Large Corporations Pay the Tax Bill (on Audits)
The IRS issues a data book each year and in the recent 2016 data book, we can glean quite a bit of data about taxpayers returns. One of the items they spend a fair amount of time on is the type and number of taxpayers who get audited and the amount of revenue raised by these audits.
On page 27, they list the percentage of audits performed by average gross income (AGI). Over 84% of all returns filed listed AGI of under $100,000. The average audit rate on these returns (excluding ones showing net losses) was less than .8% and for returns between $25,000 and $100,000 the audit rate was less than .5%.
For taxpayers with AGI between $100,000 and $500,000, the audit rate was still less than 1%. Once AGI went over $500,000, the audit rate jumped to about 2% up to a million; 4.6% for million to $5 million; 10.46% for $5 million to $10 million and 18.79% for those with more than $10 million of AGI (now we can see why President Trump gets audited). Less than 1% of taxpayers make more than $500,000 (.82% to be exact).
Page 28 then provides data on the revenue raised by all taxpayers. Total revenue during October 1, 2015 to September 30, 2016 was about $12.2 billion. Of this amount, Large Corporations generated almost $9 billion of revenue. The other $3 billion was generated by individuals at about $1.7 billion; estate tax returns at $382 million; payroll tax returns at $309 million and gift tax returns at $235 million.
As you can see, the IRS likely spends their efforts on auditing large corporations since that is where the money is at. Of the total $1.7 billion generated by individuals, almost half of it came from taxpayers with AGI of $1 million or more.
On a personal note, I was finally able to go out and disk my ground this weekend to get ready to plant some lavender. We have had a lot of rain this year but it has finally dried up enough to get into the field. I may not be a “real” farmer, but it felt good to till the ground. I will provide some photos over the next month or so of getting it into the ground.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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