Tax Administration: IRS Can Better Pursue Noncompliant Sole Proprietors
GGD-94-175
Published: Aug 02, 1994. Publicly Released: Sep 01, 1994.
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Highlights
Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) monitoring of income reporting by sole proprietors, focusing on: (1) the extent of noncompliance by type of sole proprietor; (2) IRS actions to correct such noncompliance; and (3) additional steps IRS could take to improve compliance.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should develop a system for managing and monitoring all sole proprietor compliance projects, linking them to IRS-wide plans, and disseminating their results throughout IRS. |
Closed – Implemented
IRS implemented this system during the summer.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should use existing TCMP information, including workpapers, to help identify projects that would address the most noncompliant sole proprietor market segments on a nationwide basis and analyze the underlying causes of noncompliance. |
Closed – Not Implemented
IRS claims the 1988 TCMP data--the most recent--are too old to use. IRS said it will use the data from its planned TCMP for 1994. The data will not be fully collected until 1998.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should work with trucking industry groups to improve recordkeeping and with other sectors where TCMP indicates that recordkeeping may be a problem. |
Closed – Implemented
With industry representatives' input, IRS developed and issued an audit technique guide to help clarify recordkeeping issues.
|
| Internal Revenue Service | The Commissioner of Internal Revenue should clarify information return filing instructions for insurance companies and work with these companies to improve compliance with information reporting requirements. |
Closed – Implemented
IRS worked with the insurance industry to clarify the instructions on reporting third-party payments. The Assistant Chief Counsel (Income Tax and Accounting) forwarded to the Department of the Treasury draft reporting regulations on third party payments for services rendered. In October 2000, Treasury approved the draft regulations and received public comments in February 2001. Revisions are being made based on these comments.
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Income taxesLaw enforcementManagement information systemsNoncomplianceReporting requirementsTax administration systemsTax nonpaymentTax returnsTaxpayersSelf-employed