Tax Administration: Changes Are Needed to Improve Federal Agency Tax Compliance
GGD-91-45
Published: Apr 16, 1991. Publicly Released: Apr 16, 1991.
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Highlights
GAO reviewed the Internal Revenue Service's (IRS) accounts receivable from federal agencies for employment taxes to determine the: (1) extent and causes of delinquent tax payments; (2) options for improving the processing of federal agency employment tax payments; and (3) options for improving federal agencies' compliance with tax laws and regulations.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | The Department of the Treasury, in close coordination with IRS and the Financial Management Service (FMS), should undertake a governmentwide program to improve federal agency tax processing. Such a program should include streamlining agency tax payment processing through electronic interagency funds transfer and requiring that the funds transfer information be provided to IRS. |
IRS and FMS implemented FEDTAX on July 1, 1992. FEDTAX allows agencies to pay their taxes and file their quarterly employment tax returns electronically. 55 payroll offices including a DOD finance center and 2 overseas payroll offices are participants. FEDTAX will become a part of the government's Electronic Federal Tax Payment System (EFTPS). EFTPS will require that most tax payments be electronically deposited. EFTPS is scheduled to be fully implemented in early 1995.
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| Department of the Treasury | The Department of the Treasury, in close coordination with IRS and FMS, should undertake a governmentwide program to improve federal agency tax processing. Such a program should include enhancing the clarity of IRS communications with agencies in such ways as developing notices tailored to the unique tax situation of federal agencies and informing agencies of adjustments to their accounts. |
IRS will be able to communicate to agencies via computer screens to inform them when a tax delinquency exists. Agencies in turn can communicate electronically to IRS with a response. IRS plans to discontinue sending agencies the balance due notice it currently sends them.
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| Department of the Treasury | The Department of the Treasury, in close coordination with IRS and FMS, should undertake a governmentwide program to improve federal agency tax processing. Such a program should include providing for an IRS training program for agencies' staff involved in making tax payments and filing tax returns. |
Training of agency staff is continuous as part of the process of bringing agencies online with the new FEDTAX system.
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| Department of the Treasury | The Department of the Treasury should develop methods to promote greater accountability by top agency management for compliance with tax laws and regulations by working with the agencies and the Office of Management and Budget. Treasury should consider, among other methods, enhancing agency tax compliance by: (1) ensuring that agencies' Federal Managers' Financial Integrity Act reviews adequately cover tax compliance and include management followup; and (2) developing a process for top managers to certify their agencies' tax compliance. |
On September 16, 1993, the Acting Assistant Secretary (Management) requested that OMB include a specific compliance statement for federal employment tax laws and regulations in the FY 1994 FMFIA report requirements. Specifically, each agency must certify that timely deposits and filing of quarterly employment tax returns are being reviewed as a part of the FMFIA review process and that any identified noncompliance that meets the current materiality standards will be reported as a deficiency in the report to the President and Congress.
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Topics
Accounting errorsAccounts receivableElectronic funds transferFederal agenciesFederal agency accounting systemsFederal taxesInteragency relationsLate paymentsReporting requirementsTax administration