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Open Recommendations

Taxpayer Advocate Service: Opportunities Exist to Improve Reports to Congress

GAO-21-217
Jun 16, 2021
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7 Open Recommendations
Agency Affected Recommendation Status
Office of the Taxpayer Advocate The National Taxpayer Advocate should clearly identify TAS's objectives for the upcoming fiscal year in its objectives report. This should include clearly linking objectives to TAS's planned activities. (Recommendation 1)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. In its Fiscal Year 2022 Objectives Report to Congress, TAS added clear and consistent labels to more easily identify TAS's objectives and the planned activities that support those objectives. We will continue to monitor TAS's implementation of this recommendation and others related to improving TAS's Objectives Report.
Office of the Taxpayer Advocate The National Taxpayer Advocate should define measurable outcomes for TAS's objectives. This may involve aligning TAS's existing performance goals with its objectives, and where gaps may exist, developing new performance goals. (Recommendation 2)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. However, TAS noted it may face difficulties defining systemic advocacy outcomes that can be directly measured. As stated in our report, clearly aligning activities and related measures to objectives will enable TAS to better understand how its activities contribute to the outcomes it seeks to achieve. Although TAS may not have direct control over those outcomes, such information could help TAS leadership make more informed decisions about actions that could lead to further progress toward those outcomes. At the start of fiscal year 2022, TAS plans to publish (online) its annual operational plan, including proposed timeframes for completing activities and potential measurable outcomes. TAS plans to provide quarterly updates on its progress. We will continue to monitor TAS's implementation of this recommendation and others related to improving TAS's Objectives Report.
Office of the Taxpayer Advocate The National Taxpayer Advocate should expand TAS's reporting beyond planned activities to include the actual results it achieved through those activities. This performance reporting should include information to help assess progress toward objectives, including full-year performance data and trend information from past years. (Recommendation 3)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. Beginning with the 2022 National Taxpayer Advocate Annual Report to Congress, TAS plans to include performance reporting for fiscal year 2022 and prior years and continue this practice in future Annual Reports. We will continue to monitor TAS's implementation of this recommendation.
Office of the Taxpayer Advocate The National Taxpayer Advocate should consult with congressional stakeholders—at least once every 2 years—and other relevant stakeholders to obtain input on TAS's goals and measures and better understand stakeholders' information needs. (Recommendation 4)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. We will continue to monitor TAS's implementation of this recommendation.
Office of the Taxpayer Advocate The National Taxpayer Advocate should publish updates on the inventory of IRS's actions taken, partially taken, or not taken in response to recommendations made in the most serious problems section of TAS's annual report. Updates should include how long those actions have remained on the inventory as partially taken and not yet taken, as well as planned completion dates. Updates should also be discussed as part of TAS's annual report. (Recommendation 5)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. On its public webpage, TAS plans to add information on the status of its administrative recommendations to IRS and publish quarterly status updates online. We will continue to monitor TAS's implementation of this recommendation, including fulfilling the requirement to discuss such information in its Annual Reports.
Office of the Taxpayer Advocate The National Taxpayer Advocate should better identify in TAS's annual report what statistical data and sections of the report were or were not included in IRS's review. This should include a discussion of whether IRS found the information it reviewed to be valid or methodologically sound. (Recommendation 6)
Open
The Taxpayer Advocate Service (TAS) agreed with this recommendation. We will continue to monitor TAS's implementation of this recommendation.

Tax Cuts and Jobs Act: Future Rulemaking Should Provide Greater Detail on Paperwork Burden and Economic Effects of International Business Provisions

GAO-21-277
May 28, 2021
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3 Open Recommendations
Agency Affected Recommendation Status
Department of the Treasury The Secretary of the Treasury, in consultation with IRS, should ensure that relevant data are used to develop quantitative estimates of the benefits and costs for future regulations related to TCJA's international provisions, or any reviews Treasury or IRS may conduct for regulations already issued. (Recommendation 1)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Internal Revenue Service The Commissioner of IRS should use future regulatory activity and renewals of PRA authorizations to develop more specific paperwork burden estimates related to TCJA's international provisions. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Internal Revenue Service The Commissioner of IRS should, in light of the government wide regulatory review, identify ways to provide public comment opportunities for significant guidance documents when appropriate. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Tax Filing: Actions Needed to Address Processing Delays and Risks to the 2021 Filing Season

GAO-21-251
Mar 01, 2021
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7 Open Recommendations
1 Priority
Agency Affected Recommendation Status
Internal Revenue Service
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
The Commissioner of Internal Revenue should revise IRS's estimates for resolving its backlog of work from the 2020 filing season. (Recommendation 1)
Open
IRS disagreed with this recommendation. In February 2021, IRS said it continues to monitor and assess the 2020 filing season carryover paper inventory daily, and that it adjusts processing priorities based on constantly changing variables that affect the paper inventory backlog, such as social distancing requirements and shutdowns in functional areas due to reported positive COVID-19 tests. We agree that monitoring inventory levels is a useful management tool. However, the backlog of work includes more than paper inventory, such as millions of e-filed returns suspended for errors or potential identify theft. IRS addressed its unopened mail backlog in mid-December 2020, and is now in a position to better estimate the effort required to resolve the backlog of unprocessed returns, returns held for review due to errors or suspected identity theft, and taxpayer correspondence. Doing so would help IRS identify potential resource needs, including staffing, and provide taxpayers and stakeholders, including Congress, critical information about when IRS expects to process taxpayers' 2020 returns and deliver long overdue refunds.
Internal Revenue Service The Commissioner of Internal Revenue should track business refund processing, such as through IRS's weekly performance tracking. (Recommendation 2)
Open
IRS disagreed with this recommendation. In February 2021, IRS stated that it tracks, and management uses, information on the timeliness of business refund processing, and that a report to track business refunds will not be a useful mechanism for reducing interest on business refunds. We maintain that this recommendation is valid. During our review, IRS could not tell us the extent to which business tax refunds were delayed during the 2020 filing season because it does not monitor and report on this information. As a result, IRS does not know how well it is processing business returns with refunds, or the extent to which it will have to pay refund interest, which was $3 billion in fiscal year 2020. We will continue to monitor this issue.
Internal Revenue Service The Commissioner of Internal Revenue should conduct an assessment to comprehensively identify barriers taxpayers face to e-filing business-related returns. (Recommendation 3)
Open
IRS agreed with this recommendation and in February 2021 described the steps it planned to take to address it, including conducting an assessment to identify barriers to e-filing for business taxpayers. We will continue to monitor IRS's progress in addressing this recommendation.
Internal Revenue Service The Commissioner of Internal Revenue should, after completing the barrier assessment in recommendation 3, determine what actions IRS could take to address the barriers and implement those actions, as feasible. (Recommendation 4)
Open
IRS agreed with this recommendation and in February 2021 described the steps it planned to take to address it, including conducting an assessment to identify barriers to e-filing for business taxpayers. We will continue to monitor IRS's progress in addressing this recommendation.
Internal Revenue Service The Commissioner of Internal Revenue should identify and consider implementing actions to transition staff currently on weather and safety leave to active work status, as appropriate. This could include reassigning staff to other tasks that can be performed remotely. (Recommendation 5)
Open
IRS disagreed with this recommendation. In February 2021, IRS stated that it has taken all reasonable steps to identify work that can be made portable and have assigned it to employees that had previously been on weather and safety leave and could not report to IRS facilities due to their inclusion in medically certified high-risk categories. Shortly after providing this information, IRS recalled all employees that were on weather and safety leave to return to IRS offices in preparation for the start of the 2021 filing season. In March 2021, IRS officials stated that they continue to identify telework for employees, as appropriate, but did not provide further details. IRS's continued efforts to identify alternate work assignments for staff who cannot report to the office but are able to telework--such as performing administrative tasks, other operational functions, or training--will help ensure that IRS is positioned to meet its operational demands. We will follow-up with IRS to determine what additional actions it has taken.
Internal Revenue Service The Commissioner of Internal Revenue should identify and document all risks to the 2021 filing season; conduct a comprehensive risk assessment, including determining the likelihood of these risks occurring and potential impact of these risks on IRS's ability to carry out its mission-essential functions; and identify options to respond to each identified risk. (Recommendation 6)
Open
In February 2021, IRS agreed with this recommendation, but stated that it planned no further actions. IRS said that it had implemented actions to document risks to the 2021 filing season and had completed a risk assessment. For example, IRS stated that the Filing Season Readiness Executive Steering Committee had developed a risk register statement and corresponding strategies to address items that could impact the integrity of the 2021 filing season. After receiving our draft report, in January 2021, IRS provided us with several monthly reports describing the impact of COVID-19 on its filing season operations and its recovery efforts. According to IRS officials, these documents indicate that IRS considered some COVID-19-related risks to the 2021 filing season prior to October 2020 that it did not document in the filing season planning documents that it previously provided us. In addition, in February 2021, we followed up with IRS to obtain more information on its recent risk management efforts. We will continue to review the additional information IRS provided to determine if the agency's actions are sufficient to address this recommendation.

Tax Administration: Better Coordination Could Improve IRS's Use of Third-Party Information Reporting to Help Reduce the Tax Gap

GAO-21-102
Jan 14, 2021
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9 Open Recommendations
5 Priority
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should expedite final planning efforts and implement the expansion of IRS's capacity to allow for additional transcription of K-1 Schedules. (Recommendation 1)
Open
IRS neither agreed nor disagreed with this recommendation. Officials reported that IRS will continue the effort to plan for the expansion of IRS's capacity to allow for additional transcription of Schedules K-1 for partnerships and S-corporations. IRS reported that the ability to implement this recommendation will be based on the requirements, funding, resource availability, and agency prioritization. As long as IRS systems lack access to data from paper information returns with critical tax information about these entities, such as the Form 1065, Schedule K-1, IRS enforcement programs will face limitations in their ability to cost-effectively identify and select the cases for further review.
Internal Revenue Service
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
The Commissioner of Internal Revenue should research, evaluate, and develop potential recommendations to expand third-party information reporting to include more information on sole proprietor's income and expenses. (Recommendation 2)
Open
IRS neither agreed nor disagreed with this recommendation. IRS officials reported that IRS will further research and evaluate the tax administration benefits and taxpayer burdens of expanding third-party information reporting for sole proprietors' income and expenses. Further, upon conclusion of its research and evaluation, IRS will also prepare a briefing document for the Department of Treasury (Treasury) and offer its support in developing any recommendations that Treasury chooses to pursue. Without research into options to increase information reporting for sole proprietorships, IRS is missing an opportunity to help address a significant part of the tax gap.
Internal Revenue Service The Commissioner of Internal Revenue should evaluate characteristics of late information return filers to determine the effect of penalty assessment for late and incorrect information returns on third-party information reporting compliance. (Recommendation 3)
Open
IRS neither agreed nor disagreed with this recommendation. Officials reported IRS would conduct a research study to determine the effects of asserting penalties on late information return filers. IRS reported it would look at the behavioral impact of asserting the penalty, including trends on why filers choose to file late. IRS noted that the goal of the study would be to utilize the data to improve policy and determine if there are any gaps to encourage voluntary compliance. Without analyzing data it already has, IRS may be missing an opportunity to identify trends or patterns, such as repeated violations by particular parties or types of businesses, or common types of errors made by filers, which could lead to improved compliance with information return filing requirements.
Internal Revenue Service The Commissioner of Internal Revenue should reassess the risks described and recommendations made in its internal 2016 report related to information returns and identify potential new risks and recommendations as a result of changes to the tax administration environment. (Recommendation 4)
Open
IRS neither agreed nor disagreed with this recommendation. Officials reported that IRS would reassess the remaining risks in that report and create a working group to assist in identifying new opportunities to leverage use of information returns. Without reassessing the issues identified in the report and developing a timeline to implement the remaining recommendations, IRS may be missing an opportunity to help ensure that the risks are mitigated on a timely basis.
Internal Revenue Service The Commissioner of Internal Revenue should prioritize and develop a timeline for implementing the remaining recommendations from its internal 2016 report related to information returns, along with any newly identified recommendations. (Recommendation 5)
Open
IRS neither agreed nor disagreed with this recommendation. Officials reported that IRS will make a determination on any additional recommendations to implement based on the results of the reassessment of risks. Without reassessing the issues identified in the report and developing a timeline to implement the remaining recommendations, IRS may be missing an opportunity to help ensure that the risks are mitigated on a timely basis
Internal Revenue Service
Priority Rec.
Priority recommendations are those that GAO believes warrant priority attention from heads of key departments or agencies.
The Commissioner of Internal Revenue should revise the 2017 Information Returns Systems Modernization plans by evaluating changes in the environment, assessing risks to systems and programs, and detailing how the agency plans to address issues in the intake, processing, and use of information returns across business units. (Recommendation 6)
Open
IRS neither agreed nor disagreed with this recommendation. Officials reported that IRS will submit an Information Return System Modernization plan to Congress that leverages the 1099 Internet Platform required by section 2102 of the Taxpayer First Act as the foundation for its information return modernization efforts. As part of the agency's broader modernization effort, it is important that IRS can explain to Congress and other decision makers the critical need to modernize the information reporting system, as well as the proposed scope, schedule, and resource requirements needed to implement such a project . Without a plan that provides an overall picture of what IRS is investing in, it will be difficult for Congress and other decision makers to understand the funding needs, as well as the benefits that can be expected from such an investment. Because some of the costs being incurred by IRS today are for foundational modernization efforts, it is even more important that the agency develop a strategy explaining the long-term benefits expected from this work.
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