government icon, source: Eyewire

General Government: Employment Taxes (2018-18)

Analyzing and using results from the Internal Revenue Service's National Research Program employment tax study could help the agency to annually identify and pursue millions of dollars in additional revenue owed.

Action:

The Commissioner of Internal Revenue should develop and document plans to analyze the results in 2017 of the National Research Program employment tax study to identify the major issues of noncompliance.

Progress:

The Internal Revenue Service (IRS) has developed and documented plans to analyze the National Research Program (NRP) employment tax study, as GAO recommended in April 2017. In January 2018, IRS completed NRP data perfection activities and delivered the updated data to its data warehouse system. In April 2018, IRS provided a high-level data analysis plan to study the NRP employment tax data. This plan noted that IRS would be developing the analytical plan details such as by reviewing and comparing desired outcomes against NRP data elements to determine the necessary database queries needed and potential benefits. In October 2018, the Tax Exempt and Governmental Entities business unit provided a data analysis plan used to analyze variables of the NRP data. Lastly, as of December, the Small Business/Self Employed business unit provided documentation of analysis of NRP data it completed in March 2019. By taking these steps to address this action, IRS will better ensure it understands taxpayer compliance behavior, which will help improve operational employment tax examinations going forward.

Implementing Entity:

Internal Revenue Service

Action:

The Commissioner of Internal Revenue should develop and document plans for addressing the noncompliance identified in the Internal Revenue Service’s (IRS) analysis of the National Research Program employment tax results.

Progress:

IRS has developed and documented plans for addressing the noncompliance identified in its analysis of the National Research Program (NRP) employment tax results, as GAO recommended in April 2017. In October 2018, the Tax Exempt and Governmental Entities business unit provided a plan used for analyzing the variables in its portion of the NRP data as well as a list of the types of employment tax noncompliance that it plans to pursue. In addition, the Small Business/Self Employed business unit provided a plan on the types of employment tax noncompliance that it plans to pursue based on analysis of the NRP data it completed in December 2019. By addressing this action, IRS is better positioned to identify and address compliance problems on employment tax returns.

Implementing Entity:

Internal Revenue Service

Action:

The Commissioner of Internal Revenue should develop and document plans for assessing the results of the National Research Program (NRP) employment tax study to estimate the current state of the employment tax gap.

Progress:

In response to GAO’s April 2017 recommendation, Internal Revenue Service (IRS) officials said that after IRS analyzes the NRP data, it would use the results to update its estimate for the employment tax gap. In January 2020, IRS provided documentation that the tax gap estimates released in September 2019 incorporated the results from its NRP employment tax study for its employment tax gap estimate. By addressing this action, IRS can rely on tax gap estimates that incorporate current data to make decisions about allocating resources to operational employment tax examinations.

Implementing Entity:

Internal Revenue Service