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Highlights

The tax filing season is when the Internal Revenue Service (IRS) has most of its contacts with taxpayers, answering questions and processing returns and refunds. The 2008 filing season was particularly challenging due to the unanticipated mandate to make economic stimulus payments. The filing season is also the start of IRS's efforts to ensure the newly filed returns are compliant with the tax laws. GAO was asked to assess IRS's performance, describe the costs and foregone revenue of administering the economic stimulus payments, and identify any opportunities for improving filing season compliance checks. GAO analyzed IRS performance data, reviewed IRS operations, and interviewed IRS officials.

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Recommendations

Matter for Congressional Consideration

Matter Status Comments
Given the potential for improving compliance now and in the future, Congress may wish to provide IRS with the authority to use math error checks to identify and correct returns with ineligible (1) IRA "catch-up" contributions, and (2) contributions to traditional IRAs from taxpayers over age 70-1/2.
Open
As of January 2021, Congress had not provided IRS math error authority in these circumstances. GAO maintains that providing IRS with math error authority to identify and correct ineligible claims for taxpayers contributing to IRAs would enable IRS to correct obvious noncompliance and would be less intrusive and burdensome to taxpayers than audits.

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service 1. The Commissioner of Internal Revenue Service should direct the appropriate officials to use IRS's existing math error authority (MEA) to identify and correct child and dependent care credit claims on "Married Filing Separately" returns.
Closed - Implemented
As of February 14, 2011, IRS reported it had changed its computer programs in January 2010 to begin using math error authority to deny child and dependent care credits for taxpayers using "Married Filing Separately" filing status.
Internal Revenue Service 2. The Commissioner of Internal Revenue Service should direct the appropriate officials to include information on math error notices to inform taxpayers that they may be eligible for the child and dependent care credit if they file under a different status, such as "Single," "Married Filing Jointly," "Head of Household," or "Qualifying Widow(er) with a dependent child.
Closed - Implemented
As of February 14, 2011, IRS reported it had changed its notice to taxpayers in January 2010 telling them that they may be eligible for the child and dependent care credits if their filing status is Single, Married Filing Jointly, Head of Household, or Qualifying Widow(er) with a dependent child.
Internal Revenue Service 3. The Commissioner of Internal Revenue Service should direct the appropriate officials to assess the effectiveness of combining Federal Registry of Child Support Orders (FCR) and other data on taxpayer characteristics to verify the eligibility of Earned Income Tax Credit (EITC) claims from noncustodial parents.
Closed - Implemented
The IRS completed a study to test the accuracy of Federal Case Registry (FCR) and other related data for parents claiming the Earned Income Tax Credit (EITC) who were listed as noncustodial parents in FCR records. Study results showed that the available data were not accurate enough to justify using math error authority to automatically reject these claims, but could potentially be used to identify returns for further examination.

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