Vernoia, Enterline + Brewer, CPA LLC

The IRS’s latest Statistics of Income Bulletin (Winter 2011), just released in April, reveals a significant drop in taxable income, reflecting the economic slowdown. The IRS also reported a drop in alternative minimum tax (AMT) revenue.

Income. The IRS reported that adjusted gross income (AGI) fell 6.3 percent from tax year 2008 to tax year 2009. Taxable income decreased 9.3 percent, total income tax fell 15.4 percent and total tax liability decreased 15 percent. The largest component of AGI, salaries and wages, declined 3.7 percent from tax year 2008 to tax year 2009. The second largest component of AGI, taxable pension and annuities, increased 3.1 percent from tax year 2008 to tax year 2009. Statistics for the 2010 tax year will not be available until the IRS gathers and then releases the data from returns just filed for the April 18, 2011 filing deadline.

AMT. For the first time since 2001, revenue collected from the AMT decreased. The IRS reported that AMT revenue fell 9.1 percent to $20.2 billion for tax year 2009.

Credits. Among all tax credits, the IRS reported that residential energy credits experienced the greatest percentage increase. The $1,500 tax credit for home-efficient improvements, including installation of certified heating/air conditioning units, however, expired on December 31, 2010.  A maximum $500 credit nevertheless remains available for 2011.

Comment.  Despite the drop in income due to the economy, the IRS audit rates did not also drop.  Statistics for the IRS indicate that, while slightly fewer returns were filed and revenue collection dropped overall in FY 2010 (Sept 2009 through August 2010) as compared to the 2007-2009 period, audit rates remained fairly constant.