Additional IRS Actions Needed To Make Sure That Individuals Pay the Correct Social Security Tax

GGD-78-70: Published: Aug 15, 1978. Publicly Released: Sep 15, 1978.

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The focus of the Internal Revenue Service (IRS) audits is on the proper reporting and payment of income taxes rather than on the accurate reporting of and payment of social security taxes. There is a need to recognize that any problem affecting social security taxes will grow in importance as these taxes increase in the coming years.

A net underpayment of about $32 million to the Social Security Tax Fund resulted from: the number and quality of IRS audits of social security taxes paid by taxpayers who indicated they had self-employment incomes; problems that the IRS and taxpayers have in determining whether miscellaneous earned income is subject to social security tax and, if so, what kind; and the adequacy of IRS programs to ensure proper reporting and payment of social security taxes.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The IRS should: revise its procedures to require classifiers to look at the self-employment tax issue when identifying areas for audit; require quality review staffs to identify and report on all errors so that error patterns and trends are identified and made available for management consideration of program quality; implement on a test basis a service center audit program to identify obvious social security tax errors on returns with attached schedule SE'm to all service centers if it proves to be cost effective; revise tax auditor and examiner course material to provide more training in social security tax problems; expand the self-employment tax program to include returns reporting "other income" subject to Federal Insurance Contributions Act social security tax; and specify the factors to be included in the service center quality review program audit reports and require the quality review staffs to send reports on their review efforts to appropriate management officials.

    Agency Affected:

 

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