Other Income Reporting

GGD-95-199R: Published: Jul 19, 1995. Publicly Released: Jul 19, 1995.

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GAO examined the adjustments that Internal Revenue Service (IRS) auditors made during Taxpayer Compliance Measurement Program (TCMP) audits. GAO noted that: (1) based on its 1988 TCMP, IRS estimated that 7.7 million taxpayers underreported income by over $13 billion, but the estimate may be deceptive since auditors made some erroneous audit adjustments; (2) these audit adjustments to the Other Income line inappropriately increased the noncompliance of the Other Income line while distorting the compliance levels of other line items on returns; (3) it is unclear why IRS auditors had problems with Other Income line reporting, but it is important that they have specific instructions on when to make adjustments to the Other Income line; and (4) IRS auditors' use of causal codes to identify specific tax issues did not result in better taxpayer compliance programs, since IRS had no criteria or instructions on the application of causal codes.

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