Tax Administration:

IRS' System Used in Prioritizing Taxpayer Delinquencies Can Be Improved

GGD-92-6: Published: Mar 26, 1992. Publicly Released: Mar 26, 1992.

Additional Materials:

Contact:

Lynda D. Willis
(202) 512-8633
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Pursuant to a congressional request, GAO examined the Internal Revenue Service's (IRS) evaluation of and planned revisions to its Resources and Workload Management System (RWMS) formulas for assigning scores to tax delinquencies to determine probable collections.

GAO found that IRS: (1) uses 30 formulas to compute RWMS scores, but the formulas are primarily based on the outcomes and characteristics of 1982 delinquencies; (2) plans to revise RWMS so that it can use more current information to make the relationship between scores and probable collections and probable amounts due more precise; (3) plans to create new formulas for generating substitute returns for nonfilers and employment tax delinquencies; (4) has developed a list of hundreds of variables to test in its revision efforts, but has not sought the experience of private industry in identifying potentially relevant variables for assessing collectibility; (5) emphasis on amounts due rather than on collection probability may not lead to collection maximization, since it may not be able to collect a significant amount of the taxes due; (6) does not assign RWMS scores to the prevention and identification components of revenue officers' workloads; (7) evaluations of RWMS formulas show that scores are generally related to actual collections or amounts due, but there is only limited analysis of the relationship between scores and collections or amounts due; and (8) used a sampling methodology to evaluate its formulas, but did not measure sampling error or confidence level and could not assess the validity or reliability of sample results.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS contacted a number of private industry collection agencies and obtained information on predictor variables. IRS also contracted with Price Waterhouse to test additional variables. IRS identified two potentially useful variables--ZIP codes and credit bureau information. IRS intends to add ZIP codes to its predictive formulas, but credit bureau information was determined to be too costly. This is a closed recommendation.

    Recommendation: The Commissioner of Internal Revenue should direct the Assistant Commissioner (Collection) to seek the experience of private industry in identifying variables and prioritization practices affecting collections that IRS should consider.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Not Implemented

    Comments: IRS has contracted with Price Waterhouse to develop and test the accuracy of scoring nonfilers on the basis of yield. Price Waterhouse's model for predicting the yield of business nonfilers was not any more accurate than IRS' model using the expected balance to be due as the basis for the score. However, Price Waterhouse's model for individual nonfilers was more accurate than IRS' model using the expected balance to be due as the basis for the score for the highest-yielding nonfilers in the top 20 percent of the cases. IRS was not satisfied with Price Waterhouse's results on the individual nonfilers and did its own analysis using different criteria. IRS' results using balance due as a score reflected a more accurate predictor of collection yield.

    Recommendation: The Commissioner of Internal Revenue should direct the Assistant Commissioner (Collection) to consider scoring nonfiler delinquencies on the basis of probable collections rather than expected amounts due.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Not Implemented

    Comments: GAO continues to view this recommendation as valid but it is a long-term goal that will take years to develop as part of IRS' implementation of its Tax Systems Modernization program.

    Recommendation: The Commissioner of Internal Revenue should direct the Assistant Commissioner (Collection) to consider expanding RWMS to cover the employment tax delinquency prevention and identification components of revenue officers' workloads.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Not Implemented

    Comments: GAO views this recommendation as a long-term goal that will take years to develop as IRS' Tax Systems Modernization program moves forward.

    Recommendation: The Commissioner of Internal Revenue should direct the Assistant Commissioner (Collection) to include RWMS scores on master file records and collection reports that track delinquency dispositions to provide the means for continual evaluations of formulas and avoid the limitations of evaluations based on sample results.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

Explore the full database of GAO's Open Recommendations »

Sep 13, 2016

Sep 6, 2016

Jul 29, 2016

Jul 7, 2016

Jun 27, 2016

Jun 23, 2016

Apr 19, 2016

Apr 13, 2016

Apr 7, 2016

Mar 28, 2016

Looking for more? Browse all our products here