Tax Administration:

Federal Agency Tax Compliance Problems Remain; Improvements Are Planned

GGD-92-29: Published: Feb 18, 1992. Publicly Released: Apr 8, 1992.

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Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS) federal agencies accounts receivable inventory, focusing on: (1) which federal agency accounts remained unresolved; and (2) the status of the Secretary of the Treasury's efforts to implement previous GAO recommendations addressing federal agency tax compliance problems.

GAO found that: (1) on June 22, 1991, the IRS accounts receivable inventory included $268.5 million in accounts receivable from federal agencies, compared to $185 million in February 1990, indicating that the tax payment and processing problems identified in a earlier review were still occurring; (2) the $268.5-million June 1991 IRS accounts receivable inventory did not truly reflect how much money federal agencies owed, but largely reflected overstatements in the IRS accounts receivable inventory caused by tax payment and processing errors; (3) receivables for 63 federal agency accounts declined from $34.5 million in August 1990 to about $2.4 million a year later; (4) Treasury checks for the payment of agency taxes continued to get lost, agencies continued to make mistakes in paying their taxes, and IRS mistakes in processing agency payments continued to result in erroneous receivables; (5) IRS, in conjunction with the Department of the Treasury's Financial Management Service (FMS) has plans under way to allow federal agencies to electronically file their quarterly employment tax returns using a specially tailored version for on-line payments; (6) IRS has taken indirect actions to enhance the clarity of IRS notices to agencies and inform them of account adjustments; (7) IRS plans to begin governmentwide training programs in October 1992; and (8) IRS is considering using the Federal Managers' Financial Integrity Act reviews as the vehicle for implementing methods for promoting greater accountability by top agency management for compliance with tax laws and regulations.

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