Reports & Testimonies

Your tax returns are filled with sensitive personal and financial data—which you expect the IRS to protect. However, recent disclosures of sensitive taxpayer data have made headlines. We, and the Treasury Inspector General for Tax Administration, have also raised concerns about IRS's ability to safeguard taxpayer information. In this review, we found weaknesses in training, information systems, contractor oversight, information-sharing, and more. Of the related...

Each year, we make more than 1,000 recommendations to help the federal government save money, address issues on our High Risk List , and significantly improve government operations. This letter to IRS outlines 24 open recommendations that it should prioritize. For example, IRS could improve taxpayer services by modernizing its refund status-tracking tool, setting specific performance goals for the taxpayer experience, and giving taxpayers estimated...

More businesses have been organizing as partnerships. This allows them to pass income and losses to their partners instead of being taxed as corporations. Between 2002 and 2019, the number of large partnerships—with over $100 million in assets and 100 or more partners—increased almost 600%. The IRS audit rate for large partnerships has dropped to less than 0.5% since 2007. About 80% of audits conducted...

In March 2018, the President placed tariffs on certain imported steel and aluminum products. Companies can apply to the Department of Commerce to be excluded from paying these tariffs. Commerce then tells Customs and Border Protection how to administer approved exclusions. Companies didn't use the majority of the exclusions, and CBP generally administered them as instructed. However, weaknesses in CBP's process allowed some exclusions to...

This Fast Facts has been updated to correct a reference to the percentage of decline in program use. The IRS's alternative dispute resolution programs—which use an IRS mediator to resolve tax disputes between taxpayers and the agency—may be faster and less costly than its traditional appeals process. But the use of these programs fell by 65% between FYs 2013-2022, and the IRS doesn't have enough...

Each year, we audit the financial statements of the IRS and issue opinions regarding these statements and related internal controls (i.e., processes in place to ensure the proper authorization and recording of transactions). Our FY 2022 audit identified new issues related to IT systems, tax refunds, and safeguarding assets. For example, IRS did not adequately correct certain tax return errors according to its own procedures...

This testimony covers our work on nonprofit community hospitals' tax exemptions. Hospitals can be exempt if they: Meet legal requirements, e.g., set billing and collection limits Provide community benefits, e.g., run an emergency room that's open to all—regardless of ability to pay While the legal requirements are easy for IRS to confirm, it's harder to verify community benefits because the law isn't specific about which...

One option for buying health insurance plans in the U.S. is through marketplaces. The Affordable Care Act provided a tax credit in some cases to help individuals buy these plans. The U.S. government may pay this credit to insurance issuers in advance, which lowers the individual's monthly bill. We reviewed methods 5 states and the U.S. government used to keep ineligible people from using the...

According to IRS estimates, taxpayers—people and businesses—collectively pay about 85% of the total taxes they owe. The difference between what taxpayers owe and what they pay on time is known as the tax gap, which IRS estimated to be $496 billion per year for tax years 2014-2016. In this snapshot, we identify factors—such as the complexity of tax laws—that contribute to the gap. We also...

The IRS relies extensively on its IT systems to collect taxes and distribute refunds. However, much of its IT infrastructure is outdated, which can increase cybersecurity risks, staffing issues, and costs. As of August 2022, the IRS had 21 modernization initiatives, including 9 to replace its outdated IT systems. However, 6 of those 9 initiatives did not specify how they would dispose of outdated systems—a...

Abusive tax schemes contribute to the nation's tax gap—the difference between taxes owed and paid. These schemes can involve complex, multi-layer transactions that attempt to conceal the true nature and ownership of taxable income or assets. One of IRS's tools to combat such schemes—and the people that promote them—is its Dirty Dozen list. This annual publication lists schemes that taxpayers may encounter. However, we found...

Each year from 2014-2018, about half of large corporations and a quarter of profitable ones didn't owe federal taxes. For example, profitable corporations may not owe taxes due to prior years' losses. Average effective tax rates—the percentage of income paid after tax breaks—among profitable large corporations fell from 16% in 2014 to 9% in 2018. A 2017 tax law lowered the top corporate rate from...

"Advanced Air Mobility" services could soon carry people or cargo on revolutionary aircraft that can take off and land vertically and leave a smaller carbon footprint. Taxes on airspace users support FAA operations and help finance airport infrastructure. Some users qualify for tax exemptions, such as for medical transport services. But current tax laws don't define some of these new aircraft. For example, certain tax...

For three years, IRS has struggled with a backlog of work. During the 2022 filing season, IRS focused on reducing its correspondence backlog, which left most phone calls from taxpayers unanswered. IRS also prioritized processing its backlog of returns from 2021, but then had more than 12 million returns from 2022 to process as of late September. IRS hired the staff it needed with the...