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    Subject Term: "Earned income tax credit"

    4 publications with a total of 10 open recommendations including 1 priority recommendation
    Director: Beryl Davis
    Phone: (202) 512-2623

    2 open recommendations
    Recommendation: To help fulfill the IPERA and OMB requirements to submit proposals to Congress when agencies reach 3 or more consecutive years of noncompliance with IPERA criteria, the Secretary of Agriculture or a designee should submit a letter to Congress detailing proposals for reauthorization or statutory changes in response to 3 consecutive years of noncompliance as of fiscal year 2014 for its (1) Child and Adult Care Food Program; (2) School Breakfast Program; (3) National School Lunch Program; and (4) Special Supplemental Nutrition Program for Women, Infants, and Children. To the extent that reauthorization or statutory changes are not considered necessary to bring a program into compliance, the Secretary or designee should state so in the letter.

    Agency: Department of Agriculture
    Status: Open

    Comments: We provided a draft of this report to OMB, the IG offices of the 24 CFO Act agencies, and the CFO offices of those agencies with programs that were determined to be noncompliant with IPERA criteria for 3 consecutive years as of fiscal year 2014. In their e-mailed response, officials from the CFO office at USDA neither concurred nor disagreed with our recommendations. We will continue to monitor the status of this recommendation.
    Recommendation: To help fulfill the IPERA and OMB requirements to submit proposals to Congress when agencies reach 3 or more consecutive years of noncompliance with IPERA criteria, the Secretary of Defense or a designee should submit a letter to Congress detailing proposals for reauthorization or statutory changes in response to 3 consecutive years of noncompliance as of fiscal year 2014 for its Department of Defense Travel Pay program. To the extent that reauthorization or statutory changes are not considered necessary to bring the program into compliance, the Secretary or designee should state so in the letter.

    Agency: Department of Defense
    Status: Open

    Comments: We provided a draft of this report to OMB, the IG offices of the 24 CFO Act agencies, and the CFO offices of those agencies with programs that were determined to be noncompliant with IPERA criteria for 3 consecutive years as of fiscal year 2014. In their written comments, the offices of the DOD CFO and DOD IG concurred with our recommendations. The DOD CFO office noted that it does not consider reauthorization or statutory change necessary for its Travel Pay program, but will submit a letter to Congress containing planned actions for improvement by August 30, 2016. As of June 2, 2017, no updated information has been provided by the Department of Defense. We will continue to monitor the status of this recommendation.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    4 open recommendations
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to, building on current efforts, develop a comprehensive operational strategy that includes all the RTCs for which RCPPM is responsible. The strategy could include use of error rates and amounts, evaluation and guidance on the proper use of indicators like no-change and default rates, and guidance on how to weigh trade-offs between equity and return on investment in resource allocations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of February 2017, IRS is taking steps toward developing a comprehensive compliance strategy that includes the three refundable tax credits GAO reviewed, as well as the PTC. These steps include initial planning meetings with Lean Six Sigma consultants and refundable credit policy and program managers and soliciting volunteers for the teams needed to develop the strategy. GAO will continue to monitor the progress of this effort.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to assess whether the data received from the Department of Education's Postsecondary Education Participants System (PEPS) database (a) are sufficiently complete and accurate to reliably correct tax returns at filing and (b) provide additional information that could be used to identify returns for examination; if warranted by this research, IRS should use this information to seek legislative authority to correct tax returns at filing based on PEPS data.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In February 2016, Refundable Credits Policy and Program Management asked Wage & Investment Strategy & Solutions (WISS) to test the Department of Education's Postsecondary Education Participants System database (PEPS) to match and validate the EINS reported on Form 8863, Education Credits. According to IRS, preliminary assessment of the PEPS database indicates that it is not a sufficiently complete database to confirm AOTC eligibility during return processing or post processing. GAO reviewed the study results and submitted several follow-up questions to IRS in May 2017. GAO followed-up with IRS on the status of that information request in June 2017.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to take necessary steps to ensure the reliability of collections data and periodically review that data to (a) compute a collections rate for post-refund enforcement activities and (b) determine what additional analyses would provide useful information about compliance results and costs of post-refund audits and document-matching reviews.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS raised concerns about the cost of studying collections data for post-refund enforcement activities. GAO recognizes that gathering collections data has costs. However, a significant amount of enforcement activity is occurring after refunds have been paid, and use of these data could better inform resource allocation decisions and improve the overall efficiency of enforcement efforts.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to, as RCPPM begins efforts to track the number of erroneous returns claiming the ACTC or AOTC identified through pre-refund enforcement activities, such as screening filters and use of math error authority, it should develop and implement a plan to collect and analyze these data that includes such characteristics as identifying timing goals, resource requirements, and the appropriate methodologies for analyzing and applying the data to compliance issues.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of February 2017, IRS is taking steps toward developing a comprehensive compliance strategy that includes the three refundable tax credits GAO reviewed, as well as the PTC. These steps include initial planning meetings with Lean Six Sigma consultants and refundable credit policy and program managers and soliciting volunteers for the teams needed to develop the strategy. GAO will continue to monitor the progress of this effort.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: If Congress agrees that significant paid preparer errors exist, it should consider legislation granting IRS the authority to regulate paid tax preparers.

    Agency: Congress
    Status: Open

    Comments: In 2017, several bills were introduced in Congress that would authorize the Department of Treasury to regulate paid tax return preparers. As of September 2017, no action has been taken on any of the bills. GAO testified on October 1, 2015 on improper payments and the tax gap before Senate Finance and on December 10, 2015 on GAO recommendations before the Subcommittee on Regulatory Affairs and Federal Management, Committee on Homeland Security and Governmental Affairs, US Senate. Both hearings increased attention to GAO's matter to Congress that tax preparers be regulated. Paid preparer regulation may increase the accuracy of tax returns and potentially reduce the tax gap.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    3 open recommendations
    including 1 priority recommendation
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year. As part of this review, IRS should develop estimates of the marginal direct revenue and marginal direct cost within each enforcement program and each taxpayer group.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS agrees in principle to using ratios of direct revenue yield-to-cost to adjust its enforcement resource allocation, as GAO recommended in December 2012; however, IRS officials plan to wait until it has developed such ratios at the marginal level (e.g., for the last cases worked within specific categories of exams) before they make such adjustments. GAO maintains that IRS has a basis to adjust its allocation of enforcement resources each year and could improve resource allocation immediately (while it is still working to develop the marginal ratios) by using average yield-to-cost ratios for each category. IRS has developed a methodology for estimating marginal ratios for limited subsets of cases within their correspondence examination program. IRS officials are working to apply this methodology to other cases within that program; however, they expect this effort will be complex and time consuming and officials did not have a timeline for full implementation as of March 2017. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year. As part of this review, IRS should compile data on the amount of time that specific grades of examiners and downstream employees spend on specific categories of exams that can be identified in ERIS.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has developed a methodology to estimate for each closed correspondence audit the total cost to IRS to identify, assess, and collect whatever direct revenue is collected from that audit. These estimated take into account the actual time applied in Examination and Appeals, as well as the job series and grades of the Exam and Appeals employees who handled each return. Collections cost do not vary significantly across the population of correspondence audits, so an average cost factor is used for that portion of the costs. IRS anticipates that expanding this estimation effort to other enforcement programs, such as field examination will require a much larger effort. As of December 2015, officials did not yet have a timeline for full implementation. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year.As part of this review, IRS should explore the potential of estimating the marginal influence of enforcement activity on voluntary compliance, potentially taking advantage of new NRP data.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has not yet found a way to use NRP data or other data sources to estimate the indirect effects of audits. While they continue to explore alternative ways to estimate these effects, they expect to continue to account for these effects subjectively as they develop their enforcement resource allocation plans. As of December 2015, officials did not yet have a timeline for full implementation. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.