Information Returns:

Administration of Selected Filing Penalty Cases at Austin Service Center

GGD-90-99: Published: Sep 28, 1990. Publicly Released: Sep 28, 1990.

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GAO reviewed the Internal Revenue Service's (IRS) Austin Service Center's administration of information return filing penalty assessment and abatement cases to determine its compliance with the Internal Revenue Code (Code) and IRS assessment and abatement criteria.

GAO found that: (1) the Center erroneously assessed penalties in about half of the 68 reviewed cases of manually assessed penalties, with 26 cases having unwarranted penalties, and 10 cases having miscalculated penalties; (2) Center examiners demonstrated difficulties both in determining when to assess examiners and in appropriately applying abatement criteria; (3) Center examiners erroneously granted abatement in 67 of 221 reviewed cases; (4) supervisors reviewed and approved 45 of those 67 cases; (5) 51 of the cases warranted abatement, but not for the reasons examiners cited; and (6) examiners erroneously denied abatement in 15 of 74 reviewed cases. GAO believes that recent legislative changes to make the provisions of the penalty more consistent across all types of information returns will not rectify the identified assessment and abatement problems, since the causes of the problems were primarily examiners' and supervisors' failure to follow guidance and weak internal controls.

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