IRS collects record-setting $4.9 trillion in tax revenue in FY 2022

The IRS collected a single-year record of $4.9 trillion of total tax revenue from return filings in fiscal year 2022, the Treasury Inspector General for Tax Administration (TIGTA) said in a report on IRS compliance activities.

The total revenue collected was about $790 billion more than in FY 2021, TIGTA said in its report, Trends in Compliance Activities Through Fiscal Year 2022 (TIGTA Rep’t No. 2024-300-011 (Dec. 20, 2023)).

In FY 2022, U.S. taxpayers filed more than 161 million individual and 12 million business income tax returns, along with over 31 million employment tax returns, over 1 million excise tax forms, and just over 297,000 estate and gift tax forms, the report said. Income taxes collected from individuals increased by 47%, or nearly $1 trillion, since FY 2019.

The IRS collected $72 billion in enforcement revenue in FY 2022, just shy of the record $75 billion collected in FY 2021, the report said.

Enforcement revenue has jumped significantly over the years. In comparison, the enforcement revenue collected for FY 2013 to FY 2020 was never over $59 billion.

Automated collection processes drove revenue collection as the IRS ended FY 2022 with a slight decrease in full-time-equivalent employees from FY 2019. For example, about 74% of FY 2022’s enforcement revenue was collected within the collection notice stream and automated collection. The decrease in staffing contributed to a decline in examinations, TIGTA said. During FY 2022, the IRS completed 2% fewer correspondence examinations and 25% fewer field examinations than in FY 2019.

Still, in FY 2022 revenue from field collection (cases worked by IRS revenue officers through direct contact with taxpayers and their representatives) increased 37% compared with FY 2019, and the IRS attributed the increase in part to a focus on high-dollar employment tax cases with balances of at least $250,000. Field collection management also focused on assigning cases with individual taxpayers who owe over $1 million, TIGTA said.

The IRS has said it plans to use its dollars from the Inflation Reduction Act of 2022, P.L. 117-169, to focus on high-income individuals and difficult business cases, such as large or complex passthrough entities.

Meanwhile, the IRS estimated the gross tax gap — the difference between estimated true tax liability for a given period and the amount of tax that is paid on time — for tax year 2021 to be $688 billion, TIGTA said.

“The IRS’s examination function continued its declining enforcement trend in terms of the number of examinations; however, there was a general increase from $17.3 billion in FY 2019 to $30.2 billion in FY 2022 for proposed additional taxes after examinations,” the report said. “The trending decline in the number of examinations is likely contributing to expansion in the overall tax gap as taxpayers that appear to present a compliance risk are less likely to have an examination conducted.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.