For many people, tax filing is becoming a distant memory for this year; April 15 has passed. But taxes are year-round for business owners. They deal with payroll taxes on a regular basis and many pay quarterly estimated taxes. A few even pay excise taxes. But what about the big picture when it comes to tax filings? Each year, the IRS creates a data book with tables showing various information—how many returns were filed, how many were filed electronically, how many were examined, and more. The most recent data book covering the government’s fiscal year 2023 (ending September 30, 2023) shows changes from the previous fiscal year (FY). Yes, they’re just statistics. But they do provide 2 key takeaways: growth in the number of businesses and the fact that audit rates continue to be low.
Number of returns
The total number of returns filed in FY 2023 was more than 271 million, compared with 262,829,039 in FY 2022. Of these returns filed in FY 2023:
- C corporations: 2,464,836 (2,260,757 in FY 2022)—9% more returns
- S corporations: 5,882,030 (5,583,837 in FY 2022)—5.3% more returns
- Partnerships (including LLCs that file partnership returns): 5,117,987 (4,582,871 in FY 2022)—11.7% more returns
- Employment taxes: 36,286,127 (31,180,674 in FY 2022)—16.4% more returns
- Excise taxes: 1,241,344 (1,166,197 in FY 2022)—6.4% more returns
Electronic filing
Almost 90% of individuals filed their income tax returns electronically in FY 2023. The story is only a little different when it comes to businesses:
- C corporations: 63%
- S corporations: 90%
- Partnerships (including LLCs that file partnership returns): 89%
The percentage of C corporations filing electronically jumped from 57% in FY 2023. Expect to see nearly 100% e-filing for FY 2024 because returns filed on or after January 1, 2024, must be filed in this manner if they file 10 or more returns. “Returns” for this purpose includes W-2s and 1099s.
Audits
The numbers are a little fuzzy because they cover returns filed for tax years 2013 through 2021 and show the total number of returns examined as of the end of FY 2023. The IRS examined 0.44% of all individual returns and 0.74% of all corporate returns filed in this period. It appears that the rate for S corporations and partnerships was 0.1%. These are very low statistics and don’t show the complete picture. The audit rate for individuals increased for those with higher income. The audit rate for corporations increased for those with larger balance sheets. And those selected for audit aren’t comforted by these low audit odds.
Final thought
If you’ve read this far, then you probably can appreciate IRS activity with respect to businesses. Will more businesses be formed, as evidenced by more returns filed? Who knows? Economic conditions may affect the growth trend. Will audit rates increase? The IRS said they would. Stay tuned!
To read other blogs concerning the IRS, see earlier posts here.
