IRS Needs to Implement a Corporate Document Matching Program

T-GGD-91-40: Published: Jun 10, 1991. Publicly Released: Jun 10, 1991.

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GAO discussed the feasibility of the Internal Revenue Service (IRS) instituting a document matching program for investment-type income earned by corporations, focusing on: (1) the benefits and costs of such a program; (2) administrative issues; and (3) potential burdens on businesses that file information returns. GAO noted that: (1) IRS data showed that corporate compliance with the tax laws significantly declined; (2) in 1980, small corporations voluntarily reported 81 percent of taxes they owed, but in 1987 those corporations reported only 61 percent; (3) in 1990, IRS audited 2.6 percent of all corporations, which was substantially less than the 6.5 percent corporate audit coverage it had in 1980; (4) a business document matching program would be a cost-effective way to improve business compliance, and could generate about $1 billion in additional revenue at a cost of less than $70 million; (5) an expanded program that included more types of unreported corporate income could generate even more revenue; (6) such administrative issues as differences among companies in accounting for income and reporting information returns needed to be addressed; and (7) corporate taxpayers and payers submitting information returns would have to change their accounting records and information systems, if IRS implemented such a program.

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