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:

In July 2017, Internal Revenue Service (IRS) officials said they would take these steps that GAO recommended in April 2017. By January 2018, IRS had 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 the plan used to analyze variables in the NRP data. As of December 2018, the Small Business/Self Employed business unit was working on a plan to analyze the NRP data, which it intended to start by June 2019. Addressing this action should help IRS ensure it uses the data from the NRP examinations to better understand taxpayer compliance behavior and to improve operational employment tax examinations. 

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 begun taking actions in response to this April 2017 recommendation but has not completed those actions. In October 2018, the Tax Exempt and Governmental Entities business unit provided the 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. As of December 2018, the Small Business/Self Employed business unit intends to use the analysis of its portion of the NRP data to develop a plan for pursuing any employment tax noncompliance, as appropriate, by December 2019. Addressing this action should help IRS ensure it uses the data from the NRP examinations to better understand taxpayer compliance behavior and to improve operational employment tax examinations.

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 employment tax study to estimate the current state of the employment tax gap.

Progress:

In response to this April 2017 recommendation, Internal Revenue Service (IRS) officials said that after IRS analyzes the NRP data, it will use the results to update its estimate for the employment tax gap.  As of March 2019, IRS plans to complete the effort by June 2019.  Addressing this action should help IRS ensure it uses the data from the NRP examinations to better understand taxpayer compliance behavior and to improve operational employment tax examinations.

Implementing Entity:

Internal Revenue Service