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Pursuant to a legislative requirement, GAO conducted a follow-up review of the Internal Revenue Service's (IRS) controls over its process for certifying excise taxes for distribution to the federal trust funds.
Recommendations for Executive Action
|Internal Revenue Service||1. To strengthen internal controls over IRS' process of inputting tax return information into the master file, IRS should determine if it would be cost effective to develop and implement procedures requiring either key verification of the assessment amount by excise tax type before final processing or to implement other post-input controls to verify the accuracy of assessment amounts by excise tax type on the master file. In making this determination, IRS should consider establishing a dollar threshold that would ensure coverage of 90 percent of total excise tax assessments from the tax returns.|
|Internal Revenue Service||2. To strengthen internal controls over IRS' process of inputting tax return information into the master file, IRS should revise the Form 720 tax return to reflect a separate column adjacent to the column for entering the tax assessment, by abstract number, for the taxpayer to report on pages 1 and 2 of the tax return claims and adjustments, by abstract number, based on the information the taxpayer reports on Schedule C.|
|Internal Revenue Service||3. To strengthen internal controls over IRS' process of certifying excise tax distributions to the general fund and federal trust funds, IRS should develop, document, and implement review procedures over the adjustment and summarization of assessment data used in the certifications. Specifically, IRS should require detailed supervisory review be performed and documented to ensure that adjustments are reasonable and adequately supported, calculations are appropriately performed, and the certification letter agrees with the supporting schedules. IRS recently changed its procedures to certify excise taxes based on estimated collections. Despite this change, review procedures are still necessary.|
|Internal Revenue Service||4. To strengthen internal controls over IRS' process of certifying excise tax distributions to the general fund and federal trust funds, IRS should establish and implement specific procedures requiring that IRS personnel review the distribution rates provided by the Office of Tax Analysis prior to those rates being used in the certification of Highway Trust Fund distributions and document evidence of these reviews.|