Tax Administration: Missing Independent Contractors' Information Returns Not Always Detected

Highlights

Pursuant to a congressional request, GAO reviewed whether Internal Revenue Service (IRS) examinations effectively identified businesses that failed to file information returns for payments made to independent contractors.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Internal Revenue Service	To improve IRS compliance checks of information return reporting requirements, the Commissioner of Internal Revenue should require that field managers and quality reviewers stress the importance of doing compliance checks, enforce workpaper standards, and assess the effectiveness of the checks.	Closed – Implemented IRS issued a guide designed to aid in meeting audit requirements and standards.
Internal Revenue Service	To improve IRS compliance checks of information return reporting requirements, the Commissioner of Internal Revenue should establish minimum requirements for revenue agents to follow in doing compliance checks.	Closed – Implemented IRS issued a guide for examiners that reinforces the need for package audits and serves as a desk reference for audit requirements.
Internal Revenue Service	To improve IRS compliance checks of information return reporting requirements, the Commissioner of Internal Revenue should require that the payor master file data summarizing businesses' information return filings be made available to, and be used by, revenue agents when doing compliance checks.	Closed – Implemented Payor Master File transcripts are provided with case files. Internal Revenue Manual changes were made instructing Revenue agents to use the Business Information Return data when doing compliance checks.

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Topics

Tax Policy and Administration

Contractor paymentsCorporationsIncome taxesNoncomplianceReporting requirementsTax administration systemsTax evasionTax lawTax return auditsVoluntary compliance