# THE DISTRIBUTION OF UNDERREPORTED INCOME:

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THE DISTRIBUTION OF UNDERREPORTED INCOME:
WHAT WE CAN LEARN FROM THE NRP
February 2023
Gerald Auten and Patrick Langetieg

This paper presents new information about the underreporting of income on individual tax returns over
the last 25 years by type of income and income class. The analysis is based on detailed audit studies
conducted by the IRS, including the 1988 TCMP study and the 2001 and 2006 through 2013 studies under
the NRP program. While the likelihood of having underreported income increases at higher reported
income levels, the average ratio of underreported to reported income actually declines as reported income
increases. In addition, underreporting of business income is substantially greater than that of income
subject to information reporting and is especially concentrated among taxpayers reporting business
losses. We also compare results ranking by reported income with results ranking by audit-corrected
incomes. Because of our interest in helping other researchers account for underreported income in data
based on reported incomes, most of our analysis focuses on reported income groups.
Keywords:
JEL Codes:

______________________________________________________________
Gerald Auten: U.S. Treasury Department (gerald.auten@treasury.gov)
Patrick Langetieg, Internal Revenue Service (Patrick.T.Langetieg@irs.gov)

Disclaimer. This research was conducted while the authors are, respectively, employees at the U.S.
Department of the Treasury and the Internal Revenue Service. The findings, interpretations, and
conclusions expressed in this paper are entirely those of the authors and do not necessarily reflect the
views or the official positions of the U.S. Department of the Treasury or the Internal Revenue Service.
Any taxpayer data used in this research was kept in a secured Treasury or IRS data repository, and all
results have been reviewed to ensure no confidential information is disclosed.

1

In 1963, the IRS began a program of special detailed audit studies of individual income tax returns.
The results of these studies have been used to improve the selection of returns for regular operational
audits and to estimate the tax gap, the amount of revenue not collected on time. Under the Taxpayer
Compliance Measurement Project (TCMP), periodic studies were conducted from 1963 through 1988.
This TCMP program was discontinued after 1988 due to controversy over costs of a planned study for
1994.1 In 2001, the IRS initiated the National Research Program (NRP), intended to obtain this
information while making the audits less onerous for affected taxpayers and less costly for the IRS. Under
this program, the IRS conducted a new large sample study for tax year 2001 and began a series of smaller
annual sample studies in 2006.
In addition to being a valuable tool for the IRS, the results of these detailed audits are also an
important resource for government agencies, think tanks and researchers for improving their income
measures.2 With a few exceptions, however, there has been very little published information on the
amounts of underreported income by type of income and income group.
Using the 1988 TCMP file and the more recent NRP data, this paper provides previously
unavailable information about the types and amounts of unreported income by income class and the extent
to which this may have changed over time. Not surprisingly, there is relatively little underreporting of
income subject to information reporting (such as wages, dividends and interest), but much higher
underreporting for income subject to little or no information reporting, especially business income. When
tax units are ranked by audit-corrected or “true” income, the largest proportions of underreported income
are found at the top of the distribution. When ranking by reported income, however, larger portions of
unreported income are in lower deciles, especially the bottom decile which includes returns with negative
incomes. Because of our interest in helping to understand where taxpayers with unreported income can be
found in published data, most of our analysis groups taxpayers based on their reported incomes.
I. NONCOMPLIANCE BY INCOME LEVEL IN PRIOR STUDIES
While there have been many previous studies on various aspects of tax compliance, only a few
have reported on non-compliance by income class using micro data, and those have only examined a
single year. Using the 1988 TCMP file, Charles Christian (1994) found that compliance levels were higher
for taxpayers with higher reported incomes, reaching 97 percent for returns with $500,000 or higher AGI.3
In contrast, using the 2001 NRP data, Johns and Slemrod (2010) found that when ranking by “true”
income, underreporting was higher in high income groups. Specifically, the ratio of unreported to true
income rises with income, peaking in the 90 to 99.5 centiles. Another finding was the inclusion of

1 Additional factors in the cancellation included criticism from Congress and others that the planned sample size was

too large and the audits would be too burdensome on taxpayers (GAO, 2001). TCMP audit studies were also
conducted of tax returns of corporations, partnerships, estates and fiduciaries.
2 For example, the Bureau of Economic Analysis uses them as the basis for underreported income in the national income
accounts. The treatment of underreported business income is explained in Bureau of Economic Analysis (2019), Chapter 11.
3 These results were for compliance with taxes paid, but should correlate closely with compliance rates for income.
There were only two statutory rates in 1988: 15 and 28 percent, but a phaseout of the benefit of the 15 percent rate created an
effective rate of 33 percent. There was a slight dip in the compliance rate in the $100,000 to $250,000 AGI group that roughly
corresponds to the phaseout range with the higher 33 percent rate. Other early studies reporting compliance by income class,
such as Bishop, et al. (2000) seem to have used aggregated data on average incomes by 3-digit zipcodes.
2

unreported income has little effect on inequality as measured by Gini coefficients due to re-ranking.4
While not discussed in the papers, other tabulations of the 2001 data show the importance of business
losses: the underreporting rate for sole proprietorship income is about 100 percent for returns with
negative AGI. This implies that the NRP audits essentially offset all sole proprietorship losses in the
aggregate for the returns with negative AGI.5 In this paper, we provide additional insights into the issues
of the effects of alternative rankings of returns and the importance of underreporting of taxpayers claiming
business losses. More recently, Debacker, et al. (2020) examined NRP data for 2006 through 2014 and
concluded that measures of inequality are lower after accounting for non-compliance. Both Gini
coefficients and top income are slightly reduced after including unreported income for AGI and specific
types of income.
II. DATA
The analysis in this paper is based on data from the 1988 TCMP study and the NRP studies for
2001 and 2006 through 2013. The first two studies were large cross-section samples for tax years 1988
(54,000 observations) and 2001 (45,000 observations). Beginning in 2006, the NRP program changed to
smaller annual samples of about 14,000 to 15,000 returns. Because of the smaller sample sizes, our
analysis combines annual samples in similar parts of the business cycle to obtain greater reliability. The
resulting samples are for 2006 and 2007, 2008 and 2009, 2010 and 2011, and 2012 and 2013. Combining
2012 and 2013 helps account for the shifting of income between these two years in response to the 2013
tax increases anticipated in 2012.
While frequently referred to as “random audits”, these data are more accurately described as
stratified random samples. Sampling rates are based on audit classes (presence of certain types of business
income) and the amount of total positive income. Returns including income with little or no information
reporting, such as sole proprietorships and farms, are sampled at higher rates. Returns including only
income subject to substantial information reporting are sampled at lower rates. While other studies often
use AGI, total positive income can be considered a better measure of economic income (and to some
degree, of wealth) and of the incentive to engage in tax shelters or other tax avoidance strategies.6
While these audits potentially involve in-person audits of every return item, not all will necessarily
receive the same scrutiny. An initial review classifies returns into three groups: accept as filed (or with
minor adjustments) based on information returns, conduct a correspondence audit or conduct an in-person
audit. This approach was one of the ways the IRS reduced the burden on taxpayers, especially those
believed most likely to be compliant based on preliminary examination of information returns.
III. RESULTS
4

While all differences are very small, Johns and Slemrod (2010) estimates that when unreported income is added the Gini
coefficient for pre-tax income is lower, but is unchanged for after-tax “true” income. Johns and Slemrod (2010) use the term
“true” income to describe their estimates that are DCE corrected for underreported income not discovered in the NRP audit.
5
Tables in Johnston (2008) and Johns and Slemrod (2008) break out returns with no positive reported AGI showing net
underreporting rates of 101 and 102 percent respectively. Another hint of the importance of business losses in Johns and
Slemrod (2010) is that the bottom decile that includes negative AGI returns accounts for 13 percent of underreported income,
while the next two deciles each account for only 8 percent.
6
Periods before the Tax Reform Act of 1986 and when tax rates have increased significantly (such as in 1993) have been
associated with increases in tax shelters that defer tax or provide losses that can be used to offset high taxable income. See
Auten, Splinter and Nelson (2013).
3

In this section, we examine various dimensions of taxpayer compliance and underreporting using
the TCMP and NRP audit studies from 1988 to 2013. Questions include what percent of taxpayers
underreport income, by how much they underreport and by how much underreporting varies by type of
income, by income class and over time.
Table 1 shows summary information on underreporting by type of income discovered in the TCMP
and NRP studies. Total income as reported on the front of Form 1040 was increased by these audits by a
relatively modest 3.9 percent.7 As discussed in more detail later, we adjust underreporting of types of
income for cases where income was reported, but on the wrong line of tax forms. Sources of income
subject to substantial information return reporting to the IRS, such as wages, dividends and interest, were
found to have only small amounts of underreporting and account for only small shares of total
underreporting. Sole proprietorship income was increased by 54 percent under audit and accounted for 46
percent of all underreported income discovered. Partnership and S corporation income was increased by
only 5.7 percent and accounted for 7.6 percent of underreported income. As discussed later, this does not
include any underreporting on the tax return of the business. Net rent and royalty was increased by 94
percent and accounted for 9 percent of unreported income. Net farm income was increased by 120 percent,
largely because farm losses are almost as large as farm profits so that net farm income is relatively small.
A. Underreporting of Total Income
The choice of the variable used to rank taxpayers in the income distribution can also affect how
underreporting is distributed. Johns and Slemrod argue that distributions by corrected income are most
appropriate. While this approach clarifies underreporting by truly wealthy taxpayers, it isn’t helpful for
researchers who only observe reported incomes. If underreporting rates by true income are applied to
reported incomes, this can produce misleading results by overstating top incomes.
To illustrate the effects of ranking, Figure 1 compares ranking returns by reported income with
ranking by audit-corrected income for 1988 through 2013. Figure 1A shows that under both rankings, the
percent of taxpayers with unreported income generally increases with income, from less than one-fourth of
the lowest income quintile to about half of the top one percent. In part, this reflects the fact that most
income in this group is wages and salaries and other sources subject to third-party information reporting.
The exception is among taxpayers reporting negative total incomes: nearly 70 percent of returns with
negative reported incomes had unreported income, primarily disallowed business losses and loss
carryovers. In comparison, less than 40 percent of returns with negative corrected incomes had unreported
income. This large difference is due to auditors discovering enough unreported income to change total
income from negative to positive.
Another perspective is unreported income as a percent of reported income and how this varies
under alternative rankings (see Figure 1B). When returns are ranked by reported incomes, the ratio of
unreported to reported income declines at higher reported incomes, sharply at first and then much more
gradually to only 2 or 3 percent for the top half of the distribution. When ranking by audit-corrected
incomes, the ratio is relatively constant and is higher in the top two quintiles. The most dramatic

7 Total income is the sum of the income items on Form 1040. This is before any adjustments for calculating adjusted

gross income. These adjustments have varied considerably, making AGI less comparable over time.
4

differences are among taxpayers with negative incomes: unreported income is more than one-third of
reported income for those with negative reported income but less than 10 percent for those with auditcorrected negative income. This difference is a result of the re-ranking: some returns found to have
substantially overstated their losses end up in the middle of the distribution, and a few near the top of the
distribution.
Another useful perspective is the shares of unreported income under the different definitions of
income (Figure 1C). By reported income groups, the largest shares of unreported income are in the
negative income and quantile groups up to about the 80th percentile and small shares in the top income
groups. The pattern is similar when ranked by total positive income except for the lack of a negative
income group. By corrected income, the largest shares are in the middle of the distribution and there is
now much less in the negative income group after including the income discovered in the audit.
Finally, as might be expected, while underreporting is smaller for those with the highest reported
incomes, the average amounts generally increase with higher reported incomes with some notable
exceptions. When ranking by reported income, the highest average unreported amount is found among
firms with negative incomes. When ranking by audited incomes, somewhat surprisingly, the highest
average amounts are found not in the top 0.1 percent but in the lower part of the top 1 percent.
For the rest of the analysis of overall underreporting, this section uses total income as found on
Form 1040. Additional dimensions in understanding underreporting include how much underreporting
patterns have changed over time and how much variation there is within each income group. (Figures 2A2D). Have these underreporting patterns changed over time? Figure 2A shows the ratio of unreported
income by reported income group for each of the separate time periods in our data: 1988, 2001, 2006-7,
2008-9, 2010-11 and 2012-13. The decline in this ratio at higher reported income levels is found in all the
time periods, but with some variation in the levels and patterns. In 1988, for example, underreporting was
relatively lower in all income groups except for the top 1 percent. This may have been related to the
transition to new rules under the Tax Reform Act that targeted high-income taxpayers.
There is wide variation in the extent underreporting both within and across income groups,
especially in the bottom two income quintiles (Figure 2B shows all years combined). While about half
have little or no unreported income in all income groups, small percentages have quite high ratios of
unreported to reported income. At the 20th centile of the income distribution, for example, 10 percent of
returns have failed to report almost half of their income and 5 percent have failed to report almost onethird. A few taxpayers (well under 1 percent) are found to have reported less than 5 percent of their auditcorrected income. For taxpayers with negative incomes and low positive incomes, the line for the 5 percent
(95th percentile) with the highest ratios goes off the chart: these taxpayers reported less than12 percent of
their income. In the top of the distribution, the underreporting ratios are much lower. In the top one percent
of the distribution, for example, while per return dollar amounts can be large, only 5 percent have
underreported income more than 8 percent of reported income.
Another perspective is provided in Figure 2C that shows the shares of unreported income by
reported income groups for each time period. From 2001 through 2013, about 11 percent of unreported
income is found among the typically 1 or 2 percent of returns with negative total incomes. Having a
negative total income is the result of some combination of current year business losses and loss carryovers
5

from prior years. After adjusting for unreported income, the remaining returns with negative incomes
account for only less than two percent of unreported income. In the 1988 TCMP data, the share of
unreported income of returns with negative incomes is larger: about 17 percent. This is likely due to
taxpayers not yet being fully compliant with provisions of the Tax Reform Act to reduce tax shelter losses
and limit deductions of passive losses. The top one percent share was 7.5 percent in 1988, but smaller in
more recent years: about 6 percent in 2006-2007 and 4 to 5 percent in other years.
Comparison of the top one percent share with the rest of the distribution yields some surprising
results. Returns with negative total incomes accounted for over twice the share of unreported income of
the top one percent except in 2006-2007 when it was only 80 percent higher. Even the middle three
quintiles and the rest of the top and bottom quintiles accounted for twice the share of the top one percent
share in all periods.
Taking all of these findings into account yields the following picture for total income. Taxpayers
with higher reported incomes have a greater likelihood of having underreported income. But the average
ratio of unreported income declines at higher levels of reported income. This is at least partly accounted
for by relatively small percentages of taxpayers who have substantially understated their income.
An additional question is the extent to which the share of income subject to substantial information
reporting to the IRS varies by income group and how this might affect what is observed about
underreporting. It is useful to consider this in three categories. Some income, such as wages and salaries,
Social Security, and interest and dividends, is subject to substantial information reporting. Some income is
subject to little or no reporting, including sole proprietorships, rent and farm income. An in-between
category has some information reporting but is more subject to error or underreporting. This category
includes partnership and S-corporation, pension and IRA, and alimony income. As shown in Table 3, most
of the income distribution is subject to substantial information reporting on over 80 percent of their
income. While the percentages vary over time, the top one percent has much less of its income subject to
substantial income reporting, less than half for the top 0.5 percent. Including income subject to some
reporting, however, the percentage subject to some information reporting increases to about 90 percent.
This is due to K-1 reporting for partnerships and S corporations. Returns reporting low positive incomes
have experienced a significant increase in the portion of their income subject to some or little information
reporting. This likely reflects the shift to more independent contracting and the Gig economy. While this
group should be receiving 1099-Misc reporting, they have the opportunity to claim deductions not
available to most employees when they file a Schedule C.
Returns with negative total incomes are typically subject to little information reporting on their
losses, and account for disproportionate shares of unreported income. Since these negative incomes are the
result of business losses, the next section considers the underreporting of business income.
B. Underreporting of Business Income
Business income from sole proprietorships, rental properties, farms and pass-through business
(partnerships and S corporations) has been subject to relatively little information reporting and therefore
found to have much higher rates of noncompliance and underreporting. In this section we measure

6

business income as all income included on Schedules C (sole proprietorships), E (rent and royalty, farm
rent, partnerships and S corporations) and F (farms).8
Several measures of underreporting of business income are illustrated in Figures 3A to 3D in which
businesses are ranked and grouped by reported business income. Returns with business losses are part of
the bottom quintiles, but in a separate group.
Figure 3A illustrates that over 70 percent of returns with overall negative business income have
some amount of underreported income. Among returns with positive business income percentage with
underreported income over 60 percent in the upper middle of the distribution (60th to 90th percentiles)
dropping to less than 40 percent both at the top and bottom.
As with total income, Figure 3B shows that the average ratio of unreported to reported income
declines substantially among taxpayers with high reported business incomes. Among taxpayers with
business losses, the audits reduce these losses by about half. Taxpayers in the middle of the distribution
(40th to 60th centile group) have unreported income roughly equal to what they reported, that is, they
reported about half of their business income. In the highest income groups, the income discovered in the
audits is only about one percent of the reported amounts.
The most striking part of this figure is for returns with positive business incomes below the 40th
percentile where unreported income is over seven times the reported amount in all periods except 20122013 when it is over five times. It turns out that because returns with business losses are grouped
separately and account for large portions of the bottom 40%, these are primarily taxpayers who reported
very modest amounts of business income who auditors found should have reported much larger amounts.
Examples would be returns reporting $2,000 to $4,000 of business income that is increased to $15,000 to
$40,000 as a result of the audit.
As with total income, Figure 3C illustrates that relatively small percentages of returns are found to
have substantial non-compliance, reporting only a small fraction of their actual income. The 95th percentile
of underreporting reaches a peak in the middle of the distribution showing that 5 percent of these taxpayers
have unreported income of at least 5.5 times the amounts reported. Another 5 percent of business
taxpayers in this range have unreported income of two to three times their reported amounts. The extent of
underreporting declines at the highest reported income levels. The 5th centile is below zero over much of
the distribution, illustrating that business income is adjusted downward in some cases, perhaps because of
additional expenses the taxpayer claimed during the audit process.
The importance of unreported income by taxpayers claiming business losses is illustrated in Figure
3D which shows the shares of unreported business income by reported income groups. Well over one-third
of unreported business income has been accounted for by taxpayers reporting business losses in all periods
since 2001. This helps explain the high ratios in Figure 3A for the group with modest positive business
income up to the 40th centile. Returns in the 60th to 90th centiles accounted for approximately another one-

8 Schedule E has also included typically small amounts of miscellaneous other income sources that may also be

considered business income such as REMICS. Some items reported on the “other income” line of Form 1040 could
be considered business income. For example, net operating loss carryovers often constitute a substantial share of
negative amounts on this line.
7

third of this unreported income, roughly their share of returns with business income. The share of
unreported income of the top one percent of returns is two to three percent since 2001.
The distribution of unreported business income in the 1988 study is quite different than in the later
periods. The roughly two percent of returns with business losses accounted for about 13 percent of
unreported business income, a much smaller share than in the later period. As a result, the shares of
unreported business income are much higher in the middle and top of the distribution. The top one percent
accounted for about 6 percent in 1988. The reasons for the much different distribution are unclear. Some
of this difference may be because this was so soon after the Tax Reform Act of 1986 when the top
individual income tax was only 28 percent and taxpayers had not fully adjusted to the changed incentives.
IV. IRS COMPLIANCE EFFORTS AND LIMITATIONS OF DATA
While the emphasis of IRS compliance efforts is typically on field audits, it is useful to consider
the overall program of compliance, summarized in Table 2. When returns are filed and before refunds are
paid, the IRS checks for “math errors” such as errors in calculating income and deductions or the number
and amount of exemptions. Since these are computer generated, the IRS can check a large percentage of
returns and many can be handled with little or no interaction with the taxpayer. In recent years, this has
resulted in about 2 million notices to taxpayers. The IRS does not report the effects on tax liabilities. In the
Automated Underreporter (AUR) Program, the IRS compares information returns, such as Forms W-2 and
1099 filed by employers and other third parties with what is reported on tax returns. The IRS then contacts
taxpayers to resolve significant discrepancies. In FY2019, the IRS closed about 2 million cases generating
about $6.7 billion in assessments. These checks are applied to all returns with income subject to third-party
reporting.
In fiscal year 2019, the IRS conducted 133,000 field exams and 547,111 correspondence exams,
which is down from 310,000 and 1,081,000 in fiscal year 2008 respectively. These exams are typically
focused on one or a small number of specific issues. In fiscal year 2019, field exams generated about $3.6
billion and correspondence exams generated about $3.3 billion in recommended additional tax. For field
exams, 63 percent of the recommended amounts were agreed to by the taxpayer, 10,909 audited taxpayers
(0.8 percent) accounting for the other 37 percent did not agree and went to appeal and perhaps additional
steps. For correspondence exams, 99 percent of the recommended amounts were agreed to by the taxpayer
and 5,476 taxpayers went to appeal and perhaps took additional steps. Using information returns, the IRS
Automated Substitute for Return Program constructs tax returns for certain non-filers and assesses taxes, interest
and penalties based on the substitute returns. In fiscal year 2019, the IRS obtained 207,000 closures and assessed
$6.6 billion in taxes, interest and penalties. Finally, the Criminal Investigation Program completed about 2,800
cases in fiscal year 2019, about half of which resulted in incarcerations. The cases included legal income source tax
crimes, illegal source financial crimes and narcotics-related financial crimes.

The NRP program is included in these numbers. About 5 percent of returns selected for these
studies are relatively simple and are accepted as filed or accepted with adjustments based on associated
information returns. Another 35 percent receives correspondence audits that generally focus on selected
issues. The remainder, about 60 percent, receive more comprehensive field audits. Auditors have the
option of opening prior year returns if there is evidence suggesting earlier non-compliance or if some
income or deductions should have been included in a prior year return.
8

While income subject to third-party reporting, such as wages, interest and dividends can readily be
checked for accuracy, identifying underreported tip income and other income not subject to third-party
reporting is subject to much more uncertainty. To account for unreported income not found during the
TCMP and NRP audits, the IRS has long estimated additional amounts of unreported income. Early TCMP
studies increased the income discovered by simple multipliers. For example, Internal Revenue Service
(1996) reported that the effective multiplier was 3.28 in most cases. For sole proprietor, farm and rent and
royalty income, a smaller multiplier was applied to gross income but overstated expenses were assumed to
have been found. This would result in an effective multiplier closer to 3.28 in most cases. For more recent
analysis, the IRS has turned to more sophisticated detection controlled estimation (DCE) methods
(Feinstein, 1990, 1991, 2004).
For this paper, we have not adjusted the results for estimated unreported income not discovered in
the NRP audits. Debacker et al. (2020) and others have raised concerns about such estimates. The
multipliers used in Johns and Slemrod (2010), for example, had only two basic return categories (with and
without low visibility income from Schedules C and F) and two income categories: under and over
$100,000 of total positive income. Having only two income groups and a relatively low break point seems
inconsistent with the noncompliance rate peaking below the very top incomes even when ranking by true
income. The IRS has updated its DCE procedures which include substantial improvements. While we will
be updating our analysis to include DCE analysis, this should not significantly affect relative results for
different types of income considered separately, but could affect results for total income by income group
due to varying compositions of income.
Another issue is that while sole proprietor (Schedule C) and farm income (Schedule F) are included
in individual income tax returns, business income from partnerships and S corporations is reported on
separate tax returns not generally included in NRP or TCMP studies. While these returns are accounted for
separately in tax gap estimates, unreported income at the business level is not attributed to specific
individuals. Thus, NRP and TCMP likely understate the underreported income of individuals with
partnership and S corporation income.
Several studies offer insights into this issue. Using a 1987 TCMP compliance study of smaller C
corporations with assets of $10 million or less, Joulfaian (2000) found that firms with executives that
underreported income on their individual tax returns were more likely to underreport income. About half
of the non-compliant firms had officers non-compliant on their individual returns compared to only 15
percent of the compliant firms. These non-compliant firms understated their net income by about 35
percent. Joulfaian concluded that the results indicate a preference for evasion by these executives.
Preliminary results in Johns (2009) found that S corporations underreported income by $50 billion in 2003
and $56 billion in 2004 (not accounting for income not detected). He also found that the income
misreporting rates of small S corporations with one or two shareholders (26 percent and 29 percent in the
two years) were similar to those of sole proprietors (27 percent in additional underreported income at the
business level), at least as a sensitivity test.
A statement in Cooper et al. (2016) that 20% of partnership income was earned by partners that
they were not able to classify by type has been interpreted as implying substantial underreporting of
partnership income. While there may be substantial underreported partnership income and fraudulent K-1s
9

intended to evade income taxes, a footnote clarifies that the information return did not report the type of
entity, i.e., an individual, estate or other business. Thus, this result does not help in quantifying actual tax
evasion.
Using IRS corporate audit data, Hanlon et al (2007) found that private corporations have higher
proposed deficiency rates than public companies (17.1 and 12.5 percent respectively), perhaps reflecting
greater aggressiveness since they don’t face financial market pressure to report high earnings.
Noncompliance rates may also change over time with the introduction of additional information
returns. Some studies have found that information reporting introduced in the 1980s increased reporting of
interest, dividends and other income. More recently, Slemrod, et al. (2017) examined the effects of new
information return 1099-K providing new information for the IRS about credit card sales. They found that
many small sole proprietorship businesses increased their reported sales and additional businesses began
reporting their activity, but some businesses increased their expense deductions thereby offsetting some
portion of the increased sales.
Noncompliance due to unreported income from offshore accounts is also a concern. As explained
in Johanneson, et al. (2020), the U.S. began a series of actions in 2008 to improve tax compliance by
taxpayers with offshore accounts, especially in tax havens. Johanneson, et al. (2020) found that these
efforts resulted in at least $100 billion in additional offshore accounts being reported (about 10 percent of
offshore accounts) and estimated that $2 to $4 billion additional capital income was reported on tax
returns. Other analysis by Guyton et al. (2020) found that the NRP program found only 7 percent of the
taxpayers that began reporting and paying tax on their offshore accounts by 2012. Preliminary DCE
corrected estimates in that study suggest that new filers under the voluntary programs and new “quiet
filers” may account for at least 10 percent of previously evaded taxes.
It is also important to consider aspects of NRP and TCMP data that can overstate underreporting.
For example, some taxpayers report income on the wrong line. For example, pension income or Schedule
C income may be reported as wages. Since the income shows up on another line, total income may not
change. Tax liability would not generally be affected in some cases of putting income on the wrong line.
But tax liability may be affected if self-employment tax is owed on Schedule C income. In other cases,
taxpayers are found to have reported income that should have been reported in a different tax year. In
1988, for example, high-income taxpayers had an incentive to report income in 1988 rather than 1987 so
as to benefit from the lower tax rate. In this situation, the auditors require an amending the return for the
year where the income should have been reported as well as correcting the current year return. In neither
case was there any net underreporting in the long run, but there may appear to be under- or overreported
income in the audit year. In this paper, we have adjusted for line changes to the extent these could be
identified, but have not been able to account for reporting in the wrong year.
V. CONCLUSIONS
This paper provides new information on the underreporting of income on individual tax returns
discovered in the IRS comprehensive audit studies for tax years 1988, 2001 and 2006 through 2013. It
focuses on the amounts and types of underreported income by type of income and income classes based on
reported income.
10

Our results show that returns with negative total incomes and with business losses have the highest
rates of underreporting and the highest ratios of unreported to reported income. Among those with positive
total incomes, the percentage of returns with unreported income tends to increase at higher levels of
reported income, but the ratio of unreported to reported income generally declines at higher incomes. Our
results also illustrate the considerable variation in the extent of underreporting among taxpayers. The
majority of returns have no discovered underreported income, and most of the rest are found to have
underreported by less than 20 percent. However, small percentages of returns are found to have substantial
underreporting. In some cases, taxpayers reported less than 5 or 10 percent of the correct amount.
When returns are ranked by audit-corrected rather than reported income, the ratio of unreported to
corrected income increases rather than declines. This is primarily the result of the re-ranking of returns
which results from relatively small numbers of returns that reported only modest incomes while their
audit-corrected income would put them in higher income groups.
Underreporting is lower for wages, interest and dividends, retirement income and other income
subject to substantial income reporting to the IRS. Underreporting is much higher for income not subject
to information reporting, primarily sole proprietorships, pass-through business income, rental and farm
income. Underreporting is found to be especially frequent and large among returns reporting business
losses.
The results of this paper should help researchers and others using tax data to better understand the
role of underreported income and potentially to improve their income estimates. The intent of the authors
is to make additional tables and summary information available on the IRS TaxStats website. The results
may also be of interest to policymakers and others considering tax reform.

ACKNOWLEDGEMENTS
The authors wish to thank Edith Brashares, Drew Johns, Jeff Larrimore, Joel Slemrod, and David Splinter
for helpful discussions, comments and suggestions.
Conflict of Interest Disclosure
The authors have no financial arrangements that might give rise to conflicts of interest with respect to the
research reported in this paper.
REFERENCES
Auten, Gerald, David Splinter, and Susan Nelson, 2016. “Reactions of High-Income Taxpayers to major
Tax Legislation.” National Tax Journal 69 (4): 935–964.
Bishop, John A., John P. Formby, and Peter Lambert, 2000. “Redistribution through the Income Tax: The
Vertical and Horizontal Effects of Noncompliance and Tax Evasion.” Public Finance Review 28 (4), 335–
350
Bureau of Economic Analysis. 2019. Concepts and Methods of the U.S. National
Income and Product Accounts: Chapter 11: Nonfarm Proprietors Income.
https://www.bea.gov/resources/methodologies/nipa-handbook
https://www.bea.gov/system/files/2019-05/Chapter-11.pdf
11

Christian, Charles W., 1994. “Voluntary Compliance with the Individual Income Tax: Results from the
1988 TCMP Study.” IRS Research Bulletin (1993/1994), 35–42.
DeBacker, Jason, Bradley Heim, Anh Tran, and Alexander Yuskavage. “Tax Noncompliance and
Measures of income Inequality,” Tax Notes Federal 166(7), 1103-1118.
Feinstein, Jonathan S., 1990. “Detection Controlled Estimation.” Journal of Law and Economics 33 (1),
233-276.
Feinstein, Jonathan S., 1991. “An Econometric Analysis of Income Tax Evasion and Its Detection.” Rand
Journal of Economics 22 (1), 14–35.
Feinstein, Jonathan S., 2004. “Statistical Analysis of Compliance Using the NRP Data: Detection
Controlled Models: Slides.” Presentation at the IRS Research Conference, June 2, Washington, DC.
http://www.irs.gov/pub/irs-soi/1-2feinst.pdf
Guyton, John, Patrick Langetieg, Daniel Reck, Max Risch and Gabriel Zucman. 2020. “Tax Evasion at the
Top of the Income Distribution: Theory and Evidence.” NBER working paper no. 28542.
Hanlon, Michelle, Lillian Mills, and Joel Slemrod. 2007. in Taxing Corporate Income in the 21st Century
Alan Auerbach, James Hines and Joel Slemrod. Cambridge University Press.
Internal Revenue Service, Federal Tax Compliance Research: Individual Income Tax Gap Estimates for
1985, 1988, and 1992. Publication 1415 (Rev. 4-96). Washington, DC: 1996.
Johns, Drew, 2009. “Preliminary Results of the 2003/2004 National Research Program S Corporation
Underreporting Study” Presentation at the 2009 IRS Research Conference, July 8, 2009.
Johnston, David Cay. 2008. “Trust, But Verify” Tax Notes 120 (August 4): 485-488.
http://www.taxhistory.org/www/features.nsf/Articles/6C8346A9DB201A588525749E0010A5F1?OpenDocument

Johannesen, Niels, Patrick Langetieg, Daniel Reck, Max Risch, and Joel Slemrod. 2020. "Taxing Hidden
Wealth: The Consequences of US Enforcement Initiatives on Evasive Foreign Accounts." American
Economic Journal: Economic Policy. 12 (3), 312-46.
Joulfaian, David. 2000. “Corporate Income Tax Evasion and Managerial Preferences’” Review of
Economics and Statistics 82(4), 698-701.
Plumley, Alan, 2005. “Preliminary Update of the Tax Year 2001 Individual Income Tax Underreporting
Gap Estimates.” Paper presented at the IRS Research Conference, Washington, DC.
http://www.irs.gov/pub/irs-soi/05plumley.pdf
Slemrod, Joel, 2007. “Cheating Ourselves: The Economics of Tax Evasion.” Journal of Economic
Perspectives 21(1), 25–48.
U.S. Department of the Treasury. Internal Revenue Service. Report to Congress on the Current State of
Knowledge about Federal Tax Noncompliance. Washington, D.C., February, 2000.

12

Table 1
Net Discovered Unreported Income, 1988-2013

Type of Income

Average Annual Total
Income

Percent Share of
Unreported Income

Percent Increase
Due to Audit

Total Income
347,300
100.0%
3.9%
Sole proprietorships
161,072
46.4%
54.2%
Rent and royalty
31,226
9.0%
94.4%
Partnerships and S corps.
26,318
7.6%
5.7%
Other income: Negative
26,653
7.7%
29.0%
Other Income: Positive
11,255
3.2%
10.6%
Net capital gains
23,886
6.9%
5.1%
Retirement income
16,846
4.9%
2.3%
Net farm income
11,424
3.3%
120.1%
Wages
10,511
3.0%
0.2%
Ordinary gains: Form 4797
5,565
1.6%
73.8%
Taxable Social Security
7,825
2.3%
4.0%
Interest and dividends
7,264
2.1%
2.1%
Unemployment comp.
4,073
1.2%
5.9%
Taxable tax refunds
2,438
0.7%
8.5%
Other Schedule E
866
0.2%
17.6%
Alimony Income
76
0.02%
0.6%
Notes: Dollar amounts are in millions of dollars and are the average annual amounts from the 1988 TCMP and the
2001 and 2006 through 2013 NRP studies Total income is the sum of income as reported on Form 1040, before
certain items are deducted in computing adjusted gross income. Total income does not include non-taxable Social
Security benefits, non-taxable unemployment compensation in 2009, tax-exempt interest or non-taxable retirement
distributions reported on the 1040 (almost all such distributions reflect pension or IRA rollovers). Most income
items are defined as reported on Form 1040. Rent and royalty, partnership and S corporation incomes are from
Schedule E. Sole proprietor income is reported on Schedule C and farm income is that reported on Schedule F.
Ordinary gain is from the sale of certain business assets reported on Form 4797. Taxable tax refunds are an
adjustment for state and local tax refunds previously deducted as an itemized deduction.

Table 2
IRS Compliance and Exam Programs

Math Error
Corrections

Fiscal Year
Number of Returns
FY2008
3,239,152
FY2018
2,299,222
FY2019
2,184,366
Recommended Additional Tax
FY2008
n/a
FY2018
n/a
FY2019
n/a

Automated
Underreporter
Program

Correspondence
Exams

3,530,000
3,012,000
1,968,731

1,081,152
722,772
547,111

310,429
169,415
133,432

6,396
5,339
6,656

6,518
4,594
3,325

5,945
4,457
3,573

Field Exams

Notes: Dollar amounts in millions. The dollar amounts of recommended additional tax have not been
reported by the IRS. Source: IRS Data Books for 2008, 2018 and 2019.

13

Table 3
Extent of Information Reporting by Income Class
Income
Substantial Information Reporting (%)
Quantile
1988
2001
2006-07
2008-09
2010-11
2012-13
Negative
11.7
17.7
16.7
15.8
15.7
11.2
0 - 20
91.1
87.0
84.4
82.4
77.8
80.4
20 - 40
85.3
83.0
82.7
83.3
82.5
81.1
40 - 60
88.0
87.4
87.0
87.3
86.6
84.4
60 - 80
90.8
87.4
85.8
87.9
84.9
83.5
80 - 90
90.5
86.0
85.1
85.2
83.6
82.5
90 - 95
89.1
84.2
79.8
84.7
80.7
82.0
95 - 99
79.7
76.0
72.6
77.6
76.6
73.4
99 - 99.5
68.8
66.3
56.9
68.6
66.4
64.3
Top 0.5%
50.8
48.4
41.4
44.1
46.5
41.7
Total
81.6
79.5
75.5
79.4
78.3
76.3
Income
Some Information Reporting (%)
Quantile
1988
2001
2006-07
2008-09
2010-11
2012-13
Negative
9.2
23.7
21.0
32.0
22.4
7.8
0 - 20
4.7
7.3
8.8
9.8
12.1
9.9
20 - 40
10.6
12.0
13.0
11.4
10.7
11.7
40 - 60
8.6
9.7
10.5
9.8
9.9
12.4
60 - 80
5.9
9.9
11.7
10.3
12.9
13.7
80 - 90
6.2
10.8
12.1
12.2
13.8
14.5
90 - 95
7.1
11.6
15.6
11.7
15.6
13.9
95 - 99
11.6
16.1
20.4
15.9
16.9
19.8
99 - 99.5
18.9
22.8
32.9
22.3
23.5
27.6
Top 0.5%
41.9
46.1
53.6
47.1
45.6
51.7
Total
12.1
16.6
20.8
16.9
18.2
20.8
Income
Little or No Information Reporting (%)
Quantile
1988
2001
2006-07
2008-09
2010-11
2012-13
Negative
79.1
58.6
62.3
52.2
61.9
81.0
0 - 20
4.2
5.8
6.8
7.7
10.1
9.7
20 - 40
4.1
5.0
4.3
5.3
6.8
7.2
40 - 60
3.3
2.9
2.6
2.9
3.5
3.1
60 - 80
3.3
2.7
2.5
1.8
2.3
2.7
80 - 90
3.2
3.2
2.8
2.6
2.6
3.0
90 - 95
3.8
4.3
4.6
3.6
3.6
4.1
95 - 99
8.7
7.9
7.0
6.6
6.5
6.8
99 - 99.5
12.2
10.9
10.2
9.1
10.1
8.1
Top 0.5%
7.4
5.5
5.0
8.9
8.0
6.5
Total
6.3
3.9
3.7
3.6
3.5
2.8
Notes: Income groups are based on centile groups of total income. Returns with negative income are part of the
bottom 20 percent. Substantial reporting includes wages, dividends, interest, Social Security, unemployment
compensation, and state tax refunds. Some reporting includes capital gains, pension and IRA distributions,
partnership and S corporation income, alimony, other Schedule E. Little or no reporting includes sole proprietorship,
rent and royalty, farm, ordinary gain and other income. Shares of negative income group are based on absolute
values due to mix of positive and negative values.

14

Figure 1A
Returns with Unreported Total Income by Alternative Income Rankings
70%

Percent of Returns with Unreported Income
by Income Quantile
60%
50%
40%
30%

By Reported Income
20%

By Corrected Income
10%

By Positive Income
0%

Notes: See notes after Figure 1C

Figure 1B
Unreported Income as Percent of Reported Income by Income Class
40%
35%

Unreported as Percent of Reported Income
by Income Quantile

30%
By Reported Income

25%

By Corrected Income

20%

By Positive Income

15%
10%
5%
0%

15

Figure 1C
Shares of Unreported Total Income by Alternative Income Measures
25%

Percent Share
By Reported Income
By Corrected Income

20%

By Positive Income

15%

10%

5%

0%

Figure 1D
Average Net Unreported Income Discovered in TCMP and NRP Audits, 1988-2013
100,000

Average Net Unreported Income at 2013 Levels

By Reported Income
80,000

By Audited Income
By Positive Income

60,000

40,000

20,000

-

Notes: Figures are based on the averages of the 1988 TCMP file, and the 2001 and 2006 through 2013 NRP files and
converted to 2013 levels using per capita personal income.. Black lines show the results when returns are ranked by
reported total income. Grey lines show the results when returns are ranked by corrected total income. Dashed lines show
the results when returns are ranked by total positive income. Returns with negative total incomes are a subset of the
bottom quintile, the rest of which is in the group labeled 0-20. Average dollar values in Figure 1D are for tax returns with a
change in reported income.
16

Figure 2A
Percent of Returns with Underreporting of Total Income by Year, 1988-2013

Percent of Returns with Underreported Income
80%
1988

2001

2006/2007

2008/2009

2010/2011

2012/2013

70%
60%
50%
40%
30%
20%
10%
0%

Figure 2B
Net Underreported Total Income as Percent of Reported Total Income
55%
Unreported Income as Percent of Reported Income
50%
45%
40%

1988

2001

2006/2007

2008/2009

2010/2011

2012/2013

35%
30%
25%
20%
15%
10%
5%
0%

Notes: See notes following Figures 1D and 2D.

17

Figure 2C.
Variation of Ratio of Unreported to Reported Total Income

500%
50th, 75th 90th and 95th Centiles

400%

300%

200%

100%

0%
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 9599
50%
75%
90%
95%
See notes following 2D.

Figure 2D

Percent Shares of Net Underreported Total Income
Percent of Net Underreported Income
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

<0

1988

2001

0-20

20-40

2006-7
40-60

2008-9

60-80

80-90

2010-11 2012-13
90-99

Top 1%

Notes: Total income is the sum of taxable income items on Form 104, before deducting various adjustments to
obtain AGI. Total income does not include tax-exempt interest or non-taxable Social Security benefits and therefore
understates the income of low income retirees who are generally age 62 and over.

18

Figure 3
3A. Percent of Returns with Underreporting of Business Income

80%
70%
60%
50%
40%
30%
By reported income

20%
By audited income

10%

0%

See notes following 3D.
3B. Ratio of Unreported to Reported Business Income
Unreported Income as Percent of Reported Income
800%
700%
600%

1988

2001

2006/2007

2008/2009

2010/2011

2012/2013

500%
400%
300%
200%
100%
0%

See notes following 3D.

19

Figure 3C
Variation in Ratio of Underreported to Reported Business Income, 2006-2013
600%
5th, 50th, 75th 90th
550%
and 95th Centiles
500%
p5

p50

400%

p75

p90

350%

p95

Axis Title

450%

300%
250%
200%
150%

100%
50%
0%
-50%

<035 40 45 50 55 60 65 70 75 80 85 90 95 99
Notes: See notes following 3D.

3D: Distribution of Unreported Business Income Detected

Share of Underreported Business Income
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1988
Negative

2001
0-20

2006/20072008/20092010/20112012/2013

20-40 40-60 60-80 80-90 90-99 Top 1%

Notes: Business income includes all ordinary income on Schedules C, E and F, including from sole proprietorships,
partnerships and S corporations, rent and farm rent, estates and trusts, and farms. Returns are ranked by reported
income. Returns with negative total incomes are a subset of the bottom quintile. For 1988, the rest of which is in the
group labeled 0-20. For 2001 to 2013, more than 20 percent of returns have negative business income. The 20-40
group includes the rest of the lowest two quintiles.

20

Appendix
The tables in this appendix provide an approach for researchers to add unreported income to data that does
not include such income, including IRS tax data. Based on the TCMP and NRP data, the approach
involves selecting returns to be assigned varying amounts of unreported income and then multiplying the
reported incomes by appropriate multipliers to obtain estimated audit-corrected income.
Using the 1988 tables as an example, the steps for doing this are:
1. Rank observations by reported income and find the income group in the table. The income groups are
based on income centiles. Observations with negative total incomes are divided into two groups: those
with losses less than $50,000 and those with $50,000 or more losses in $2013. Returns with negative
$10,000 income would be in row 2
2. Select observations in each income group for each ratio class in proportion to the percentages in the
appropriate row using a uniform random number function. For example, in the 20-40 centile group, 2.94%
would be in the 0.5 ratio group and 75.84% would be in the 1 ratio group.
3. Multiply the absolute value of the reported income by the average ratio in the average ratio group (sign
of the ratio in each cell accounts for whether the reported and corrected incomes have the same or different
sign). For example, the reported income of an observation in the 40-60 income centile group and assigned
to the 1.2 ratio group would be multiplied by 1.30. The largest ratio group 1 is for observations with little
or no unreported income so their multiplier is 1. Group 1.01 is observations unreported income up to 10%
of reported income. Groups 1.1, 1.2, 1.5 have unreported income of at least 10, 20 and 50 percent.
Ratio group 0.5 works differently for observations with positive and negative incomes. For returns with
positive incomes, the ratio is less than one because these returns have overreported their incomes and their
income is actually reduced in the audit. For returns with negative incomes, the 0.5 ratio group applies to
cases where the audit reduces the amount of their losses. In 1988, 56.28% of returns with negative incomes
of at least $50,000 in $2013 are in this group. The ratio of -0.670 means auditors disallowed 33% of the
losses. Multiplying the absolute value by -.670 generates the correct audit-corrected income with smaller
negative amounts ($67,000=.670*abs(-100,000) loss if the original amount was $100,000 loss). This also
works when the discovered unreported income results in positive audit-corrected incomes. For example, an
observation with total income of negative $100,000 in ratio class 2 would have audit-corrected income of
positive $243,600(=2.436*abs(-100,000)).

21

Tables for generating estimates of audit-corrected income starting from reported total income These
table are based on the distributions of audit corrections by reported total income groups in the TCMP and
NRP studies. The negative reported total income groups are up to $49,999 in losses and $50,000 and over
in losses in $2013 based on the CPI-RS series.

rank
<-$50k
< $0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

1988
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
6.94
56.28 19.42
4.87
1.83
3.37
2.95
3.60
0.36
7.19
19.30 25.99
1.27
1.36
3.11
4.03 16.01 13.17
3.30 77.89
7.41
2.32
2.70
1.98
2.34
1.21
2.94 75.84 11.61
3.12
3.50
1.58
1.19
0.18
3.33 76.27 12.92
3.06
2.71
1.06
0.52
0.09
4.04 74.49 15.99
2.50
2.00
0.70
0.20
0.03
4.68 74.10 17.02
2.22
1.39
0.38
0.18
0.03
4.72 73.99 17.11
2.12
1.42
0.36
0.25
0.02
5.56 68.06 21.58
2.52
1.79
0.34
0.13
0.00
7.20 59.85 26.88
2.91
2.59
0.35
0.22 .
6.24 65.28 24.24
2.23
1.24
0.59
0.16
0.03
0.00
3.85 75.04 13.23
2.65
2.49
1.15
0.96
0.36
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
-1.375 -0.730 0.999 1.043 1.151 1.319 1.723 2.436 6.633
-2.303 -0.501 1.000 1.053 1.138 1.351 1.772 2.770 5.556
0.778 1.000 1.035 1.146 1.344 1.684 2.691 5.359
0.847 1.000 1.033 1.148 1.323 1.682 2.639 5.397
0.935 1.000 1.032 1.140 1.307 1.697 2.561 5.386
0.951 1.000 1.032 1.143 1.317 1.702 2.438 4.774
0.942 1.000 1.031 1.137 1.319 1.667 2.555 5.014
0.963 1.000 1.030 1.136 1.300 1.704 2.420 5.970
0.965 1.000 1.029 1.138 1.301 1.618 2.576 4.744
0.963 1.000 1.029 1.136 1.304 1.694 2.465 .
0.948 1.000 1.027 1.136 1.307 1.685 2.294 5.632
0.313
0.890 1.000 1.032 1.143 1.322 1.689 2.652 5.390
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
0.100
0.014 0.000 0.008 0.010 0.015 0.040 0.149 0.629
0.399
0.021 0.000 0.007 0.006 0.012 0.017 0.046 0.090
0.015 0.000 0.002 0.002 0.005 0.008 0.025 0.061
0.013 0.000 0.001 0.002 0.004 0.007 0.028 0.107
0.004 0.000 0.001 0.001 0.003 0.007 0.027 0.161
0.003 0.000 0.001 0.001 0.003 0.008 0.039 0.196
0.005 0.000 0.001 0.001 0.004 0.014 0.078 0.121
0.003 0.000 0.001 0.002 0.007 0.019 0.059 0.177
0.004 0.000 0.001 0.002 0.005 0.014 0.093 0.201
0.006 0.000 0.001 0.003 0.011 0.039 0.123 .
0.008 0.000 0.001 0.003 0.011 0.032 0.065 .
0.429
0.003 0.000 0.000 0.001 0.001 0.003 0.014 0.042

22

8
0.38
8.55
0.72

0.19
8
9.959
15.767
15.562

15.452
8
2.189
1.179
0.817

0.621

rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

2001
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
5.37
41.37 30.89
3.52
2.95
7.89
2.92
4.24
0.53
3.87
20.52 33.50
3.35
2.47
2.07
5.67
9.91 10.27
2.49 73.13
7.64
2.85
4.39
3.12
3.84
1.32
2.56 73.07 11.58
2.86
5.14
2.35
1.80
0.50
2.91 73.47 13.87
3.67
3.43
1.49
1.00
0.12
3.73 73.29 15.70
3.12
2.77
0.91
0.44
0.02
3.93 75.13 16.21
2.41
1.74
0.38
0.15
0.05
4.12 74.50 17.00
2.36
1.44
0.40
0.16
0.02
4.99 69.58 20.72
2.11
1.83
0.51
0.22
0.02
5.09 69.83 20.82
2.22
1.56
0.37
0.07
0.04
5.02 74.34 17.20
1.79
1.32
0.24
0.07
0.00
0.05
3.37 73.02 13.25
2.96
3.46
1.66
1.47
0.45
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
-1.136 -0.670 1.000 1.057 1.159 1.346 1.702 2.823 5.117
-2.258 -0.613 1.000 1.035 1.139 1.292 1.657 2.656 5.560
0.662 1.000 1.038 1.150 1.332 1.718 2.678 5.626
0.814 1.000 1.039 1.147 1.329 1.685 2.583 5.535
0.908 1.000 1.036 1.144 1.322 1.697 2.512 4.956
0.937 1.000 1.034 1.138 1.305 1.673 2.569 4.965
0.956 1.000 1.029 1.138 1.301 1.683 2.452 5.492
0.951 1.000 1.029 1.142 1.311 1.647 2.464 6.026
0.932 1.000 1.032 1.139 1.299 1.718 2.548 4.540
0.952 1.000 1.028 1.138 1.322 1.772 2.373 4.104
0.955 1.000 1.024 1.143 1.281 1.676 2.478
0.049
0.860 1.000 1.034 1.144 1.322 1.697 2.621 5.552
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
0.098
0.022 0.000 0.010 0.006 0.019 0.026 0.155 0.675
0.453
0.022 0.000 0.007 0.006 0.013 0.022 0.048 0.121
0.027 0.000 0.002 0.002 0.005 0.009 0.023 0.063
0.012 0.000 0.001 0.001 0.003 0.005 0.019 0.067
0.009 0.000 0.001 0.001 0.003 0.006 0.025 0.091
0.004 0.000 0.001 0.001 0.003 0.006 0.034 0.166
0.004 0.000 0.001 0.002 0.005 0.014 0.070 0.412
0.008 0.000 0.001 0.002 0.008 0.025 0.073 0.457
0.009 0.000 0.001 0.002 0.007 0.022 0.120 0.192
0.011 0.000 0.001 0.004 0.016 0.106 0.226 0.057
0.008 0.000 0.001 0.005 0.018 0.046
0.429
0.004 0.000 0.000 0.001 0.001 0.003 0.011 0.039

23

8
8.37
1.16

0.31
8
19.908
18.194

18.142
8
1.856
1.062

0.800

rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

2006/2007
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
3.90
42.40 28.71
4.23
1.27
2.30 11.58
5.35
1.14
21.29 23.45
1.33
1.36
4.87 11.21 10.20
3.55 67.75
8.86
3.05
5.20
3.67
3.70
2.55 69.92 12.76
3.50
4.88
2.85
2.67
3.23 73.34 12.76
3.50
4.31
1.53
1.04
3.47 71.21 17.00
3.44
3.15
1.04
0.59
4.28 74.04 16.28
2.35
2.07
0.69
0.27
4.20 71.33 19.42
2.48
2.14
0.32
0.07
5.31 67.87 20.52
2.86
2.68
0.61
0.14
6.50 65.83 22.94
2.05
2.14
0.44
0.10
3.94 71.41 20.27
2.53
1.16
0.37
0.28
0.04
3.66 70.62 14.12
3.18
3.86
1.90
1.57
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
-1.191 -0.630 1.000 1.056 1.140 1.350 1.700 2.933
-2.868 -0.605 1.000 1.060 1.144 1.361 1.697 2.862
0.652 1.000 1.037 1.146 1.314 1.745 2.709
0.798 1.000 1.039 1.147 1.330 1.687 2.677
0.874 1.000 1.035 1.147 1.330 1.688 2.694
0.925 1.000 1.034 1.145 1.312 1.684 2.549
0.947 1.000 1.030 1.138 1.301 1.638 2.425
0.959 1.000 1.027 1.148 1.274 1.711 2.233
0.906 1.000 1.028 1.147 1.277 1.673 2.453
0.954 1.000 1.030 1.135 1.248 1.752 2.057
0.933 1.000 1.027 1.138 1.346 1.689 2.233
-4.133
0.842 1.000 1.034 1.146 1.319 1.703 2.683
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
0.107
0.038 0.000 0.013 0.006 0.031 0.022 0.123
0.889
0.033 0.000 0.003 0.009 0.025 0.023 0.072
0.034 0.000 0.002 0.002 0.005 0.011 0.035
0.021 0.000 0.001 0.002 0.005 0.009 0.035
0.012 0.000 0.001 0.002 0.004 0.010 0.044
0.009 0.000 0.001 0.001 0.004 0.011 0.051
0.007 0.000 0.001 0.002 0.007 0.019 0.077
0.006 0.000 0.001 0.003 0.008 0.036 0.072
0.014 0.000 0.001 0.003 0.008 0.023 0.133
0.011 0.000 0.002 0.006 0.012 0.035 0.055
0.014 0.000 0.001 0.005 0.022 0.059 0.231
4.176
0.006 0.000 0.000 0.001 0.002 0.005 0.018

24

4
0.13
12.98
2.04
0.57
0.25
0.07
0.02
0.04
0.01
0.00
0.00
0.59
4
7.994
6.036
5.451
5.106
4.807
4.971
5.733
4.358
4.823

8
12.16
2.11

0.48
8
18.924
22.031

5.399

20.356

4

8

0.161
0.088
0.140
0.176
0.297
0.543
0.298
0.452

2.355
2.472

0.064

1.659

rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

2008/2009
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
5.14
45.79 17.29
8.83
1.06 10.02
2.76
8.58
0.52
5.48
23.17 22.77
2.71
0.63
6.10
7.11 12.16 10.20
3.93 68.37
9.07
2.96
4.54
3.70
3.68
2.02
3.39 70.78 11.44
3.79
4.82
3.10
1.94
0.59
3.67 71.29 14.58
3.21
3.91
2.04
1.08
0.18
4.00 71.40 16.21
3.70
3.09
1.16
0.34
0.08
3.37 72.29 18.51
2.95
2.15
0.48
0.24
0.00
4.65 73.75 17.06
2.49
1.44
0.34
0.26
0.01
3.77 76.67 15.18
2.27
1.48
0.42
0.18
0.02
4.11 70.11 20.79
3.88
0.77
0.25
0.09
0.00
3.95 75.05 18.42
1.46
0.41
0.59
0.12
0.00
0.09
4.00 70.62 13.73
3.25
3.64
2.10
1.52
0.63
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
-1.090 -0.715 1.000 1.053 1.134 1.386 1.832 2.270 5.150
-2.884 -0.626 1.000 1.061 1.136 1.396 1.752 3.024 6.209
0.566 1.000 1.037 1.143 1.340 1.727 2.666 5.489
0.706 1.000 1.036 1.148 1.319 1.704 2.684 5.194
0.889 1.000 1.035 1.146 1.332 1.692 2.620 4.837
0.904 1.000 1.032 1.145 1.310 1.704 2.547 5.145
0.936 1.000 1.032 1.139 1.298 1.681 2.609
0.954 1.000 1.030 1.148 1.294 1.643 2.489 4.738
0.947 1.000 1.027 1.137 1.280 1.649 2.702 6.928
0.951 1.000 1.029 1.132 1.263 1.584 2.065
0.930 1.000 1.021 1.148 1.302 1.770 2.718
0.766
0.796 1.000 1.033 1.145 1.324 1.709 2.675 5.484
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
0.045
0.030 0.000 0.008 0.001 0.022 0.065 0.088 0.567
0.487
0.027 0.000 0.009 0.006 0.015 0.020 0.078 0.173
0.029 0.000 0.002 0.002 0.005 0.010 0.034 0.087
0.027 0.000 0.001 0.002 0.005 0.010 0.042 0.149
0.014 0.000 0.001 0.002 0.004 0.010 0.054 0.176
0.012 0.000 0.001 0.002 0.005 0.012 0.071 0.289
0.008 0.000 0.001 0.002 0.006 0.020 0.117
0.007 0.000 0.001 0.004 0.011 0.026 0.150 0.365
0.009 0.000 0.001 0.002 0.009 0.028 0.123 0.013
0.018 0.000 0.002 0.004 0.023
0.071
0.016 0.000 0.001 0.007 0.026 0.033 0.488
0.522
0.008 0.000 0.000 0.001 0.002 0.005 0.021 0.065

25

8
9.67
1.57

0.41
8
31.207
23.427

24.074
8
8.559
2.506

2.561

rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

2010/2011
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
4.06
37.01 34.09
3.07
3.50 11.42
1.90
4.15
0.61
6.98
20.09 29.11
2.80
2.31
5.50
6.28 10.46
9.26
5.12 66.40
8.62
3.29
5.62
3.43
3.73
1.78
4.70 70.54 10.57
3.34
5.07
2.97
2.22
0.50
4.18 72.52 11.80
3.40
4.48
2.03
1.28
0.19
3.59 70.95 17.15
3.38
3.45
0.93
0.53
0.01
3.75 74.39 16.42
2.48
2.15
0.63
0.17
0.01
3.38 75.20 15.47
3.27
2.12
0.43
0.12
0.01
4.58 72.80 18.19
2.73
1.32
0.25
0.13
0.00
4.84 74.74 17.74
1.72
0.46
0.40
0.09
0.00
3.79 77.73 15.40
2.02
0.82
0.18
0.07
0.00
0.12
4.47 70.63 12.95
3.21
4.10
1.97
1.61
0.52
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
-1.207 -0.770 1.000 1.078 1.174 1.357 1.667 2.918 4.639
-1.666 -0.594 1.000 1.029 1.116 1.362 1.863 2.850 6.242
0.560 1.000 1.039 1.145 1.338 1.716 2.743 5.628
0.514 1.000 1.038 1.145 1.322 1.677 2.753 5.294
0.763 1.000 1.039 1.145 1.328 1.700 2.548 4.906
0.940 1.000 1.032 1.141 1.314 1.701 2.591 5.158
0.942 1.000 1.031 1.138 1.316 1.705 2.463 5.172
0.964 1.000 1.034 1.152 1.306 1.636 2.586 4.848
0.954 1.000 1.028 1.134 1.314 1.688 2.660 4.169
0.931 1.000 1.027 1.136 1.363 1.683 2.034
0.952 1.000 1.028 1.132 1.313 1.661 3.082
0.103
0.725 1.000 1.035 1.143 1.326 1.702 2.707 5.603
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
0.104
0.026 0.000 0.010 0.008 0.019 0.042 0.192 0.149
0.379
0.033 0.000 0.008 0.012 0.025 0.024 0.083 0.171
0.029 0.000 0.002 0.002 0.005 0.011 0.031 0.101
0.028 0.000 0.001 0.002 0.005 0.009 0.042 0.137
0.025 0.000 0.001 0.002 0.005 0.010 0.035 0.184
0.006 0.000 0.001 0.001 0.004 0.011 0.053 0.287
0.009 0.000 0.001 0.002 0.007 0.018 0.075 0.486
0.007 0.000 0.001 0.003 0.008 0.024 0.132
0.006 0.000 0.001 0.003 0.011 0.021 0.114
0.022 0.000 0.002 0.008 0.020 0.065 0.004
0.009 0.000 0.001 0.004 0.014 0.064 0.083
0.267
0.009 0.000 0.000 0.001 0.002 0.005 0.018 0.072

26

8
7.23
1.89

0.44
8
24.082
17.410

17.834
8
2.720
0.928

0.831

rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All
rank
<-50
<0
0-20
20-40
40-60
60-80
80-90
90-95
95-99
99-99.5
Top 0.5
All

2012/2013
Percent of Returns by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
4.82
32.08 44.03
1.96
0.42
9.28
5.10
1.92
0.34
5.89
19.17 27.31
3.34
0.04
3.12
8.35 14.45
8.20
0.31
4.42 66.76
9.77
3.08
3.95
3.48
4.62
2.05
3.94 69.70 11.08
3.44
4.63
3.89
2.65
0.55
2.64 72.28 13.86
3.60
4.16
1.98
1.26
0.17
3.09 73.09 14.96
3.45
3.61
1.11
0.60
0.03
4.10 73.62 16.43
3.27
1.86
0.56
0.15
0.01
3.24 73.42 18.37
2.74
1.62
0.46
0.12
0.03
3.59 72.59 19.10
2.79
1.48
0.36
0.05
0.02
4.35 72.80 19.60
2.05
0.57
0.58
0.06
0.00
3.72 77.70 15.85
1.34
1.07
0.10
0.22
0.00
0.13
3.77 70.69 13.39
3.27
3.59
2.21
1.92
0.61
Average Ratio of Corrected to Reported Income by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
-1.127 -0.828 1.000 1.059 1.151 1.312 1.679 2.615 5.281
-1.576 -0.561 1.000 1.053 1.145 1.366 1.760 2.987 5.405
-1.442
0.490 1.000 1.036 1.144 1.333 1.742 2.673 5.339
0.610 1.000 1.039 1.145 1.319 1.718 2.589 5.136
0.799 1.000 1.032 1.142 1.319 1.706 2.593 5.025
0.924 1.000 1.034 1.144 1.305 1.704 2.492 5.388
0.961 1.000 1.032 1.141 1.321 1.719 2.619 6.068
0.955 1.000 1.027 1.140 1.301 1.692 2.607 5.498
0.959 1.000 1.029 1.140 1.310 1.643 2.457 5.419
0.964 1.000 1.027 1.142 1.323 1.639 2.601
0.935 1.000 1.025 1.139 1.288 1.822 3.232
-0.221
0.735 1.000 1.034 1.143 1.319 1.722 2.647 5.296
Standard Error for Ratio by Ratio Class
-0.5
0.5
1
1.01
1.1
1.2
1.5
2
4
0.058
0.017 0.000 0.005 0.022 0.019 0.041 0.142 0.529
0.346
0.033 0.000 0.007
0.015 0.025 0.061 0.151
0.709
0.032 0.000 0.002 0.003 0.007 0.012 0.031 0.085
0.029 0.000 0.001 0.002 0.005 0.009 0.029 0.110
0.023 0.000 0.001 0.002 0.004 0.008 0.036 0.168
0.010 0.000 0.001 0.001 0.004 0.009 0.035 0.289
0.005 0.000 0.001 0.002 0.005 0.015 0.085 0.868
0.007 0.000 0.001 0.002 0.008 0.021 0.097 0.209
0.006 0.000 0.001 0.002 0.008 0.022 0.149 0.497
0.009 0.000 0.002 0.006 0.026 0.042 0.138
0.012 0.000 0.001 0.004 0.011 0.060 0.214
0.283
0.009 0.000 0.000 0.001 0.002 0.004 0.016 0.055

27

8
0.00
10.13
1.54

0.41
8
19.112
19.657

19.199
8
2.676
1.870

1.354

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A4466dad06705cb05. Public record. Not legal advice.