The IRS’s recently released FY 2024 Data Book offers fresh insights into its compliance presence and collection activities, cornerstones of tax administration that ensure taxpayers meet their obligations under U.S. law. While these figures do not necessarily dictate the agency's current or future priorities, they provide a window into the scope and scale of recent enforcement actions.
Key highlights from the FY 2024 data
As of the end of FY 2024, the IRS identified over $29 billion in recommended additional taxes from examinations. However, these figures stem from audits of returns filed for tax years 2014 through 2022 because examinations typically take place years after the original filing.
Despite the dollar amounts involved, most taxpayers face a very low risk of audit. Fewer than 0.4% of individual returns were examined, and the rate for corporate returns was only slightly higher at 0.66%. However, the audit risk jumps significantly for high-income individuals (total positive income of $10 million or more), with a 7.9% examination rate.
Methods used to identify potential noncompliance
Beyond traditional audits, the IRS leans heavily on automated programs and third-party reporting to flag potential errors and discrepancies. Information returns, such as Forms W-2 and 1099, are systematically matched against taxpayers' reported income. When mismatches arise, the Automated Underreporter (AUR) Program contacts taxpayers to resolve them. In cases where taxpayers fail to file altogether, the Automated Substitute for Return (ASFR) Program uses third-party data to calculate what the IRS believes is owed, including taxes, interest, and potential penalties.
The IRS also scans for math and clerical errors before issuing refunds. Common mistakes can include incorrect calculations of taxable income, tax liability, and various credits. According to the data, calculation and income adjustments represented some of the most frequent errors for current-year returns. For prior-year returns, issues related to credits such as the Recovery Rebate Credit were widespread.
Criminal investigation findings
The IRS Criminal Investigation (CI) division pursues cases involving willful violations of the tax law, such as tax evasion, money laundering, and other financial crimes. During FY 2024, the CI branch completed thousands of investigations. Roughly one-third of these cases involved legitimate income that was misreported for tax evasion purposes, another third dealt with proceeds from illegal sources such as fraud or money laundering, and the final third centered on narcotics-related financial crimes.
Collection activities
One of the most watched figures is the total amount of unpaid assessments the IRS collects. In FY 2024, the agency brought in over one hundred billion dollars in overdue taxes. The IRS also collected $3.2 billion from delinquent returns - those not filed on time.
Taxpayers struggling with financial hardship may propose an offer in compromise (OIC) to settle their liability for less than the full amount owed. Data for FY 2024 shows tens of thousands of OIC proposals, with a smaller fraction being accepted, reflecting the rigorous qualifications and negotiations required.
Meanwhile, a far more common method for people to manage unpaid balances is an installment agreement. Millions of new agreements were established, leading to $16.1 billion in payments toward outstanding balances.
Key takeaways and practical considerations
The FY 2024 data highlights the ongoing need for meticulous recordkeeping and proactive tax planning for individuals and businesses with complex financial profiles.
For everyone, the IRS's increased reliance on third-party data matching (from Forms W-2, 1099, and similar information returns) means that inconsistencies can quickly trigger automated notices. These automated checks are not trivial; unaddressed discrepancies can evolve into protracted document requests and potential penalties.
Taxpayers with overdue liabilities should also remember the available resolution options, whether through installment agreements or offers in compromise. Early engagement and professional guidance can help manage exposure to penalties, streamline appeals, and reduce the risk of a more serious enforcement action.
If you're concerned about audit risks, facing IRS document requests, or potential penalties, please contact our office for tailored guidance.