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This is a rather specific question, but I'm wondering if others who have used IRS data have encountered this oddity. I'm looking at the IRS Statistics of Income for individuals here, specifically the most recent Publication 1304 Table 1.2.

This table has the data broken down by the level of adjusted gross income. The first such group is listed as "No adjusted gross income". Under the "All returns" section, the column for "Total income tax" shows 177,444; since it says money amounts are in thousands, this would be $177,444,000. But the "number of returns" column shows only 6231 returns. This comes out to an average of more than $28,000 in tax paid per return, which is far more than the corresponding numbers for other income levels until you get to $100k+ AGI.

Why does this IRS data seem to show that people with zero income were paying an average of $28,000 in taxes? Am I missing something about how to interpret these values?

  • Below a certain threshold, people aren't required to file a return. So it's possible that it's not as simple as just dividing by number of returns. People who are under that amount might still file a return if they were subject to withholdings and would get money back. – Joe Feb 24 '16 at 14:30
  • @Joe: I wondered about that, but I don't think that alone explains this. For one thing, all the column headers refer to "returns" (not, e.g., "households"), so it seems to be only counting ones who actually submitted a return. Second, if it included those who got a refund, I would expect a negative (or small positive) value in the "total tax" column, reflecting a net payout. Third, the threshold for not owing tax is higher than $0, but there is a huge jump in average tax from the $0 category to the $0-$5000 category; if it were a matter of unfiled returns I'd expect these two to be similar. – BrenBarn Feb 24 '16 at 18:50
  • what do the people at irs.gov/uac/SOI-Tax-Stats--Contact-Statistics-of-Income say? – Anthony Damico Feb 24 '16 at 21:20
  • @AnthonyDamico: Thanks, I had been looking for such contact info but couldn't find it on the site. I sent them an email. We'll see if they reply. . . – BrenBarn Feb 28 '16 at 22:33
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I emailed the people at the IRS SOI. Here is their response:

The reason returns that have no AGI but show a high average tax amount is due almost entirely to the Alternative Minimum Tax. Returns with no AGI will not have income tax without a special income tax calculation, such as the AMT.

This unfortunately means that the AGI as listed does not have any reliable relationship to the tax amount paid, since you can't tell whether the tax that was paid was based on AGI via normal tax brackets, or involved AMT calculations that added back in some deductions.

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