1949 - Internal Revenue Service

20
REPORT OF COMMISSIONER OF INTERNAL REVENUE
Preliminary review of income and excess profits tax returns.—Of the
returns filed during the year 1949, as shown in the preceding table,
3,989,011 consisted of returns of individuals and partnerships reporting
income of substantial amounts or involving complex transactions,'
taxable returns of fiduciaries, returns of withholding agents, corporation
income and excess profits tax returns, personal holding company
returns, and returns of exempt organizations.
During the year 1949 the Bureau revised the procedure with respect
to the preliminary review of individual returns included in the above
classification, so that such returns for taxable years beginning after
December 31, 1947, are now reviewed and classified by revenue agents
in the field offices, instead of the Washington office. The preliminary
review of returns , other than individual returns, continues in the
Income Tax Unit in Washington, as under the procedure prior to
revision.
Upon initial review of those returns forwarded to Washington
(including those on hand in Washington July 1, 1948, relating to
previous taxable years), 1,814,382 were closed and 603,119 were found
to require further consideration and investigation by the field offices
of the Income Tax Unit. A comparative analysis of the results of
this initial reviewing operation is as follows:
Corporation
Individual
Fiduciary
Total
Type of return
164, 646
I 426, 121
12,352
I Figures for the individual returns initially reviewed in the field offices after the change in procedure
above referred to, are not presently available. Accordingly the number of return constituting the work
load of the field offices for the coming year is somewhat greater than is indicated by the number of field
returns shown.
There was also inaugurated during the year 1949, a method whereby
representative samples of individual income tax returns, including
many which might not have been selected for field investigation under
previously existing classification procedure, are automatically selected
by the Statistical Division in Washington, for intensive investigation
as a "sample audit." The figures pertaining to field returns do not
include this random sample.
Investigation of tax returns by field offices .—The number of income and
excess profits tax returns investigated during the year 1949 was 614,323,
as compared with 595,729 for 1948. These figures include all returns
for which the examiners' reports have been submitted, whether or
not the cases have been finally released by reviewing officers.
Estate and gift tax returns investigated by the field offices during the
year numbered 18,624, as compared with 18,185 for 1948.
The total number of income and excess profits tax returns on which
action was completed by the field offices during the year was 2,097,122,
I The collectors retained for audit all returns on Form 1040-A, together with returns on Form 1040 which
show adjusted gross income of under $7,000 (provided total receipts from business or profession were not in
excess of 425,000). During the year 1949, the number of Forms 1040 filed equaled 33,600,363, of which
30,660,554 were retained for audit by collectors under this rule.
REPORT OF COMMISSIONER OF INTERNAL REVENUE 21
consisting of 2,023,706 income tax returns and 73,416 excess profits
tax returns. In addition, the field offices completed their work on
29,299 estate and gift tax returns. The results shown include returns
which required investigation as well as returns for which investigations
were deemed unnecessary. The following table shows the number of
returns on which action was completed during 1949, compared with
the number completed during the preceding year:
Number of tax returns on which action has been completed by field offices during
fiscal years 1948 and 1949
Type of return
Income tax:
Corporations, individuals, and fiduciaries:
No change
Deficiency adjustments
Overassessment adjustments
Total
Partnerships
Fiscal year
1948 1949
893,450
28A 914
121,139
1,298, 503
486, 006
1, 132,918
244, 295
116,719
1,533,923
489, 783
Total income tax returns 1,784,539 2,023, 706
Excess profits tax:
No change 73, 274 35, 147
Deficiency adjustments 36,012 24,808
Overassessment adjustments 15,932 13, 463
Total excess profits tax returns 125, 218 73, 416
Estate and gift tax:
No change 14,246 15,313
Deficiency adjustments 12, 463 12, 590
Overassessment adjustments 1, 255 1,396
Total estate and gift tax returns 27,963 29,299
Petitions to The Tax Court of the United States filed during 1949
involved 8,520 returns and proposed tax deficiencies of $170,382,276.
This compares with 7,394 returns and tax deficiencies of $164,127,620
for the fiscal year 1948. For a statement showing the number of
returns, amounts of proposed tax, and penalties in cases petitioned,
classified by tax years, see page 128.
Revenue results of investigation of income and excess profits tax returns.—
The amount of additional tax, interest, and penalty assessed by the
Income Tax Unit during 1949 reached an unprecedented total of
$1,408,523,728, representing an increase of 0.2 percent as compared
with 1948. The portion of this total applicable to income tax returns
is $846,842,861, and the portion applicable to excess profits tax returns
is $561,680,867. Excluding jeopardy and duplicate items, the amounts
for these two classes of taxes were $792,183,080 and $511,711,052,
respectively. In relation to the total technical personnel assigned
to the field offices, the amount of additional tax, interest, and penalty
assessed in 1949 (including the estate and gift tax deficiencies set forth
on page 31) represented an average of $220,065 for each agent, as
against $237,440 for 1948. An analysis of the additional income and
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