Tax Administration: IRS Can Improve Information Reporting for Original Issue Discount Bonds
GGD-96-70
Published: Mar 15, 1996. Publicly Released: Mar 15, 1996.
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Highlights
GAO provided information on the Internal Revenue Service's (IRS) efforts to ensure that taxpayers report investment income earned from bonds sold at original issue discount (OID), focusing on the completeness and use of IRS Publication 1212.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | To help IRS better meet its responsibility to provide middlemen with complete and reliable information that can be used for OID information reporting, and to help better ensure that the billions of dollars of OID income are properly reported for tax purposes, the Commissioner of Internal Revenue should assign organizational responsibility for monitoring and enforcing the OID bond issuance reporting requirement to specific organizational units and establish formal linkages between the units so that each can effectively carry out its responsibilities. |
Closed – Implemented
The AC Collection will be responsible for monitoring OID bond issuance reporting via the Detroit MFCT. For example, MFCT will be responsible for determining the most effective means of monitoring compliance with the OID bond issuance reporting requirements and, in coordination with the office of the AC for Examination, will develop a system for generating enforcement leads on potential nonfilers and taking appropriate enforcement action.
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| Internal Revenue Service | To help IRS better meet its responsibility to provide middlemen with complete and reliable information that can be used for OID information reporting, and to help better ensure that the billions of dollars of OID income are properly reported for tax purposes, the Commissioner of Internal Revenue should develop procedures, such as periodically matching the list of OID bonds in Publication 1212 with those contained in databases outside of IRS, to improve and help ensure the completeness and reliability of Publication 1212 as an authoritative source of OID information for middlemen. |
Closed – Implemented
IRS Examination contracted with a commercial reporting service, WSC Investment Services of New York, to provide information on long-term OID bonds that were issued in 1996. On November 12, 1997, WSC provided a listing to Examination of the OID bond issuances identified by WSC Investment Services that did not file the Form 8281 with the IRS and, therefore, were not included in Publication 1212. Examination will follow up on those OID issuances not reflected in Publication 1212.
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| Internal Revenue Service | To help IRS better meet its responsibility to provide middlemen with complete and reliable information that can be used for OID information reporting, and to help better ensure that the billions of dollars of OID income are properly reported for tax purposes, the Commissioner of Internal Revenue should work with representatives of the securities industry to develop a means to inform and remind OID bond issuers of their responsibility to file Forms 8281. |
Closed – Implemented
The Technical Field Support Section of the Office of Finance Products and Transactions took the lead in drafting and finalizing a newsletter item of OID reporting requirements, then ensured that this information would be disseminated throughout the financial securities industry as well as being made available to other interested parties. A number of organizations/associations have been given this information. The OID information has also appeared on the IRS web site, and was incorporated in the Coordinated Examination Program (CEP) newsletter, CEP Extra. Lastly, a series of memoranda were issued to the Regional Compliance Officers, for distribution to all Field Examination Groups, regarding the filing requirement of Form 8281.
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Bonds (securities)Government publicationsIncome taxesInvestmentsReporting requirementsTax administrationTax nonpaymentTax returnsVoluntary complianceTaxpayers