Recommendation: The Commissioner of Internal Revenue should make publicly available, such as on its website, a list of tax topics considered out of scope for CSRs to answer on the telephone, as well as include references for how and where to find information about these topics. (Recommendation 1)

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

Comments: IRS agreed with this recommendation and said it would make out-of-scope topics more readily available for taxpayers.

Recommendation: The Commissioner of Internal Revenue should reconcile authority and implement procedures for routinely reviewing the English versions of IRS's most commonly used vital tax products and web pages to ensure that information is included in commonly encountered languages about where taxpayers with LEP can obtain the translated content. If such content is not translated, the products and web pages should include information about where taxpayers with LEP can obtain language assistance from IRS. (Recommendation 2)

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

Comments: IRS neither agreed nor disagreed with this recommendation. In commenting on the draft report, IRS said the recommendation affects multiple stakeholders and IRS is evaluating the recommendation and actions for implementation. IRS said it would provide additional details at a later time.

Recommendation: The Commissioner of Internal Revenue should reconcile authority and implement procedures for routinely reviewing its multilingual web pages to effectively prevent, or detect and correct, errors such as incorrect or outdated information. For example, these procedures could call for the divisions to work with the Linguistics, Policy, Tools, & Services (LPTS) section whenever the English version of translated content is updated. (Recommendation 3)

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

Comments: IRS agreed with this recommendation, saying each business unit would be required to work with the Linguistic Policy, Tools and Services Section whenever the English version of translated content is updated. IRS also said interpreting the Form 1040 into different languages would be a major accomplishment that it wishes to achieve in the near future.

Recommendation: The Commissioner of Internal Revenue should conduct the four-factor assessment of its language services to persons with LEP for its most commonly used vital tax products to determine (1) which products should be translated and into what languages, and (2) what interpretation assistance will be provided to arrive at the appropriate mix of translation and interpretation services. IRS should document these assessments, including the determinations it made, and take action as appropriate based on these assessments. (Recommendation 4)

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

Comments: IRS neither agreed nor disagreed with this recommendation. In commenting on the draft report, IRS said the recommendation affects multiple stakeholders and IRS is evaluating the recommendation and actions for implementation. IRS said it would provide additional details at a later time.

Recommendation: The Commissioner of Internal Revenue should collect and use employee input on the strengths and weaknesses of its customer service training, including on whether training is effective in improving CSRs' performance, to inform changes to its training program and strategy under the Taxpayer First Act. (Recommendation 5)

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

Comments: IRS agreed with this recommendation and said it would review the employee training evaluation process to determine what steps can be taken to improve training, such as making certain evaluations mandatory for employees and updating the surveys with more focused questions in order to get more substantial feedback.

Recommendation: The Commissioner of Internal Revenue should direct the Wage and Investment division to develop and implement a strategy, in collaboration with its strategic workforce planning initiative, for the efficient use of overtime. (Recommendation 6)

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

Comments: IRS agreed with this recommendation.

Recommendation: The Commissioner of Internal Revenue should further assess the increase in "system downtime" and identify possible solutions to mitigate any problems and reduce system downtime. (Recommendation 7)

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

Comments: IRS agreed with this recommendation. In commenting on the draft report, IRS said it completed a further assessment after our audit and identified potential contributing factors. IRS said it implemented changes to the call center environment and was updating the Customer Service Representative technology platform to further improve system availability.

Recommendation: The Commissioner of Internal Revenue should perform regular monitoring of fluctuations in system downtime charges, such as increases overall or by specific units, to determine what, if any, factors are interrupting CSRs' work. (Recommendation 8)

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

Comments: IRS said it agreed with this recommendation and would monitor the system downtime reported by the Customer Service Representatives (CSR) in Customer Account Services. In commenting on the draft report, IRS said it had implemented changes to the call center environment and was updating the CSR technology platform to further improve system availability.

Recommendation: Congress should consider amending the Internal Revenue Code, Bank Secrecy Act of 1970, and other statutes, as needed, to address overlap in foreign financial asset reporting requirements for the purposes of tax compliance and detection, and prevention of financial crimes, such as by aligning the types of assets to be reported and asset reporting thresholds, and ensuring appropriate access to the reported information.

Agency: Congress
Status: Open

Comments: No legislative action enacted as of January 2020. Congress has not amended the Internal Revenue Code, Bank Secrecy Act of 1970 and other statutes as needed to address overlap in foreign financial asset reporting requirements, as GAO suggested in April 2019. GAO continues to believe that if Congress were to modify these various statutes, the reporting burden created by navigating multiple reporting requirements will be reduced. Modifying these statutes will also allow for the use foreign financial asset information collected under the Foreign Account Tax Compliance Act to prevent and detect financial crimes.

Recommendation: The Commissioner of Internal Revenue should develop a plan to mitigate risks with compliance activities due to the lack of accurate and complete Taxpayer Identification Numbers of U.S. account holders collected from FFIs. (Recommendation 1)

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

Comments: The Internal Revenue Service (IRS) has taken several steps to improve collection of accurate and complete taxpayer identification numbers (TINs) from foreign financial institutions (FFIs). For example, in December 2019, IRS officials said they began identifying 2017 records submitted by FFIs without valid TIN fields or corresponding dates of birth for account holders. IRS also launched a campaign to identify FFIs that did not file a Form 8966 with IRS. While these steps can improve the quality of account data submitted by FFIs, IRS still faces ongoing risks that receiving inaccurate or incomplete TINs pose to efforts to identify and combat taxpayer and FFI noncompliance. Additionally, IRS has not yet developed a plan that elaborates on these risks and identifies steps to mitigate them, as we recommended in April 2019. Without such a strategy, IRS may fail to identify opportunities to adjust compliance programs to better enforce FFI reporting of valid TINs and identify U.S. persons who are not complying with FATCA reporting requirements.

Recommendation: The Commissioner of Internal Revenue should ensure that appropriate business units conducting compliance enforcement and research have access to consistent and complete data collected from individuals' electronic and paper filings of Form 8938 and elements of parent individual tax returns. As part of this effort, the Commissioner should ensure that IRS provides clear guidance to the business units for accessing such data in IRS's Compliance Data Warehouse. (Recommendation 2)

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

Comments: The Internal Revenue Service (IRS) has taken several steps to address this recommendation. According to IRS Information Technology division officials, as of December 2019, they deliver paper and electronically filed Form 8938 data to IRS's Research, Applied Analytics, and Statistics organization on a monthly basis, and makes such data available in the Compliance Data Warehouse (CDW) for use by agency officials. According to Large Business and International (LB&I) Division officials, IRS's enforcement functions also have access to this data. One outcome of this access, according to LB&I officials, is the use of FATCA data in the development of compliance examination leads. However, IRS has not yet developed clear guidance for business units to access relevant data from Forms 8938 and elements of parent individual tax returns in CDW, as we recommended. Without such guidance, CDW users may be less likely to effectively leverage CDW data for examination purposes.

Recommendation: The Commissioner of Internal Revenue should employ a comprehensive plan for managing efforts to leverage FATCA data in agency compliance efforts. The plan should document and track activities over time to
• ensure individuals and FFIs comply with FATCA reporting requirements;
• assess and mitigate data quality risks from FFIs;
• improve the quality, management, and accessibility of FATCA data for compliance, research, and other purposes; and
• establish, monitor, and evaluate compliance efforts involving FATCA data intended to improve voluntary compliance and address noncompliance with FATCA reporting requirements. (Recommendation 3)

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

Comments: In September 2019, IRS's Deputy Commissioner for Services and Enforcement said that IRS disagreed with our April 2019 recommendation. The Deputy Commissioner said that resources that would be dedicated to update a comprehensive plan unique to FATCA-such as the FATCA Compliance Roadmap-are better spent on enforcement activities. The Deputy Commissioner also said that IRS's strategy for FATCA compliance will instead be part of IRS's Large Business & International (LB&I) Division's overall portfolio management strategy. Implementing enforcement activities could increase taxpayers' and foreign financial institutions' (FFIs) compliance with FATCA reporting requirements. While IRS does not have to revise and reemploy its FATCA Compliance Roadmap, it can employ a comprehensive plan as part of LB&I's portfolio management strategy to evaluate FATCA enforcement activities already in place, and determine the extent to which these activities improve voluntary compliance and address noncompliance with FATCA reporting requirements. Without such a plan, IRS risks not maximizing efforts to manage and address the myriad of challenges it faces in effectively ensuring taxpayer compliance.

Recommendation: The Commissioner of Internal Revenue should assess factors contributing to unnecessary Form 8938 reporting and take steps, as appropriate, to address the issue. Depending on the results of the assessment, potential options may include:
• identifying and implementing steps to further clarify IRS Form 8938 instructions and related guidance on IRS's website on determining what foreign financial assets to report, and how to calculate and report asset values subject to reporting thresholds; and
• conducting additional outreach to educate taxpayers on required reporting thresholds, including notifying taxpayers that may have unnecessarily filed an IRS Form 8938 to reduce such filings. (Recommendation 4)

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

Comments: As of February 2020, IRS officials said the agency is in the process of obtaining 2017 and 2018 tax data to analyze the number of unnecessary filings of Form 8938. Completing this data analysis and identifying the full range of factors contributing to unnecessary Form 8938 reporting will allow IRS to better address such factors. These efforts, in turn, will reduce the risk that taxpayers file-and IRS processes-forms that taxpayers were not required to submit to IRS.

Recommendation: The Secretary of the Treasury should lead efforts, in coordination with the Secretary of State and Commissioner of Social Security, to establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 5)

Agency: Department of the Treasury
Status: Open

Comments: The Department of the Treasury (Treasury) has taken some steps to implement GAO's April 2019 recommendation. Specifically, Treasury proposed changes to the Internal Revenue Service (IRS) relief procedures to abate assessments for certain expatriating taxpayers and is working with IRS and the Department of State (State) to publicize the procedures. In addition, Treasury led efforts with IRS, State, and the Social Security Administration (SSA) to develop frequently asked questions that combine relevant guidance for individuals to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. However, as of December 2019, Treasury lacked a collaborative interagency mechanism to address ongoing issues U.S. persons living abroad continue to encounter from implementation of Foreign Account Tax Compliance Act (FATCA) reporting requirements. In November 2019, Treasury said it was not the appropriate agency to lead these coordination efforts. However, GAO continues to believe that because Treasury is ultimately responsible for effectively administering FATCA, it is in a better position than State or SSA to establish an effective collaborative mechanism. Doing so will help agencies address the ongoing issues Americans living abroad experience from FATCA.

Recommendation: The Secretary of State, in coordination with the Secretary of the Treasury and Commissioner of Social Security, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 6)

Agency: Department of State
Status: Open

Comments: The Department of State (State) has taken several steps to implement GAO's April 2019 recommendation. In September 2019, State worked with the Department of the Treasury (Treasury), the Internal Revenue Service (IRS), and Social Security Administration (SSA) to develop and post online frequently asked questions on how to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. Additionally, State officials participated in an October 2019 webinar hosted by IRS regarding newly approved tax relief procedures for certain former citizens who have renounced U.S. citizenship and seek to be federal tax compliant. State also established procedures with SSA for its embassies and consulates abroad to help U.S. citizens apply for a Social Security number during the passport application process without SSA permission, thus removing a significant barrier in serving U.S. citizens abroad. However, as of December 2019, State lacked a collaborative interagency mechanism with Treasury to address ongoing FATCA implementation issues related to access to foreign financial services and denial of employment and promotion opportunities overseas. Treasury is responsible for leading efforts to establish such a mechanism; however, State's participation in such a mechanism on a continuing basis will help agencies address remaining issues Americans living abroad experience from FATCA.

Recommendation: The Commissioner of Social Security, in coordination with the Secretaries of State and Treasury, should establish a formal means to collaboratively address ongoing issues—including issues accessing financial services and employment and obtaining SSNs—that U.S. persons living abroad encounter from implementation of FATCA reporting requirements. (Recommendation 7)

Agency: Social Security Administration
Status: Open

Comments: The Social Security Administration (SSA) has taken or plans to take steps to implement GAO's April 2019 recommendation. SSA worked with the Department of the Treasury (Treasury), the Internal Revenue Service, and the Department of State (State) to develop and post online frequently asked questions on how to obtain a Social Security number, renounce U.S. citizenship, and comply with U.S. tax obligations. Additionally, in October 2019, SSA said it plans to conduct outreach events for U.S persons living abroad who need Social Security numbers. However, as of December 2019, SSA lacked a collaborative interagency mechanism with Treasury and State to address ongoing FATCA implementation issues, such as recurring issues U.S. persons may have obtaining Social Security numbers. Treasury is responsible for leading efforts to establish such a mechanism; however, SSA's participation in such a mechanism on a continuing basis will help agencies address remaining issues Americans living abroad experience from FATCA.

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 further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should document lessons learned from stakeholder input and past performance.

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

Comments: As of February 2020, IRS officials said LB&I has developed and deployed the Campaign Development Form and the LB&I Taxpayer Registry to capture stakeholder input and feedback. The form documents all actions and a decision made on a particular campaign and is used to monitor real-time performance. While this will help IRS document lessons learned moving forward, IRS officials have not said how they would document lessons learned in the past.

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 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: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should establish, document, and implement clear objectives for the collection program and enterprise-wide case categorization and routing processes, and define key terms, such as "fairness" and "risk."

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

Comments: IRS agreed with the recommendation. In March 2017, IRS provided documentation of actions taken on the recommendation, but the documents did not clearly define and communicate program objectives sufficient for internal control to support the collection program mission, including fairness in case selection. In November 2017, IRS provided additional documentation but it did not address case selection fairness or other objectives for the collection program and enterprise-wide case categorization and routing processes. In June 2019, IRS officials provided information on an ongoing IRS initiative to identify objectives for various programs, but the collection program with its case processes was not among the pilot programs. As a result, any actions to implement the recommendation will be stalled until the initiative's pilot programs are complete. As of November 2019, IRS had not provided a planned date when it expects to complete them. We will update the status of IRS's plans and actions to implement the recommendation after we complete review of any documents IRS provides, as we requested in December 2019.

Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should build upon existing Enterprise Risk Management (ERM) guidance to help managers identify internal and external risks to collection program objectives, and better understand how long-standing risk processes integrate with new ERM approaches; incorporate this guidance into existing or future ERM or collection program risk assessment processes.

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

Comments: IRS agreed with the recommendation. In November 2016, IRS provided documentation of risk management training for managers intended to assist them in understanding their responsibilities for identifying internal and external risks to collection program objectives. However, since objectives for the collection program and fairness were not yet clearly defined, such guidance could not be effectively incorporated into risk assessment processes. In March 2017, IRS provided documentation of further actions taken, but the documents did not clearly define and communicate program objectives sufficient for internal control, including risk assessment. In November 2017, IRS provided additional documentation but it did not address case selection fairness or other objectives for the collection program. In June 2019, IRS officials provided information on an ongoing IRS initiative to identify objectives for various programs, but the collection program was not among the pilot programs. As a result, any actions to implement the recommendation will be stalled until the initiative's pilot programs are complete. As of November 2019, IRS had not provided a planned date when it expects to complete them. We will update the status of IRS's plans and actions to implement the recommendation after we complete review of any documents IRS provides, as we requested in December 2019.

Recommendation: The Secretary of the Interior should direct the Director of the Bureau of Land Management to take steps, including making changes to AFMSS, and in any new system that replaces AFMSS, to improve the ability of staff to identify wells that are a high priority for environmental inspection and to incorporate information on the inspection history of wells into the environmental inspection prioritization process.

Agency: Department of the Interior
Status: Open

Comments: BLM concurred with the recommendation and has initiated action to update its application for permit to drill (APD) permit processing system. This new system will be known as AFMSS II and, when fully implemented, may address GAO's recommendations. Currently, BLM's actions are insufficient to close this recommendation because they have not completed the updates to AFMISS. Specifically, BLM has not completed its update of AFMSS II to cover environmental inspections. We will continue to follow up with BLM as the agency continues to take action to improve its well tracking system. BLM said it intends to update AFMSS II to cover environmental issues and projects that the remaining AFMSS II related tasks ensuring the system's full deployment will be completed by March 2020. In October 2019, we requested an update on BLM's timeframes.

Recommendation: The Secretary of the Interior should direct the Director of the Bureau of Land Management to take steps to ensure that environmental violations or problems and enforcement actions are documented in a consistent manner.

Agency: Department of the Interior
Status: Open

Comments: In August 2018, BLM informed us that the agency has taken several corrective actions to address the implementation of the recommendation, which will be accomplished related to the redesign of its Automated Fluid Minerals Support System (AFMSS). However, the agency reported that this system will not be completed until March 2020. In October 2019, we requested an update on BLM's timeframes.

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: 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 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 better assess whether changes are needed in the way IRS administers activities not engaged in for profit provisions, the Commissioner of Internal Revenue should take steps to estimate the extent of activities not engaged in for profit noncompliance from its ongoing research programs.

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

Comments: IRS agreed to research sole proprietor noncompliance, as GAO recommended in September 2009. It is focusing on those who improperly claim business losses (i.e., not profits). IRS's Office of Research, Analysis and Statistics is using the reporting compliance study of Form 1040 filers to gather the data on such noncompliant business losses. This research covered sampled tax returns filed for tax years 2009, 2010, and 2011 and used audits of the sampled tax returns that are filed for each tax year. In November 2016, IRS research officials provided the initial rough estimates of the percentage of disallowed losses and associated dollar amounts for all 3 tax years but as of December 2019, they had not yet indicated how these estimates helped IRS to understand the nature of the tax noncompliance. The officials cautioned that their ability to develop the estimates depends on the number of observations that can be applied from each tax year. This research, when completed, could help IRS to identify noncompliant sole proprietor issues and take action to reduce losses.

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: Given the potential for improving compliance now and in the future, Congress may wish to provide IRS with the authority to use math error checks to identify and correct returns with ineligible (1) IRA "catch-up" contributions, and (2) contributions to traditional IRAs from taxpayers over age 70-1/2.

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 2019. 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 April 2019, the Congress had not provided IRS with such authority.

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.