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Internal Revenue Service's Efforts Against Illegal Tax Protesters

Published: Jun 10, 1981. Publicly Released: Jun 10, 1981.
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Highlights

An illegal tax protester is a person who advocates and/or participates in a scheme with broad exposure that results in the illegal underpayment of taxes. In the past few years, the illegal tax protest movement has grown significantly. It alone poses a threat to the Nation's voluntary compliance tax system. To determine the nature and extent of the illegal tax protest problem and to evaluate the effectiveness of the Internal Revenue Service's (IRS) efforts to deal with the problem, GAO reviewed the: (1) IRS procedures for identifying illegal tax protesters and processing and controlling cases that IRS placed in its illegal tax protester program, (2) IRS management information system as it pertained to illegal tax protesters, and (3) coordination between IRS and the Department of Justice's Tax Division. IRS has taken some important actions to counter the growing tax protest movement, including implementing a nationwide program to identify and investigate tax protesters. It is essential that IRS demonstrate to protesters and to the taxpaying public that it can and will aggressively pursue protest cases to a timely conclusion, thus assuring that these persons carry their tax responsibility in accordance with existing laws. Due to various limitations and weaknesses in the IRS detection system, its information on the extent of the illegal tax protest problem is understated. Illegal protester cases have not been handled as timely or effectively as might be expected of a priority effort. Other factors which reduce the IRS effectiveness in dealing with protesters include: (1) cases are not distinguished by their potential deterrent significance; (2) IRS is not structured to ensure that protester cases get adequate management attention and support; (3) IRS does not have an overall approach or strategy for dealing with protesters; and (4) the IRS management information system is not sufficient for monitoring protester cases and measuring program results. IRS needs to improve its ability to identify illegal tax protesters. It also needs to improve its efforts to bring protesters into compliance by investigating them in a more timely and effective manner. Additionally, IRS needs to develop an overall strategy and to provide for collateral information to target its resources better and to maximize their deterrent effect on the protester problem.

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