How the Internal Revenue Service Selects Individual Income Tax Returns for Audit

GGD-76-55: Published: Nov 5, 1976. Publicly Released: Nov 5, 1976.

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GAO reviewed the process used by the Internal Revenue Service (IRS) to select individual tax returns for audit.

GAO found that most tax returns are selected for audit by a computer or a person other than the examiners who will audit them, and procedures generally protect the taxpayer against abuse. At district offices, most returns are selected because they have good audit potential. About 70 percent of returns audited by district offices are selected by a two-stage system. Returns are first scored as to their audit potential by a computer using sophisticated mathematical formulas. The highest scored returns are then manually screened to determine if an audit is warranted, and, in most cases, what items of income and deductions should be examined. Examiners can sometimes request returns for audit without having to explain why they need them. Overpayers are less likely to have their returns audited than those who underpay. Not enough is known about why taxpayers do or do not comply with the tax laws.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: IRS should require its examiners, when requesting a return, to explain on the requisition why they need the return to facilitate review and further protect against abuse. IRS should evaluate the feasibility of devising a system to ensure that a representative number of returns involving overassessments are audited. Action should be taken to achieve uniformity among regions and districts in developing their work plans.

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