Auditing and Financial Management:

Repetitive IRS Audits of Taxpayers Are Justified

GGD-77-74: Published: Nov 18, 1977. Publicly Released: Nov 18, 1977.

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The Internal Revenue Service (IRS) audits a relatively small number of individual taxpayers each year. Overall, taxpayers who have been audited repetitively by the IRS were audited because their returns fit the usual selection criteria. However, IRS should reduce the number of repetitively audited taxpayers.

All returns are selected for audit through the same system, and the system generally protects against selection abuse. Repetitive audits are like all audits in terms of recommended tax increases, indicating that taxpayers were not repeatedly selected unless tax adjustments were probable. About 60 percent of repetitive audits resulted from: high scores under the computer-generated audit selection program, unallowable items on the return, or selection by an auditor as a result of auditing another year's return.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendation for Executive Action

    Recommendation: The Commissioner of Internal Revenue should include repetitive audits in the planned study of factors contributing to voluntary taxpayer compliance with the tax laws. When classifying returns for audit potential, the Commissioner should discontinue the practice of not selecting returns because earlier audits did not change the tax amount, unless information about the previous issues is available to make a more informed audit/no-audit decision. He should make changes in the taxpayer contact procedure to prevent unnecessary repetitive audits and require a written explanation and supervisory approval before auditing a return originally obtained for information or references purposes.

    Agency Affected:

    Status: Closed

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

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