Tax Administration:

IRS' Improved Estimates of Tax Examination Yield Need to Be Refined

GGD-90-119: Published: Sep 5, 1990. Publicly Released: Sep 7, 1990.

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Jennie S. Stathis
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Pursuant to a congressional request, GAO provided information on the Internal Revenue Service's (IRS): (1) methodology for estimating additional audit revenues obtained from hiring additional auditors; and (2) plans to track the results of the pending staffing increase.

GAO found that: (1) IRS used a revised methodology to compute the $1.1-billion estimate associated with the proposed fiscal year (FY) 1991 staffing increase; (2) IRS assumed that all the new staff would be working by the beginning of FY 1991 and that a revised and less costly training program would be in place at that time; (3) IRS assumed that the influx of new staff would allow experienced agents to work on higher-yield cases, thus further increasing audit revenues; (4) if Congress authorized the examination staffing increase, IRS planned to monitor its impact, but the reliability of that monitoring information would depend on the validity of the baseline from which IRS began tracking results; and (5) it could not assess the IRS baseline because IRS had not computed it yet.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Members from the IRS Examination and Research Division formed a team to address this issue. Gaps were found in the data needed to do the analysis and the project has been suspended. Although IRS staff say that there is still interest in doing the study, it seems clear that it no longer has much priority and that the data problems may be insurmountable.

    Recommendation: To further improve its methodology for estimating the revenue to be derived from an increase in examination staff, the Commissioner of Internal Revenue should develop empirical data to show whether the influx of new examination staff allows more experienced agents to work higher-yield cases and in what time frame.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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