Tax Administration:

Efforts to Prevent, Identify, and Collect Employment Tax Delinquencies

GGD-91-94: Published: Aug 28, 1991. Publicly Released: Aug 28, 1991.

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Pursuant to a congressional request, GAO reviewed Internal Revenue Service (IRS) efforts to prevent, identify, and collect employment tax delinquencies, focusing on whether problems exist in the overall IRS strategy for addressing employment tax delinquencies.

GAO found that: (1) IRS did not have a centralized effort for preventing, identifying, or collecting delinquent employment taxes; (2) IRS could not ensure that its resources were effectively allocated to address employment tax delinquencies, since its efforts were scattered throughout various functional areas with no central focus or assigned responsibility; (3) IRS could not effectively target its prevention programs, since it had not developed the information necessary to determine the employers most likely to be delinquent or the effectiveness of its employment tax delinquency efforts; (4) one of two IRS primary prevention programs, the Federal Tax Deposit Alert Program, was not targeted at those most likely to be delinquent, produced numerous unproductive alerts, and did not have any significant effect on promoting employment tax compliance; (5) limited staff resources prevented IRS from investigating many of the leads and cases brought to its attention; (6) the number of employment tax audits done by the IRS examination function fell from 109,000 in fiscal year (FY) 1979 to a low of about 24,000 in FY 1988 before rising to 42,000 in FY 1990; (7) most programs designed for collecting delinquent employment taxes were ineffective because they were generally untimely or used infrequently; and (8) IRS relied primarily on collection to ultimately resolve the delinquencies.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: To develop a comprehensive plan for employment tax matters, the Commissioner has designated an official to oversee the establishment of a multifunctional matrix management office (Office of Employment Tax Administration and Compliance) dealing with just employment tax delinquencies. In addition, to develop better data on employment tax delinquents, IRS, under its Compliance 2000 initiative, is undertaking a number of studies to achieve the intent of the recommendation. Compliance 2000 is IRS' ongoing strategy to improve taxpayer compliance. IRS is also developing information under its Compliance Research Information System to better characterize delinquent taxpayers. Because some of IRS' efforts are long-term, GAO is closing this recommendation.

    Recommendation: The Commissioner of Internal Revenue should develop a comprehensive plan to prevent, identify, and collect employment tax delinquencies. The plan should coordinate efforts among all IRS functions. The Commissioner should designate an official to oversee execution of the plan and the various programs involved. The plan should include development of the information necessary to: (1) define the characteristics of employers who are delinquent in paying employment taxes; and (2) measure the effectiveness of the IRS programs to prevent, identify, and collect employment tax delinquencies. The report contains a list of specific items which the plan should address.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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