Tax Administration: Information Returns Can Improve Reporting of Forgiven Debts
GGD-93-42
Published: Feb 17, 1993. Publicly Released: Mar 19, 1993.
Skip to Highlights
Highlights
Pursuant to a congressional request, GAO reviewed whether the Internal Revenue Service (IRS) should require lenders to report taxpayers' forgiven debts, focusing on the potential effects on voluntary compliance if the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation (RTC) were required to report forgiven debt information to IRS.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| To improve taxpayer compliance in reporting forgiven debt, Congress should require FDIC and RTC to issue information returns on forgiven debts that exceed $600 and to include the date of the compromised or charged-off debt on the return. |
Closed – Implemented
|
The Budget Reconciliation Act enacted this revision. The effective date is January 1995. |
| If FDIC and RTC information reporting on forgiven debts proves to be cost-effective, Congress may wish to explore whether extending similar information reporting to other institutions is warranted. |
Closed – Implemented
|
The Budget Reconciliation Act enacted this provision. The effective date is January 1995. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | If Congress enacts related legislation, the Commissioner of Internal Revenue should require IRS to use the information returns on forgiven debts in its enforcement programs. |
Closed – Implemented
IRS issued regulations to implement the reporting requirements and has finished developing its matching criteria program.
|
Full Report
Office of Public Affairs
Topics
Debt collectionFederal corporationsGovernment collectionsIndebtedness waiversLoan repaymentsReporting requirementsTax administrationTax nonpaymentTax returnsVoluntary compliance