IRS and SSA Can Improve the Verification and Recording of Data Provided by Self-Employed Taxpayers
GGD-85-21
Published: May 28, 1985. Publicly Released: May 28, 1985.
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Highlights
GAO reviewed processing of self-employment earnings information to determine whether the Internal Revenue Service (IRS) and the Social Security Administration (SSA) are properly processing such information and crediting it to taxpayers' accounts.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should expand the use of the error register to include those situations where the sum of farm and nonfarm earnings is less than the total earnings amount being recorded and correct any identified earnings and tax errors. |
Closed – Implemented
IRS corrected those SE schedules showing more earnings than the sum of farm and nonfarm earnings when the optional method was used. Action was completed on May 8, 1986.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should identify, review, and correct those SE schedules processed in 1983 with math problems, similar to action taken for 1981-processed SE schedules. |
Closed – Implemented
On May 8, 1986, IRS completed a recovery program for those SE schedules processed in 1983.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should modify existing returns processing procedures to: (1) record SE schedules whose wages alone equal maximum taxable earnings; and (2) verify wages on schedule SE for workers with maximum taxable earnings. |
Closed – Implemented
By mutual agreement, IRS sent SSA computer tapes with schedule SE information for reconciliation of SE records processed, including the number of records and amounts of money involved. Action was completed on May 8, 1986.
|
| Social Security Administration | The Commissioners of Internal Revenue and Social Security should work together to identify those self-employed individuals who did not receive proper credit for their earnings and correct their accounts. Specifically, SSA should identify for IRS, using SE schedules with maximum reportable earnings, those individuals whose earnings were not properly credited. IRS should help SSA identify specific individuals and their earnings. SSA should then correct the problem for those individuals, as well as any others similarly affected. |
Closed – Implemented
Under an agreement between IRS and SSA, in January 1986, SSA began receiving computer tapes from IRS enabling SSA to identify individuals who have not received proper credit for their earnings and to make necessary corrections.
|
| Internal Revenue Service | The Commissioners of Internal Revenue and Social Security should work together to identify those self-employed individuals who did not receive proper credit for their earnings and correct their accounts. Specifically, SSA should identify for IRS, using SE schedules with maximum reportable earnings, those individuals whose earnings were not properly credited. IRS should help SSA identify specific individuals and their earnings. SSA should then correct the problem for those individuals, as well as any others similarly affected. |
Closed – Implemented
Under an agreement between IRS and SSA, in January 1986, SSA began receiving computer tapes from IRS enabling it to identify individuals who have not received proper credit for their earnings and to make necessary corrections.
|
| Social Security Administration | The Commissioners of Internal Revenue and Social Security should work together to develop a systematic way of identifying and correcting tax and earnings overpayments for self-employed persons who erroneously elected the nonfarm optional method of determining their earnings either because they: (1) were not self-employed in 2 of the 3 previous years; or (2) exceeded the 5-year usage limit. |
Closed – Implemented
In January 1986, SSA began receiving IRS tapes to make necessary corrections to the accounts of the self-employed.
|
| Internal Revenue Service | The Commissioners of Internal Revenue and Social Security should work together to develop a systematic way of identifying and correcting tax and earnings overpayments for self-employed persons who erroneously elected the nonfarm optional method of determining their earnings either because they: (1) were not self-employed in 2 of the 3 previous years; or (2) exceeded the 5-year usage limit. |
Closed – Implemented
In January 1986, IRS began sending tapes to SSA to make necessary corrections to the accounts of self-employed individuals.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should identify and provide SSA, starting with the 1980 processing year, with self-employment records showing different SSN for the same person or self-employment earnings that were not previously provided. |
Closed – Implemented
The request for data services, requesting an abstract of the Returns Transaction File (RTF) for tax years 1979 through 1982, for use by SSA, was implemented on January 1, 1987.
|
| Social Security Administration | The Commissioner of Social Security should use the self-employed persons' records with different SSN obtained from IRS to correct earnings accounts credited erroneously and those not previously credited. |
Closed – Implemented
SSA processed self-employed persons' records for tax years through 1982 were obtained from IRS. IRS was not in a position to give SSA this data on a continuing basis. Contributing to this delay was the fact that IRS did not keep records of wrong SSN when inputting corrections. A joint IRS/SSA meeting was held and there was agreement that IRS can at least provide both correct and incorrect SSN.
|
| Social Security Administration | The Commissioner of Social Security should credit the social security accounts of those self-employed individuals whose records were never processed and ensure that the trust funds are provided the correct tax amount from their earnings. |
Closed – Implemented
All recoverable, previously unprocessed self-employment returns were posted by November 20, 1989.
|
| Social Security Administration | The Commissioner of Social Security should periodically conduct tests of the accuracy of self-employment earnings and identification data and work with IRS to resolve any problems that are identified. |
Closed – Implemented
Specifications for representative sampling of several different types of self-employment returns from 10 IRS service centers were completed on April 21, 1989. SSA sent specifications to IRS May 1989 and received sample cases in September 1989. Accuracy reviews will be conducted annually.
|
| Social Security Administration | The Commissioners of Internal Revenue and Social Security should work together to establish overall control of the number of self-employment records received for processing so that differences between the number processed by IRS and SSA can be reconciled. IRS should provide SSA with overall control totals of all SE schedules processed; SSA should then account for all records received and processed. |
Closed – Implemented
SSA agreed to receive IRS tapes showing all of the necessary information from SE schedules and to reconcile the number of self-employment records processed by IRS and SSA.
|
| Internal Revenue Service | The Commissioners of Internal Revenue and Social Security should work together to establish overall control of the number of self-employment records received for processing so that differences between the number processed by IRS and SSA can be reconciled. IRS should provide SSA with overall control totals of all SE schedules processed; SSA should then account for all records received and processed. |
Closed – Implemented
IRS and SSA agreed to have IRS send SSA computer tapes containing all the necessary information from SE schedules for SSA to reconcile the number of self-employment records processed between the two agencies.
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Topics
Accounting errorsFederal social security programsInteragency relationsSelf-employedSocial security taxesTax administrationTaxesData errorsSocial security numbersTax returns