Tax Administration:

Reducing Delays in the Pursuit of Tax Revenue on Closed Criminal Cases

GGD-89-41: Published: Mar 16, 1989. Publicly Released: Mar 16, 1989.

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In response to a congressional request, GAO evaluated the Internal Revenue Service's (IRS) General Enforcement Program (GEP), focusing on the: (1) amount of civil tax assessed and collected; and (2) IRS process for referring completed cases for civil action.

GAO reviewed selected GEP cases completed in fiscal year 1984, and found that IRS: (1) assessed about $204 million in penalties on 2,470 criminal cases, and was still auditing another 408 cases; (2) collected $89 million, was actively attempting to collect an additional $58 million, and determined that $57 million was uncollectible; (3) failed to timely refer cases with the potential for criminal prosecution; (4) failed to timely authorize tax assessment or collection when criminal actions were completed, and failed to timely notify the IRS Chief Counsel so that it could initiate civil actions; and (5) lacked internal controls to track cases that could be referred for civil action.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS revised its Criminal Investigation Management Information System to track the status of cases subsequent to closure of the criminal case. A manual transmittal dated May 2, 1990 provides for notification of Counsel and Exam as soon as the Grand Jury or administrative investigation is closed.

    Recommendation: To better protect the collection of tax revenues on completed criminal prosecution cases, the Commissioner of Internal Revenue should establish appropriate internal control mechanisms in the Criminal Investigation Division to better ensure prompt notification to the Office of the Chief Counsel about actions taken on criminal prosecution cases and about delays in the issuance of closing memoranda to authorize civil action on criminal prosecution cases.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: The Chief Counsel has established new criteria and additional guidance for its attorneys. The attorneys are required to authorize civil action within 5 days of the completion of all criminal action. The Counsel has also expanded its automatic closing procedures to these criminal cases to ensure their timely closure.

    Recommendation: To better protect the collection of tax revenues on completed criminal prosecution cases, the Chief Counsel, IRS, should establish controls to better ensure timely authorization of civil action by promptly issuing closing memoranda on completed criminal prosecution cases.

    Agency Affected: Department of the Treasury: Internal Revenue Service: Office of the Chief Counsel

 

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