Tax Administration: IRS Does Not Investigate Most High-Income Nonfilers
GGD-91-36
Published: Mar 13, 1991. Publicly Released: Mar 18, 1991.
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Highlights
Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) program for detecting and pursuing individuals with income over $100,000 who failed to file required tax returns.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should separately estimate net tax yields for high-income nonfiler cases in the formula for screening cases to be investigated by revenue officers. |
IRS had been revising the formula for high-income nonfiler cases.
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| Internal Revenue Service | The Commissioner of Internal Revenue should modify SFR to include high-income nonfiler cases that would otherwise escape IRS action. |
IRS changed its procedure so that all high-income nonfiler cases that are resolved after collection action will be referred to the Examination Division. A memorandum to all assistant regional commissioners (collection) was issued May 5, 1991.
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| Internal Revenue Service | The Commissioner of Internal Revenue should develop a system to ensure that delinquent returns from high-income nonfilers are checked for unreported income and overstated deductions. |
Memorandums issued in May and June 1991 contained instructions to refer all secured high-income nonfiler returns to Examination. A September 1991 manual supplement required Collection and Revenue offices to conduct a complete investigation following the procedures in IRM 5200. High-income nonfiler cases selected for field examination should be worked using the procedures in the Handbook.
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| Internal Revenue Service | To ensure that the Examination Division's limited resources are used efficiently, IRS should complete in-depth examinations only on those delinquent returns for which strong evidence of noncompliance was found during the check. |
High-income nonfiler cases selected for field examination should be worked using procedures in the Techniques Handbook for Indepth Examinations. Indirect methods should be used to determine other sources and subsequent year income. Where the taxpayer does not voluntarily comply with the examiners requests to produce books and records, a summons to testify and produce records should be considered.
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Collection proceduresDelinquent taxesFederal taxesInvestigations by federal agenciesLaw enforcementTax administrationTax evasionTax nonpaymentTax return auditsTaxes