Thomson Reuters Tax & Accounting News

Featuring content from Checkpoint

Back to Thomson Reuters Tax & Accounting News

Subscribe below to the Checkpoint Daily Newsstand Email Newsletter

Winter SOI shows strong growth in individual income

March 24, 2014

IRS has announced the availability of the Winter 2014 issue of the Statistics of Income Bulletin (SOA). It features preliminary data for individual income tax returns filed for 2012 tax year and also includes information on the sales of capital assets (for 2004 through 2007); split-interest trusts (2012 filing year); and nonprofit organizations (2010).

Background. The SOI Division produces the SOI Bulletin on a quarterly basis. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

The SOI Division also collects data on the sales of capital assets to identify trends in the capital gains and losses reported on individual tax returns. In ’99, SOI began a panel study of individual taxpayers to measure the trends in taxes and income, including capital gains and losses, at different points in time. SOI designed the panel sample to represent all ’99 tax year returns, including late returns.

Individual returns. For the 2012 tax year, taxpayers filed 144.9 million U.S. individual income tax returns (down 0.4% from the 145.6 filed for the 2011 tax year). Taxpayers reported $9 trillion in adjusted gross income (AGI)—a 9% increase from 2011. This was the largest year-to-year percentage increase in AGI since a 9.2% increase from ’96 to ’97. Taxable income increased 11.6% to $6.4 trillion.

A number of components contributed to the growth in AGI. Net capital gains showed the largest increase (up 60.4%), from $310.9 billion in 2011 to $498.7 billion in 2012. Included in this, capital gain distributions rose 30% from $13.6 billion to $17.6 billion. The largest component of AGI, salaries and wages, increased 4.8% from $6.17 trillion to $6.46 trillion. The second largest component of AGI, taxable pensions and annuities, increased 5.6% over the same period, from $590.4 billion in 2011 to $623.3 billion in 2012. Taxable Social Security benefits rose by 10.7% and taxable Individual Retirement Arrangement (IRA) distributions increased by 5.9%. In addition, ordinary dividends increased 39.8% to $237.0 billion.

Partnerships and S corporations reported a 28.6% increases in net income (less losses). Sole proprietorships (businesses or professions) reported a 6.5% increase.

Two major components of income decreased for the year: taxable interest declined 8.9% to $89.6 billion and taxable unemployment compensation decline 22.9% to $71.5 billion.

The SOI also indicated that total income tax increased 14.9% to $1.2 trillion. Total tax liability increased 14.5% to $1.2 trillion. Along with the rise in income and other taxes, the alternative minimum tax (AMT) rose 7.8% to $29.1 billion for 2012

Sales of capital assets. The SOI panel study of individual taxpayer trends in taxes and income showed the following increases from 2004 through 2007: net gains and losses increased 84.7% from $496.3 billion to $916.5 billion; and capital gains rose 69.2% from $654.3 billion to $1.1 trillion during the same period. Long-term gains made up the majority of these gains, increasing more than 70% from $576.5 billion to $989.4 billion. Short-term gains also increased significantly, rising 51.2% from $77.8 billion to $117.6 billion. For all 4 years of the study, taxpayers realized most combined short- and long-term net gains less losses from passthrough entities (partnerships, S corporations, and fiduciaries).

Split-interest trusts. Tax preparers filed 113,688 Forms 5227 (Split-Interest Trust Information Return) to report the financial activities of split-interest trusts to the IRS for the 2012 filing year, a 3.4% decline from 2011. Split-interest trusts reported 16,500 distributions of principal ($2.5 billion) and 15,580 distributions of income ($1,793.7 billion) for the year. Asset contributions rose to more than $5.2 billion, a 74% increase over the previous year. Charitable remainder trusts continued to be the most common split-interest trust, accounting for 93% of the returns filed.

Charitable organizations. Tax exempt public charities (i.e., Code Sec. 501(c)(3) organizations) filed almost 270,000 Forms 990 and 990-EZ and reported $2.9 trillion in assets or the 2010 tax year, an increase of 9% from the previous year. They reported $1.6 trillion in total revenue, nearly three-quarters ($1.2 trillion) of which came from program services. They also reported $1.5 trillion in expenses.

Tagged with →