Recommendation: The Commissioner of IRS should change Schedule C or Form 1099-NEC so that taxpayers can identify if they received payment for platform work. (Recommendation 1)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should develop a process for monitoring feedback on its communications efforts and products tailored for platform workers, which should include documenting and evaluating feedback. (Recommendation 2)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should clarify the instructions and publications for Forms 1040 and 1099-K by adding plain language to clearly indicate to platform workers that the forms apply to them. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should work with the Secretary of the Treasury to amend the 6050W "tie-breaker rule" that applies to duplicative reporting requirements so that payments made through a TPSO's third party payment network are reportable under Section 6041, rather than under Section 6050W. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should work with Treasury to determine what thresholds would be the most appropriate for payment information reporting and, if warranted, recommend that Congress adjust the thresholds. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should work with the Secretary of the Treasury to implement withholding that is voluntary for companies making payments for services to platform workers and other independent contractors who choose to participate. (Recommendation 6)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of IRS should assess the impact of withholding that is voluntary for companies, once implemented, and if warranted, work with the Secretary of the Treasury on a proposal to Congress that would require TPSOs to offer tax withholding to platform workers and other independent contractors who choose to participate. (Recommendation 7)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Recommendation: The Commissioner of the IRS should ensure that information is collected on taxpayers' experiences with all online services and the extent to which the services are meeting taxpayers' needs. (Recommendation 1)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In June 2020, IRS reported that it intends to "implement new surveys to better capture customer experience data" with its online services. To this end, IRS in March 2020 published a notice in the Federal Register stating that it intends to seek approval from the Office of Management and Budget (OMB) on collecting information in a manner consistent with section 280 of OMB's Circular A-11 intended to improve the customer experience with federal services. Among other requirements, section 280 of Circular A-11 directs agencies to collect feedback from customers. IRS states that it intends to complete this process and fully address the recommendation by the end of calendar year 2021. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should ensure that information collected on taxpayers' experiences with online services is summarized in the document serving as IRS's performance plan and report. (Recommendation 2)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In June 2020, IRS reported that it is working to "implement new surveys to better capture customer experience data" and intends to publish this information on Performance.gov. Further, IRS states that it "will evaluate and identify the most appropriate medium each year for publication of data based on statutory and other requirements" and expects to fully address this recommendation by November 15, 2022. Section 280 of the Office of Management and Budget's Circular A-11 states that in addition to publishing this information on Performance.gov, agencies should also summarize this information in performance plans and reports. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should direct the Director of OLS and the Chief Research and Analytics Officer to work together to analyze the potential effects of online services on taxpayer burden. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In June 2020, IRS reported two planned actions to address this: 1) IRS will conduct comparative analyses of the current Individual Taxpayer Burden and Taxpayer Compliance Burden surveys and expects to complete this by September 30, 2020; and 2) IRS will implement new customer experience surveys to better capture comparative data relating to user perceptions of the ease and effectiveness of both online and traditional interactions and expects to complete this by the end of calendar year 2021. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should ensure that taxpayer input is included as an element of IRS's identification and prioritization process for new online services. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with the recommendation. In June 2020, IRS reported that it plans to introduce new survey methods to obtain taxpayer input regarding potential new online services. One specific example IRS provided was testing a new version of the irs.gov satisfaction survey. This new version, which was launched in January 2020, asks respondents what additional online services taxpayers would like and solicits suggestions from taxpayers for improving IRS's online services. IRS stated that it is currently evaluating this new survey method. IRS expects to fully address the recommendation by the end of calendar year 2021. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should work with relevant officials to set a target to reduce taxpayer burden through the development of new online services. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS did not agree with this recommendation. In June 2020, IRS stated that it will analyze the effect of online services on taxpayer burden in response to recommendation number 3 of this report. However in regards to setting a target, IRS reiterated its view that its "taxpayer burden measurement methodology is not designed to evaluate the effect of specific online services or web site enhancements." Further, IRS states that changes in tax policy (e.g., the Tax Cuts and Jobs Act of 2017) can affect taxpayer burden and it believes other factors, such as ease of use of online services, are more important to the taxpayer experience. Our report recognized that it may take time for the relevant IRS offices to review how online services may be affecting taxpayer burden. However, we continue to believe that this recommendation has merit because IRS has previously stated that it expects online services to reduce taxpayer burden, thereby contributing to one of IRS's strategic goals. Since IRS has already stated it plans to analyze the effect of online services on taxpayer burden in response to recommendation number 3, we believe it would be relatively easy for IRS to use the results of that analysis to set a more specific goal. For example, IRS in its June 2020 update refers to the time taxpayers spend using online services. A potential research question could be the extent to which taxpayers are more efficiently completing tasks using IRS's online services as IRS makes improvements to these services. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should direct the Chief Information Officer and the Director of OLS to ensure that planned future capabilities of digital communication platforms are tested or piloted before deployment with a particular focus on mitigating the risks that were identified in prior pilots of digital communication services, such as challenges in establishing common objectives and enrolling taxpayers. (Recommendation 6)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In June 2020, IRS reported that it will apply multiple user preference and usability testing methods to the design of Taxpayer Digital Communications. For example, IRS said it surveyed visitors to IRS.gov about their views towards digital communications in the winter of 2019-2020 and in March 2020 conducted remote testing sessions with taxpayers to obtain feedback on two possible design options. IRS says additional testing may be done and expects to fully address this recommendation by November 30, 2020. We will continue to monitor IRS's efforts to address this recommendation.

Recommendation: The Commissioner of the IRS should direct the Commissioner of W&I to work with the Director of OLS to ensure that future decisions regarding whether to renew the Free File agreement incorporate findings from a comprehensive examination of the benefits and costs of the agreement as it relates to long term plans for IRS's online services, including plans to file amended returns electronically. (Recommendation 7)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: Our report identified IRS's pledge to "not enter the tax preparation software and e-filing services marketplace" as a potential cost of IRS's agreement with Free File, Inc. to provide services to eligible taxpayers. Shortly after our report was issued, the Commissioner of the Wage and Investment Division signed on December 23, 2019 an addendum to the most recent agreement between IRS and Free File, Inc. which among other provisions struck the language prohibiting IRS from offering its own online filing services. Under the terms of the addendum, companies participating in Free File, Inc. will continue to provide services to eligible taxpayers subject to some new requirements, such as a prohibition on companies excluding their services from internet search engines and surveying a sample of taxpayers about their experiences. The agreement between IRS and Free File, Inc. remains scheduled to expire in October 2021. While the deletion of the language prohibiting IRS from offering its own online filing services removes a cost for IRS, our recommendation was for any future renewal of the agreement to be based on a comprehensive examination of the benefits and costs of the agreement as it relates to IRS's plans to expand online services. IRS agreed with our recommendation. In June 2020, IRS said that it "would continue to coordinate with appropriate stakeholders to assess the costs and benefits derived from the Free File agreement and incorporate findings in future agreements". In addition, several new developments have occurred related to Free File: 1) IRS used Free File, Inc. in the spring of 2020 to develop a website to identify Americans who were not required to file a 2019 tax return and may be eligible for economic impact payments pursuant to the Coronavirus Aid, Relief, and Economic Security Act; 2) IRS announced in May 2020 that taxpayers will soon be able to electronically file an amended return using tax software and IRS's announcement of this planned capability refers to its agreement with Free File, Inc.; and 3) one of the ten companies which had been participating in Free File, Inc. announced it plans to leave in October 2020. We will continue to monitor IRS's efforts to address the recommendation.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA staff record and track contact with taxpayers. (Recommendation 2)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS has taken steps to develop and implement an integrated case inventory and management system capable of recording and tracking taxpayer contacts. It expects this system to be deployed by October 2020.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA staff record and track the hours they spend on MAP cases. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS has taken steps to develop and implement an integrated case inventory and management system capable of tracking actual time worked on cases. It expects this system to be deployed by October 2020.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that Advance Pricing and Mutual Agreement Program (APMA) identify and record the dates of key milestones throughout MAP case resolutions. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS plans to review its current practices in order to ensure they are in line with the GAO's recommendation with respect to MAP cases, as well as APA cases. IRS has taken steps to develop and implement an integrated case inventory and management system that it expects to deploy by October 2020.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA puts procedures in place to review the quality of inventory data. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS has taken steps to develop and implement an integrated case inventory and time management system for APMA's MAP (and other) cases that it believes will help it quickly identify when case and inventory data do not meet quality standards. The new system is expected to be deployed by October 2020.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA records the dollar amounts of MAP case outcomes in its database. (Recommendation 6)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS has taken steps to record these amounts in the inventory management system that is expected to be deployed by October 2020.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA analyzes trends in case characteristics as part of routine program management activities. (Recommendation 7)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. As of July 2020, IRS is exploring ways to examine correlations between case management and administrative characteristics as part of ongoing, routine measurement of stages of the MAP.

Recommendation: The Commissioner of Internal Revenue should direct USCA to ensure that APMA identify and record categories of the tax issue relevant in the dispute. (Recommendation 8)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's recommendation. APMA already tracks issue classification data for completed APA cases for its annual report to Congress on the APA program, and IRS agrees that a similar system can and should be pursued for MAP cases. Implementing an integrated inventory management system capable of tracking these data across both MAP and APA cases would be especially informative and helpful for APMA management. As of July 2020, the IRS has taken steps to develop and implement such a system. It is expected to be deployed by October 2020..

Recommendation: The Commissioner of Internal Revenue should direct the Chief of Appeals, in coordination with the IRS Human Capital Office, to conduct a skills gap analysis specific to Appeals mission needs and develop a strategy for mitigating any identified gaps. (Recommendation 1)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. As of April 2020, the Office of Appeals stated that it is working with the IRS Human Capital Office to design a questionnaire for all Appeals managers to identify the technical and organizational skills necessary to meet organizational short and long-term needs for the Appeals Officer position. This information will be used to conduct a skills gap analysis on the current Appeals workforce and to enhance the selection/hiring process to ensure future hires possess necessary skills. IRS plans to complete these actions by October 2020, and Appeals stated that time frame for this corrective action may be affected by budgetary and resource constraints. GAO will continue to monitor IRS's implementation of this recommendation.

Recommendation: The Commissioner of Internal Revenue should evaluate the existing monitoring for collection due process appeal requests and address deficiencies in collection staff meeting the requirement for timely transfer to the Office of Appeals. (Recommendation 2)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In July 2019, IRS evaluated the existing monitoring for collection due process appeal requests to identify any impediments to collection staff timely transferring these requests to the Office of Appeals and provided the studies and related recommendations to GAO. The affected IRS collection units have developed action plans to address deficiencies in case transfer time. These plans include modifying inventory software to alert both staff and managers on the number of days collection due process requests have been under review. IRS also plans to update relevant IRM documentation in early 2020 to ensure that receipt dates of collection due process appeal requests are recorded for all cases and that there is appropriate notation of reasons why certain cases exceed established timeframes for transfer to the Office of Appeals. To fully implement this recommendation, IRS will need to provide GAO copies of the updated IRM as well as evidence of other corrective actions outlined in its evaluations of its monitoring procedures for collection due process appeal requests. GAO will continue to monitor the implementation of this recommendation.

Recommendation: The Commissioner of Internal Revenue should establish timeframes and monitoring procedures for timely transfer of taxpayer appeals requests by examination compliance units to the Office of Appeals. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS agreed with this recommendation. All four IRS business operating divisions have a corrective action plan and established and documented time frames for timely appeal transfer as of February 2020. While three business operating divisions have reporting procedures planned for monitoring timely appeal transfer, one division has not provided a plan for monitoring its timeliness in transferring cases to the Office of Appeals. To fully implement this recommendation, IRS needs to assess whether the planned monitoring actions will result in timely transfer of examination appeals. As of February 2020, data tracking the time from taxpayer request for appeal to when it is received by the Office of Appeals indicated that the actual transfer times are longer than the established time frames. Delays in transferring such requests can result in increased interest costs for taxpayers because interest continues to accumulate on the tax liability during the appeal process. Further, taxpayers unsure of their appeal status may call or write to IRS, tying up other IRS staff to respond to inquiries about appeals delayed in transfer. GAO will continue to monitor IRS's implementation of this recommendation.

Recommendation: The Commissioner of Internal Revenue should direct the Chief of Appeals to regularly report and share with each compliance unit the data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In February 2019, IRS stated that the Chief of Appeals will share with each compliance unit data on the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals. Appeals will also conduct an assessment with IRS compliance units of the time elapsed between when a taxpayer requests an appeal to when it is received in the Office of Appeals and implement improvements based on that assessment. As of February 2020, Appeals demonstrated that it provided to compliance units initial example data that tracks the time from taxpayer request for appeal to when it is received by the Office of Appeals. As of April 2020, it continues to refine the format of these reports. Appeals said it plans to do an assessment of the data with compliance units and will provide an example of this analysis when it is complete. IRS plans to complete these actions by October 2020, and GAO will continue to monitor IRS's implementation of this recommendation.

Recommendation: The Commissioner of Internal Revenue should provide more transparency to taxpayers on historical average total appeal resolution times. This could include publishing average total resolution times by workstream on an Office of Appeals web page as well as including total expected times in the Appeals welcome letter. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with this recommendation. In February 2019, IRS stated that the Chief of Appeals will review appeal resolution times and participate in IRS-wide efforts to improve transparency of resolution timeframes. As of June 2019, the Office of Appeals explained that IRS was beginning to simplify its website, including the Appeals website, with a focus on making it more customer friendly. IRS plans to complete these actions by June 2020, and GAO will continue to monitor IRS's implementation of this recommendation.

Recommendation: The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to make Appeals customer service standards and performance results more transparent to the public. This could include publishing customer service standards and related performance measure results on the Office of Appeals web page on IRS.gov. (Recommendation 6)

Agency: Department of the Treasury
Status: Open

Comments: Treasury agreed with this recommendation and plans to monitor IRS implementation. In February 2019, IRS stated that it will publish customer service standards and related performance measure results on the Office of Appeals web page on IRS.gov. As of April 2020, the Office of Appeals stated it plans to use information from its redesigned customer satisfaction survey to address this recommendation and is determining how to include the performance information on its website. IRS plans to complete these actions by June 2020, and GAO will continue to monitor IRS's implementation of this recommendation.

Recommendation: The Secretary of the Treasury, consistent with its responsibilities under GPRAMA and Executive Orders for customer service, should ensure that the Commissioner of Internal Revenue takes action to develop a mechanism to solicit and consider public input and customer feedback on a regular basis on current and proposed IRS appeal policies and procedures. This could include leveraging existing IRS advisory bodies or establishing an Office of Appeals advisory body representing the taxpaying public, the tax practitioner community, and businesses to solicit customer perspectives. (Recommendation 7)

Agency: Department of the Treasury
Status: Open

Comments: Treasury agreed with this recommendation and will monitor IRS implementation. In February 2019, IRS stated that it will leverage existing IRS advisory bodies to solicit customer perspectives. In January 2020, the Office of Appeals reported that it had begun to meet with the IRS Advisory Committee (IRSAC) to solicit customer perspectives, with its first interactions beginning in November 2019. The Office of Appeals stated that, in addition to this action, its leadership continues to meet with other external bodies to capture public input and customer feedback on an ad hoc basis. As of April 2020, the Office of Appeals stated it plans to participate in IRSAC's public meetings. Since the Office of Appeals has only begun leveraging IRSAC to solicit customer perspectives in November 2019 in a working session, GAO will continue to monitor the implementation of this recommendation to ensure sustained interaction with IRSAC through working sessions, as well as public meetings.

Recommendation: Congress should consider legislation to require that returns prepared electronically but filed on paper include a scannable code printed on the return. (Matter for Consideration 1)

Agency: Congress
Status: Open

Comments: Congress introduced the Acting on the Annual Duplication Report Act of 2019 on July 18, 2019. If enacted this legislation would require returns prepared electronically but filed on paper include a scannable code. Congress had not passed the legislation as of February 2020.

Recommendation: Based on the assessment in recommendation 2, the Commissioner of Internal Revenue should implement the most cost-effective method to digitize information provided by taxpayers who file returns on paper. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS agreed with this recommendation and in December 2019 indicated that it plans to begin scanning and digitizing individual tax returns filed on paper beginning in October 2021. According to IRS, digitizing paper returns at intake would allow IRS to reduce processing time, use the same RRP fraud filters on all paper and electronic forms, and allow more pre-refund audits or investigations, among other benefits.

Recommendation: The Commissioner of Internal Revenue should evaluate the costs and benefits of expanding RRP to analyze individual returns not claiming refunds to support other enforcement activities. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS agreed with this recommendation and told us expanding the use of RRP is an agency goal. In December 2019, IRS officials reported that internal IRS offices are collaborating on identifying priorities for expanding use of RRP to support other enforcement activities, such as pre-refund audits and investigations, and improve detection and treatment of fraud and noncompliance.

Recommendation: Based on the assessment in recommendation 4, the Commissioner of Internal Revenue should expand RRP to support identified activities. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: As of June 2019, IRS has not yet completed its analysis of the costs and benefits of expanding RRP, and therefore has not taken action to expand RRP based on this assessment. IRS agreed with the recommendation but noted that it must first evaluate opportunities to expand RRP. Implementing this recommendation could help IRS streamline the detection and treatment of fraud as well as promote voluntary compliance with tax laws.

Recommendation: The Commissioner of the IRS should ensure the operational analysis for IMF fully addresses greater utilization of technology or consolidation of investments to better meet organizational goals. (Recommendation 1)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In August 2019, IRS provided its fiscal year 2018 Operational Analysis Results report, dated June 24, 2019. The report demonstrated that IRS, in response to our recommendation, had ensured that the operational analysis for IMF fully addressed greater utilization of technology or consolidation of investments to better meet organizational goals. However, the operational analysis did not reflect IRS's progress to date in modernizing IMF and the associated challenges. As we reported, this omission is concerning given the risk exposure from the agency's continued use of the legacy assembly language code. In order to close the recommendation, IRS needs to update the operational analysis to reflect its progress modernizing IMF.

Recommendation: The Commissioner of the IRS should ensure the operational analysis for Telecommunications Systems and Support (TSS) addresses the extent to which the investments support customer processes as designed, and how well the investments are delivering the goods or services they were designed to deliver. (Recommendation 3)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In August 2019, IRS provided its fiscal year (FY) 2018 Operational Analysis Results report, dated June 24, 2019. While the report included a summary of the FY 2018 operational analysis for TSS, it did not identify the metrics used to determine whether TSS supported customer processes or delivered the goods and services that it is intended to deliver. To close this recommendation, IRS will need to provide the detailed operational analysis for TSS incorporating these metrics. As of December 2019, IRS has not provided the full TSS operational analysis to GAO. Upon receiving the document, we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should ensure the operational analysis for TSS includes a comparison of current performance with a pre-established cost baseline. (Recommendation 4)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In August 2019, IRS provided GAO its fiscal year (FY) 2018 Operational Analysis Results report. While the report included a summary of the FY 2018 operational analysis for the Telecommunications Systems and Support (TSS) investment , including planned and actual cost figures for FY2018, the report did not indicate whether the planned cost figure for FY2018 accounted for reimbursable costs and user fees, as we reported. To address this recommendation, IRS will need to provide a full operational analysis for TSS, as well as documentation showing whether reimbursable costs and user fees are included in the planned cost figure. As of December 2019, IRS has not provided a full TSS operational analysis to GAO. Upon receiving the document, we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should ensure the operational analysis for End User Systems and Services includes a comparison of current performance with a pre-established cost baseline. (Recommendation 5)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In August 2019, IRS provided its fiscal year (FY) 2018 Operational Analysis Results report, dated June 24, 2019. While the report included a summary of the FY 2018 operational analysis for End User Systems and Services (EUSS) investment, including planned and actual cost figures for FY2018, it did not specify whether the planned cost figure accounted for multi-year funding and user fees, as we reported. To address this recommendation, IRS will need to provide a full operational analysis for EUSS, as well as documentation showing whether multi-year funding and user fees are included in the planned cost figure. As of December 2019, IRS has not provided the full EUSS operational analysis to GAO. Upon receiving it, we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the IMF investment. (Recommendation 7)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates on the status of the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the IMF investment. (Recommendation 8)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates on the status of the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice for prioritizing risk for the IMF investment. (Recommendation 9)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates indicating whether the agency has implemented the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the IMF investment. (Recommendation 10)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates on the status of the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the IMF investment. (Recommendation 11)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates on the status of the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the IDRS investment. (Recommendation 12)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates indicating whether the agency has implemented the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the IDRS investment. (Recommendation 13)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates on the status of the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the IDRS investment. (Recommendation 14)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates indicating whether the agency has implemented the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the IDRS investment. (Recommendation 15)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by November 2019. As of December 2019, IRS has not provided any updates indicating whether the agency has implemented the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with preparing for risk management for the MSSS investment. (Recommendation 16)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In November 2019, IRS provided its IT Enterprise Operations Mainframe and Servers Services and Support (MSSS) Risk Management Plan, dated October 7, 2019. While the plan addressed most of the activities associated with the preparing for risk management key practice, it did not identify risk constraints, risk assumptions, or risk tolerance for the MSSS investment. Upon receiving further information, we will review it to determine if IRS has fully addressed this recommendation.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with analyzing risk for the MSSS investment. (Recommendation 18)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by October 2019. In November 2019, IRS provided its IT Enterprise Operations Mainframe and Servers Services and Support (MSSS) Risk Management Plan, dated October 7, 2019, along with several other documents associated with the agency's IT risk management process. However, the documents do not demonstrate that IRS has implemented the activities associated with the Analyze Risk key practice. Specifically, while the plan describes a risk analysis process in which risks are classified as high, medium, or low risk, neither the plan nor any of the other documents describes criteria for evaluating and quantifying risk likelihood and severity (impact) levels. Additionally, the Risk Management Plan does not indicate whether analysis of MSSS risks includes both inherent and residual risks. Upon receiving additional information indicating that IRS has addressed these activities, we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with mitigating risk for the MSSS investment. (Recommendation 19)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by October 2019. In November 2019, IRS provided its IT Enterprise Operations Mainframe and Servers Services and Support (MSSS) Risk Management Plan, dated October 7, 2019, along with several other documents associated with the agency's IT risk management process. However, the documents do not demonstrate that IRS has established threshold values for MSSS risk categories or alternative courses of action for critical risks. Upon receiving additional information indicating that it has addressed these activities. we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should fully implement the risk management key practice associated with monitoring, reporting, and controlling risk for the MSSS investment. (Recommendation 20)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it would implement the recommendation by October 2019. In November 2019, IRS provided its IT Enterprise Operations Mainframes and Servers Services and Support (MSSS) Risk Management Plan, dated October 7, 2019, along with several other documents associated with the agency's IT risk management process. However, the documents do not demonstrate that IRS has fully implemented all of the activities associated with the monitoring, reporting, and controlling key practice. Specifically, our review of the documents shows that IRS has not established threshold values for MSSS risk categories, and as a result is unable to compare the status of risks to acceptability thresholds to determine the need for implementing a risk mitigation plan. In addition, although the MSSS Risk Management Plan was updated in October 2019, its previous revision occurred in October 2017, indicating that IRS has not yet reviewed all aspects of the risk management program at least once a year. Upon receiving additional information that IRS has addressed these activities, we will review it to determine if IRS has implemented the recommendation.

Recommendation: The Commissioner of the IRS should fully implement IT workforce planning practices, including the following actions (1) setting the strategic direction for workforce planning; (2) analyzing the workforce to identify skill gaps; (3) developing strategies and implementing activities to address skill gaps; and (4) monitoring and reporting on progress in addressing skill gaps. (Recommendation 21)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS told GAO it had initiated efforts to address workforce planning agency-wide. The agency stated that the Human Capital Office in coordination with the Information Technology organization prioritizes critical skills gaps to develop gap mitigation strategies, which are implemented through IT annual training plans and succession planning efforts. IRS also stated that the mitigation plans will be monitored in the current Project and Portfolio Management System and that the Human Capital and Information Technology organizations will monitor resource capacity, skills, assigned work effort, and staff availability. In addition, IRS stated that it would utilize special hiring authorities as a competency and staffing mitigation strategy. The agency noted that the special authorities are subject to the availability of resources and agency approval. Further, IRS stated that, due to the diversion of IT resources to the Tax Cuts and Jobs implementation, development of a plan for scaling and expansion of workforce planning efforts will commence after the opening of Filing Season 2020. IRS stated that, due to those constraints, it could not provide a date for fully implementing the recommendation. As of December 2019, IRS has not provided any updates indicating whether it has implemented the recommendation. When we confirm what actions IRS has taken, we will provide updated information.

Recommendation: The Commissioner of Internal Revenue should re-establish long-term, quantitative goals for improving voluntary compliance. (Recommendation 1)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS reported it does not agree with the recommendation. In September 2018, IRS officials stated that the Fiscal Year 2018-2022 IRS Strategic Plan included six strategic goals and six performance measures. However, none of those performance measures related to a long-term, quantitative goal for improving voluntary compliance. In its 60-day letter, IRS agreed that improving voluntary compliance is core to its mission; however, it stated that creating a quantifying goal will do little to advance that purpose. IRS provided several reasons why it should not create a quantitative measure, including the voluntary compliance rate could rise over time without any help from IRS, or fall despite additional effort from IRS. Further, IRS reported that the voluntary compliance rate is not effective to making strategic and operational decisions. However, as we note in the report, setting long-term strategic goals is essential for results-oriented management, because such goals explain in greater specificity the results an agency is intending to achieve. Further, focusing on intended results can promote strategic and disciplined management decisions that are more likely to be effective because managers who use fact-based performance analysis are better able to target areas most in need of improvement and to select appropriate interventions. As of August 2020, there has been no change in this status.

Recommendation: The Commissioner of Internal Revenue should instruct the appropriate officials to develop and document a strategy that outlines how IRS will use National Research Program data to update compliance strategies that could help address the tax gap. (Recommendation 2)

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: As of August 2020, IRS stated that it is working on a redesign of the National Research Program (NRP). The outcome of the redesign will determine the scope of the information available from NRP in the future. IRS reported that next steps to address this recommendation is contingent on the completion of the NRP redesign.

Recommendation: To enhance the budget process and to improve transparency, the Commissioner of Internal Revenue, to the extent feasible, should ensure that the CJ includes data by appropriation account on the amount of funding requested to maintain current services for each future state theme.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In its fiscal year 2017 congressional justification, IRS modified how its budget data were organized, including linking requested increases to future state themes, but did not clarify how current spending by themes relates to appropriation accounts. Information on current spending by theme and account is important to ensure transparency on the current funding levels to assist Congress in making informed budget decisions. As reported in October 2018 in GAO-19-108R, the themes under the Future State vision are now being pursued as part of IRS's strategic plan for fiscal years 2018 to 2022-issued in May 2018. IRS has been phasing out the use of the term Future State and did not include it in its fiscal year 2020 congressional justification. Including data on the themes in the strategic plan would provide additional transparency and improve the quality of the information available to Congress for budget deliberations.

Recommendation: As Treasury works with IRS to improve the quality and accuracy of budget data, the Secretary of the Treasury should ensure sufficient controls are in place to make certain that the information technology investment reports generated from the SharePoint Investment Knowledge Exchange are accurate. This includes, for example, taking steps to reduce the need for manual corrections to the data.

Agency: Department of the Treasury
Status: Open

Comments: As of November 2017, Treasury Department officials took steps to address the need to manually correct budget data for the fiscal year 2017 budget request. However, as of October 2019, we have not received documentation that they have done so for future budget years. Improved information would help Treasury and IRS better account for information technology resources. We will continue to monitor Treasury's progress.

Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to establish, document, and implement policies and procedures for selecting new and reselecting ongoing business systems modernization activities, consistent with IRS's process for prioritizing operations support priorities, which addresses (1) prioritization and comparison of IT assets against each other, (2) criteria for making selection and prioritization decisions, and (3) ensuring IRS executives' final funding decisions on IT proposals are based on IRS's prioritization process.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In September 2018, IRS provided GAO a slide deck titled "Prioritization Process for the Business Systems Modernization (BSM) Program/Projects" which describes a process for prioritizing BSM investments and capabilities within the investments. However, the slides were labeled "pre-decisional." In addition, they did not include specific procedures for prioritizing investments. In April 2020, IRS informed us that it had moved its target for fully implementing the recommendation to November 2020. We will continue to monitor IRS's efforts to implement the recommendation.

Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to modify existing processes for Foreign Account Tax Compliance Act (FATCA) and Return Review Program (RRP) for measuring work performed by IRS staff to incorporate best practices, including accounting for actual work performed and using the level of effort measure sparingly.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: In May 2018, IRS told GAO it had implemented the recommendation. As supporting evidence, the agency provided an April 2018 update to its Investment Performance Tool user guide along with briefing slides specifying actions taken to modify its processes to measure work performed by IRS staff. We reviewed the evidence provided and determined that it was not sufficient to close the recommendation as implemented. Specifically, while the Investment Performance Tool user guide included updated procedures for measuring work performed by IRS staff which aligned with best practices, it did not clearly state that earned value (or work performed) during an iteration should always be based on to the percentage of planned features or user stories that were completed for that iteration. In addition, IRS did not provide evidence that it had used its updated procedures for the Return Review Program investment. We followed up with IRS to obtain this documentation. The agency subsequently provided the requested documentation to us and, as of July 2020, we were reviewing it to determine the extent to which it addresses the recommendation.

Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to take necessary steps to ensure the reliability of collections data and periodically review that data to (a) compute a collections rate for post-refund enforcement activities and (b) determine what additional analyses would provide useful information about compliance results and costs of post-refund audits and document-matching reviews.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: No executive action taken as of December 2019. The Internal Revenue Service (IRS) disagreed with this May 2016 recommendation. IRS raised concerns about the cost of studying collections data for post-refund enforcement activities. GAO recognizes that gathering collections data has costs and the data have limitations, notably that not all recommended taxes are collected. However, use of these data -- once IRS is able to verify their reliability -- could better inform resource allocation decisions and improve the overall efficiency of enforcement efforts. By not taking necessary steps to ensure the reliability of that data and to link them to tax assessments to calculate a collections rate, IRS lacks critical information. Periodic reviews of collections data and analyses could help IRS officials more efficiently allocate limited enforcement resources by providing a more complete picture about compliance results and costs.

Recommendation: The Commissioner of Internal Revenue should direct the referral programs to establish a mechanism to coordinate on a plan and timeline for developing a consolidated, online referral submission in order to better position IRS to leverage specialized expertise while exploring options to further consolidate the initial screening operations.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: As of January 2020, IRS had taken some action to establish a mechanism to coordinate on a plan and timeline for developing a consolidated, online referral submission, as GAO recommended in its February 2016 report. IRS established a cross-functional team in February 2016 to comprehensively review IRS's referral programs. Among other things, the team has explored options to consolidate the initial screening operations and determine the scope and complexity for moving the referral process to an online format. According to IRS, an electronic submission process is expected to provide better access to the program and reduce the burden associated with making a written report or referral. In November 2016, the cross-functional team requested information technology resources for fiscal year 2019 to develop an online system which could potentially replace four separate referral forms, filter out incomplete referrals, and electronically route referrals for further IRS action. IRS assessed options for consolidating all forms for the various referral programs and determined that consolidating them to a single form was not feasible because of the technical nature and complexity of the various referral types. The cross-functional team had worked with IRS On Line Services to develop an online application prototype and was considering the cost-effectiveness of a commercial off-the-shelf product. According to IRS, the online application will make it easier for the public to report possible tax violations. Also, the online system will improve efficiency in coordination and provide reports that will be incorporated into the quarterly coordination meetings of the new cross-division referral coordination committee. As of January 2020, IRS was still considering funding for online referral submission development. IRS estimated that a commercial off-the-shelf product would cost about $2 million with an online referral capacity operational within one year. IRS said it will consider further consolidating the referral programs once the online application is in place. Without continued progress on efforts to consolidate referral intake, IRS faces continued inefficiencies in receiving and processing referrals as well as public confusion caused by trying to choose among multiple forms.

Recommendation: To promote retirement savings without creating permanent tax-favored accounts for a small segment of the population, Congress should consider revisiting the use of IRAs to accumulate large balances and consider ways to improve the equity of the existing tax expenditure on IRAs. Options could include limits on (1) the types of assets permitted in IRAs, (2) the minimum valuation for an asset purchased by an IRA, or (3) the amount of assets that can be accumulated in IRAs and employersponsored plans that get preferential tax treatment.

Agency: Congress
Status: Open

Comments: No legislation limiting account owner accumulations enacted as of February 2020. In its October 2014 report, GAO found that individuals with limited, occupationally related opportunities could engage in sophisticated investment strategies and accumulate considerable tax-preferred wealth in IRAs and subsequently suggested to Congress legislative options. The Senate Finance Committee held a hearing on a range of IRA policy issues in September 2014 for which GAO provided a statement for the record that covered preliminary data on IRA balances. The Setting Every Community Up for Retirement Enhancement Act of 2019, enacted in December 2019 as division O of the Further Consolidated Appropriations Act, 2020, amended a number of requirements related to retirement accounts (Public Law 116-94). For example, section 401 limits inherited beneficiaries' ability to continue tax deferral to 10 years beyond the account owner's death. This provision somewhat reduces the long-term financial benefits of accumulating large balances in IRA accounts. However the Act did not adopt any of the other limits identified in GAO's October 2014 report. Without legislation, the intended broad-based tax benefits of IRAs are likely to continue to be skewed toward a select group of individuals.

Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should work in consultation with the Department of the Treasury on a legislative proposal to expand the statute of limitations on IRA noncompliance to help IRS pursue valuation-related misreporting and prohibited transactions that may have originated outside the current statute's 3-year window.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS agreed with GAO's October 2014 recommendation on IRAs with large balances and said it had discussed the recommendation with Treasury's Office of Tax Policy and Benefits Tax Counsel. Consequently, IRS said Treasury is aware of IRS's willingness to support legislative efforts in this area. Ultimately, Treasury reviews all tax legislative proposals and presents the administration's tax proposals for congressional consideration. However, Treasury has not released a legislative proposal as of January 2020. GAO reported in January 2020 that IRS examination said the 3-year statute of limitations for assessing taxes owed remains an obstacle in pursuing noncompliance that may span the many years of an IRA investment.

Recommendation: To help taxpayers better understand compliance risks associated with certain IRA choices and improve compliance, the Commissioner of Revenue should, building on research data on IRAs holding nonpublic assets, identify options to provide outreach targeting taxpayers with nonpublic IRA assets and their custodians, such as reminder notices that engaging in prohibited transactions can result in loss of the IRA's tax-favored status.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS has taken some action to provide general outreach and as of January 2020 has ongoing compliance research that could inform additional opportunities to target outreach to taxpayers with nonmarketable IRA assets at greater risk of noncompliance, as GAO recommended in October 2014. In June 2016, IRS published information on IRS.gov outlining the new information to be reported for nonmarketable IRA assets and included a general caution that IRAs with nonmarketable investments or assets under direct taxpayer control may be subject to a heightened risk of committing prohibited transactions. This caution is similar to those that IRS added to its publications about IRA contributions and distributions. It is a step toward helping taxpayers better understand which investments pose greater risks. In February 2018, IRS completed its first analysis of new information about the amounts and types of nonpublic IRA assets from Form 5498 for tax year 2016 that was filed in 2017. In October 2019, IRS also completed an interim compliance research project examining a sample of tax returns to determine whether the beneficiary of the IRA caused his or her IRA to engage in a prohibited transaction. As of January 2020, IRS was conducting a new compliance research project examining IRAs holding certain nonpublic asset types. The compliance research began in February 2019 and is to be completed in January 2021. Unless IRS augments outreach based on reliable data about nonpublicly traded IRA investments, taxpayers at greater risk may not be able to ensure compliance with rules on prohibited transactions.

Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should establish formal program objectives.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS correspondence audit program officials planned a working group to develop formal program objectives. In November 2016, IRS officials provided documents intended to define the program objectives, but the objectives were unclear. As of December 2019, IRS officials provided draft program objectives to GAO for discussion and are responding to comments from GAO. We will update the status when IRS provides any further supporting documentation, as we requested in March 2020.

Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should ensure that the program measures reflect those objectives.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS officials said that, among other actions, they plan to review and update program documentation and guidance as warranted to ensure a clear link between correspondence audit program objectives and related measures. IRS officials provided documentation in November 2016, but program measures could not be clearly linked to objectives because the objectives were not clear. As of December 2019, IRS officials provided draft measures for their draft program objectives to GAO and are responding to comments from GAO. We will update the status when IRS provides any further supporting documentation, as we requested in March 2020.

Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should clearly link those measures with strategic IRS-wide goals on ensuring compliance in a cost-effective way while minimizing taxpayer burden.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS officials said that, among other actions, they plan to review and update program documentation and guidance as warranted to ensure that program measures clearly link to IRS strategic goals. IRS officials provided documentation in November 2016,but measures for the program could not be clearly linked to either the program objectives or IRS goals because the objectives were not clear. As of December 2019, IRS officials provided GAO with draft linkages to IRS's strategic goals for the draft measures and program objectives and are responding to comments from GAO on those linkages. We will update the status when IRS provides any further supporting documentation, as we requested in March 2020.

Recommendation: While IRS works to improve the quality of its Schedule K-1 data, the Commissioner of Internal Revenue should develop a plan for conducting testing or other analysis to determine whether the improved Schedule K-1 data, perhaps combined with other IRS information about businesses and taxpayers, could be used more effectively to ensure compliance with the reporting of flow-through income.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS stated that it understands the objective of this recommendation and, at such time that resources are available to enhance capabilities, it would consider the proposed methodology of advanced testing. However, based on current and anticipated budget constraints, it does not expect its plans to change in the near future. As of September 2020, there has been no change. As such we will continue to monitor progress.

Recommendation: To ensure that IRS is meeting the stated goals of CAP, the Principal Deputy Commissioner of Internal Revenue and Deputy Commissioner for Services and Enforcement should track savings from Compliance Maintenance and CAP overall and develop a plan for reinvesting any savings.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: As of December 2019, IRS had taken some steps to implement this August 2013 recommendation, but had not developed a plan to track and reinvest any savings. IRS provided documents from October 2019 which discussed how portfolio management is used as a tool to prioritize and allocate time to eight compliance program areas, including CAP. IRS officials explained that any hours saved in a compliance program area are reallocated to the same or another compliance program area based on the division's strategic priorities rather than a plan focusing on CAP. Furthermore, CAP has not yet achieved the desired outcome of saving resources, according to IRS. If IRS finds any savings from CAP, it will need to develop a plan for reinvesting it to expand audit coverage. Without a plan for tracking savings and using them to increase audit coverage, IRS cannot be assured that the savings are effectively invested in either CAP or non-CAP taxpayers with a high compliance risk.

Recommendation: To increase the effectiveness of IRS's examinations individual tax returns, the Commissioner of Internal Revenue should transcribe data from paper-filed Form 1040 Schedules C and E that are not currently transcribed and make that data available to SB/SE examiners for classification. If IRS has evidence that the costs related to transcribing all such data on Schedules C and E are prohibitive, IRS could do one or both of the following actions: (1) transcribe less data by transcribing only the missing data for selected line items, such as certain, large expense line items, or (2) develop a budget proposal to fund an initiative for transcribing Schedule C and E.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS has taken some steps to implement this May 2013 recommendation. In September 2015, IRS completed a study on whether to transcribe more data from paper-filed returns. IRS officials said the study showed that the benefits to be derived from additional transcription are not significant and would not outweigh the added cost. That study did not provide specific information about the costs and benefits of transcribing information from Schedules C and E. In December 2018, IRS provided a cost-benefit estimate for transcribing all data from Schedules C and E and concluded that the cost of transcribing all additional Schedule C and Schedule E lines would exceed the expected benefits. This analysis satisfied the first part of GAO's recommendation. However, the study did not address whether transcribing certain, select lines on Schedules C and E would be cost-effective, as GAO's recommendation suggested. Having specific data transcribed and electronically available likely will improve the classification of audits as well as the quality of the audits, according to examiners GAO spoke with for the report. As of March 2020, GAO continues to monitor IRS's progress.

Recommendation: The Acting Commissioner of Internal Revenue should take the following action outline a strategy that defines appropriate levels of telephone and correspondence service and wait time and lists specific steps to manage service based on an assessment of time frames, demand, capabilities, and resources.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open
Priority recommendation

Comments: IRS neither agreed nor disagreed with GAO's recommendation from December 2012, but has made progress in developing a customer service strategy that defines appropriate levels of telephone service; however, as of February 2020, IRS had not finalized its strategy nor determined the appropriate levels of service for correspondence and wait time. In January 2017, IRS shared results of a benchmarking study that compared its telephone service, measures, and goals to comparable agencies and companies. The team that conducted the study recommended options for additional measures to indicate the level of access taxpayers have to service across service channels. In September 2019, IRS provided GAO its revised customer service strategy; however, it did not include correspondence service. In July 2019, the Taxpayer First Act (Public Law 116-25) was enacted which requires IRS to develop a comprehensive customer service strategy. As of February 2020, IRS had established an internal office to implement this requirement. Completion of a comprehensive customer service strategy that defines appropriate levels of service and wait time as well as specific steps to manage services based on an assessment of time frames, demand, capabilities, and resource requirements would enable IRS to make a more informed request to Congress about resources needed to deliver specific levels of service. Further, finalizing a long-term comprehensive strategy will help ensure IRS is maximizing the benefit to taxpayers and possibly reduce costs in other areas.

Recommendation: Congressmay wish to consider amending the Internal Revenue Code to authorize IRS to assess penalties on preparers for failure to comply with section 6011(e)(3).

Agency: Congress
Status: Open

Comments: A bill was introduced on June 28, 2011, which would have amended electronic filing requirements for paid preparers. This included language amending section 6695 of the Internal Revenue Code to include a penalty of $50 for failure to electronically file returns under section 6011 (e)(3). However, this bill was never enacted. As of January 2020, there are no bills pending that would provide IRS with authority to penalize paid preparers for failure to electronically file returns as GAO recommended

Recommendation: To better ensure that economically similar outcomes are taxed similarly and minimize opportunities for abuse, the Secretary of the Treasury should undertake a study that compares the current approach to alternative approaches for the taxation of financial derivatives. To determine if changes would be beneficial, such a study should weigh the tradeoffs to IRS and taxpayers that each alternative presents, including simplicity, administrability, and economic efficiency.

Agency: Department of the Treasury
Status: Open

Comments: Treasury disagreed with this recommendation based on the fact that many outside studies already exist and IRS did not comment. The Tax Cuts and Jobs Act enacted in December 2017 did not include any requirements that Treasury study alternative approaches for the taxation of financial derivatives. However members of Congress have released proposals for a mark-to-market tax system, which would include financial derivatives. GAO continues to maintain that further study is needed in coordination with IRS and will continue to monitor the climate for such a study.

Recommendation: To ensure that IRS can adequately enforce certain tax provisions, Congress may wish to consider providing IRS with MEA to use tax return information from previous years to ensure that taxpayers do not improperly claim credits or deductions in excess of lifetime limits where applicable.

Agency: Congress
Status: Open

Comments: As of March 2020, Congress has expanded IRS's math error authority in certain circumstances, but not as broadly as GAO suggested in February 2010. Section 208 of division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113 enacted in December 2015) gave IRS the authority to use math error authority if (1) a taxpayer claimed the Earned Income Tax Credit, Child Tax Credit, or the American Opportunity Tax Credit (AOTC) during the period in which a taxpayer is not permitted to claim such credit as a consequence of either having made a prior fraudulent or reckless claim; or (2) a taxpayer omitted information required to be reported because the taxpayer made prior improper claims of the Child Tax Credit or the AOTC. While expanding math error authority is consistent with what GAO suggested in February 2010, GAO maintains that a broader authorization of math error authority with appropriate controls would enable IRS to correct obvious noncompliance, would be less intrusive and burdensome to taxpayers than audits, and would potentially help taxpayers who underclaim tax benefits to which they are entitled. If Congress decides to extend broader math error authority to IRS, controls may be needed to ensure that this authority is used properly such as requiring IRS to report on its use of math error authority. The Administration also requested that Congress expand IRS's math error authority as part of the Service's Congressional Budget Justification and Annual Performance Report and Plan for fiscal year 2021. Specifically, the Administration requested authority to correct a taxpayer's return in the following circumstances: 1) the information provided by the taxpayer does not match the information contained in government databases or Form W-2, or from other third party databases as the Secretary determines by regulation; 2) the taxpayer has exceeded the lifetime limit for claiming a deduction or credit; or 3) the taxpayer failed to include with his or her return certain documentation that is required to be included on or attached to the return. As of March 2020, the Congress had not provided IRS with such authority.

Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials, based on the quality of service provided by comparable organizations and on what matters most to the customer, to determine a customer service telephone standard, and the resources required to achieve this standard based on input from Congress and other stakeholders.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: As of August 2019, IRS finalized a customer service strategy identifying an optimal telephone level of service. According to the strategy, IRS has a process to compare major metrics with other agencies and private industry, and conducted two studies to look at industry practices. In response to our recommendation, IRS compared its telephone data with similar telephone environments, and determined that a telephone level of service between 70 and 80 percent provides an optimal balance for servicing customer service telephones and paper correspondence requests. However, IRS faced two significant challenges in managing the 2019 filing season: (1) implementing major tax law changes from the Tax Cuts and Jobs Act (TCJA), and (2) a lapse in appropriations that left IRS unfunded during five weeks leading up to the opening of the 2019 filing season. As a result of issues stemming from these challenges, IRS revised its 2019 filing season telephone service goals from 80 percent to 65 percent during the filing season, and from 75 percent to 63 percent for all of fiscal year 2019. By not maintaining the identified optimal level of service standard, IRS is missing opportunities to illustrate gaps between actual and desired levels of service that may have resulted from issues linked to TCJA implementation and the lapse in appropriations. IRS did outline steps it is taking to achieve the optimal range of 70-80 percent telephone level of service outlined in its customer service strategy. Specifically, IRS said that it is working to upgrade equipment for all IRS business units that provide telephone services to taxpayers. It also cited examples of these upgrades, such as implementing a customer callback system that allows callers to keep their place in queue without remaining on the phone. While IRS said it has allocated funding to begin the development and installation of the customer callback feature, it did not provide an estimate of the resources required to upgrade the equipment and otherwise achieve the optimum range of telephone level of service. By not providing sufficient information to Congress on resources needed to achieve an optimal level of service, IRS is missing opportunities to justify the resources it believes are needed to improve taxpayer service.

Recommendation: The Congress may wish to consider broadening IRS's ability to use math error authority (MEA), with appropriate safeguards against misuse of that authority.

Agency: Congress
Status: Open

Comments: Congress has expanded IRS's math error authority in certain circumstances, but not as broadly as we suggested in February 2010. Section 208 of division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113 enacted in December 2015) gave IRS the authority to use math error authority if (1) a taxpayer claimed the Earned Income Tax Credit, Child Tax Credit, or the American Opportunity Tax Credit (AOTC) during the period in which a taxpayer is not permitted to claim such credit as a consequence of either having made a prior fraudulent or reckless claim; or (2) a taxpayer omitted information required to be reported because the taxpayer made prior improper claims of the Child Tax Credit or the AOTC. In addition, Congress expanded math error authority for the First-Time Homebuyer Credit in November 2009. While expanding math error authority is consistent with what we suggested in February 2010, we maintain that a broader authorization of math error authority with appropriate controls would enable IRS to correct obvious noncompliance, would be less intrusive and burdensome to taxpayers than audits, and would potentially help taxpayers who underclaim tax benefits to which they are entitled. If Congress decides to extend broader math error authority to IRS, controls may be needed to ensure that this authority is used properly such as requiring IRS to report on its use of math error authority. The Administration also requested that Congress expand IRS's math error authority as part of the President's budget proposal for fiscal year 2021. Specifically, the Administration requested authority to correct a taxpayer's return in the following circumstances: 1) the information provided by the taxpayer does not match the information contained in government databases; 2) the taxpayer has exceeded the lifetime limit for claiming a deduction or credit; or 3) the taxpayer has failed to include with his or her return certain documentation that is required by statute. As of January 2020, the Congress had not provided IRS with such authority. We continue to believe that Congress should broaden IRS's math error authority with appropriate safeguards in order to help reduce the tax gap, which is the difference between tax amounts that taxpayers should have paid and what they actually paid .

Recommendation: Should the program be extended beyond 2009, to ensure that the maximum amount of capital ends up in low-income community businesses, Congress may wish to consider offering grants to CDEs that would provide the funds to low-income community businesses. If it does so, Congress may wish to require Treasury to gather appropriate data to assess whether and to what extent the grant program increases the amount of federal subsidy provided to low-income community businesses compared to the NMTC; whether the grant program otherwise affects the success of efforts to assist low-income communities; and how costs for administering the program incurred by the CDFI Fund, CDEs, and investors would change. One option may be for Congress to set aside a portion of funds to be used as grants and a portion to be used as tax credit allocation authority under the current structure of the program in a future allocation round to facilitate comparison of the two program structures.

Agency: Congress
Status: Open

Comments: No legislative action has been identified as of March 2020. Section 141 of division Q of the Further Consolidated Appropriations Act, 2020, extended NMTC through 2020 (Public Law 116-94). However, this act did not offer grants in lieu of credits, as GAO suggested in January 2010. The Joint Committee on Taxation estimates the cost of this extension to be approximately $1.5 billion. Offering grants in lieu of NMTCs could result in a greater portion of the federal subsidy reaching low-income community businesses.

Recommendation: To improve compliance with shareholder basis rules, Congress may wish to require S corporations to calculate and report shareholder's stock and debt basis as completely as possible. S corporations would report the calculation on the Schedule K-1 and send it to shareholders as well as IRS. If Congress judges that stock purchase price information that is currently only available to shareholders should not be transmitted to the S corporation due to privacy concerns, an alternative is to require that S corporations report less complete basis calculations using information already available to the S corporation.

Agency: Congress
Status: Open

Comments: As of January 2020, Congress had not enacted legislation to require S corporations--a federal business type that provides certain tax benefits like passing income and losses to shareholders' individual returns-- to calculate and report shareholder's stock and debt basis as completely as possible and report the calculation to shareholders and IRS, as GAO suggested in December 2009.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should issue regulations clarifying the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations.

Agency: Department of the Treasury
Status: Open

Comments: Treasury issued proposed regulations clarifying the definition of gross receipts on December 13, 2013 and solicited public comments. During the course of 2014, tax practitioners and business executives submitted comments criticizing the regulations and asking for them to be withdrawn. As of March 2020, Treasury has yet to issue final regulations that would include responses to these criticisms. The regulations would not become effective until the tax year beginning after the date on which the regulations are published in final form.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should provide additional guidance to more clearly identify what types of activities are considered to be qualified support activities.

Agency: Department of the Treasury
Status: Open

Comments: As of March 2020, Treasury has not issued regulations to clarify what types of activities are considered to be qualified support activities.

Recommendation: In order to significantly reduce the uncertainty that some taxpayers have about their ability to earn credits for their research activities, the Secretary of the Treasury should provide additional guidance to more clearly identify when commercial production of a qualified product is deemed to begin.

Agency: Department of the Treasury
Status: Open

Comments: As of March 2020, Treasury has not issued regulations to more clearly identify when commercial production of a qualified product is deemed to begin.

Recommendation: In order to reduce economic inefficiencies and excessive revenue costs resulting from inaccuracies in the base of the research tax credit, Congress should consider eliminating the regular credit option for computing the research credit.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of December 2019, Congress had not enacted legislation to eliminate the regular computation option for the research tax credit or to add a minimum base to the ASC option, as GAO suggested in November 2009. The credit is designed to encourage business innovation by providing a subsidy for new research. Continued use of the regular computation credit option, which arbitrarily distributes subsidies across taxpayers, can distort investment decisions so that research spending and economic activity are not allocated to sectors that offer the highest returns to society. These misallocations may reduce economic efficiency and, thereby, diminish any economic benefits of the credit.

Recommendation: In order to reduce economic inefficiencies and excessive revenue costs resulting from inaccuracies in the base of the research tax credit, Congress should consider adding a minimum base to the ASC that equals 50 percent of the taxpayer's current-year qualified research expenses.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of December 2019, Congress had not enacted legislation to eliminate the regular computation option for the research tax credit or to add a minimum base to the ASC option, as GAO suggested in November 2009. The credit is designed to encourage business innovation by providing a subsidy for new research. Continued use of the regular computation credit option, which arbitrarily distributes subsidies across taxpayers, can distort investment decisions so that research spending and economic activity are not allocated to sectors that offer the highest returns to society. These misallocations may reduce economic efficiency and, thereby, diminish any economic benefits of the credit. Adding a minimum base for the ASC would reduce the revenue cost of the credit without affecting the average incentive it provides for research.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by updating the historical base period that regular credit claimants use to compute their fixed base percentages.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken by Congress to update the historical base period that regular credit claimants use to compute their fixed base percentages.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by eliminating base period recordkeeping requirements for taxpayers that elect to use a fixed base percentage of 16 percent in their computation of the credit.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken to eliminate base period recordkeeping requirements for taxpayers that elect to use a fixed base percentage of 16 percent in their computation of the credit.

Recommendation: If Congress nevertheless wishes to continue offering the regular research credit to taxpayers, it may wish to consider reducing inaccuracies in the credit's base and to reduce taxpayers' uncertainty and compliance costs and IRS's administrative costs by clarifying for Treasury its intent regarding the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations. In particular it may want to consider clarifying that the regulations generally excluding transfers between members of controlled groups apply to both gross receipts and QREs and specifically clarifying how it intended sales by domestic members to foreign members to be treated. Such clarification would help to resolve open controversies relating to past claims, even if the regular credit were discontinued for future years.

Agency: Congress
Status: Open

Comments: While legislation has been introduced to expand the research tax credit, as of March 2020, no action has been taken by Congress to clarify for Treasury its intent regarding the definition of gross receipts for purposes of computing the research credit for controlled groups of corporations. In particular, it may want to consider clarifying that the regulations generally excluding transfers between members of controlled groups apply to both gross receipts and QREs and specifically clarifying how it intended sales by domestic members to foreign members to be treated. Such clarification would help to resolve open controversies relating to past claims, even if the regular credit were discontinued for future years.

Recommendation: To improve IRS's guidance to its examiners auditing the real-estate tax deduction, the Commissioner of Internal Revenue should revise the guidance to indicate that evidence of deductibility should not rely on mortgage escrow statements, Forms 1098, and cancelled checks (which can be evidence of payment), and may require more than reliance on a real-estate tax bill.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: No executive action taken. IRS had not addressed this action and had no plans to do so as of January 2020. IRS did not agree with GAO's May 2009 recommendation and the agency maintains that existing examination guidance provides examiners with sufficient information to properly examine this deduction. For tax years beginning after December 31, 2016, section 11042 of Public Law 115-97 caps the deduction for state and local taxes, including real estate taxes, at $10,000. In its 2009 review, GAO found that some examiners were not confirming that taxpayers were entitled to deduct real estate charges claimed, even in situations where their deductibility may have been in question. As a result, GAO maintains that examiners are continuing to rely on guidance that is inadequate to properly examine this deduction and that action should be taken to clarify the guidance.

Recommendation: To improve IRS's guidance to its examiners auditing the real-estate tax deduction, the Commissioner of Internal Revenue should revise the guidance to require examiners to ask taxpayers to substantiate the deductibility of the amounts claimed whenever they are examining the real-estate tax deduction and they have reason to believe that taxpayers have claimed nondeductible charges that are large, unusual, or questionable.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: No executive action taken. IRS had not addressed this action and had no plans to do so as of January 2020. IRS did not agree with GAO's May 2009 recommendation and the agency maintains that existing examination guidance provides examiners with sufficient information to properly examine this deduction. For tax years beginning after December 31, 2016, section 11042 of Public Law 115-97 caps the deduction for state and local taxes, including real estate taxes, at $10,000. In its 2009 review, GAO found that some examiners were not confirming that taxpayers were entitled to deduct real estate charges claimed, even in situations where their deductibility may have been in question. As a result, GAO maintains that examiners are continuing to rely on guidance that is inadequate to properly examine this deduction and that action should be taken to clarify the guidance.

Recommendation: To simplify the burden that the corporate exemption places on payers to distinguish payees' business status and also provide greater information reporting, Congress may wish to consider requiring payers to report payments to corporations on the form 1099 MISC, as we previously suggested and as proposed in the Bush Administration's budget.

Agency: Congress
Status: Open

Comments: No legislative action has been taken, as of March 2020, to require payers engaged in a trade or business to report on payments to corporations for services, thereby reducing these payers' burden to determine which payments require reporting, as GAO recommended in January 2009. Reporting of third-party information is a powerful compliance tool, and eliminating the reporting exemption for payments to corporations would be a cost-effective way to improve voluntary compliance.

Recommendation: To gauge the extent of 1099-MISC payer noncompliance and its contribution to the tax gap, the Commissioner of Internal Revenue should, as part of future research studies, develop an estimate of 1099-MISC payer noncompliance.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: According to IRS, developing such an estimate requires a multi-pronged approach and a large amount of coordinated effort. One prong is to determine the extent of filing compliance among employers. A second prong would determine the extent to which 1099-MISC payers properly report their payments. Starting with the Tax Year 2001 individual income tax reporting compliance study, the National Research Program (NRP) office has been collecting some data related to Form 1099-MISC compliance, from both the payer and payee perspectives. Additional data were generated by the NRP reporting compliance study for employment tax. As part of the NRP employment tax research, IRS examiners were to review taxpayers' Form 1099 filing compliance. Data collected from these studies should shed some light on whether employers are appropriately reporting required payments on Form 1099-MISC. As of March 2020, IRS had completed its preliminary analysis and expected to complete more comprehensive analysis of the NRP employment tax data by May 2020. GAO will continue to monitor IRS's progress.

Recommendation: To gauge the extent of 1099-MISC payer noncompliance and its contribution to the tax gap, the Commissioner of Internal Revenue should, as part of future research studies, determine the nature and characteristics of those payers that do not comply with 1099-MISC reporting requirements so that this information can be factored into an IRS-wide strategy for increasing 1099-MISC payer compliance.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: IRS researchers collected data on 1099-MISC reporting as part of its National Research Program (NRP) study on employment taxes, a program that involved examinations of a sample of tax returns for tax years 2008 through 2010. As part of the NRP employment tax research, IRS examiners were to review taxpayers' Form 1099 filing compliance. Collecting data on this issue will enable IRS to study the nature and characteristics of payers that do not comply with 1099-MISC reporting requirements. As of March 2020, IRS had completed its preliminary analysis and expected to complete more comprehensive analysis of the NRP employment tax data by May 2020. GAO will continue to monitor IRS's progress.

Recommendation: To provide clarity for which taxpayers with rental real estate activity must report expense payments on information returns and to provide greater information reporting, Congress may wish to consider amending the Internal Revenue Code to make all taxpayers with rental real estate activity subject to the same information reporting requirements as other taxpayers operating a trade or business.

Agency: Congress
Status: Open

Comments: No legislative action had been taken, as of January 2020, to make owners of rental real estate subject to the same payment reporting requirements regardless of whether they engaged in a trade or business under current law, as GAO recommended in August 2008. Changing reporting requirements and holding taxpayers with rental real estate to the same filing requirements as taxpayers whose activities are considered a trade or business would provide clarity about who is required to file, which would improve tax compliance.

Recommendation: Given the lack of information on IRD users and where property claimed under IRD is placed in service, Congress may wish to consider requiring IRS to collect information identifying which taxpayers use IRD and the reservation and/or address where they have placed the property into service. In deliberating additional requirements, Congress should weigh the need for more IRD information with the associated costs of collecting and analyzing the information as well as the effects on IRS's other priorities.

Agency: Congress
Status: Open

Comments: As of February 2020, we continue to monitor the issue.

Recommendation: As Congress considers whether tax-exempt governmental bonds should be used for professional sports stadiums that are generally privately used, it may also wish to consider whether other facilities, including hotels and golf courses, that are privately used should continue to be financed with tax-exempt governmental bonds.

Agency: Congress
Status: Open

Comments: No legislative action as of March 2020. GAO suggested in February 2008 that as Congress considers whether tax-exempt governmental bonds should be used for professional sports stadiums that are generally privately used, it also should consider whether other privately used facilities, including hotels and golf courses, should continue to be financed with such bonds. Reconsidering the tax-exempt status of certain bonds could generate hundreds of millions of dollars in additional federal revenue.

Recommendation: To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of the Office of Management and Budget (OMB), in consultation with the Secretary of the Treasury, should resume presenting tax expenditures in the budget together with related outlay programs to show a truer picture of the federal support within a mission area.

Agency: Executive Office of the President: Office of Management and Budget
Status: Open

Comments: No executive action taken as of February 2020. OMB had not presented tax expenditures in the fiscal year 2021 budget together with the related outlay programs. OMB did not agree that GAO's September 2005 recommendation is necessary and stated that presenting information on tax expenditures together with related outlay programs is not useful for budgeting and that such a presentation is not part of the congressional budget process. However, the Congressional Budget Act of 1974 requires a list of tax expenditures, including special tax credits, deductions, exclusions, exemptions, deferrals, and preferential tax rates. Whereas OMB favors reporting tax expenditures separately from the rest of the budget, GAO has reported that an integrated presentation is also useful to show the relative magnitude of tax expenditures compared to spending and credit programs across mission areas. OMB previously presented tax expenditure sums alongside outlays and credit activity for each budget function in the federal budget from fiscal year 1998 through fiscal year 2002, but discontinued the practice. Tax expenditures resulted in $1.32 trillion in forgone revenue in fiscal year 2019 and have been roughly approximate to federal discretionary spending levels in recent years.

Recommendation: To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of OMB, in consultation with the Secretary of the Treasury, should require that tax expenditures be included in the PART process and any future such budget and performance review processes so that tax expenditures are considered along with related outlay programs in determining the adequacy of federal efforts to achieve national objectives.

Agency: Executive Office of the President: Office of Management and Budget
Status: Open

Comments: OMB made some progress in including tax expenditures along with related outlay programs in the executive branch's budget and performance review processes, as GAO recommended in September 2005. However, as of December 2019, OMB had not developed a systematic approach for conducting such reviews, and OMB staff told GAO that they were not pursuing the effort because of competing priorities, as well as capacity and resource constraints. Prior to that time, OMB had made some progress on the action. The President's fiscal year 2012 budget stated that the administration would work toward examining the objectives and effects of the wide range of tax expenditures in the budget. The GPRA Modernization Act of 2010 (GPRAMA) requires OMB and the agencies to identify the relevant tax expenditures that contribute to each crosscutting priority goal. Beginning with its August 2012 update to Circular No. A-11 with guidance for implementing GPRAMA and continuing in subsequent annual updates, OMB has directed agencies to identify tax expenditures that contribute to each of their agency priority goals. Beginning with the July 2013 update, OMB expanded its guidance to include identifying these contributions to agency strategic objectives. In both its July 2013 and July 2014 guidance, OMB stated that it planned to work with the Department of the Treasury (Treasury) and agencies to facilitate alignment of tax expenditure information with agency priority goals and strategic objectives. However, in its June 2015 update of this guidance, OMB removed the language about working with Treasury and agencies to align tax expenditures with agency goals. OMB's December 2019 guidance still requires agencies to identify tax expenditures that contribute to their agency priority goals and strategic objectives.

Recommendation: To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of OMB, in consultation with the Secretary of the Treasury, should develop and implement a framework for conducting performance reviews of tax expenditures. In developing the framework, the Director should (1) determine which agencies will have leadership responsibilities to review tax expenditures, how reviews will be coordinated among agencies with related responsibilities, and how to address the lack of credible performance information on tax expenditures; (2) set a schedule for conducting tax expenditure evaluations; (3) re-establish appropriate methods to test the overall evaluation framework and make improvements as experience is gained; and (4) to identify any additional resources that may be needed for tax expenditure reviews.

Agency: Department of the Treasury
Status: Open
Priority recommendation

Comments: Treasury did not submit comments on this report and deferred to OMB. OMB agreed that this recommendation had promise and also said that tax expenditure evaluations were the responsibility of Treasury, which had access to the necessary data. As of February 2020, when the President's fiscal year 2021 budget was released, the Director of OMB had not developed a framework for reviewing tax expenditure performance, as GAO recommended in June 1994 and again in September 2005. Since their initial efforts in 1997 and 1999 to outline a framework for evaluating tax expenditures and preliminary performance measures, OMB and the Department of the Treasury have ceased to make progress and retreated from setting a schedule for evaluating tax expenditures. The President's fiscal year 2012 budget stated that developing an evaluation framework is a significant challenge due to limited data availability and analytical constraints of isolating the effect of any single program. The administration planned to focus on addressing some of these challenges so it can work toward crosscutting analyses that examine tax expenditures alongside related spending programs. However, OMB and Treasury have not reported on progress on this recommendation since the President's fiscal year 2012 budget. In December 2019, OMB said its Office of Economic Policy is responsible for the framework outline. OMB said it was exploring options to further develop its evaluation framework, which would include working with Treasury. The budget released in February 2020 did not provide an update on these evaluation framework efforts.

Recommendation: To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of OMB, in consultation with the Secretary of the Treasury, should develop and implement a framework for conducting performance reviews of tax expenditures. In developing the framework, the Director should (1) determine which agencies will have leadership responsibilities to review tax expenditures, how reviews will be coordinated among agencies with related responsibilities, and how to address the lack of credible performance information on tax expenditures; (2) set a schedule for conducting tax expenditure evaluations; (3) re-establish appropriate methods to test the overall evaluation framework and make improvements as experience is gained; and (4) to identify any additional resources that may be needed for tax expenditure reviews.

Agency: Executive Office of the President: Office of Management and Budget
Status: Open
Priority recommendation

Comments: No executive action has been taken. As of February 2020, when the President's fiscal year 2021 budget was released, the Director of OMB had not developed a framework for reviewing tax expenditure performance, as GAO recommended in June 1994 and again in September 2005. Since their initial efforts in 1997 and 1999 to outline a framework for evaluating tax expenditures and preliminary performance measures, OMB and the Department of the Treasury have ceased to make progress and retreated from setting a schedule for evaluating tax expenditures. The President's fiscal year 2012 budget stated that developing an evaluation framework is a significant challenge due to limited data availability and analytical constraints of isolating the effect of any single program. The administration planned to focus on addressing some of these challenges so it can work toward crosscutting analyses that examine tax expenditures alongside related spending programs. However, OMB and Treasury have not reported on progress on this recommendation since the President's fiscal year 2012 budget. As of December 2019, OMB said its Office of Economic Policy is responsible for the framework outline. OMB said it was exploring options to further develop its evaluation framework, which would include working with Treasury. The budget released in February 2020 did not provide an update on these evaluation framework efforts.

Recommendation: To ensure that policymakers and the public have the necessary information to make informed decisions and to improve the progress toward exercising greater scrutiny of tax expenditures, the Director of OMB, in consultation with the Secretary of the Treasury, should require that tax expenditures be included in the PART process and any future such budget and performance review processes so that tax expenditures are considered along with related outlay programs in determining the adequacy of federal efforts to achieve national objectives.

Agency: Department of the Treasury
Status: Open

Comments: In October 2005, the Department of the Treasury responded that this recommendation did not relate to Treasury. OMB made some progress in including tax expenditures along with related outlay programs in the executive branch's budget and performance review processes, as GAO recommended in September 2005. However, as of December 2019, OMB had not developed a systematic approach for conducting such reviews, and OMB staff told GAO that they were not pursuing the effort because of competing priorities, as well as capacity and resource constraints. The President's fiscal year 2012 budget stated that the administration would work toward examining the objectives and effects of the wide range of tax expenditures in the budget. The GPRA Modernization Act of 2010 (GPRAMA) requires OMB and the agencies to identify the relevant tax expenditures that contribute to each crosscutting priority goal. Beginning with its August 2012 update to Circular No. A-11 with guidance for implementing GPRAMA and continuing in subsequent annual updates, OMB has directed agencies to identify tax expenditures that contribute to each of their agency priority goals. Beginning with the July 2013 update, OMB expanded its guidance to include identifying these contributions to agency strategic objectives. In both its July 2013 and July 2014 guidance, OMB stated that it planned to work with the Department of the Treasury (Treasury) and agencies to facilitate alignment of tax expenditure information with agency priority goals and strategic objectives. However, in its June 2015 update of this guidance, OMB removed the language about working with Treasury and agencies to align tax expenditures with agency goals. OMB's December 2019 guidance still requires agencies to identify tax expenditures that contribute to their agency priority goals and strategic objectives.

Recommendation: The Commissioner of Internal Revenue should match independent contractors' information returns with their tax returns to more systematically identify employers who are misclassifying employees as independent contractors and to better target audit resources for doing employment tax examinations.

Agency: Department of the Treasury: Internal Revenue Service
Status: Open

Comments: Call 202/512-6100 for additional information.

Recommendation: Section 630 of the Revenue Act of 1978 restricts IRS' authority to ensure that current and future classifications will be correct. In view of the equity issues and tax revenues involved, Congress may wish to consider repealing this restriction against requiring employers to prospectively reclassify employees who have been misclassified as independent contractors.

Agency: Congress
Status: Open

Comments: Call 202/512-6100 for additional information.