Internal Revenue Service:

Results of Nonfiler Strategy and Opportunities to Improve Future Efforts

GGD-96-72: Published: May 13, 1996. Publicly Released: May 13, 1996.

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GAO reviewed the results of the Internal Revenue Service's (IRS) Nonfiler Strategy and opportunities to improve any similar future efforts.

GAO found that: (1) IRS actions to achieve its Nonfiler Strategy's goals included deploying examination staff to work on nonfiler cases, increasing other IRS functions' emphasis on nonfiler activities, eliminating old cases from inventory, establishing cooperative relationships with states and the private sector, and implementing a refund hold program; (2) IRS believes that its Nonfiler Strategy was generally a success, since it reduced its nonfiler inventory, eliminated unproductive cases, increased the number of returns from and dollars assessed against individual nonfilers, and created closer working relationships with outside stakeholders and professional associations; (3) although IRS reduced its nonfiler inventory, there are not enough data to determine voluntary compliance improvement or the program's cost-effectiveness; (4) returns from business nonfilers and collection of delinquent taxes decreased during the two years the strategy was in effect; (5) IRS made measuring the strategy's success more difficult by failing to establish measurable goals; (6) at least 38 percent of nonfilers who eventually filed a return became recidivists in the following year; (7) future IRS nonfiler efforts could be improved by shortening the time before first notices and telephone contacts are made, using lower-grade staff to pursue nonfiler cases, and revising notices sent to recidivists to increase their urgency; and (8) IRS has reduced the time before sending first notices and developed special recidivist procedures, but it continues to send several notices before making telephone contact.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS agreed with this recommendation and said that it is assigning less nonfiler work to Examination employees and will ensure, in any future nonfiler projects and initiatives, that standard case assignment procedures are used.

    Recommendation: To enhance any future IRS efforts directed at nonfiling, the Commissioner of Internal Revenue should consider the feasibility and appropriateness of assigning more nonfiler work to lower graded professional staff, paraprofessionals, and administrative staff. In considering its options, IRS might want to solicit input from district managers and staff who worked on the Nonfiler Strategy.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: According to IRS' report recommendation followup system, the second notice normally sent nonfilers has been eliminated. This should result in earlier telephone contact.

    Recommendation: To enhance any future IRS efforts directed at nonfiling, the Commissioner of Internal Revenue should revise procedures to provide for more timely telephone contact with nonfilers in line with the reengineering team's recommendations. In that regard, IRS should consider whether the Early Intervention Project, which includes, among other things, earlier telephone contact with taxpayers whose taxes are delinquent, should be extended to nonfilers.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Not Implemented

    Comments: IRS' 60-day letter did not address this recommendation. However, IRS said in another forum that it would develop cost data for future nonfiler efforts as necessary for effective program administration and to the extent feasible and practicable. Since there is really nothing more IRS can do until it undertakes another nonfiler initiative and since there is no reason to believe that another nonfiler initiative will be undertaken any time soon, GAO is closing this recommendation as no longer applicable.

    Recommendation: To better assess the results of future nonfiler efforts, if any, and provide a better foundation for deciding about subsequent efforts, the Commissioner of Internal Revenue should develop comprehensive data on program costs.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Not Implemented

    Comments: IRS' 60-day letter did not address this recommendation. However, IRS said in another forum that it would develop measurable goals for future nonfiler efforts as necessary for effective program administration and to the extent feasible and practicable. Since there is really nothing more IRS can do until it undertakes another nonfiler initiative and since there is no reason to believe that another nonfiler initiative will be undertaken any time soon, GAO is closing this recommendation as no longer applicable.

    Recommendation: To better assess the results of future nonfiler efforts, if any, and provide a better foundation for deciding about subsequent efforts, the Commissioner of Internal Revenue should establish measurable goals.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: According to IRS, it has new codes in its Master File system that facilitate the identification of repeater cases, and it has revised its return delinquency notices to include a special paragraph for use in cases involving repeaters.

    Recommendation: To enhance any future IRS efforts directed at nonfiling, the Commissioner of Internal Revenue should, if IRS decides to send fewer notices to recidivists, determine whether the language of the remaining notices should be revised.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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