How the IRS runs the test
The 972CG classifies you as a large or small filer systemically. If you dispute it, the examiner pulls your income tax returns, takes line 1c net receipts (gross receipts reduced by returns and allowances, per IRC 448(c)(3)(C)) for the three most recent tax years, averages them, and applies the $5,000,000 test (IRM 4.19.25.7.1.14). If the result is $5,000,000 or less, the lead must contact headquarters before adjusting.
Affiliates count. A subsidiary with no separate income tax filing requirement is tested on "the aggregated gross receipts of both parent and subsidiary(ies), as member(s) of a controlled group within the meaning of IRC 1563(a)" (IRM 20.1.7.8.1(3) to (4)). The examiner looks for the 1120-14 filing requirement that marks a subsidiary and researches the parent and affiliates together. A small subsidiary of a large parent gets the large-filer maximums.
| Returns due in | Tier 1 max, large / small | Tier 2 max | Tier 3 max |
|---|---|---|---|
| 2027 | $698,500 / $244,500 | $2,095,500 / $698,500 | $4,191,500 / $1,397,000 |
| 2026 | $683,000 / $239,000 | $2,049,000 / $683,000 | $4,098,500 / $1,366,000 |
| 2025 | $664,500 / $232,500 | $1,993,500 / $664,500 | $3,987,000 / $1,329,000 |
Not in existence for all three years: the test uses the years you existed. A first-year filer is also a mitigating factor in its own right (IRM 4.19.25.8(8)).