Tax Administration:

Opportunities Exist for Improving IRS' Administration of Alien Taxpayer Programs

GGD-88-54: Published: Apr 11, 1988. Publicly Released: May 12, 1988.

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Pursuant to a congressional request, GAO studied the: (1) extent to which legal aliens complied with tax filing requirements; and (2) effectiveness of Internal Revenue Service (IRS) programs aimed at identifying and collecting legal aliens' income taxes.

GAO found that IRS: (1) lacked sufficient information to measure the extent to which legal aliens complied with requirements, or the effectiveness of its compliance efforts; (2) advised aliens of tax requirements, including the need to obtain a tax compliance certificate, through a publication it distributed to aliens as they entered the country; (3) did not monitor these requirements, but relied on aliens to voluntarily comply; (4) did not receive sufficient information from the Immigration and Naturalization Service (INS) concerning nonresident aliens; (5) did not administer its alien compliance programs according to its procedures; (6) has not designated specific district office personnel to coordinate compliance efforts; (7) used an unrevised and outdated withholding agent contact letter to obtain information regarding some aliens' income; and (8) declined to further investigate 59 GAO-identified cases of possible noncompliance, citing the potential costliness of further efforts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Because about 85 percent of H-1 visa holders are located in either IRS Los Angeles or Manhattan districts, IRS established local coordinators for those two districts. IRS plans to monitor the volume of H-1 leads on a continuing basis to determine whether coordinators will become necessary in other districts.

    Recommendation: The Commissioner of Internal Revenue should designate district office personnel responsible for coordinating nonresident alien compliance efforts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: INS and IRS have agreed to exchange additional information. INS is automating the process that produces the basic data that has been shared with IRS. INS will make programming changes to accommodate IRS needs when the automation effort is up and running. IRS has done all it can do at this point. Until the INS automation effort is completed, that action will not be fully responsive.

    Recommendation: The Commissioner of Internal Revenue should obtain from INS the kinds of information necessary to better meet IRS nonresident alien information needs. This might include the possibility of INS revising Form I-171C to include additional information that would be useful to IRS or sending Form I-129B to IRS.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS is providing every U.S. embassy and consulate with income tax forms and publications. Publication 513 "Tax Information For Visitors to the U.S." was shipped to embassies in February 1990. IRS also arranged with State to display a poster in the VISA section of all embassies and consulates.

    Recommendation: The Commissioner of Internal Revenue should arrange with the Department of State to have U.S. embassies distribute information on the potential tax obligations of aliens, including, where applicable, the need to obtain a tax compliance certificate.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: IRS completed some actions related to the recommendation. However, a management information system that has been designed to control alien leads from INS and to determine costs and benefits cannot be implemented until INS completes certain automation efforts. For that reason, IRS action is not fully responsive. GAO believes it is counterproductive to continue tracking this recommendation.

    Recommendation: The Commissioner of Internal Revenue should begin collecting the kinds of management information needed to assess the effectiveness of its alien compliance efforts. That information should include, but not necessarily be limited to, the: (1) number of tax compliance certificates issued and the amount of tax collected as a result of that process; (2) number of alien leads received from INS and the results obtained; (3) results that derive from final tour accountings; and (4) overall program costs and tax revenues associated with IRS administration of its alien compliance efforts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: The text of the withholding agent contact letter has been revised, as recommended.

    Recommendation: The Commissioner of Internal Revenue should review and revise, as appropriate, the text of the withholding agent contact letter to bring it into conformity with current IRS forms and information.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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