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General government: Internal Revenue Service Enforcement Efforts (2012-44)

Enhancing the Internal Revenue Service enforcement and service capabilities can help reduce the gap between taxes owed and paid by collecting billions in tax revenue and facilitating voluntary compliance.

Year Identified: 2012
Area Number: 44
Area Type: Cost Savings & Revenue Enhancement

6 Total Action(s)

Action 1
Not Addressed

To help improve taxpayer compliance, Congress may wish to make owners of rental real estate subject to the same payment reporting requirements regardless of whether they engaged in a trade or business under current law.

Type
Congressional
Last Updated
August 31, 2021
Progress:

No legislative action had been taken as of June 2021 to make owners of rental real estate subject to the same payment reporting requirements, regardless of whether they engaged in a trade or business under current law, as GAO recommended in August 2008. Changing reporting requirements and holding taxpayers with rental real estate to the same filing requirements as taxpayers whose activities are considered a trade or business would provide clarity about who is required to file, which would improve tax compliance.

Implementing Entity:
Congress
Action 2
Not Addressed

To help improve taxpayer compliance, Congress may wish to require payers to report service payments to corporations, thereby reducing payers' burden to determine which payments require reporting.

Type
Congressional
Last Updated
August 31, 2021
Progress:

No legislative action had been taken as of June 2021 to require payers engaged in a trade or business to report on payments to corporations for services, thereby reducing these payers' burden to determine which payments require reporting, as GAO recommended in January 2009. Reporting of third-party information is a powerful compliance tool, and eliminating the reporting exemption for payments to corporations would be a cost-effective way to improve voluntary compliance.

Implementing Entity:
Congress
Action 3
Partially Addressed

To increase revenue, reduce costs, and promote voluntary compliance, the Internal Revenue Service (IRS) should track the examination results for abusive tax avoidance transactions (ATAT) versus non-ATAT issues separately and check whether taxpayers filed all required ATAT-related disclosure forms.

Type
Executive Branch
Last Updated
August 31, 2021
Progress:

IRS took steps to check whether taxpayers filed all required ATAT-related disclosure obligations. In February 2013, IRS implemented a new indicator and matching process to regularly review whether taxpayers are meeting their ATAT-related filing obligations. Additionally, IRS developed a procedure to evaluate the completeness of ATAT-related disclosure forms and to follow up on incomplete forms as necessary, and updated the Internal Revenue Manual to reflect these changes.

As of May 2021, IRS has made progress in tracking examination results by specific ATAT issues. IRS has stated that it could not fully track examination results for ATAT versus non-ATAT issues, as GAO recommended in May 2011. In March 2021, IRS provided a paper to explain that benefits from tracking detailed ATAT examination issues are not high enough given the changes that would necessary to its data systems and given the agency’s higher priorities and limited resources, particularly with pandemic-related priorities. In May 2021, IRS officials said the agency had recently created a suite of reports that afford IRS the ability to summarize data from its open and closed tax shelter inventory. In addition to general ATAT examination results, the results of tax shelter inventory, penalty determinations, and Promoter Investigations can be used to study trends and analyze results, GAO informed IRS that these actions could be considered as meeting the intent of these recommendation if IRS could provide examples of using these new data reports to better inform IRS management when making judgments about program effectiveness and resource allocation in considering ATAT and non-ATAT examinations.

Developing and implementing these new processes and procedures will provide IRS with additional information for determining whether the disclosures are made as required and are complete. GAO maintains that tracking examination results for ATAT versus non-ATAT issues would provide IRS management with data needed to make informed judgments about program effectiveness and resource allocations.

Implementing Entity:
Internal Revenue Service
Action 4
Addressed

To increase revenue, reduce costs, and promote voluntary compliance, the Internal Revenue Service (IRS) should collect and report more information on the whistleblower program and establish a process to follow up on claims that exceed review time targets.

Type
Executive Branch
Last Updated
November 19, 2014
Progress:

IRS has taken several steps to collect more information on the whistleblower program, as GAO recommended in August 2011, including updating the whistleblower claims tracking system, collecting more information from whistleblowers, and reporting more statistics about whistleblower claims and payments. In July and August of 2012, the IRS Whistleblower Office added several fields to its claims tracking system to collect additional information on whistleblower claims, such as how long claims remain in each review status and reasons why claims are rejected or suspended, and included this information in the Whistleblower Office 2013 Annual Report. IRS also released an updated form, Form 211: Application for Award for Original Information, for whistleblowers to use when submitting claims. The revised form requests additional information from whistleblowers, including a description of the relationship between the whistleblower and the targeted taxpayer. IRS has also adopted a 90-day review time target for whistleblower claims. Whistleblower Office officials stated that they follow up monthly via e-mail with the operating divisions on the most aged whistleblower claims, and that all aged claims must be explained quarterly on internal reports that are reviewed by the Deputy Commissioner for Services and Enforcement. These actions are positive steps in helping the Whistleblower Office more effectively leverage external resources to collect more tax revenue. Further, these actions should help IRS assess the effectiveness of the program and encourage more whistleblowers to submit claims.

Implementing Entity:
Internal Revenue Service
Action 5
Addressed

To increase revenue, reduce costs, and promote voluntary compliance, the Internal Revenue Service (IRS) should determine the costs and benefits of creating automated telephone applications and automate those where benefits exceed the costs.

Type
Executive Branch
Last Updated
November 15, 2015
Progress:

IRS has expanded some automated telephone and online applications to assist taxpayers, as GAO recommended in December 2011. In March 2013, IRS launched an automated telephone and online application that allows taxpayers to identify the status of their amended returns. It also developed an online application allowing taxpayers to locate Volunteer Income Tax Assistance sites but noted that it was cost prohibitive to provide a similar application over the telephone. Implementing automated telephone and online applications has provided taxpayers with additional options for accessing IRS's services.

Implementing Entity:
Internal Revenue Service
Action 6
Addressed

To increase revenue, reduce costs, and promote voluntary compliance, the Internal Revenue Service (IRS) should finalize a more comprehensive plan for online services, including an assessment of granting taxpayers the ability to update their account information online.

Type
Executive Branch
Last Updated
March 31, 2020
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
Progress:

As of December 2019, IRS has made meaningful progress in improving its online services strategy, as recommended in GAO's December 2011 and April 2013 reports. In April 2019, IRS published the IRS Integrated Modernization Business Plan (modernization plan). The modernization plan is intended to be a six-year roadmap to guide IRS's efforts and one of the plan's goals is to modernize the taxpayer experience. In the plan, IRS committed to developing new services, provided that IRS continues to receive the requested resources from Congress. These services include delivering taxpayer notices electronically, modernizing online installment agreements, and establishing multiple communication methods such as text chat and video chat assistance. A companion document to the modernization plan provides additional detail, including an estimated budget for fiscal years 2019 and 2020 for improving taxpayer services, timeframes for developing these capabilities, and anticipated benefits of the new services such as increasing the number of notices available electronically. GAO believes the modernization plan addresses the intent of the recommendations made in the 2011 report as it helps IRS ensure that it is maximizing the benefit to taxpayers and its investment in web services provided to taxpayers.

Implementing Entity:
Internal Revenue Service
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