IRS Tax Levies, Seizures, & Liens Fall With Audits At 10+ Year Low in 2017

April 3rd, 2018 by Filed under: Tax News

The IRS yesterday released the 2017 IRS Databook. It provides an overview of the IRS’s activities over the past fiscal year. In other words, it includes activities from October 1st, 2016 to September 30th, 2017.

IRS enforcement actions, which include tax levies, liens, and seizures fell in comparison to the previous year. IRS examinations dropped as well. In fact, the overall percentage of tax returns audited fell to .5% which is a level not seen since 2002, when the overall examination coverage percentage was less than half a percent or .48%.

Also worth mentioning, the number of new delinquent taxpayer accounts increased by 614,000 with an increase in year-end taxpayer delinquency investigations of 75,000.

IRS Levies Declined More Than 30% in 2017

A levy on a 3rd party by the IRS usually results in a seizure of the taxpayer’s property or rights to the property. The IRS may levy a taxpayer’s bank accounts, wages, accounts receivable, and more. The number of notices of levy requested on third parties dropped to 590,246 from 869,196. It represents a 32.09% drop from the previous fiscal year. The levy notices tally includes the Automated Collection System and the Field Collection Programs.

Total Number of Federal Tax Liens Filed Fell In 2017

The total number of tax liens filed by the IRS fell by a little over 5%. Total tax liens filed dropped from 470,602 to 446,378 in the fiscal year 2017. Essentially, it represents the number of requests put into the IRS Automated Lien System. The IRS generally files a tax lien when delinquent taxpayers fail to respond to balance due notice letters. Under the IRS fresh starts program, there are exceptions. Usually, the IRS will not file a tax lien if the taxpayers owe less $10,000.

IRS Seizures of Real and Personal Property Declined by 25%

Although the number of delinquent accounts increased, the number of seizures dropped by almost 26% from 436 to 323. Seizures include real property like a taxpayer’s house and personal property (such as a truck or car). Although a large decrease, it shows the IRS generally does not want your house or car in most cases if you do not pay your tax bill. A large reason for this is that if the IRS sells real property, it must have equity otherwise why would the IRS sell it or auction it? The IRS normally applies a 20% reduction to the market value of real property to account for a quick sale.

IRS Audits for Individuals Fell to the Levels Not Seen Since 2002

The percentage of tax returns audited has decreased from .6% to .5% from the previous year.  The IRS examination coverage has not hit such a low percentage of overall tax returns since 2002 when the overall examination rate was .48%.  An overall examination rate of .5% represents more than a 16.67% drop from the fiscal year 2016. In fact, such a low percent has not been seen since 2002.

The percentage of corporate and individual tax returns audited, unlike s-corporations or partnerships, largely accounted for the decrease in the overall number of tax returns examined.

Overall, it seems the IRS fresh start changes coupled with IRS budget cuts has led to a decrease in IRS enforcement actions as well as examinations. In many ways, the IRS realizes that some enforcement actions may actually hinder a taxpayer from getting into compliance.

Sources: IRS Data Book 2002-2017

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