Tax Administration:

IRS' Efforts to Improve Corporate Compliance

GGD-92-81BR: Published: Apr 17, 1992. Publicly Released: Jun 8, 1992.

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GAO reviewed the Internal Revenue Service's (IRS) Coordinated Examination Program (CEP), focusing on: (1) trends in CEP examination results; (2) CEP audit coverage estimates; (3) a profile of CEP taxpayers; and (4) information on IRS efforts to address the drop in small corporate compliance.

GAO found that: (1) CEP-recommended taxes per direct examination hour remained fairly steady from fiscal years 1987 through 1990; (2) IRS estimates that taxpayers currently appeal about 90 percent of CEP-recommended taxes, and IRS assessed about 25 percent of appealed recommendations; (3) IRS does not audit every CEP return, but stated that it carefully reviews returns for revenue potential before deciding to exclude them from audit; (4) the majority of CEP corporations were in manufacturing, finance, insurance, or transportation industries and had average reported assets of $6.5 billion; (5) CEP corporations 1988 tax returns reported an average of $1.5 billion in total income and $179 million in taxable income; (6) decreased IRS audit coverage for small corporations could have caused the decline in small corporation tax compliance; and (7) IRS is conducting four studies to study the drop in small corporate tax compliance.

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