Tax Administration: Difficulties in Accurately Estimating Tax Examination Yield
GGD-88-119
Published: Aug 08, 1988. Publicly Released: Aug 08, 1988.
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Highlights
In response to a congressional request, GAO examined the Internal Revenue Service's (IRS): (1) computation of the revenue it actually realized as a result of its implementation of a revenue initiative, which added 2,500 to the examination staff; and (2) assumptions in estimating the yield derived from the increased staff.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should consider requiring IRS to include in its annual budget submission information on the actual amount of revenues derived from its audits. | Congress will probably not decide what to do until after IRS completes its attempt to develop a methodology for identifying actual audit revenues. IRS is implementing a system that will allow it to determine the amount of actual audit revenues. If IRS does not use that data in its budget submissions, thus precluding the need for Congress' intervention, GAO will issue a follow-up report. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should complete a systematic reexamination and validation of the IRS estimating process. This should include an analysis of the use of historical trends, updating of the audit tracking data used to compute assessment rates, validation of the average yield assumptions, and writing procedures to demonstrate the quality controls used in the process. |
IRS issued a report in November 1989 that: (1) discussed major criticisms of its estimating process, including those made in the GAO report; (2) introduced a revised interim methodology for estimating Exam revenues; and (3) set forth numerous short and long-term improvements that were underway or planned.
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| Internal Revenue Service | The Commissioner of Internal Revenue should also fully disclose in its budget requests that assessed amounts shown as actual are really only estimates. |
In its budget request for fiscal year (FY) 1990, IRS labeled the yield figures for FY 1988 as Estimated Actuals. This is too minor to justify an accomplishment report.
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Topics
Appropriated fundsAuditing proceduresBudget receiptsStaff utilizationProjectionsTax administration systemsTax return auditsTaxesStatistical dataTax returns