Tax Research:

IRS Has Made Progress but Major Challenges Remain

GGD-96-109: Published: Jun 5, 1996. Publicly Released: Jun 5, 1996.

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GAO reviewed the Internal Revenue Service's (IRS) tax compliance research program, focusing on: (1) the success IRS has had with its new research approach; and (2) IRS ability to implement lessons learned from its Compliance 2000 initiative.

GAO found that: (1) IRS implemented its new compliance research approach to address concerns over taxpayer noncompliance and the large gap between income taxes owed and taxes paid; (2) IRS attempted to address these concerns through Compliance 2000, but had limited success due to inadequate compliance data; (3) IRS could avoid these mistakes by establishing more support for its research, using objective compliance data, acquiring more specialized staff, developing an organizational infrastructure, and setting objective measurements; (4) IRS officials believe that this new research approach is more cost-effective, but they doubt that they will reach 90-percent compliance by 2001; (5) IRS officials are concerned that district offices will spend 85 percent of their resources on national compliance issues rather than on district-level issues; (6) IRS has made some progress in developing the Compliance Research Information System (CRIS), but it is unsure when it will become available; (7) IRS officials believe that more training is needed in specialized areas to achieve research objectives; and (8) IRS is in the process of developing tools that track and measure the success of its research projects.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Compliance Planning Councils have been formed in all IRS districts to oversee the district compliance programs and to provide the conduit to district compliance functions. Also, seven CSWGs have been formed to organize and manage the research effort. The CSWGs are composed of managers and analysts from National Office Research, the district research offices, and the regional offices. The Compliance Research organization issues an annual Research Plan, has established a Wide Area Network, and has implemented conferencing capability. Compliance Research installed CD-ROM equipment for computer-based training, which will feed results from research efforts into the annual Compliance Plan. This exchange will occur on an annual basis.

    Recommendation: The Commissioner of Internal Revenue should establish milestones and monitoring mechanisms for completing the infrastructure needed to organize and manage the research effort.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS approved a schedule for completing the Compliance Research Information System (CRIS), and a process to monitor and resolve problems as they are identified. For example, IRS approved the CRIS Business Case on June 14, 1996, which set the budget requirements along with the completion schedule for the project. However, budget cutbacks to the CRIS Project due to the year 2000 conversion, have delayed the development schedules for data models beyond the 1040 Filers Model. The CRIS Project established a steering committee to resolve problems in the development of the 1040 Model.

    Recommendation: The Commissioner of Internal Revenue should set a schedule for completing CRIS, monitor its progress, and take the necessary actions to resolve identified problems.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS has a team working to develop a replacement system for TCMP. IRS named its new compliance research effort the National Research Program (NRP). It is to produce compliance data useful for management and for targeting enforcement audits while minimizing taxpayer burden--a key criticism of TCMP. GAO reported that IRS has made substantial progress toward fully implementing NRP in its report, GAO-02-769, June 27, 2002. GAO is closing out this recommendation, believing that IRS has made sufficient progress with NRP, and that NRP will provide enough compliance data to form a baseline for much of IRS' research on tax compliance.

    Recommendation: The Commissioner of Internal Revenue should devise a method to better ensure that reliable compliance data will be available when needed for the research effort, given the indefinite postponement of the Taxpayer Compliance Measurement Program.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: Compliance Research established the Cooperative Strategy Working Groups (CSWG) to organize and manage the research process. The Research Planning CSWG establishes and monitors the research plan through the research planning process. The process and plan are used to identify all locations and time used for a research project. The Compliance Research Intranet is used to track the status of projects. Also, the Compliance Studies and Tests CSWG and the Market Segmentation and Profiling CSWG are responsible for monitoring and reviewing all research projects. The Compliance Research organization has also developed computer based training courses to satisfy training and staff-sharing needs. These courses have test components that measure the effectiveness of the training and training product, as well as pinpoint short-term training needs that still need to be addressed. The Informing and Educating CSWG is responsible for developing, monitoring, and improving training within the research community.

    Recommendation: The Commissioner of Internal Revenue should develop an approach for monitoring the effectiveness of mechanisms established to build support for the new approach as well as for the staff-sharing and training efforts that are under way and, if necessary, make modifications.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: IRS has developed ways to measure the success of its National Research Program (NRP)through various management reports and critical assessments at 3 year intervals. The first such review is scheduled for May 1, 2004. Although many decisions/transition issues need to be worked out, GAO's report (GAO-02-769) generally agreed with IRS's efforts to date. This recommendation is being closed because IRS has established at least some milestones and monitoring mechanisms for eventually developing the measures of success.

    Recommendation: The Commissioner of Internal Revenue should establish milestones and monitoring mechanisms for developing the measures needed for evaluating success.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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