Tax Administration:

IRS' Efforts to Establish a Business Information Returns Program

GGD-88-102: Published: Jul 22, 1988. Publicly Released: Aug 23, 1988.

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In response to a congressional request GAO discussed the Internal Revenue Service's (IRS) progress in implementing its Document Matching Program for business taxpayers.

GAO found that IRS: (1) developed a cross-reference file containing sole proprietors' social security numbers (SSN) and employer identification numbers (EIN); (2) plans to use the file to combine information returns sole proprietors file under EIN with those under SSN to match income reported on tax returns; (3) completed a pilot project which demonstrated information returns' usefulness in detecting partnership and corporate nonfilers; and (4) developed methodologies for determining the costs and benefits of a corporate document matching program. GAO belives that IRS should: (1) expand its cross-reference file to include more data on sole proprietors; (2) evaluate information from all delinquent returns obtained through nonfiler investigations of partnerships and corporations; (3) verify taxpayers' statements made during nonfiler investigations; (4) include the proper mix of personnel costs in computing the costs of a document matching program; and (5) include just the additional tax revenue that would result from using information returns to identify unreported income in calculating the benefits of the program.

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