taxes be reported on

Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 53,868 $2,504 384,371 $1,322 174,467 $258 612,706 $4,083

1996 84,764 2,216 528,754 1,417 318,359 193 931,877 3,826

1997 54,901 1,580 466,371 1,582 251,850 237 773,122 3,399

1998 52,588 1,430 407,062 1,374 182,128 230 641,778 3,035

Total 246,121 $7,729 1,786,558 $5,695 926,804 $918 2,959,483 $14,343

Notes: Includes numerous types of tax returns, such as estate, gift, partnerships, fiduciaries, and

returns used by taxpayers to report withholdings from revenues paid to nonemployees.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table III.3: Number and Amount of Abatements by Fiscal Year of Abatement–Employment Tax Returns

Table III.4: Number and Amount of Abatements by Fiscal Year of Abatement–Other Business Tax Returns
Appendix III

Abatements of Tax, Penalty, and Interest Assessments on Business Returns

Page 25 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Asset size reported on

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 13,318 $1,061 14,394 $543 16,179 $392 16,175 $710 60,066 $2,706

Assets < $250,000 199,034 155 209,144 196 209,476 214 209,255 218 826,909 782

$250,000 < $1 million 100,653 234 104,849 286 102,841 306 104,050 320 412,393 1,145

$1 million < $5 million 56,867 384 57,639 458 55,639 549 56,289 563 226,434 1,955

$5 million < $10 million 14,551 216 11,126 240 10,479 266 10,878 315 47,034 1,036

 Subtotal 384,423 $2,050 397,152 $1,722 394,614 $1,726 396,647 $2,127 1,572,836 $7,625

Large corporation

$10 million < $50 million 12,446 $785 12,959 $794 12,705 $895 12,605 $937 50,715 $3,412

$50 million < $100 million 3,333 533 3,498 489 3,322 480 3,193 611 13,346 2,113

$100 million < $250 million 3,427 773 3,476 841 3,231 971 3,366 883 13,500 3,468

$250 million or more 5,765 7,971 6,098 11,121 5,912 8,557 5,968 7,963 23,743 35,612

 Subtotal 24,971 $10,061 26,031 $13,246 25,170 $10,903 25,132 $10,393 101,304 $44,604

Asset size not availableb 21,533 $641 12,371 $357 10,887 $513 10,382 $129 55,173 $1,640

Total 430,927 $12,753 435,554 $15,325 430,671 $13,142 432,161 $12,649 1,729,313 $53,870

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate business returns because the

information is only available for corporate income tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a Taxpayer did not provide, or it was missing.

b

Asset size was not available on returns transferred from IRS’ historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table III.5: Number and Amount of Abatements by Asset Size and Fiscal Year of Abatement–Corporate Income Tax Returns
Appendix III

Abatements of Tax, Penalty, and Interest Assessments on Business Returns

Page 26 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 20,715 21,996 24,308 26,024 93,043

1980-84 11,823 6,873 4,678 2,515 25,889

1985-89 119,722 72,276 51,808 35,396 279,202

1990 84,901 38,029 22,156 14,219 159,305

1991 345,527 90,237 39,297 21,689 496,750

1992 335,753 288,718 77,206 33,325 735,002

1993 591,763 365,124 268,941 73,296 1,299,124

1994 2,630,280 690,742 306,757 187,091 3,814,870

1995 402,405 2,603,722 652,783 294,065 3,952,975

1996 b 461,865 2,440,383 677,947 3,580,195

1997 b b 461,356 2,331,806 2,793,162

1998 b bb 549,972 549,972

Total 4,542,889 4,639,582 4,349,673 4,247,345 17,779,489

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year is 1961.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $1,098 $776 $1,099 $653 $3,626

1980-84 1,975 1,450 1,578 736 5,740

1985-89 3,024 3,202 3,179 2,115 11,520

1990 2,574 2,426 1,151 436 6,588

1991 3,673 2,157 472 611 6,914

1992 2,146 3,957 1,147 564 7,814

1993 2,889 2,437 3,592 1,324 10,241

1994 3,202 2,371 2,437 3,372 11,381

1995 1,039 5,340 3,352 3,038 12,769

1996 b 728 4,647 3,751 9,126

1997 b b 360 4,024 4,384

1998 b bb 871 871

Total $21,619 $24,844 $23,014 $21,496 $90,973

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatement amounts, not return amounts.

Amounts may not sum to totals because of rounding.

a

Earliest tax year is 1961.

b

Does not apply.

Source: GAO compilation of IRS data.

Table III.6: Number of Abatements by Tax Year and Fiscal Year of Abatement–Business Tax Returns

Table III.7: Amount of Abatements by Tax Year and Fiscal Year of Abatement–Business Tax Returns
Appendix III

Abatements of Tax, Penalty, and Interest Assessments on Business Returns

Page 27 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected IRS activitya

Fiscal year of

abatement

Number of

abatements

Audit

indicator b 6020bc

Additional tax

assessmentsd

Offer-incompromisee Collectionf LitigationgCriminal

investigationh

1995 4,542,889 3.4% 3.7% 9.8% 0.1% 78.6% 1.3% i

1996 4,639,582 3.6 2.6 8.9 0.1 80.2 1.1 i

1997 4,349,673 3.7 3.1 8.0 f 81.4 1.0 i

1998 4,247,345 3.7 3.6 5.9 f 81.6 1.1 i

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Percentages should not be totaled because the abatement could have been preceded by more than

one selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

6020b, a substitute for return prepared by IRS for nonfilers of employment tax returns.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in a refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

i

Less than one-tenth of 1 percent.

Source: GAO compilation of IRS data.

Table III.8: Distribution of Abatements on Returns With Selected IRS Activity by Fiscal Year of Abatement–Business Tax

Returns
Appendix III

Abatements of Tax, Penalty, and Interest Assessments on Business Returns

Page 28 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Selected IRS activitya

Fiscal year of

abatement

Amount of

abatements

Audit

indicator b 6020bc

Additional tax

assessmentsd

Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 $21,619 60.7% 1.0% 35.9% 0.1% 47.1% 6.3% 0.4%

1996 $24,844 62.3 0.8 30.7 f 54.2 11.6 0.1

1997 $23,014 57.4 1.1 35.8 f 48.7 8.5 0.3

1998 $21,496 59.7 1.4 25.1 f 37.9 5.7 0.2

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Percentages should not be totaled because the abatement could have been preceded by more than

one selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

6020b, a substitute for return prepared by IRS for nonfilers of employment tax returns.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in a refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table III.9: Distribution of Amounts of Abatements on Returns With Selected IRS Activity by Fiscal Year of Abatement–

Business Tax Returns
Appendix IV

Abatements of Penalty and Interest

Assessments on Individual and Business Tax

Returns

Page 29 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 825,233 18.8 822,298 18.7 835,604 19.7 821,156 17.5 826,073 18.6

Estimated tax (6654 and 6655) 278,063 6.3 261,128 5.9 244,436 5.7 244,042 5.2 256,917 5.8

Failure to make tax deposit (6656) 866,594 19.8 809,347 18.4 773,695 18.2 740,374 15.7 797,503 18.0

Failure to furnish taxpayer

identification number (6723) 504 a 432 a 237 a 101 a 319 a

Daily delinquency (6652(c)(2)(A))b 39,644 0.9 39,829 0.9 38,905 0.9 58,106 1.2 44,121 1.0

Miscellaneous civil-trust fund

(6672)c

229,630 5.2 187,250 4.3 222,502 5.2 255,453 5.4 223,709 5.0

Miscellaneous civil-other (6721(e)

and others)d

86,833 2.0 81,081 1.8 61,747 1.5 71,880 1.5 75,385 1.7

Incomplete partnership return

(6698) 4,661 0.1 3,321 0.1 3,077 0.1 2,339 a 3,350 0.1

Failure to pay (6651(a) (2)-(3)) 1,991,945 45.4 2,138,238 48.7 2,034,711 47.9 2,475,955 52.6 2,160,212 48.7

Bad check (6657) 13,170 0.3 13,331 0.3 13,766 0.3 20,024 0.4 15,073 0.3

Tip income (6652(b)) 2,569 0.1 3,113 0.1 2,562 0.1 1,729 a 2,493 0.1

Fraud (6663) 1,593 a 1,166 a 1,012 a 837 a 1,152 a

Negligence (6662(c))e 46,399 1.1 29,882 0.7 19,615 0.5 13,485 0.3 27,345 0.6

Total penalty abatements 4,386,838 100.0 4,390,416 100.0 4,251,869 100.0 4,705,481 100.0 4,433,651 100.0

Interest abatements 3,074,732 100.0 3,216,721 100.0 3,507,147 100.0 3,532,125 100.0 3,332,681 100.0

Total 7,461,570 100.0 7,607,137 100.0 7,759,016 100.0 8,237,606 100.0 7,766,332 100.0

Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

a

Less than one-tenth of 1 percent.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Abatements of penalties for intentional disregard of the information return filing requirements (section

6721(e)) accounted for 54 percent of all other miscellaneous civil penalty abatements over the 4

years. The remaining 46 percent of abatements were spread among numerous types of other

miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.1: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual and Business Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 30 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $928 18.8 $1,278 21.3 $1,339 24.2 $1,363 28.4 $1,227 23.1

Estimated tax (6654 and 6655) 182 3.7 208 3.5 188 3.4 282 5.9 215 4.0

Failure to make tax deposit (6656) 1,831 37.2 2,493 41.5 2,182 39.4 1,343 28.0 1,962 36.9

Failure to furnish taxpayer identification

number (6723) abab ab abab

Daily delinquency (6652(c)(2)(A))c 55 1.1 58 1.0 55 1.0 110 2.3 70 1.3

Miscellaneous civil-trust fund (6672)d 722 14.7 635 10.6 668 12.1 621 13.0 662 12.4

Miscellaneous civil-other (6721(e) and

others)e 631 12.8 607 10.1 590 10.7 596 12.4 606 11.4

Incomplete partnership return (6698) 125 2.5 67 1.1 22 0.4 7 0.2 55 1.0

Failure to pay (6651(a) (2)-(3)) 322 6.5 576 9.6 389 7.0 380 7.9 417 7.8

Bad check (6657) 2 b 2 b 4 0.1 10 0.2 5 0.1

Tip income (6652(b)) 1 b 1 b 1 b 1 b 1 b

Fraud (6663) 37 0.7 27 0.5 40 0.7 27 0.6 33 0.6

Negligence (6662(c))f 89 1.8 57 0.9 62 1.1 56 1.2 66 1.2

Total penalty abatements $4,925 100.0 $6,009 100.0 $5,540 100.0 $4,795 100.0 $5,317 100.0

Interest abatements $2,647 100.0 $3,195 100.0 $2,788 100.0 $2,137 100.0 $2,692 100.0

Total $7,572 100.0 $9,204 100.0 $8,328 100.0 $6,932 100.0 $8,009 100.0

Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

a

Less than $1 million.

b

Less than one-tenth of 1 percent.

c

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

d

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

e

Abatements of penalties for intentional disregard of the information return filing requirements (section

6721(e)) accounted for 78 percent of all other miscellaneous civil penalty abatement amounts over

the 4 years. The remaining 22 percent of abatement amounts were spread among numerous types of

other miscellaneous civil penalties.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.2: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual and Business Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 31 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 55.3 44.7 53.3 46.7 51.5 48.5 48.8 51.2

Estimated tax (6654 and 6655) 87.1 12.9 84.8 15.2 83.2 16.8 82.0 18.0

Failure to make tax deposit (6656) 57.7 42.3 55.1 44.9 50.8 49.2 49.4 50.6

Failure to furnish taxpayer identification number (6723) 100.0 0 100.0 0 100.0 0 100.0 0

Daily delinquency (6652(c)(2)(A))a 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-trust fund (6672)b 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6721(e) and others)c 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) 0 100.0 0 100.0 0 100.0 0 100.0

Failure to pay (6651(a) (2)-(3)) 15.4 84.6 12.4 87.6 12.1 87.9 13.9 86.1

Bad check (6657) 99.3 0.7 99.3 0.7 99.1 0.9 99.5 0.5

Tip income (6652(b)) 100.0 0 100.0 0 100.0 0 100.0 0

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))d 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatements 43.9 56.1 39.3 60.7 38.4 61.6 36.8 63.2

Percent of interest abatements 4.9 95.1 2.7 97.3 1.3 98.7 4.2 95.8

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

 bTrust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

c

Abatements of penalties for intentional disregard of the information return filing requirements (section

6721(e)) accounted for 54 percent of all other miscellaneous civil penalty abatements over the 4

years. The remaining 46 percent of abatements were spread among numerous types of other

miscellaneous civil penalties.

d

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.3: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—

Individual and Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 32 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 63.6 36.4 60.7 39.3 69.2 30.8 69.3 30.7

Estimated tax (6654 and 6655) 94.6 5.4 93.1 6.9 92.2 7.8 93.9 6.1

Failure to make tax deposit (6656) 83.7 16.3 84.9 15.1 77.7 22.3 72.0 28.0

Failure to furnish taxpayer identification number (6723) 100.0 0 100.0 0 100.0 0 100.0 0

Daily delinquency (6652(c)(2)(A))a 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-trust fund (6672)b 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6721(e) and others)c 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) 0 100.0 0 100.0 0 100.0 0 100.0

Failure to pay (6651(a) (2)-(3)) 39.2 60.8 56.0 44.0 40.7 59.3 39.8 60.2

Bad check (6657) 92.9 7.1 99.7 0.3 99.8 0.2 99.9 0.1

Tip income (6652(b)) 100.0 0 100.0 0 100.0 0 100.0 0

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))d 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatement amounts 80.4 19.6 79.8 20.2 78.9 21.1 78.1 21.9

Percent of interest abatements 54.6 45.4 50.8 49.2 51.2 48.8 43.1 56.9

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

.bTrust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

c

Abatements of penalties for intentional disregard of the information return filing requirements (section

6721(e)) accounted for 78 percent of all other miscellaneous civil penalty abatement amounts over

the 4 years. The remaining 22 percent of abatement amounts were spread among numerous types of

other miscellaneous civil penalties.

d

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.4: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of

Abatement—Individual and Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 33 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables IV.5-IV.27 show abatements of penalty and/or interest on individual

tax returns, including returns with Schedule C, business income, and

Schedule F, farm income.

Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 436,914 22.3 446,479 23.5 443,776 23.5 445,699 18.8 443,217 21.8

Estimated tax (6654 and 6655) 251,326 12.9 232,023 12.2 212,444 11.2 207,312 8.7 225,776 11.1

Failure to make tax deposit (6656) aa aa aa aa aa

Failure to furnish taxpayer

identification number (6723) 504 a 432 a 237 a 101 a 319 a

Daily delinquency (6652(c)(2)(A))b aa aa aa aa aa

Miscellaneous civil-trust fund

(6672)c 229,630 11.7 187,250 9.9 222,502 11.8 255,453 10.8 223,709 11.0

Miscellaneous civil-other (6662(d)-

(h)) and others)d 23,015 1.2 18,666 1.0 18,273 1.0 23,853 1.0 20,952 1.0

Incomplete partnership return

(6698) aa aa aa aa aa

Failure to pay (6651(a) (2)-(3)) 953,200 48.7 969,139 51.0 958,255 50.7 1,413,773 59.6 1,073,592 52.9

Bad check (6657) 11,133 0.6 11,354 0.6 10,887 0.6 11,359 0.5 11,183 0.6

Tip income (6652(b)) 2,569 0.1 3,113 0.2 2,562 0.1 1,729 0.1 2,493 0.1

Fraud (6663) 1,367 0.1 907 a 795 a 749 a 955 a

Negligence (6662(c))e 45,914 2.3 29,429 1.5 19,246 1.0 13,275 0.6 26,966 1.3

Total penalty abatements 1,955,572 100.0 1,898,792 100.0 1,888,977 100.0 2,373,303 100.0 2,029,161 100.0

Interest abatements 1,698,182 100.0 1,717,690 100.0 2,103,189 100.0 2,167,071 100.0 1,921,533 100.0

Total 3,653,754 100.0 3,616,482 100.0 3,992,166 100.0 4,540,374 100.0 3,950,694 100.0

Note: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

 aDoes not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))

accounted for an average of 89 percent of other miscellaneous civil penalty abatements. The

remaining abatements, averaging 11 percent, were spread over numerous types of other

miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.5: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 34 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $322 22.2 $365 27.5 $362 26.8 $507 34.9 $389 27.9

Estimated tax (6654 and 6655) 106 7.3 86 6.5 84 6.2 97 6.7 93 6.7

Failure to make tax deposit (6656) aaaa aaaaaa

Failure to furnish taxpayer identification

number (6723) bcbc bcbcbc

Daily delinquency (6652(c)(2)(A))d aaaa aaaaaa

Miscellaneous civil-trust fund (6672)e 722 49.6 635 47.8 668 49.4 621 42.8 662 47.4

Miscellaneous civil-other (6662(d)-(h) and

others)f

66 4.5 54 4.1 46 3.4 55 3.8 55 4.0

Incomplete partnership return (6698) aaaa aaaaaa

Failure to pay (6651(a) (2)-(3)) 117 8.0 108 8.2 103 7.6 115 7.9 111 7.9

Bad check (6657) 1 0.1 2 0.1 2 0.1 3 0.2 2 0.1

Tip income (6652(b)) 1 c 1 0.1 1 0.1 1 c 1 0.1

Fraud (6663) 32 2.2 24 1.8 37 2.8 25 1.8 30 2.1

Negligence (6662(c))g 87 6.0 54 4.1 49 3.6 27 1.9 55 3.9

Total penalty abatements $1,454 100.0 $1,329 100.0 $1,353 100.0 $1,452 100.0 $1,397 100.0

Interest abatements $927 100.0 $820 100.0 $816 100.0 $756 100.0 $830 100.0

Total $2,382 100.0 $2,150 100.0 $2,168 100.0 $2,208 100.0 $2,227 100.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Amounts may not sum to totals because of rounding.

a

Does not apply.

b

Less than $1 million.

c

Less than one-tenth of 1 percent.

d

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

e

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

f

From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))

accounted for an average of 78 percent of abatement amounts for other miscellaneous civil penalty

abatements. The remaining abatement amounts, averaging 22 percent, were spread over numerous

types of other miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.6: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 35 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 62.1 37.9 58.9 41.1 51.7 48.3 47.7 52.3

Estimated tax (6654 and 6655) 88.1 11.9 85.0 15.0 83.2 16.8 81.3 18.7

Failure to make tax deposit (6656) a aa aa aa a

Failure to furnish taxpayer identification number (6723) 100.0 0 100.0 0 100.0 0 100.0 0

Daily delinquency (6652(c)(2)(A))b a aa aa aa a

Miscellaneous civil-trust fund (6672)c 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6662(d)-(h) and others)d 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) a aa aa aa a

Failure to pay (6651(a) (2)-(3)) 19.3 80.7 15.8 84.2 14.4 85.6 16.1 83.9

Bad check (6657) 100.0 0 100.0 0 100.0 0 100.0 0

Tip income (6652(b)) 100.0 0 100.0 0 100.0 0 100.0 0

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))e 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatements 50.6 49.4 45.5 54.5 43.3 56.7 38.6 61.4

Percent of interest abatements 7.4 92.6 3.9 96.1 1.4 98.6 6.0 94.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))

accounted for an average of 89 percent of other miscellaneous civil penalty abatements. The

remaining abatements, averaging 11 percent, were spread over numerous types of other

miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.7: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—

Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 36 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 73.4 26.6 72.0 28.0 68.0 32.0 76.7 23.3

Estimated tax (6654 and 6655) 92.1 7.9 86.5 13.5 85.6 14.4 86.1 13.9

Failure to make tax deposit (6656) a aa aa aa a

Failure to furnish taxpayer identification number (6723) 100.0 0 100.0 0 100.0 0 100.0 0

Daily delinquency (6652(c)(2)(A))b 0 00 00 00 0

Miscellaneous civil-trust fund (6672)c 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6662(d)-(h) and others)d 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) a aa aa aa a

Failure to pay (6651(a) (2)-(3)) 53.6 46.4 49.6 50.4 46.1 53.9 48.5 51.5

Bad check (6657) 100.0 0 100.0 0 100.0 0 100.0 0

Tip income (6652(b)) 100.0 0 100.0 0 100.0 0 100.0 0

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))e 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatement amounts 89.8 10.2 87.3 12.7 86.4 13.6 86.9 13.1

Percent of interest abatements 49.6 50.4 36.7 63.3 27.5 72.5 18.0 82.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings

d

From fiscal year 1995 through 1998, abatements of accuracy penalties (section 6662(d)–(h))

accounted for an average of 78 percent of abatement amounts for other miscellaneous civil penalty

abatements. The remaining abatement amounts, averaging 22 percent, were spread over numerous

types of other miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.8: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 37 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Income level reported on 1995 1996 1997 1998 Total

original return Number Amount Number Amount Number Amount Number Amount Number Amount

Individual nonbusiness

1040A TPI < $25,000 588,579 $281 621,497 $304 574,650 $315 576,303 $339 2,361,029 $1,239

Non-1040A TPI < $25,000 131,526 17 144,810 12 138,390 17 182,419 13 597,145 59

TPI $25,000 < $50,000 249,616 36 251,466 28 268,271 26 389,746 36 1,159,099 126

TPI $50,000 < $100,000 182,982 43 194,341 36 213,875 39 295,568 43 886,766 161

TPI $100,000 or more 202,668 165 173,992 144 149,475 167 199,977 184 726,112 660

 Subtotal 1,355,371 $542 1,386,106 $524 1,344,661 $563 1,644,013 $616 5,730,151 $2,245

Individual businessa

C-TGR < $25,000 90,291 $13 82,830 $28 87,814 $7 125,285 $89 386,220 $138

C-TGR $25,000 < $100,000 153,361 55 131,533 37 127,896 27 198,049 36 610,839 156

C-TGR $100,000 or more 104,699 94 93,384 76 87,281 70 131,299 73 416,663 314

F-TGR < $100,000 5,435 1 5,071 1 5,083 1 6,326 1 21,915 4

F-TGR 100,000 or more 7,023 5 5,291 4 8,443 4 7,111 4 27,868 16

 Subtotal 360,809 $169 318,109 $146 316,517 110 468,070 $203 1,463,505 $628

Income level not availableb 239,392 $743 194,577 $659 227,799 $680 261,220 $633 922,988 $2,715

Total penalty abatements 1,955,572 $1,454 1,898,792 $1,330 1,888,977 $1,352 2,373,303 $1,452 8,116,644 $5,588

Legend

1040A = Nonbusiness returns filed by individuals

TPI = Total positive income (income reported as a positive on tax return tables)

C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts

F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Returns with Schedules C or F may be categorized as nonbusiness rather than business if the

reported primary source of income was wages, investments, and other nonbusiness income.

b

Income level was not available on certain miscellaneous civil penalties.

Source: GAO compilation of IRS data.

Table IV.9: Number and Amount of Penalty Abatements by Income Level and by Fiscal Year of Abatement—Individual Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 38 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Income level reported on 1995 1996 1997 1998 Total

original return Number Amount Number Amount Number Amount Number Amount Number Amount

Individual nonbusiness

1040A TPI < $25,000 484,237 $349 514,806 $349 557,349 $383 509,310 $385 2,065,702 $1,467

Non-1040A TPI < $25,000 157,246 27 171,338 14 181,239 18 190,116 12 699,939 71

TPI $25,000 < $50,000 298,861 44 299,003 39 448,283 31 474,163 28 1,520,310 142

TPI $50,000 < $100,000 217,128 54 227,703 34 377,843 34 391,470 36 1,214,144 158

TPI $100,000 or more 232,091 214 206,216 168 186,352 225 210,826 158 835,485 765

 Subtotal 1,389,563 $688 1,419,066 $604 1,751,066 $692 1,775,885 $619 6,335,580 $2,603

Individual businessa

C-TGR < $25,000 76,600 $13 79,089 $11 98,780 $6 102,707 $8 357,176 $39

C-TGR $25,000 < $100,000 116,553 48 111,696 31 139,782 19 159,651 27 527,682 125

C-TGR $100,000 or more 88,756 124 83,745 88 87,724 68 104,220 73 364,445 353

F-TGR < $100,000 6,442 3 5,808 1 6,790 1 7,177 1 26,217 6

F-TGR 100,000 or more 6,766 6 6,045 8 7,038 8 7,733 3 27,582 24

 Subtotal 295,117 $195 286,383 $139 340,114 $101 381,488 $112 1,303,102 $546

Income level not availableb 13,502 45 12,241 77 12,009 23 9,698 25 47,450 169

Total interest abatements 1,698,182 $927 1,717,690 $820 2,103,189 $816 2,167,071 $756 7,686,132 $3,319

Legend

1040A = Nonbusiness returns filed by individuals

TPI = Total positive income (income reported as a positive on tax return tables)

C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts

F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Returns with Schedules C or F may be categorized as nonbusiness rather than business if the

reported primary source of income was wages, investments, and other nonbusiness income.

b

Income level was not available on certain miscellaneous civil penalties.

Source: GAO compilation of IRS data.

Table IV.10: Number and Amount of Interest Abatements by Income Level and by Fiscal Year of Abatement—Individual Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 39 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables IV.11-IV.14 show information on the number and amount of penalty

and interest abatements by tax year of return.

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 3,379 1,805 856 1,074 7,114

1980-84 89,553 44,039 26,661 25,959 186,212

1985-89 443,094 277,406 202,511 219,915 1,142,926

1990 167,701 110,988 84,803 86,073 449,565

1991 229,634 152,397 104,899 102,122 589,052

1992 218,807 253,154 169,260 134,375 775,596

1993 409,116 258,460 194,973 174,236 1,036,785

1994 393,350 360,043 188,916 175,891 1,118,200

1995 938 439,097 409,480 285,014 1,134,529

1996 b 1,403 505,005 682,380 1,188,788

1997 b b 1,613 484,471 486,084

1998 bb b 1,793 1,793

Total penalty abatements 1,955,572 1,898,792 1,888,977 2,373,303 8,116,644

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $9 $6 $5 $3 $23

1980-84 151 81 71 40 343

1985-89 522 357 259 210 1,348

1990 162 131 95 82 469

1991 184 153 121 107 565

1992 155 188 157 118 618

1993 217 161 194 150 722

1994 53 165 156 146 521

1995 1 86 209 150 447

1996 b c 84 238 323

1997 b b 1 208 209

1998 bbbc c

Total penalty abatements $1,454 $1,330 $1,352 $1,452 $5,588

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1962.

b

Does not apply.

c

Less than $1 million.

Source: GAO compilation of IRS data.

Table IV.11: Number of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Individual Tax Returns

Table IV.12: Amount of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 40 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 2,922 1,759 960 670 6,311

1980-84 34,093 19,826 14,392 8,877 77,188

1985-89 213,403 128,271 94,432 57,102 493,208

1990 111,210 65,093 47,409 28,565 252,277

1991 214,662 102,249 61,941 37,114 415,966

1992 238,902 239,965 134,261 64,442 677,570

1993 435,155 295,705 195,749 108,128 1,034,737

1994 447,362 380,853 195,589 134,077 1,157,881

1995 473 483,121 410,139 265,857 1,159,590

1996 b 848 947,431 660,200 1,608,479

1997 b b 886 801,287 802,173

1998 bbb 752 752

Total interest abatements 1,698,182 1,717,690 2,103,189 2,167,071 7,686,132

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

 aEarliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $82 $43 $25 $19 $169

1980-84 278 168 183 114 742

1985-89 355 303 238 180 1,077

1990 65 58 59 55 236

1991 65 59 52 55 231

1992 22 84 80 63 250

1993 45 59 90 93 287

1994 15 31 33 63 142

1995 b 15 33 40 89

1996 c b 21 55 77

1997 ccb 19 19

1998 cccb b

Total interest abatements $927 $820 $816 $756 $3,319

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1962.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.13: Number of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Individual Tax Returns

Table IV.14: Amount of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 41 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables IV.15-IV.21 show information on selected return characteristics for

penalties and/or interest abatements. Tables IV.19-IV.21 show the

characteristics for abatements of three specific types of penalties.

Filing status

Fiscal year of penalty and

interest abatement

Number of

returns Single

Married, filing

jointly

Married, filing

separately

Head of

household

Widow(er) with

dependent child Total

1995 a a a a a aa

1996 a a a a a aa

1997 2,319,461 29.1% 52.5% 4.9% 13.5% 0.1% 100%

1998 2,721,264 31.6 50.9 5.3 12.2 0.1 100

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages may not sum to 100 because of rounding.

a

IRS was unable to reconstruct the filing status data from its historical files within the time frames of

our review.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of penalty

and interest abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 1,918,078 8.5% 12.5% 52.1% 3.9%

1996 1,933,715 9.3 13.8 50.8 4.3

1997 2,319,461 8.5 10.6 48.2 3.8

1998 2,721,264 8.6 7.0 52.8 4.9

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Table IV.15: Distribution of Returns With Penalty and Interest Abatements by Filing Status and Fiscal Year of Abatement—

Individual Tax Returns

Table IV.16: Distribution of Returns With Penalty and Interest Abatements by Selected Characteristic and Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 42 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected characteristic

Fiscal year of penalty

abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 1,329,636 8.2% 16.7% 51.7% 2.9%

1996 1,351,348 9.1 18.5 49.7 3.1

1997 1,331,583 10.0 16.4 49.1 3.4

1998 1,761,327 9.1 9.6 55.1 4.9

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of interest

abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 1,576,967 8.7% 12.5% 53.0% 2.4%

1996 1,595,320 9.5 13.7 51.7 2.6

1997 1,954,573 8.4 10.1 48.3 2.3

1998 2,000,680 9.0 6.9 51.6 2.4

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Table IV.17: Distribution of Returns With Penalty Abatements by Selected Characteristic and Fiscal Year of Abatement—

Individual Tax Returns

Table IV.18: Distribution of Returns With Interest Abatements by Selected Characteristic and Fiscal Year of Abatement—

Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 43 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected characteristic

Fiscal year of failure to

file penalty abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 429,811 3.7% 46.9% 30.0% 1.2%

1996 439,040 4.3 52.6 27.1 1.2

1997 434,432 5.1 45.0 31.0 1.9

1998 433,415 5.7 30.8 39.5 2.3

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of estimated

payment penalty abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 249,270 8.8% 38.0% 41.5% 0.4%

1996 230,018 9.3 44.2 34.1 0.4

1997 210,414 12.3 39.8 36.9 0.4

1998 205,031 15.3 30.5 42.4 0.3

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of failure to

pay penalty abatement

Number of

returns

Primary taxpayer

over age 65

Substitute for

return prepared

Paid preparer on

original return

Earned income credit

on original return

1995 914,793 9.5% 4.5% 63.3% 3.1%

1996 933,188 10.9 5.0 61.9 3.5

1997 920,358 11.6 5.6 58.9 3.5

1998 1,355,750 9.6 4.1 61.4 5.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Table IV.19: Distribution of Returns With Failure to File Penalty Abatements by Selected Characteristic and Fiscal Year of

Abatement—Individual Tax Returns

Table IV.20: Distribution of Returns With Estimated Payment Penalty Abatements by Selected Characteristic and Fiscal Year of

Abatement—Individual Tax Returns

Table IV.21: Distribution of Returns With Failure to Pay Penalty Abatements by Selected Characteristic and Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 44 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables IV.22-IV.27 show information on the number or amount of

abatements by selected IRS activities for penalties and interest combined,

or separately for penalty and interest on individual returns.

Selected IRS activityaFiscal year of

penalty and

interest

abatement

Number of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd

Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 3,653,754 10.5% 15.8% 30.1% 2.0% 97.6% 6.7% 0.2%

1996 3,616,482 11.1 17.7 31.1 0.9 97.7 4.0 0.1

1997 3,992,166 10.1 14.2 26.3 0.3 98.0 2.7 0.1

1998 4,540,374 10.7 9.2 22.5 0.2 97.7 3.0 0.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.22: Distribution of Number of Penalty and Interest Abatements on Returns Associated With Selected IRS Activity by

Fiscal Year of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 45 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions

Selected IRS activityaFiscal year

of penalty

and interest

abatement

Amount of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 $2,382 34.6% 16.4% 48.1% 9.2% 98.8% 25.2% 4.8%

1996 $2,150 34.8 21.4 49.6 4.7 98.9 19.3 2.7

1997 $2,168 35.8 22.7 50.7 1.9 98.9 15.9 4.1

1998 $2,208 35.5 21.8 44.1 1.3 98.3 12.9 2.3

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third-party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.23: Distribution of Amount of Penalty and Interest Abatements on Returns Associated With Selected IRS Activity by

Fiscal Year of Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 46 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected IRS activitya

Fiscal year of

penalty

abatement

Number of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 1,955,572 11.0% 18.6% 27.6% 2.5% 97.9% 8.5% 0.3%

1996 1,898,792 11.0 21.1 29.2 1.1 98.0 5.3 0.2

1997 1,888,977 10.3 18.4 25.8 0.4 97.3 3.9 0.1

1998 2,373,303 11.4 11.2 20.3 0.3 97.1 4.4 0.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third-party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.24: Distribution of Number of Penalty Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 47 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions

Selected IRS activitya

Fiscal year

of penalty

abatement

Amount of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 $1,454 20.6% 13.1% 28.7% 9.1% 98.7% 18.9% 2.9%

1996 1,330 21.1 17.0 30.7 4.9 99.0 15.4 1.8

1997 1,352 22.3 17.1 31.1 2.0 98.0 12.5 2.9

1998 1,452 22.2 14.4 26.1 1.2 98.6 10.7 1.4

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.25: Distribution of Amount of Penalty Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 48 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected IRS activitya

Fiscal year of

interest

abatement

Number of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 1,698,182 10.0% 12.6% 33.0% 1.4% 97.4% 4.7% 0.2%

1996 1,717,690 11.2 13.8 33.2 0.6 97.4 2.7 0.1

1997 2,103,189 9.9 10.3 26.8 0.2 98.6 1.6 0.1

1998 2,167,071 10.1 7.1 24.8 0.1 98.3 1.4 0.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.26: Distribution of Number of Interest Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 49 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions

Selected IRS activitya

Fiscal year

of interest

abatement

Amount of

abatements

Audit

indicator b

Substitute

for returnc

Additional tax

assessmentsd Offer-incompromisee

CollectionfLitigationg

Criminal

investigationh

1995 $927 56.7% 21.4% 78.5% 9.6% 99.1% 35.1% 7.7%

1996 820 57.1 28.6 80.3 4.3 98.8 25.5 4.2

1997 816 58.2 32.1 83.3 1.8 99.0 21.5 6.2

1998 756 61.1 36.0 78.8 1.3 97.7 17.3 4.1

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could be preceded by more than one

selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

Return prepared by IRS based on third party information of income paid to a nonfiler.

d

IRS makes additional tax assessments after the original tax assessment because of an IRS

enforcement action, such as an audit, or a taxpayer action, such as filing amended returns.

e

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

f

Return was in collection stream (notices, installment agreements, delinquent accounts). Abatements

on full paid returns result in refunds to taxpayers and would not be in collection status.

g

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

h

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table IV.27: Distribution of Amount of Interest Abatements on Returns Associated With Selected IRS Activity by Fiscal Year of

Abatement—Individual Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 50 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables IV.28-IV.55 show information on penalty and interest abatements on

business tax returns. Tables on corporate income tax, employment tax,

and other business tax returns, generally, are subsets of the tables titled

business tax returns.

Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 388,319 16.0 375,819 15.1 391,828 16.6 375,457 16.1 382,856 15.9

Estimated tax (6654 and 6655) 26,737 1.1 29,105 1.2 31,992 1.4 36,730 1.6 31,141 1.3

Failure to make tax deposit (6656) 866,594 35.6 809,347 32.5 773,695 32.7 740,374 31.7 797,503 33.2

Failure to furnish taxpayer

identification number (6723) aa aa aa aa aa

Daily delinquency (6652(c)(2)(A))b 39,644 1.6 39,829 1.6 38,905 1.6 58,106 2.5 44,121 1.8

Miscellaneous civil-trust fund

(6672)c aa aa aa aa aa

Miscellaneous civil-other (6721(e)

and others)d

63,818 2.6 62,415 2.5 43,474 1.8 48,027 2.1 54,434 2.3

Incomplete partnership return

(6698) 4,661 0.2 3,321 0.1 3,077 0.1 2,339 0.1 3,350 0.1

Failure to pay (6651(a) (2)-(3)) 1,038,745 42.7 1,169,099 46.9 1,076,456 45.6 1,062,182 45.5 1,086,621 45.2

Bad check (6657) 2,037 0.1 1,977 0.1 2,879 0.1 8,665 0.4 3,890 0.2

Tip income (6652(b)) aa aa aa aa aa

Fraud (6663) 226 e 259 e 217 e 88 e 198 e

Negligence (6662(c))f 485 e 453 e 369 e 210 e 379 e

Total penalty abatements 2,431,266 100.0 2,491,624 100.0 2,362,892 100.0 2,332,178 100.0 2,404,490 100.0

Interest abatements 1,376,550 100.0 1,499,031 100.0 1,403,958 100.0 1,365,054 100.0 1,411,148 100.0

Total 3,807,816 100.0 3,990,655 100.0 3,766,850 100.0 3,697,232 100.0 3,815,638 100.0

Note: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the

information return filing requirements (section 6721(e)) accounted for an average of 75 percent of

other miscellaneous civil penalty abatements. The remaining abatements, averaging 25 percent, were

spread over numerous types of other miscellaneous civil penalties.

e

Less than one-tenth of 1 percent.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.28: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 51 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $606 17.5 $913 19.5 $977 23.3 $855 25.6 $838 21.4

Estimated tax (6654 and 6655) 76 2.2 122 2.6 103 2.5 184 5.5 122 3.1

Failure to make tax deposit (6656) 1,831 52.7 2,493 53.3 2,182 52.1 1,343 40.2 1,962 50.0

Failure to furnish taxpayer identification

number (6723) aaaaaaaaaa

Daily delinquency (6652(c)(2)(A))b 55 1.6 58 1.2 55 1.3 110 3.3 70 1.8

Miscellaneous civil-trust fund (6672)c aaaaaaaaaa

Miscellaneous civil-other (6721(e) and

others)d 566 16.3 553 11.8 545 13.0 540 16.2 551 14.1

Incomplete partnership return (6698) 125 3.6 67 1.4 22 0.5 7 0.2 55 1.4

Failure to pay (6651(a) (2)-(3)) 205 5.9 467 10.0 286 6.8 264 7.9 306 7.8

Bad check (6657) 1 e 1 e 2 e 7 0.2 3 0.1

Tip income (6652(b)) aaaaaaaaaa

Fraud (6663) 5 0.1 4 0.1 3 0.1 1 e 3 0.1

Negligence (6662(c))f 2 0.1 3 0.1 13 0.3 29 0.9 12 0.3

Total penalty abatements $3,471 100.0 $4,680 100.0 $4,188 100.0 $3,343 100.0 $3,920 100.0

Interest abatements $1,720 100.0 $2,375 100.0 $1,972 100.0 $1,381 100.0 $1,862 100.0

Total $5,191 100.0 $7,054 100.0 $6,160 100.0 $4,724 100.0 $5,782 100.0

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Note: Amounts may not sum to totals because of rounding.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the

information return filing requirements (section 6721(e)) accounted for an average of 86 percent of

abatement amounts for other miscellaneous civil penalty abatements. The remaining abatement

amounts, averaging 14 percent, were spread over numerous types of other miscellaneous civil

penalties.

e

Less than one-tenth of 1 percent.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.29: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement–Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 52 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 47.7 52.3 46.6 53.4 51.3 48.7 50.1 49.9

Estimated tax (6654 and 6655) 77.3 22.7 82.7 17.3 82.8 17.2 85.6 14.4

Failure to make tax deposit (6656) 57.7 42.3 55.1 44.9 50.8 49.2 49.4 50.6

Failure to furnish taxpayer identification number (6723) a aa aa aa a

Daily delinquency (6652(c)(2)(A))b 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-trust fund (6672)c 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6721(e) and others)d 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) 100.0 0 100.0 0 100.0 0 100.0 0

Failure to pay (6651(a) (2)-(3)) 11.8 88.2 9.5 90.5 9.9 90.1 11.0 89.0

Bad check (6657) 95.2 4.8 95.2 4.8 95.6 4.4 98.8 1.2

Tip income (6652(b)) a aa aa aa a

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))e 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatements 38.4 61.6 34.6 65.4 34.4 65.6 35.0 65.0

Percent of interest abatements 1.8 98.2 1.4 98.6 1.3 98.7 1.2 98.8

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the

information return filing requirements (section 6721(e)) accounted for an average of 75 percent of

other miscellaneous civil penalty abatements. The remaining abatements, averaging 25 percent, were

spread over numerous types of other miscellaneous civil penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.30: Percent of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of Abatement—

Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 53 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998

Penalty (IRC section) Manual Computer Manual Computer Manual Computer Manual Computer

Failure to file (6651(a)(1)) 58.4 41.6 56.2 43.8 69.6 30.4 64.8 35.2

Estimated tax (6654 and 6655) 98.0 2.0 97.7 2.3 97.6 2.4 98.0 2.0

Failure to make tax deposit (6656) 83.7 16.3 84.9 15.1 77.7 22.3 72.0 28.0

Failure to furnish taxpayer identification number (6723) a aa aa aa a

Daily delinquency (6652(c)(2)(A))b 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-trust fund (6672)c 100.0 0 100.0 0 100.0 0 100.0 0

Miscellaneous civil-other (6721(e) and others)d 100.0 0 100.0 0 100.0 0 100.0 0

Incomplete partnership return (6698) 100.0 0 100.0 0 100.0 0 100.0 0

Failure to pay (6651(a) (2)-(3)) 31.1 68.9 57.4 42.6 38.7 61.3 36.0 64.0

Bad check (6657) 82.9 17.1 99.1 0.9 99.6 0.4 99.9 0.1

Tip income (6652(b)) a aa aa aa a

Fraud (6663) 100.0 0 100.0 0 100.0 0 100.0 0

Negligence (6662(c))e 100.0 0 100.0 0 100.0 0 100.0 0

Percent of total penalty abatements 76.4 23.6 77.7 22.3 76.5 23.5 74.4 25.6

Percent of interest abatements 57.3 42.7 55.7 44.3 61.1 38.9 56.9 43.1

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

IRS employees manually make decisions on abatements when taxpayers establish that penalty

assessments are in error or they had reasonable cause for being delinquent. IRS computers

automatically abate all or portions of penalty and interest assessments when IRS reduces associated

tax or other penalty assessments or applies timely payments to taxpayers' accounts.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

From fiscal year 1995 through 1998, abatements of penalties for intentional disregard of the

information return filing requirements (section 6721(e)) accounted for an average of 86 percent of

abatement amounts for other miscellaneous civil penalty abatements. The remaining abatement

amounts, averaging 14 percent, were spread over numerous types of other miscellaneous civil

penalties.

e

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.31: Percent of Amount of Penalty and Interest Abatements Computed Manually and by Computer by Fiscal Year of

Abatement—Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 54 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 22,428 16.4 23,807 16.9 25,350 18.5 22,599 16.4 23,546 17.0

Estimated tax (6654 and 6655) 20,316 14.9 21,438 15.2 21,715 15.8 22,684 16.4 21,538 15.6

Failure to make tax deposit (6656) aa aaaaaaaa

Failure to furnish taxpayer identification

number (6723) aa aaaaaaaa

Daily delinquency (6652(c)(2)(A))b aa aaaaaaaa

Miscellaneous civil-trust fund (6672)c aa aaaaaaaa

Miscellaneous civil-other (6721(e) and

others)d 142 0.1 186 0.1 229 0.2 204 0.1 190 0.1

Incomplete partnership return (6698) aa aaaaaaaa

Failure to pay (6651(a) (2)-(3)) 93,552 68.5 95,213 67.6 89,670 65.4 92,345 66.8 92,695 67.1

Bad check (6657) 105 0.1 101 0.1 142 0.1 286 0.2 159 0.1

Tip income (6652(b)) aa aaaaaaaa

Fraud (6663) 30 e 24 e 29 e 16 e25 e

Negligence (6662(c))f 70 0.1 41 e 48 e 26 e

46 e

Total penalty abatements 136,643 100.0 140,810 100.0 137,183 100.0 138,160 100.0 138,199 100.0

Interest abatements 117,415 100.0 120,185 100.0 118,260 100.0 122,757 100.0 119,654 100.0

Total 254,058 100.0 260,995 100.0 255,443 100.0 260,917 100.0 257,853 100.0

Note: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Because miscellaneous civil penalties account for less than 3 percent of all business penalties, we

did not develop information on specific penalties below the level of all businesses.

e

Less than one-tenth of 1 percent.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.32: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 55 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in MiIlions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $202 53.3 $434 49.2 $150 43.9 $190 39.8 $244 47.0

Estimated tax (6654 and 6655) 71 18.7 113 12.9 95 27.8 171 35.8 112 21.6

Failure to make tax deposit (6656) a a a a aa aa aa

Failure to furnish taxpayer

identification number (6723) a a a a aa aa aa

Daily delinquency (6652(c)(2)(A))b a a a a aa aa aa

Miscellaneous civil-trust fund (6672)c a a a a aa aa aa

Miscellaneous civil-other (6721(e) and

others)d 2 0.5 2 0.2 3 0.8 2 0.5 2 0.4

Incomplete partnership return (6698) a a a a aa aa aa

Failure to pay (6651(a) (2)-(3)) 100 26.5 331 37.5 80 23.5 84 17.6 149 28.7

Bad check (6657) e 0.1 e fe 0.1 1 0.3 e 0.1

Tip income (6652(b)) a a a a aa aa aa

Fraud (6663) 2 0.6 1 0.1 2 0.5 1 0.1 1 0.3

Negligence (6662(c))g 1 0.3 1 0.1 11 3.4 28 5.9 10 2.0

Total penalty abatements $379 100.0 $881 100.0 $342 100.0 $477 100.0 $520 100.0

Interest abatements $1,243 100.0 $1,883 100.0 $1,299 100.0 $912 100.0 $1,334 100.0

Total $1,622 100.0 $2,765 100.0 $1,641 100.0 $1,389 100.0 $1,854 100.0

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Amounts may not sum to totals because of rounding.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did

not develop information on specific penalties below the level of all businesses.

e

Less than $1 million.

f

Less than one-tenth of 1 percent.

g

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.33: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 56 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 266,206 13.9 241,556 13.3 228,085 13.0 229,001 12.8 241,212 13.3

Estimated tax (6654 and 6655) aa aa aa aa aa

Failure to make tax deposit (6656) 824,772 43.2 779,226 42.8 745,366 42.4 716,595 40.1 766,490 42.1

Failure to furnish taxpayer

identification number (6723) aa aa aa aa aa

Daily delinquency (6652(c)(2)(A))b aa aa aa aa aa

Miscellaneous civil-trust fund

(6672)c aa aa aa aa aa

Miscellaneous civil-other (6721(e)

and others)d

705 e 665 e 677 e 523 e 643 e

Incomplete partnership return

(6698) aa aa aa aa aa

Failure to pay (6651(a) (2)-(3)) 816,661 42.8 798,850 43.8 782,587 44.5 833,261 46.6 807,840 44.4

Bad check (6657) 1,568 0.1 1,469 0.1 2,228 0.1 7,404 0.4 3,167 0.2

Tip income (6652(b)) aa aa aa aa aa

Fraud (6663) 67 e 41 e 140 e 42 e 73 e

Negligence (6662(c))f 273 e 253 e 255 e 130 e 228 e

Total penalty abatements 1,910,252 100.0 1,822,060 100.0 1,759,338 100.0 1,786,956 100.0 1,819,652 100.0

Interest abatements 1,084,668 100.0 1,060,487 100.0 1,033,848 100.0 1,060,169 100.0 1,059,793 100.0

Total 2,994,920 100.0 2,882,547 100.0 2,793,186 100.0 2,847,125 100.0 2,879,445 100.0

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

a

Does not apply.

a

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

b

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

c

Because miscellaneous civil penalties account for less than 3 percent of all business penalties, we

did not develop information on specific penalties below the level of all businesses.

e

Less than one-tenth of 1 percent.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.34: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatements—Employment Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 57 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $134 7.6 $156 6.5 $243 10.7 117 8.3 $162 8.3

Estimated tax (6654 and 6655) aaaaaaaaaa

Failure to make tax deposit (6656) 1,580 89.2 2,148 90.2 1,885 83.2 1,194 84.7 1,702 87.0

Failure to furnish taxpayer identification

number (6723) aaaaaaaaaa

Daily delinquency (6652(c)(2)(A))b aaaaaaaaaa

Miscellaneous civil-trust fund (6672)c aaaaaaaaaa

Miscellaneous civil-other (6721(e) and

others)d

1 0.1 5 0.2 2 0.1 2 0.2 3 0.1

Incomplete partnership return (6698) aaaaaaaaaa

Failure to pay (6651(a) (2)-(3)) 54 3.1 70 3.0 132 5.8 92 6.5 87 4.5

Bad check (6657) e fe f 1 f 5 0.3 2 0.1

Tip income (6652(b)) aaaaaaaaaa

Fraud (6663) e fe f 1 fe fe f

Negligence (6662(c))g ef 1 0.1 1 fe f 1 f

Total penalty abatements $1,770 100.0 $2,381 100.0 $2,264 100.0 $1,410 100.0 $1,956 100.0

Interest abatements $219 100.0 $298 100.0 $436 100.0 $239 100.0 $298 100.0

Total $1,989 100.0 $2,679 100.0 $2,701 100.0 $1,649 100.0 $2,254 100.0

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Amounts may not sum to totals because of rounding.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did

not develop information on specific penalties below the level of all businesses.

e

Less than $1 million.

f

Less than one-tenth of 1 percent.

g

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.35: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Employment Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 58 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Number Percent Number Percent Number Percent Number Percent Number Percent

Failure to file (6651(a)(1)) 99,685 25.9 110,456 20.9 138,393 29.7 123,857 30.4 118,098 26.4

Estimated tax (6654 and 6655) 6,421 1.7 7,667 1.5 10,277 2.2 14,046 3.5 9,603 2.2

Failure to make tax deposit (6656) 41,822 10.9 30,121 5.7 28,329 6.1 23,779 5.8 31,013 6.9

Failure to furnish taxpayer identification

number (6723) aaaaaaaaaa

Daily delinquency (6652(c)(2)(A))b 39,644 10.3 39,829 7.5 38,905 8.3 58,106 14.3 a 9.9

Miscellaneous civil-trust fund (6672)c aaaaaaaaaa

Miscellaneous civil-other (6721(e) and

others)d

62,971 16.4 61,564 11.6 42,568 9.1 47,300 11.6 53,601 12.0

Incomplete partnership return (6698) 4,661 1.2 3,321 0.6 3,077 0.7 2,339 0.6 3,350 0.7

Failure to pay (6651(a) (2)-(3)) 128,532 33.4 275,036 52.0 204,199 43.8 136,576 33.6 186,086 41.7

Bad check (6657) 364 0.1 407 0.1 509 0.1 975 0.2 564 0.1

Tip income (6652(b)) aaaaaaaaaa

Fraud (6663) 129 e 194 e 48 e 30 e 100 e

Negligence (6662(c))f 142 e 159 e 66 e 54 e 105 e

Total penalty abatements 384,371 100.0 528,754 100.0 466,371 100.0 407,062 100.0 446,640 100.0

Interest abatements 174,467 100.0 318,359 100.0 251,850 100.0 182,128 100.0 231,701 100.0

Total 558,838 100.0 847,113 100.0 718,221 100.0 589,190 100.0 678,341 100.0

Note: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did

not develop information on specific penalties below the level of all businesses.

e

Less than one-tenth of 1 percent.

f

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.36: Number and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement—Other Business Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 59 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Average

Penalty (IRC section) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Failure to file (6651(a)(1)) $270 20.4 $324 22.8 $584 36.9 $468 34.0 $411 28.9

Estimated tax (6654 and 6655) 5 0.4 9 0.6 9 0.5 14 1.0 9 0.6

Failure to make tax deposit (6656) 251 19.0 345 24.3 297 18.8 149 10.8 260 18.3

Failure to furnish taxpayer identification

number (6723) aa aa aaaaaa

Daily delinquency (6652(c)(2)(A))b 55 4.2 58 4.1 55 3.5 110 8.0 70 4.9

Miscellaneous civil-trust fund (6672)c aa aa aaaaaa

Miscellaneous civil-other (6721(e) and

others)d 563 42.6 546 38.5 540 34.1 536 39.0 546 38.4

Incomplete partnership return (6698) 125 9.5 67 4.7 22 1.4 7 0.5 55 3.9

Failure to pay (6651(a) (2)-(3)) 50 3.8 66 4.7 73 4.6 88 6.4 70 4.9

Bad check (6657) ef ef ef 1 0.1 1 f

Tip income (6652(b)) aa aa aaaaaa

Fraud (6663) 2 0.2 2 0.2 e f 1 f 1 0.1

Negligence (6662(c))g ef 1 0.1 1 f 1 0.1 1 0.1

Total penalty abatements $1,322 100.0 $1,417 100.0 $1,582 100.0 $1,374 100.0 $1,424 100.0

Interest abatements $258 100.0 193 100.0 237 100.0 230 100.0 230 100.0

Total $1,580 100.0 $1,610 100.0 $1,819 100.0 $1,605 100.0 $1,653 100.0

Notes: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees.

Amounts may not sum to totals because of rounding.

a

Does not apply.

b

Fee accumulated by certain trusts and exempt organizations for failure to file in a timely manner.

c

Trust fund penalties are assessed against responsible individuals of a business when they fail to pay

IRS the taxes they withheld from employees’ earnings.

d

Because miscellaneous civil penalties account for less than 3 percent of all business penalties we did

not develop information on specific penalties below the level of all businesses.

e

Less than $1 million.

f

Less than one-tenth of 1 percent.

g

Negligence includes any failure to make a reasonable attempt to comply with the provisions of the

Code.

Source: GAO compilation of IRS data.

Table IV.37: Amount and Percent of Penalty and Interest Abatements by Fiscal Year of Abatement–Other Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 60 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Asset size reported on 1995 1996 1997 1998 Total

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 6,263 $49 6,916 $22 7,970 $35 7,793 $133 28,942 $239

Assets < $250,000 64,215 10 66,090 11 64,842 13 65,472 14 260,619 48

$250,000 < $1 million 32,973 11 33,266 14 31,566 14 32,021 15 129,826 54

$1 million < $5 million 17,865 15 19,287 19 17,991 23 17,948 24 73,091 81

$5 million < $10 million 3,231 8 3,459 10 3,379 14 3,558 13 13,627 45

 Subtotal 124,547 $92 129,018 $76 125,748 $99 126,792 $199 506,105 $467

Large corporation

$10 million < $50 million 3,897 29 4,130 33 4,043 50 3,962 37 16,032 149

$50 million < $100 million 962 32 1,133 32 1,018 17 975 22 4,088 104

$100 million < $250 million 927 54 980 67 877 39 868 29 3,652 189

$250 million or more 1,032 153 1,097 665 1,133 132 1,097 185 4,359 1,134

 Subtotal 6,818 $269 7,340 $796 7,071 $238 6,902 $273 28,131 1,577

Asset size not availableb, 5,278 18 4,452 9 4,364 5 4,466 5 18,560 36

Total penalty abatements 136,643 $379 140,810 $881 137,183 $342 138,160 $477 552,796 $2,079

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate returns because the information

is only available for corporate income tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Taxpayer did not provide, or it is missing.

b

Asset size was not available on returns transferred from IRS' historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table IV.38: Number and Amount of Penalty Abatements by Asset Size and Fiscal Year of Abatement—Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 61 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Asset size reported on 1995 1996 1997 1998 Total

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 4,646 $33 4,949 $25 5,469 $52 5,751 $80 20,815 $190

Assets < $250,000 54,502 5 56,326 5 56,416 12 58,601 7 225,845 30

$250,000 < $1 million 27,116 6 27,746 12 26,674 8 27,762 7 109,298 32

$1 million < $5 million 14,892 9 16,061 9 14,836 11 15,523 12 61,312 41

$5 million < $10 million 2,961 4 2,891 4 2,882 7 3,011 6 11,745 22

 Subtotal 104,117 $56 107,973 $56 106,277 $90 110,648 $113 429,015 $316

Large corporation

$10 million < $50 million 3,473 32 3,538 28 3,477 40 3,521 22 14,009 122

$50 million < $100 million 938 35 958 24 979 26 890 18 3,765 103

$100 million < $250 million 1,004 73 991 50 928 43 989 29 3,912 196

$250 million or more 2,124 981 2,240 1,678 2,179 1,007 2,250 714 8,793 4,380

 Subtotal 7,539 $1,120 7,727 $1,781 7,563 $1,116 7,650 $783 30,479 $4,800

Asset size not availableb 5,759 $67 4,485 $47 4,420 $93 4,459 $16 19,123 $223

Total interest abatements 117,415 $1,243 120,185 $1,883 118,260 $1,299 122,757 $912 478,617 $5,338

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate returns because the information

is only available for corporate income tax returns

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Taxpayer did not provide, or it is missing.

b

Asset size was not available on returns transferred from IRS' historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table IV.39: Number and Amount of Interest Abatements by Asset Size and Fiscal Year of Abatement–Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 62 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 6,384 7,547 8,774 10,139 32,844

1980-84 5,397 3,135 2,039 1,021 11,592

1985-89 57,159 35,033 24,780 17,136 134,108

1990 34,437 16,959 10,295 6,621 68,312

1991 138,603 38,230 19,066 10,607 206,506

1992 135,813 117,874 34,265 16,335 304,287

1993 317,009 141,823 109,188 32,015 600,035

1994 1,482,759 365,451 132,619 82,529 2,063,358

1995 253,705 1,485,025 353,335 125,218 2,217,283

1996 b 280,547 1,394,962 374,352 2,049,861

1997 b b 273,569 1,319,677 1,593,246

1998 bbb 336,528 336,528

Total penalty abatements 2,431,266 2,491,624 2,362,892 2,332,178 9,617,960

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $56 $87 $90 $114 $347

1980-84 14 10 5 23 52

1985-89 80 51 60 30 221

1990 96 425 38 12 571

1991 597 193 26 16 832

1992 227 575 82 24 908

1993 519 206 581 95 1,400

1994 1,063 594 253 461 2,371

1995 820 2,160 1,012 241 4,232

1996 b 380 1,944 976 3,300

1997 b b 96 851 948

1998 bbb 499 499

Total penalty abatements $3,471 $4,680 $4,188 $3,343 $15,682

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Table IV.40: Number of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Business Tax Returns

Table IV.41: Amount of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 63 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 8,014 8,283 9,000 9,802 35,099

1980-84 3,892 2,277 1,587 898 8,654

1985-89 35,850 22,590 16,308 11,490 86,238

1990 22,991 11,567 7,150 4,988 46,696

1991 90,253 23,490 11,398 6,672 131,813

1992 84,576 69,478 19,824 9,427 183,305

1993 155,212 92,484 65,640 18,685 332,021

1994 842,380 189,132 73,258 35,761 1,140,531

1995 133,382 917,238 173,148 70,141 1,293,909

1996 b 162,492 856,939 180,485 1,199,916

1997 b b 169,706 824,356 994,062

1998 bbb 192,349 192,349

Total interest abatements 1,376,550 1,499,031 1,403,958 1,365,054 5,644,593

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

a

Earliest tax year was 1961.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $274 $260 $398 $166 $1,097

1980-84 418 321 323 219 1,282

1985-89 362 665 449 337 1,813

1990 268 297 111 82 757

1991 170 297 66 63 596

1992 48 264 80 52 444

1993 95 55 194 65 409

1994 76 111 73 68 327

1995 9 97 140 65 311

1996 b 9 131 145 284

1997 b b 8 111 118

1998 bbb 9 9

Total interest abatements $1,720 $2,375 $1,972 $1,381 $7,448

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1961.

b

Does not apply.

Source: GAO compilation of IRS data.

Table IV.42: Number of Interest

Abatements by Tax Year and Fiscal Year

of Abatements—Business Tax Returns

Table IV.43: Amount of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Business Tax Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 64 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 94 43 38 25 200

1980-84 336 235 151 78 800

1985-89 2,717 1,627 1,005 579 5,928

1990 1,904 1,012 614 376 3,906

1991 3,600 1,743 917 539 6,799

1992 7,520 3,563 1,787 842 13,712

1993 33,035 7,823 3,798 1,745 46,401

1994 81,106 54,100 10,047 4,172 149,425

1995 6,331 64,053 42,465 9,456 122,305

1996 b 6,611 70,253 44,016 120,880

1997 b b 6,108 69,458 75,566

1998 bbb 6,874 6,874

Total penalty abatements 136,643 140,810 137,183 138,160 552,796

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

a

Earliest tax year was 1964.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $3 $1 b b $4

1980-84 9 7 3 22 41

1985-89 18 18 29 14 79

1990 46 403 25 5 479

1991 131 113 5 3 252

1992 33 112 8 3 154

1993 90 12 7 5 113

1994 48 171 21 8 248

1995 1 45 160 30 237

1996 c 1 82 291 374

1997 c c 1 94 95

1998 ccc 2 2

Total penalty abatements $379 $881 $342 $477 $2,079

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1964.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.44: Number of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Corporate Income Tax

Returns

Table IV.45: Amount of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 65 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 308 237 209 59 813

1980-84 737 598 397 257 1,989

1985-89 3,743 2,425 1,596 1,145 8,909

1990 2,914 1,389 869 585 5,757

1991 4,782 2,404 1,258 784 9,228

1992 7,865 4,751 2,585 1,280 16,481

1993 26,365 8,090 5,038 2,548 42,041

1994 65,585 43,957 10,443 5,749 125,734

1995 5,116 50,952 33,878 9,754 99,700

1996 b 5,382 56,880 36,464 98,726

1997 b b 5,107 58,237 63,344

1998 b bb 5,895 5,895

Total interest abatements 117,415 120,185 118,260 122,757 478,617

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

a

Earliest tax year was 1961.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $176 $163 $262 $40 $641

1980-84 351 312 315 214 1,191

1985-89 318 611 415 310 1,654

1990 247 283 98 73 702

1991 84 268 50 52 454

1992 24 158 39 41 263

1993 27 11 17 38 93

1994 16 65 21 23 125

1995 b 13 57 25 95

1996 c b 24 77 102

1997 ccb 18 18

1998 ccc 1 1

Total interest abatements $1,243 $1,883 $1,299 $912 $5,338

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1961.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.46: Number of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Corporate Income Tax

Returns

Table IV.47: Amount of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Corporate Income Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 66 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 214 86 193 94 587

1980-84 3,899 2,117 1,550 731 8,297

1985-89 43,913 26,057 19,346 13,354 102,670

1990 25,635 12,453 7,621 5,008 50,717

1991 90,141 28,678 14,308 8,123 141,250

1992 96,289 72,760 25,060 12,128 206,237

1993 191,883 100,003 70,249 22,886 385,021

1994 1,215,070 196,633 85,261 40,995 1,537,959

1995 243,208 1,116,212 184,975 83,076 1,627,471

1996 b 267,061 1,092,954 198,627 1,558,642

1997 b b 257,821 1,081,064 1,338,885

1998 bbb 320,870 320,870

Total penalty abatements 1,910,252 1,822,060 1,759,338 1,786,956 7,278,606

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Table IV.48: Number of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Employment Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 67 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $2 bbb $2

1980-84 2 $2 $1 b 4

1985-89 34 18 10 $7 69

1990 12853 27

1991 55 21 10 6 93

1992 52 75 26 8 161

1993 160 63 135 20 378

1994 637 195 84 45 961

1995 816 1,623 355 89 2,883

1996 c 376 1,545 270 2,191

1997 c c 94 547 641

1998 ccc 496 496

Total penalty abatements $1,770 $2,381 $2,264 $1,491 $7,907

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1962.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.49: Amount of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Employment Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 68 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 152 50 85 53 340

1980-84 2,316 1,164 930 486 4,896

1985-89 26,774 16,295 12,349 8,417 63,835

1990 17,219 8,419 5,250 3,780 34,668

1991 78,054 17,912 8,391 4,971 109,328

1992 68,501 57,361 14,501 6,686 147,049

1993 101,704 75,200 53,813 13,370 244,087

1994 665,634 109,771 53,040 24,085 852,530

1995 124,314 623,729 102,614 50,854 901,511

1996 b 150,586 627,866 106,504 884,956

1997 b b 155,009 663,091 818,100

1998 bbb 177,872 177,872

Total interest abatements 1,084,668 1,060,487 1,033,848 1,060,169 4,239,172

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Table IV.50: Number of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Employment Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 69 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a bbbb $1

1980-84 $3 $4 $3 $2 11

1985-89 31 36 23 16 106

1990 17 9 10 5 42

1991 81 27 10 8 126

1992 19 99 34 9 162

1993 24 40 171 20 255

1994 34 25 39 38 136

1995 8 49 59 29 146

1996 c 8 80 35 123

1997 c c 7 69 76

1998 ccc 8 8

Total interest abatements $219 $298 $436 $239 $1,192

Notes: Employment tax returns include Form 940, Employer's Annual Federal Unemployment Tax

Return; Form 941, Employer's Quarterly Federal Tax Return; Form 942, Employer’s Quarterly Federal

Return for Household Employees (for tax periods prior to the requirement that these taxes be reported

on Schedule H of the employer’s Form 1040); and Form 943, Employer's Annual Tax Return for

Agriculture Employees.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1962.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.51: Amount of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Employment Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 70 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 6,076 7,418 8,543 10,020 32,057

1980-84 1,162 783 338 212 2,495

1985-89 10,529 7,349 4,429 3,203 25,510

1990 6,898 3,494 2,060 1,237 13,689

1991 44,862 7,809 3,841 1,945 58,457

1992 32,004 41,551 7,418 3,365 84,338

1993 92,091 33,997 35,141 7,384 168,613

1994 186,583 114,718 37,311 37,362 375,974

1995 4,166 304,760 125,895 32,686 467,507

1996 b 6,875 231,755 131,709 370,339

1997 b b 9,640 169,155 178,795

1998 bbb 8,784 8,784

Total penalty abatements 384,371 528,754 466,371 407,062 1,786,558

Notes: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees.

Totals are based on abatements, not returns.

a

Earliest tax year was 1963.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $51 $86 $90 $114 $341

1980-84 4 1 1 b 7

1985-89 28 15 21 9 73

1990 38 14 9 4 64

1991 410 58 11 7 487

1992 142 389 48 13 592

1993 270 132 439 69 909

1994 377 228 149 408 1,161

1995 2 492 497 122 1,112

1996 c 2 317 416 735

1997 c c 1 211 212

1998 ccc 1 1

Total penalty abatements $1,322 $1,417 $1,582 $1,374 $5,695

Notes: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees. Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1963.

b

Less than $1 million.

c

Does not apply.

Source: GAO compilation of IRS data.

Table IV.52: Number of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Other Business Tax

Returns

Table IV.53: Amount of Penalty

Abatements by Tax Year and Fiscal Year

of Abatement—Other Business Tax

Returns
Appendix IV

Abatements of Penalty and Interest Assessments on Individual and Business Tax Returns

Page 71 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 7,554 7,996 8,706 9,690 33,946

1980-84 839 515 260 155 1,769

1985-89 5,333 3,870 2,363 1,928 13,494

1990 2,858 1,759 1,031 623 6,271

1991 7,417 3,174 1,749 917 13,257

1992 8,210 7,366 2,738 1,461 19,775

1993 27,143 9,194 6,789 2,767 45,893

1994 111,161 35,404 9,775 5,927 162,267

1995 3,952 242,557 36,656 9,533 292,698

1996 b 6,524 172,193 37,517 216,234

1997 b b 9,590 103,028 112,618

1998 bbb 8,582 8,582

Total interest abatements 174,467 318,359 251,850 182,128 926,804

Notes: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees.

Totals are based on abatements, not returns.

a

Earliest tax year was 1963.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $97 $97 $135 $126 $455

1980-84 65 5 6 3 79

1985-89 13 18 11 11 54

1990 3 4 2 4 13

1991 5 2 6 3 16

1992 4 6 6 2 19

1993 44 4 6 7 62

1994 25 21 13 7 66

1995 1 35 24 11 70

1996 b c 27 33 59

1997 bbc 23 24

1998 bbb 1 1

Total interest abatements $258 $193 $237 $230 $918

Notes: Other business tax returns include numerous types of returns, such as, estate, gift,

partnerships, and fiduciaries, and returns used by taxpayers to report withholdings from revenues

paid to nonemployees.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Earliest tax year was 1963.

b

Does not apply.

c

Less than $1 million.

Source: GAO compilation of IRS data.

Table IV.54: Number of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Other Business Tax

Returns

Table IV.55: Amount of Interest

Abatements by Tax Year and Fiscal Year

of Abatement—Other Business Tax

Returns
Appendix V

Abatements of Tax Assessments on Individual

and Business Tax Returns

Page 72 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

1995 1996 1997 1998 Total

Abatement type Number Percent Number Percent Number Percent Number Percent Number Percent

Abatement of prior tax

assessment—nonExamination 2,320,900 87.9 2,129,665 87.2 3,132,257 91.3 2,818,688 91.0 10,401,510 89.6

Abatement of prior tax

assessment—Examination 65,928 2.5 73,305 3.0 65,556 1.9 58,847 1.9 263,636 2.3

Abatements due to net

operating loss carryback 254,443 9.6 240,031 9.8 233,545 6.8 221,137 7.1 949,156 8.2

Total 2,641,271 100.0 2,443,001 100.0 3,431,358 100.0 3,098,672 100.00 11,614,302 100.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Columns may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Abatement type Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent

Abatement of prior tax

assessment—non-Examination $9,249 44.4 $10,005 44.5 $10,384 46.9 $10,172 45.7 $39,810 45.4

Abatement of prior tax

assessment—Examination 3,176 15.3 3,608 16.0 3,140 14.2 3,317 14.9 13,241 15.1

Abatements due to net

operating loss carryback 8,395 40.3 8,875 39.5 8,595 38.9 8,751 39.4 34,617 39.4

Total $20,820 100.0 $22,489 100.0 $22,119 100.0 $22,240 100.0 $87,668 100.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table V.1: Number and Distribution of Tax Abatements by Fiscal Year of Abatement—Individual and Business Tax Returns

Table V.2: Amount and Distribution of Tax Abatements by Fiscal Year of Abatement—Individual and Business Tax Returns
Appendix V

Abatements of Tax Assessments on Individual and Business Tax Returns

Page 73 GAO/GGD-99-77 IRS’ Abatement of Assessments

Tables V.3-V.5 show information on the three types of tax abatements for

individual returns, business tax returns, and corporate income tax returns.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Abatement type Number Amount Number Amount Number Amount Number Amount Number Amount

Abatement of prior tax

assessment—nonExamination 1,751,338 $2,987 1,648,301 $3,056 2,710,881 $3,738 2,426,144 $3,938 8,536,664 $13,720

Abatement of prior tax

assessment—Examination 52,146 410 53,936 464 51,624 468 45,915 435 203,621 1,777

Abatements due net

operating loss carryback 102,714 995 91,837 1,178 86,030 1,060 76,500 1,095 357,081 4,327

Total 1,906,198 $4,392 1,794,074 $4,699 2,848,535 $5,266 2,548,559 $5,468 9,097,366 $19,824

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Abatement type Number Amount Number Amount Number Amount Number Amount Number Amount

Abatement of prior tax

assessment—non-Examination 569,562 $6,262 481,364 $6,949 421,376 $6,646 392,544 $6,234 1,864,846 $26,090

Abatement of prior tax

assessment—Examination 13,782 2,766 19,369 3,144 13,932 2,672 12,932 2,881 60,015 11,463

Abatements due to net

operating loss carryback 151,729 7,401 148,194 7,697 147,515 7,535 144,637 7,657 592,075 30,290

Total 735,073 $16,428 648,927 $17,790 582,823 $16,853 550,113 $16,772 2,516,936 $67,843

Notes: Business tax returns include corporate income tax, various employment taxes, and other types

of returns on IRS’ business master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table V.3: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Individual Tax Return

Table V.4: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Business Tax Returns
Appendix V

Abatements of Tax Assessments on Individual and Business Tax Returns

Page 74 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Abatement type Number Amount Number Amount Number Amount Number Amount NumberAmount

Abatement of prior tax

assessment—non-Examination 23,661 $1,554 23,489 $2,175 24,420 $1,742 23,551 $1,098 95,121 $6,568

Abatement of prior tax

assessment—Examination 5,025 2,205 5,661 2,716 5,785 2,252 5,566 2,539 22,037 9,713

Abatements due to net

operating loss carryback 148,183 7,372 145,409 7,670 145,023 7,507 142,127 7,623 580,742 30,172

Total 176,869 $11,131 174,559 $12,560 175,228 $11,501 171,244 $11,260 697,900 $46,452

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Tables V.6-V.8 show one of the three types of tax abatements by corporate

asset size.

Dollars in Millions Fiscal year of abatement

Asset size reported on 1995 1996 1997 1998 Total

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 1,151 $153 1,276 $48 1,577 $97 1,448 $204 5,452 $503

Assets < $250,000 9,851 27 10,205 26 10,574 33 10,277 36 40,907 121

$250,000 < $1 million 5,029 30 4,782 36 4,967 40 4,855 39 19,633 145

$1 million < $5 million 3,414 44 3,326 47 3,400 62 3,322 58 13,462 212

$5 million < $10 million 794 23 759 20 738 24 784 33 3,075 101

 Subtotal 20,239 $277 20,348 $178 21,256 $256 20,686 $370 82,529 $1,081

Large corporation

$10 million < $50 million 1,183 $60 1,193 $80 1,104 $137 1,002 $95 4,482 $372

$50 million < $100 million 396 98 390 64 393 41 344 97 1,523 299

$100 million < $250 million 425 180 346 102 366 105 388 105 1,525 493

$250 million or more 540 816 460 1,729 494 1,152 480 414 1,974 4,110

 Subtotal 2,544 $1,153 2,389 $1,974 2,357 $1,436 2,214 $711 9,504 $5,274

Asset size not availableb 878 $124 752 $22 807 $49 651 $17 3,088 $212

Total 23,661 $1,554 23,489 $2,175 24,420 $1,742 23,551 $1,098 95,121 $6,568

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate returns because the information

is only available for corporate income tax returns.

Totals are based on abatements, not returns.

a

Taxpayer did not provide ,or it was missing.

b

Asset size was not available on returns transferred from IRS’ historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table V.5: Number and Amount of Tax Abatements by Fiscal Year of Abatement—Corporate Income Tax Returns

Table V.6: Number and Amount of Non-Examination Tax Abatements by Asset Size and Fiscal Year of Abatement—Corporate

Income Tax Returns
Appendix V

Abatements of Tax Assessments on Individual and Business Tax Returns

Page 75 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Asset size reported on 1995 1996 1997 1998 Total

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 167 $36 171 $67 204 $76 183 $171 725 $350

Assets < $250,000 417 2 611 4 794 11 581 14 2,403 30

$250,000 < $1 million 493 5 667 6 874 11 767 8 2,801 30

$1 million < $5 million 703 12 808 16 992 25 990 22 3,493 75

$5 million < $10 million 309 9 294 11 354 15 414 15 1,371 50

 Subtotal 2,089 $64 2,551 $104 3,218 $138 2,935 $230 10,793 $535

Large corporation

$10 million < $50 million 750 $95 892 $79 748 $74 739 $67 3,129 $315

$50 million < $100 million 318 59 279 45 245 51 266 101 1,108 257

$100 million < $250 million 372 134 423 105 322 120 373 103 1,490 462

$250 million or more 1,018 1,738 1,122 2,295 1,024 1,804 1,072 2,005 4,236 7,842

 Subtotal 2,458 $2,027 2,716 $2,524 2,339 $2,049 2,450 $2,276 9,963 $8,876

Asset size not availableb 478 $114 394 $88 228 $65 181 $34 1,281 $302

Total 5,025 $2,205 5,661 $2,716 5,785 $2,252 5,566 $2,539 22,037 $9,713

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate returns because the information

is only available for corporate income tax returns.

Totals are based on abatements, not returns.

a

Taxpayer did not provide, or it was missing.

b

Asset size was not available on returns transferred from IRS’ historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table V.7: Number and Amount of Examination Tax Abatements by Asset Size and Fiscal Year of Abatement—Corporate

Income Tax Returns
Appendix V

Abatements of Tax Assessments on Individual and Business Tax Returns

Page 76 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Asset size reported on 1995 1996 1997 1998 Total

balance sheet Number Amount Number Amount Number Amount Number Amount Number Amount

Small corporation

No balance sheeta 1,091 $791 1,082 $380 959 $131 1,000 $122 4,132 $1,424

Assets < $250,000 70,049 111 75,912 149 76,850 145 74,324 148 297,135 553

$250,000 < $1 million 35,042 183 38,388 217 38,760 233 38,645 251 150,835 885

$1 million < $5 million 19,993 305 18,157 366 18,420 427 18,506 447 75,076 1,546

$5 million < $10 million 7,256 171 3,723 195 3,126 206 3,111 247 17,216 819

 Subtotal 133,431 $1,560 137,262 $1,308 138,115 $1,143 135,586 $1,215 544,394 $5,227

Large corporation

$10 million < $50 million 3,143 $569 3,206 $575 3,333 $594 3,381 $716 13,063 $2,454

$50 million < $100 million 719 309 738 323 687 345 718 373 2,862 1,350

$100 million < $250 million 699 332 736 517 738 663 748 616 2,921 2,128

$250 million or more 1,051 4,283 1,179 4,756 1,082 4,462 1,069 4,646 4,381 18,146

 Subtotal 5,612 $5,493 5,859 $6,171 5,840 $6,064 5,916 $6,350 23,227 $24,078

Asset size not availableb 9,140 $319 2,288 $191 1,068 $300 625 $57 13,121 $867

Total 148,183 $7,372 145,409 $7,670 145,023 $7,507 142,127 $7,623 580,742 $30,172

Notes: Corporate returns include all Form 1120, Federal Corporate Income Tax returns.

We could not provide the asset size for businesses on noncorporate returns because the information

is only available for corporate income tax returns.

Totals are based on abatements, not returns.

a

Taxpayer did not provide, or it was missing.

b

Asset size was not available on returns transferred from IRS’ historical files or non-master file and on

special types of assessments.

Source: GAO compilation of IRS data.

Table V.8: Number and Amount of Tax Abatements Due to Net Operating Loss Carryback by Asset Size and Fiscal Year of

Abatement—Corporate Income Tax Returns
Appendix VI

Abatements Associated With Tax, Penalty,

and Interest Assessments on Substitute for

Returns

Page 77 GAO/GGD-99-77 IRS’ Abatement of Assessments

The Internal Revenue Service uses third-party information to prepare a

substitute for return for nonfilers. IRS prepares the return without

knowledge of filing status, exemptions, and other deductions. When the

notice of deficiency is received, some taxpayers file a corrected return. IRS

will then abate any overassessed portion of tax, penalty, and interest.

In this appendix, we have excluded tables on return characteristics

because the data are unreliable, such as filing status and exemptions, or do

not apply, such as paid preparer.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 215,315 $756 454,182 $249 255,100 $219 924,597 $1,225

1996 234,138 878 466,613 274 267,216 256 967,967 1,408

1997 203,262 910 419,399 319 250,433 288 873,094 1,516

1998 152,440 869 347,449 283 191,494 306 691,383 1,457

Total 805,155 $3,412 1,687,643 $1,125 964,243 $1,069 3,457,041 $5,606

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 179,375 $614 364,291 $191 214,396 $199 758,062 $1,003

1996 207,410 757 401,402 225 236,961 235 845,773 1,217

1997 174,187 763 348,275 232 217,238 261 739,700 1,256

1998 119,660 667 265,036 209 153,931 272 538,627 1,148

Total 680,632 $2,801 1,379,004 $856 822,526 $967 2,882,162 $4,624

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table VI.1: Number and Amount of Abatements Associated With Assessments on Substitute for Returns by Fiscal Year of

Abatement–Individual and Business Tax Returns

Table VI.2: Number and Amount of Abatements Associated With Assessments on Substitute for Returns by Fiscal Year of

Abatement–Individual Tax Returns
Appendix VI

Abatements Associated With Tax, Penalty, and Interest Assessments on Substitute for

Returns

Page 78 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 20 6 5 10 41

1980-84 17,355 13,383 10,291 7,563 48,592

1985-89 287,750 199,687 148,612 97,983 734,032

1990 169,127 116,575 86,082 53,566 425,350

1991 226,368 176,137 108,462 65,480 576,447

1992 56,805 284,205 217,535 104,086 662,631

1993 624 55,500 159,219 138,389 353,732

1994 13 265 9,194 53,885 63,357

1995 0 15 291 14,041 14,347

1996 b 0 9 3,620 3,629

1997 b b 0 4 4

1998 bb b 0 0

Total 758,062 845,773 739,700 538,627 2,882,162

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Earliest tax year was 1978.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Thousands Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $124 $16 $1 b $142

1980-84 26,503 18,153 12,012 $8,693 65,361

1985-89 419,778 349,063 294,944 243,017 1,306,801

1990 205,038 162,111 142,247 121,652 631,048

1991 288,068 229,396 168,765 140,057 826,286

1992 63,245 382,587 301,334 189,936 937,103

1993 299 75,586 307,724 274,721 658,330

1994 15 182 28,664 124,380 153,240

1995 0 8 325 33,104 33,436

1996 c 0 4 12,315 12,319

1997 c c 0 37 37

1998 ccc 0 0

Total $1,003,069 $1,217,101 $1,256,020 $1,147,912 $4,624,103

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Earliest tax year was 1978.

b

Less than $1,000.

c

Does not apply.

Source: GAO compilation of IRS data.

Table VI.3: Number of Abatements Associated With Assessments on Substitute for Returns by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns

Table VI.4: Amount of Abatements Associated With Assessments on Substitute for Returns by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns
Appendix VII

Abatements of Tax, Penalty, and Interest

Assessments Associated With Tax on Original

Return

Page 79 GAO/GGD-99-77 IRS’ Abatement of Assessments

Original tax assessments are from returns filed by taxpayers. All

abatements of tax, penalty, and interest shown in this appendix are

associated with the tax assessment on the original return because IRS had

not assessed additional taxes before these abatements. We have excluded

substitute for return data fields from this set of tables as these types of

returns do not show an original tax assessment amount and would not

result in an abatement without an intervening tax assessment.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 2,182,626 $13,353 3,711,340 $4,135 2,327,540 $598 8,221,506 $18,086

1996 1,955,283 15,049 3,708,611 5,138 2,471,001 1,104 8,134,895 21,291

1997 2,981,590 14,058 3,655,941 4,835 2,797,727 656 9,435,258 19,549

1998 2,732,542 16,452 4,149,059 4,276 2,881,971 630 9,763,572 21,357

Total 9,852,041 $58,912 15,224,951 $18,383 10,478,239 $2,988 35,555,231 $80,284

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Dollars in Millions Abatement type

Tax Penalty Interest Total

Fiscal year of abatement Number Amount Number Amount Number Amount Number Amount

1995 1,568,051 $2,990 1,416,584 $1,036 1,138,472 $199 4,123,107 $4,226

1996 1,417,480 2,983 1,343,692 921 1,147,064 162 3,908,236 4,066

1997 2,490,285 3,710 1,402,363 932 1,540,613 136 5,433,261 4,778

1998 2,247,338 4,014 1,890,811 1,073 1,629,120 160 5,767,269 5,247

Total 7,723,154 $13,696 6,053,450 $3,963 5,455,269 $657 19,231,873 $18,317

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

Source: GAO compilation of IRS data.

Table VII.1: Number and Amount of Abatements Associated With Tax on Original Return by Fiscal Year of Abatement–

Individual and Business Tax Returns

Table VII.2: Number and Amount of Abatements Associated With Tax on Original Return by Fiscal Year of Abatement–

Individual Tax Returns
Appendix VII

Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original

Return

Page 80 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

Income level reported on 1995 1996 1997 1998 Total

original return Number Amount NumberAmount Number Amount Number Amount Number Amount

Individual nonbusiness

1040A TPI<$25,000 479,996 $94 497,377 $98 817,873 $227 824,288 $290 2,619,534 $708

Non1040A TPI<$25,000 392,182 143 406,915 71 463,456 99 490,487 105 1,753,040 418

TPI $25,000<$50,000 847,430 335 821,056 311 1,374,619 572 1,394,568 609 4,437,673 1,827

TPI $50,000<$100,000 676,169 522 670,788 427 1,167,764 741 1,156,208 687 3,670,929 2,378

TPI $100,000 or more 580,293 1,498 513,593 1,644 535,692 1,772 613,133 2,057 2,242,711 6,971

 Subtotal 2,976,070 $2,592 2,909,729 $2,551 4,359,404 $3,411 4,478,684 $3,747 14,723,887 $12,301

Individual businessa

C-TGR < $25,000 197,782 $56 181,239 $56 210,037 $32 254,462 $123 843,520 $266

C-TGR $25,000<$100,000 353,048 248 309,568 174 345,651 150 429,640 208 1,437,907 780

C-TGR $100,000 or more 268,134 441 236,314 496 229,983 401 289,371 450 1,023,802 1,789

F-TGR<$100,000 31,527 15 27,318 12 21,041 11 20,375 9 100,261 47

F-TGR $100,000 or more 39,693 69 33,586 80 26,795 68 24,578 59 124,652 276

 Subtotal 890,184 $828 788,025 $818 833,507 $662 1,018,426 $849 3,530,142 $3,157

Income level not availableb 256,853 $805 210,482 $697 240,350 $705 270,159 $651 977,844 $2,858

Total 4,123,107 $4,226 3,908,236 $4,066 5,433,261 $4,778 5,767,269 $5,247 19,231,873 $18,316

Legend

1040A = Nonbusiness returns filed by individuals

TPI = Total positive income (income reported as a positive on tax return tables)

C-TGR = Form 1040 Schedule C (profit or loss from business) total gross receipts

F-TGR = Form 1040 Schedule F (profit or loss from farming) total gross receipts

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Returns with Schedules C or F may be categorized as nonbusiness rather than business if the

reported primary source of income was wages, investments, and other nonbusiness income.

b

Income level was not always available on certain penalties.

Source: GAO compilation of IRS data.

Table VII.3: Number and Amount of Abatements Associated With Tax on Original Return by Income Level and Fiscal Year of

Abatement–Individual Tax Returns
Appendix VII

Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original

Return

Page 81 GAO/GGD-99-77 IRS’ Abatement of Assessments

Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a 2,601 1,269 709 630 5,209

1980-84 69,766 28,878 15,199 12,525 126,368

1985-89 356,621 193,456 128,612 137,329 816,018

1990 145,812 75,507 52,973 54,676 328,968

1991 313,788 111,529 69,530 69,177 564,024

1992 584,699 291,201 120,295 93,487 1,089,682

1993 1,301,600 649,974 307,825 150,126 2,409,525

1994 1,346,786 1,260,282 504,366 301,476 3,412,910

1995 1,434 1,293,844 1,314,666 589,266 3,199,210

1996 b 2,296 2,916,556 1,910,184 4,829,036

1997 b b 2,530 2,445,813 2,448,343

1998 b bb 2,580 2,580

Total 4,123,107 3,908,236 5,433,261 5,767,269 19,231,873

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

Tax year of return 1995 1996 1997 1998 Total

Before 1980a $11 $5 $3 $4 $23

1980-84 140 73 42 40 295

1985-89 713 407 229 176 1,526

1990 436 214 111 71 833

1991 657 380 147 110 1,294

1992 637 707 380 148 1,872

1993 966 688 757 435 2,846

1994 665 938 655 711 2,968

1995 1 652 1,040 681 2,375

1996 b 1 1,414 1,285 2,699

1997 b b 1 1,584 1,585

1998 bbb 1 1

Total $4,226 $4,066 $4,778 $5,247 $18,317

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Earliest tax year was 1962.

b

Does not apply.

Source: GAO compilation of IRS data.

Table VII.4: Number of Abatements

Associated With Tax on Original Return

by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns

Table VII.5: Amount of Abatements

Associated With Tax on Original Return

by Tax Year and Fiscal Year of

Abatement–Individual Tax Returns
Appendix VII

Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original

Return

Page 82 GAO/GGD-99-77 IRS’ Abatement of Assessments

Filing Status

Fiscal year of

abatement

Number of

returns Single

Married, filing

jointly

Married, filing

separately

Head of

household

Widow(er) with

dependent child Total

1995 a a a a a aa

1996 a a a a a aa

1997 3,545,398 24.1% 56.6% 3.5% 15.7% 0.1% 100%

1998 3,688,582 27.3 54.1 4.0 14.5 0.1 100

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages may not sum to 100 because of rounding.

a

IRS was unable to reconstruct the filing status data from its historical files within the time frame of our

review.

Source: GAO compilation of IRS data.

Selected characteristic

Fiscal year of

abatement

Number of

returns

Primary taxpayer over

age 65

Paid preparer on

original return

Earned income credit on

original return

1995 2,600,897 12.3% 63.7% 3.6%

1996 2,479,891 12.5 62.2 3.9

1997 3,545,398 9.3 54.5 3.8

1998 3,688,582 9.5 57.0 4.3

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because abatements could occur on returns with more than one

selected characteristic.

Source: GAO compilation of IRS data.

Table VII.6: Distribution of Returns With Abatements Associated With Tax on Original Return by Filing Status and Fiscal Year of

Abatement–Individual Tax Returns

Table VII.7: Distribution of Returns With Abatements Associated With Tax on Original Return by Selected Characteristic and

Fiscal Year of Abatement–IndividualTax Returns
Appendix VII

Abatements of Tax, Penalty, and Interest Assessments Associated With Tax on Original

Return

Page 83 GAO/GGD-99-77 IRS’ Abatement of Assessments

Selected IRS activitya

Fiscal year of

abatement

Number of

abatements

Audit

indicator b

Offer-incompromisec

Litigationd

Criminal

investigatione

1995 4,123,107 4.1% 1.6% 4.6% 0.1%

1996 3,908,236 4.4 0.7 2.7 0.1

1997 5,433,261 2.7 0.2 1.3 0.0

1998 5,767,269 2.6 0.1 1.7 0.0

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because the abatement could have been preceded by more than

one selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

d

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

e

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Dollars in Millions Selected IRS activitya

Fiscal year of

abatement

Amount of

 abatements

Audit

indicator b

Offer-incompromisec

Litigationd

Criminal

investigatione

1995 $4,226 15.6% 4.7% 8.7% 0.6%

1996 4,066 19.4 2.4 5.7 0.4

1997 4,778 16.0 0.7 3.1 0.4

1998 5,247 14.8 0.4 3.2 0.2

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Percentages should not be totaled because the abatement could have been preceded by more than

one selected IRS activity.

a

IRS activity that occurred before the abatement.

b

Includes audits that are still open and audits closed with a change in tax assessments or no change

in tax assessments.

c

IRS and taxpayer had reached an agreement on the portion of unpaid assessments the taxpayer

would pay.

d

Return was in some phase of the litigation process--open or closed. Would include bankruptcy cases,

and cases settled or closed before trial.

e

IRS investigation of criminal wrongdoing associated with the return. Includes cases open and closed,

including those without further action by IRS.

Source: GAO compilation of IRS data.

Table VII.8: Distribution of Number of Abatements Associated With Tax on Original Return by Selected IRS Activity and Fiscal

Year of Abatement–Individual Tax Returns

Table VII.9: Distribution of Amount of Abatements Associated With Tax on Original Return by Selected IRS Activity and Fiscal

Year of Abatement–Individual Tax Returns
Appendix VIII

Other Types of Abatements Associated With

Unpaid Assessments on Individual and

Business Tax Returns

Page 84 GAO/GGD-99-77 IRS’ Abatement of Assessments

This appendix provides abatement information on the unpaid balance of

assessments that cannot be identified separately as tax, penalty, or

interest. The information shown in this appendix is not shown or

duplicated in any way in appendixes I through VII.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Reason for abatement Number Amount Number Amount Number Amount Number Amount Number Amount

Determined currently not

collectible 484 $6 451 $11 771 $7 903 $4 2,609 $28

Bankruptcy or offer-incompromisea

19,547 446 113,752 1,021 174,867 1,673 191,675 1,697 499,841 4,837

Collection statute expired 243,260 1,848 376,048 2,724 427,843 3,199 745,517 4,833 1,792,668 12,603

Trust fund recovery creditb 140,189 89 160,052 135 227,385 199 308,237 250 835,863 673

Total 403,480 $2,389 650,303 $3,891 830,866 $5,077 1,246,332 $6,783 3,130,981 $18,140

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income. Business tax returns

include corporate income tax, various employment taxes, and other types of returns on IRS’ business

master file.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be

separated.

b

The balance due on a business return that results from employers’ not paying IRS withholdings from

employees’ earnings is abated when credit (payment) is recovered through trust fund penalties

assessed on the individual accounts of responsible officers.

Source: GAO compilation of IRS data.

Table VIII.1: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Individual and

Business Tax Returns
Appendix VIII

Other Types of Abatements Associated With Unpaid Assessments on Individual and Business

Tax Returns

Page 85 GAO/GGD-99-77 IRS’ Abatement of Assessments

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Reason for abatement Number Amount Number Amount Number Amount Number Amount Number Amount

Determined currently not

collectible 452 $6 400 $11 729 $6 851 $4 2,432 $27

Bankruptcy or offer-incompromisea b b 87,770b 869b 146,128 1,397 164,284 1,521 398,182 3,787

Collection statute expired 45,815 684 132,288 1,315 150,630 1,543 340,643 2,251 669,376 5,792

Total 46,267 $690 220,458 $2,195 297,487 $2,946 505,778 $3,775 1,069,990 $9,606

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

a

Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be

separated.

b

During fiscal year 1996 on individual returns, IRS began abating the balance due rather than specific

assessments on bankruptcy and offer-in-compromise cases as it had done in prior years. Abatements

on these types of cases before this procedural change are included in the appropriate tables in

appendixes I through VII.

Source: GAO compilation of IRS data.

Dollars in Millions Fiscal year of abatement

1995 1996 1997 1998 Total

Reason for abatement Number Amount Number Amount Number Amount Number Amount Number Amount

Determined currently not

collectible 32 a 51 a 42 a 52 a 177a

Bankruptcy or offer-incompromiseb

19,547 $446 25,982 $152 28,739 $276 27,391 $176 101,659 $1,050

Collection statute expired 197,445 1,164 243,760 1,408 277,213 1,656 404,874 2,582 1,123,292 6,811

Trust fund recovery creditc 140,189 89 160,052 135 227,385 199 308,237 250 835,863 673

Total 357,213 $1,699 429,845 $1,696 533,379 $2,131 740,554 $3,008 2,060,991 $8,534

Notes: Individual tax returns are Form 1040, Federal Individual Income Tax Returns, including those

with Schedule C, sole proprietor business income and Schedule F, farm income.

Totals are based on abatements, not returns.

Amounts may not sum to totals because of rounding.

a

Less than $1 million.

b

Abatements of unpaid assessments on bankruptcy and offer-in-compromise returns cannot be

separated.

c

The balance due on a business return that results from employers’ not paying IRS withholdings from

employees’ earnings is abated when credit (payment) is recovered through trust fund penalties

assessed on the individual accounts of responsible officers.

Source: GAO compilation of IRS data.

Table VIII.2: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Individual Tax Returns

Table VIII.3: Number and Amount of Other Types of Abatements Associated With Unpaid Assessments–Business Tax Returns
Appendix IX

Comments From the Internal Revenue Service

Page 86 GAO/GGD-99-77 IRS’ Abatement of Assessments
Appendix X

Major Contributors to This Report

Page 87 GAO/GGD-99-77 IRS’ Abatement of Assessments

Rodney F. Hobbs, Senior Evaluator

Elizabeth W. Scullin, Communications Analyst

Royce L. Baker, Evaluator-in-Charge

Thomas N. Bloom, Senior Computer Specialist

Julie A. Cahalan, Evaluator

General Government

Division, Washington,

D.C.

Kansas City Field

Office
Page 88 GAO/GGD-99-77 IRS’ Abatement of Assessments
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