Tax Administration: IRS Should Continue to Expand Reporting on
Its Enforcement Efforts (31-JAN-03, GAO-03-378).
Reported declines in the rate at which the Internal Revenue
Service (IRS) audits (also referred to as "examines") individual
income tax returns have raised concerns that taxpayers may have a
false perception of the true level of IRS's tax enforcement
efforts. In addition, many observers are concerned these reported
declines may reduce taxpayers' motivation to voluntarily pay
their taxes. Because of these concerns, GAO was asked to review a
number of issues surrounding IRS's enforcement efforts. GAO
determined the trends in the percent of returns filed that are
audited (contact rate) compared with similar data on taxpayer
contacts through other enforcement programs for fiscal years 1993
through 2002. In addition, GAO reviewed whether IRS's reporting
on its enforcement programs should be expanded.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-378
ACCNO: A06002
TITLE: Tax Administration: IRS Should Continue to Expand
Reporting on Its Enforcement Efforts
DATE: 01/31/2003
SUBJECT: Audit reports
Income taxes
Tax administration
Tax returns
Taxpayers
Data collection
IRS National Research Program
IRS Document Matching Program
IRS Audit Program
IRS Math Error Program
IRS Nonfilers Program
******************************************************************
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GAO-03-378
Report to the Chairman, Subcommittee on Oversight, Committee on Ways and
Means, House of Representatives
United States General Accounting Office
GAO
January 2003 TAX ADMINISTRATION
IRS Should Continue to Expand Reporting on Its Enforcement Efforts
GAO- 03- 378
IRS*s often- cited audit rate has been declining for several years, as
shown below. However, the audit rate portrays only a portion of IRS*s
efforts to enforce tax laws and not all of those efforts have been
declining. For IRS*s three nonaudit enforcement programs, the contact
rates in 2002 compared to 1993, after year to year variations, declined
for one, essentially remained the same for one, and significantly
increased for one* math error. A complete math error contact trend is
unavailable because IRS did not capture one type of data on a substantial
number of contacts prior to 1997. For years where complete data are
available, IRS has not included all math errors in external reports. IRS
officials agreed that all types of errors are identified under the same
math error authority and should be similarly counted and reported.
IRS annually reports extensive data on audits but only limited, or no,
data on its other enforcement programs. This limited reporting does not
provide policymakers or taxpayers information on the full extent of IRS*s
enforcement efforts. To the extent that taxpayers do, as is widely
believed, take the level of enforcement into account when self- reporting
their tax obligations, the audit rate alone may mislead them. IRS
officials believe that more reporting is desirable and intend to report
readily available, but incomplete, information on nonaudit programs in
future reports.
IRS Enforcement Program Contact Rates, Fiscal Years 1993 through 2002.
Note: Data for revised math error contacts is not available for fiscal
years 1993 to 1996. The revised math error line above includes all math
error contacts by IRS for the relevant years. TAX ADMINISTRATION
IRS Should Continue to Expand Reporting on Its Enforcement Efforts
www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 378. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Michael Brostek at (202) 512- 9110 or BrostekM@ gao.
gov. Highlights of GAO- 03- 378, a report to the
Subcommittee on Oversight, Committee on Ways and Means, U. S. House of
Representatives
January 2003
Reported declines in the rate at which the Internal Revenue Service (IRS)
audits (also referred to as *examines*) individual income tax returns have
raised concerns that taxpayers may have a false perception of the true
level of IRS*s
tax enforcement efforts. In addition, many observers are concerned these
reported declines may reduce taxpayers* motivation to voluntarily pay
their taxes.
Because of these concerns, GAO was asked to review a number of issues
surrounding IRS*s enforcement efforts. GAO determined the trends in the
percent of returns filed that are audited (contact rate) compared with
similar data on taxpayer
contacts through other enforcement programs for fiscal years 1993 through
2002. In addition, GAO reviewed whether IRS*s reporting on its enforcement
programs should be expanded. GAO recommends that IRS
determine whether future reporting on its other enforcement programs can
be more complete and comparable to reporting on audits. GAO also
recommends that IRS correct underreporting of math error contacts. In
commenting on a draft of this
report, IRS agreed with our recommendations. It has already begun to
identify additional data to report on its enforcement programs.
Page i GAO- 03- 378 IRS Enforcement Reporting Letter 1 Results in Brief 2
Background 5 Scope and Methodology 7 Similarities and Differences among
IRS Enforcement Programs Depend on the Type of Audit 8 Enforcement Program
Contact Rates Did Not Follow Consistent
Patterns 16 Limited Evidence Suggests IRS Enforcement Programs Do Increase
Compliance; No Measures Available on Enforcement Program Burden 21 IRS*s
Public Reporting on Its Enforcement Programs Is Incomplete 22 Conclusions
28 Recommendations to the Acting Commissioner of Internal
Revenue 30 Agency Comments 30 Appendix I Development of the Math Error
Program 31
Appendix II Use of Information Returns and Document Matching at IRS 33
Appendix III Individual Audit and Other Enforcement Program Data 38
Appendix IV Soft Notices and Voluntary Compliance Agreements 49
Appendix V Comments from the Commissioner of Internal Revenue 52 Contents
Page ii GAO- 03- 378 IRS Enforcement Reporting Appendix VI GAO Contacts
and Staff Acknowledgments 54 GAO Contacts 54 Staff Acknowledgments 54
Related GAO Products 55
Tables
Table 1: Operational Dimensions of IRS Enforcement Contacts 12 Table 2:
Data Published on IRS Enforcement Programs for Individual Taxpayers,
Fiscal Year 2001 23 Table 3: Legislative Authority on Math Error
Provisions for Individual Tax Returns 31 Table 4: Major Legislation
Affecting the Information Returns Program 34 Table 5: Major Types of
Information Returns Filed for Tax Years 1983 and 2000 36 Table 6: Number
and Rates of Individual Audit and Other Enforcement Contacts, Fiscal Years
1993 through 2002 38 Table 7: Number and Rates of Individual Audit and
Document Matching Contacts by Income Level, Fiscal Years 1993 through 2002
42 Table 8: Number and Rates of Individual Audits by Type of Audit
and Income Level, Fiscal Years 1993 Through 2002 46 Table 9: Average
Direct Staff Hours by Type of Audit and For Document Matching Cases,
Fiscal Years 1993 through 2002 48 Figures
Figure 1: Average Direct Staff Hours by Type of Audit and for Document
Matching Cases, Fiscal Years 1993 through 2002 14 Figure 2: IRS
Enforcement Contact Rates, Fiscal Years 1993
through 2002 17 Figure 3: IRS Individual Audit and Document Matching
Contact Rates by Income Level, Fiscal Years 1993 through 2002 19 Figure 4:
Individual Audit and Other Enforcement Contacts, Fiscal Years 1993 through
2002 40 Figure 5: Number of Individual Audit and Document Matching
Contacts by Income Level, Fiscal Years 1993 through 2002 44
Page iii GAO- 03- 378 IRS Enforcement Reporting Abbreviations
EmTRAC Employer- designed Tip Reporting Alternative Commitment GAO General
Accounting Office IRC Internal Revenue Code IRS Internal Revenue Service
MSA Medical Savings Accounts NRP National Research Program RRA IRS
Restructuring and Reform Act of 1998 SSA Social Security Administration
TIN Tax Identification Numbers TRAC Tip Reporting Alternative Commitment
TRDA Tip Rate Determination Agreement
Page 1 GAO- 03- 378 IRS Enforcement Reporting January 31, 2003 The
Honorable Amo Houghton
Chairman, Subcommittee on Oversight Committee on Ways and Means House of
Representatives
Dear Mr. Chairman: The United States tax system is based on self-
reporting and voluntary compliance by taxpayers. The Internal Revenue
Service (IRS) uses various enforcement programs to check the accuracy of
tax returns and contacts taxpayers if problems are found. IRS makes the
contacts through four major enforcement programs that have existed for
many years.
Math Error Program: While tax returns are being processed, this program
uses IRS computers to identify and generate notices to contact taxpayers
about obvious errors such as mathematical errors, omitted or inconsistent
data, or other inconsistencies on the basis of other data reported on the
return or to IRS. These errors must be corrected to process a tax return.
Document Matching Program: This program matches information on selected
tax issues (usually income) reported on tax returns by individual
taxpayers and reported on information returns by employers, banks, and
other payers of income. Document matching also matches information returns
(schedule K- 1) filed by pass- through entities* such as partnerships,
trusts and S- corporations* to individual tax returns. IRS may contact
taxpayers about any reporting discrepancies.
Nonfiler Program: This program identifies and contacts potential
nonfilers of tax returns by using data from information returns and
previously filed income tax returns. The contacts can ask for the missing
return or offer an IRS- generated return to substitute for the missing
return.
Audit Program: Also referred to as *examination,* under this program, an
IRS auditor checks compliance in reporting income, deductions, credits and
other issues on tax returns, as well as in paying the correct tax
liability. Audit contacts can be made through correspondence or in face-
to- face meetings with taxpayers at an IRS office or a taxpayer location.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 03- 378 IRS Enforcement Reporting Widely reported substantial
declines in the rate at which IRS audits income tax returns have triggered
concern that the declines could reduce
taxpayers* motivation to voluntarily pay their taxes. Many view IRS*s
enforcement programs as critical support to our voluntary system* they
help provide taxpayers with confidence that their friends, neighbors, and
business competitors are paying their share of taxes.
Because of your concerns that the declining audit rate may give taxpayers
a misleading perception of the true level of IRS*s tax enforcement efforts
and encourage some taxpayers not to comply, you requested that we review a
number of issues related to how IRS enforces tax laws and publicly reports
on those efforts. This report
compares IRS*s enforcement programs in terms of their legal authority,
and operational characteristics (including IRS staff time), and describes
what is known about taxpayer perceptions of the enforcement programs.
summarizes enforcement contact trends overall and by taxpayer income
and their causes from 1993 to 2002. determines what IRS knows about the
effect of its enforcement programs
on individual taxpayer compliance and the burdens taxpayers experience
when contacted under the programs. assesses whether and, if so, how IRS
should expand reporting on its
enforcement programs. To address these objectives, our work included
interviewing IRS officials and reviewing documents on the similarities and
differences across IRS enforcement programs. To identify trends in IRS*s
enforcement programs including trends by taxpayer income levels, we
analyzed IRS data from fiscal years 1993 through 2002. 1 To analyze
impacts on taxpayers, and
tradeoffs of reporting more data about the enforcement programs, we
interviewed IRS officials and reviewed any available research on how the
programs affect individual taxpayers* compliance and burden. (See our
scope and methodology section for details on our approach.) In addition,
you asked us to analyze trends in the number of contacts by the specific
programs. Appendix III provides this information.
Whether audits and other enforcement programs vary from each other depends
on a number of factors. With regard to legal characteristics,
1 The fiscal 2002 data on number of tax returns filed by individuals had
not been finalized before we issued the report. Results in Brief
Page 3 GAO- 03- 378 IRS Enforcement Reporting audits and other enforcement
programs are all authorized to contact taxpayers about apparent
noncompliance and to determine and adjust
taxpayers* tax liability. However, audits have the broadest authority to
detect possible noncompliance, significant powers to obtain information,
and the most restrictions on how IRS is to interact with taxpayers. With
regard to operational characteristics, the extent to which audits are
operationally similar to or different from other enforcement programs
varies depending on the type of audit. In general, audits done in taxpayer
locations and IRS offices are not similar operationally to other
enforcement programs. Audits done through correspondence with the
taxpayer, while still different, are more operationally similar to the
other programs. IRS officials were unaware of any research on whether
taxpayers perceive differences among IRS*s enforcement programs. However,
looking at audits and other enforcement programs from the taxpayers*
perspective, IRS officials and officials we interviewed who represent
taxpayers believe that taxpayers may not perceive distinctions among many
of the enforcement programs.
In fiscal years 1993 through 2002, the enforcement program contact rates
often did not follow consistent patterns from one program to another or
from year to year within programs. 2 Comparing just fiscal years 1993 to
2002, the contact rates for the audit and document matching programs
dropped 38 percent and 45 percent, respectively, while the nonfiler
program contact rates stayed about the same. Only the math error program
had a contact rate significantly higher in 2002 than in 1993. However,
this growth covers only a portion of math error contacts because data on
one type of math error contact does not exist for years before 1997, and
have not been reported by IRS as math errors. These unreported math error
contacts total about 2 million annually. IRS officials agreed that these
other contacts should be counted and reported as math errors. Excluding
these contacts, the math error contact rate was 33 percent higher in 2002
than in 1993. For individuals, audit rates for taxpayers in higher and
middle- income ranges were significantly lower in 2002 than in 1993, while
the rate for the lowest income range was virtually the same in 2002 and
1993. Document matching program contact rates ended significantly lower in
2002 than 1993 for taxpayers in all three
2 This report refers to the portion of tax returns audited by IRS as the
audit contact rate. Similarly, the portion of tax returns for which IRS
contacts taxpayers about possible noncompliance is the contact rate for
the math error, document matching, and nonfiler programs.
Page 4 GAO- 03- 378 IRS Enforcement Reporting income ranges. Income data
for the contact rates in the math error and nonfiler programs were not
available.
The divergent trends among the enforcement programs in their contacts with
taxpayers are attributable to several factors, including statutory changes
that expanded the types of issues IRS could address with nonaudit
programs, declines in IRS enforcement staffing, and priorities in using
staff. For example, the rise in math error contacts is at least partly
attributable to a 1996 statutory change that enabled IRS to check hundreds
of thousands of missing or invalid social security numbers through the
math error program rather than audits. Declines in the audit program are
generally attributable to statutory changes that reduced the availability
of IRS staff to do audits and increased the time needed to do audits. In
addition, declines in the number of staff assigned to work enforcement
cases coupled with the priority IRS gives to staffing the math error
program* because such errors must be resolved before tax returns can be
processed* have contributed to declines in contacts with taxpayers in the
audit, nonfiler, and document matching programs. IRS has limited evidence
on the effects of its enforcement programs on taxpayer compliance and no
evidence on the burdens taxpayers experience when contacted under the
programs. Although widespread agreement exists that enforcement programs
are critical to ensuring voluntary compliance, IRS officials only
identified one study that attempted to measure the effect of individual
enforcement programs on compliance. This IRS study, using various data for
1982 through 1991, estimated that the audit and document matching programs
had some positive effects on whether taxpayers filed returns and reported
relevant information. No measures are available on the burdens placed on
individual taxpayers due to IRS*s enforcement contacts and IRS does not
currently plan to start any studies to measure these burdens. IRS*s annual
public reporting on its enforcement programs for individual
taxpayers does not provide a complete perspective on its efforts to
enforce the tax laws. IRS annually reports extensive data on audits but
limited or no data on other enforcement programs. This limited reporting
does not provide policymakers or taxpayers information on the full extent
of IRS*s enforcement efforts. To the extent policymakers and taxpayers
focus on audits due to IRS*s limited reporting, they may not understand
that long- term declines in the audit rate are in part due to the movement
of some tax issues from audits into other enforcement programs, and that
these programs contact far more taxpayers about compliance issues than
does the audit program. Of two options for expanding reporting that we
Page 5 GAO- 03- 378 IRS Enforcement Reporting identified, reporting more
data on each enforcement program would avoid several disadvantages of
combined reporting under an expanded definition of an audit. Expanding the
definition of an audit would combine some
enforcement activities that are so disparate* such as audits conducted at
taxpayer locations of complex issues versus simple corrections of
inadvertent math errors* that the consolidated reporting could be
misleading. IRS officials plan to expand public reporting for fiscal year
2002 on IRS*s major enforcement programs to the extent that data are
available and cost effective to extract. They do not plan to determine
whether IRS can cost effectively develop additional data to enable future
reporting to more completely represent program results and to facilitate
program comparisons.
We are recommending that IRS determine whether data can be cost
effectively developed to make future reporting on its other enforcement
programs more complete and comparable to reporting on audits. We also
recommend that IRS correct underreporting of math error contacts. In
commenting on a draft of our report, IRS agreed with our recommendations
and has already begun to identify additional data to report on its
enforcement programs. Each year, IRS screens all individual tax returns
and selects a small
percentage in which to contact taxpayers about potential noncompliance.
Prior to doing automated checks of tax returns, IRS had relied on its
audit program to contact taxpayers about apparent inaccuracies in
reporting income, deductions, and other issues on their tax returns. For
example, to verify interest income or dependent exemptions claimed by
taxpayers, IRS auditors had to contact taxpayers, request and review
documentation. Thus, if IRS audited the returns of 5 percent of all
taxpayers, it could at most check on the accuracy of interest income for 5
percent of taxpayers.
Since the 1970s, IRS*s ability to verify some items on individual returns
expanded as IRS*s capacity to use automated processes grew and as Congress
enacted laws requiring third parties (like banks, mortgage finance firms,
etc.) to provide information returns to taxpayers and IRS on income paid.
These steps enabled IRS to more universally and efficiently check taxpayer
compliance for those tax issues covered by information returns. For
example, with the initiation of information returns for interest income
and the development of IRS*s automated capacity, IRS began to check
whether every taxpayer for whom it had received an applicable information
return had accurately reported that interest on their tax
return. Background
Page 6 GAO- 03- 378 IRS Enforcement Reporting As a result, for some wage
earners who claim no deductions, IRS can review the accuracy of all, or
nearly all, items reported on their tax return
to the extent that third parties correctly filed all information returns.
In these cases, IRS effectively receives information that should be in
taxpayers *books and records* and no longer needs to use auditors to
obtain such information from taxpayers* records for these selected issues.
Concurrent with these expansions in IRS*s ability to check the accuracy of
certain issues on taxpayers* returns, the number of taxpayer returns that
IRS audited began to decline. For example, between fiscal years 1981 and
1992, the number of document matching contacts rose from 1.2 million to
3.8 million and the number of audits dropped from 2.5 million to 1.1
million.
Several GAO reports have discussed IRS audits, other enforcement contacts,
and taxpayer burden as follows:
In 1996, we reported that audit rates fell from 1988 to 1993 and then
rose to a high of 1.67 percent in 1995. 3 In 2001, we reported that audit
rates had steadily dropped from 1996 to 2000, declining to 0.49 percent. 4
During 2000, we reported that IRS made almost 10 million nonaudit
contacts of taxpayers in 1998 through about 6 million math error notices,
2 million document matching notices, and 2 million soft notices. We
recommended that IRS analyze the data collected for each of the three
major nonaudit contact programs to improve taxpayer compliance and
taxpayer service. 5 During 2000, we reported on IRS*s efforts to
estimate taxpayer compliance
burden for prefiling, filing, and postfiling activities. We found that IRS
was developing two models that, when combined, should provide more
reliable estimates of compliance burden for wage earners. 6 3 U. S.
General Accounting Office, Tax Administration: Audit Trends and Results
for
Individual Taxpayers, GAO/ GGD- 96- 91 (Washington, D. C.: Apr. 26, 1996).
4 U. S. General Accounting Office, IRS Audit Rates: Rate for Individual
Taxpayers Has Declined But Effect on Compliance Unknown, GAO- 01- 484
(Washington, D. C.: Apr. 25, 2001).
5 U. S. General Accounting Office, Tax Administration: IRS* Use of
Nonaudit Contacts,
GAO/ GGD- 00- 7 (Washington, D. C.: Mar. 16, 2001). 6 U. S. General
Accounting Office, Tax Administration: IRS Is Working to Improve Its
Estimates of Compliance Burden, GAO/ GGD- 00- 11 (Washington, D. C.: May
22, 2000).
Page 7 GAO- 03- 378 IRS Enforcement Reporting To compare audit and other
enforcement programs, we obtained information on their legal and
operational characteristics. For legal
authority, we reviewed the Internal Revenue Code (IRC) and IRS documents.
For program operations, we reviewed IRS documents and interviewed
responsible IRS officials to understand how each program works. For the
average time spent on each type of contact, we analyzed available IRS data
for fiscal years 1993 through 2002. For how taxpayers perceive IRS*s
enforcement programs, we interviewed IRS officials; reviewed tax research
studies and press articles; and contacted four large national
organizations representing attorneys, certified public accountants,
enrolled agents, and tax preparers, as well as the largest tax return
preparation firm, and IRS*s national taxpayer advocate.
To summarize trends in the number and rate of individual taxpayer audits
and other enforcement contacts in total and by taxpayer income, we
analyzed available IRS data from fiscal year 1993 to fiscal year 2002 on
each type of contact. To compute the audit contact rate, we used IRS*s
method, which equals the proportion of IRS audits closed in a fiscal year
compared with returns filed in the previous calendar year. IRS has not
stated a method for computing math error, document matching, and nonfiler
rates. For the document matching and nonfiler programs, we compared the
proportion of notices sent in a fiscal year to return filings in the
previous year because these contacts generally occur in the year after a
return is filed. For the math error program, we based the contact rate on
the proportion of math error notices to the returns filed in that year
because the notices are sent to taxpayers as IRS processes tax returns.
For the math error, document matching, and nonfiler programs, we based the
contact rate on the number of initial notices sent to taxpayers rather
than closures because (1) it is the broadest measure of IRS*s enforcement
efforts with taxpayers and (2) the math error and document matching
programs usually conclude the contact with the taxpayer within a few
months after the initial notice is sent. Nonfiler contacts can take
considerably longer to close, making it difficult to know which tax year
to use in computing a contact rate. We used the number of initial notices
so that the nonfiler program could be measured on a consistent basis with
the document matching and math error programs. To understand the
reasons for the trends, we analyzed our previously issued reports and IRS
reports and interviewed IRS staff for each enforcement program. To
determine how audit and other enforcement programs affect individual
taxpayer compliance and burden, we obtained and reviewed available data
such as IRS studies and reports, our previous reports, and other research.
We also interviewed responsible IRS officials. Scope and
Methodology
Page 8 GAO- 03- 378 IRS Enforcement Reporting To assess whether IRS should
expand reporting on its enforcement efforts, we analyzed the types of
enforcement data already publicly reported on an annual basis by IRS. We
also analyzed the tradeoffs for two options we
identified* expanding the definition of audit to include the other
enforcement programs and reporting more data on each program. We used much
of the information from the previous objectives and interviews with
IRS officials. For all objectives, our work focused on the four major
enforcement programs identified by IRS* math error, document matching,
nonfiler, and audit. We attempted to verify the completeness and accuracy
of IRS*s data but could not reconcile all differences given time
constraints. As a result, we either did not report some data or disclosed
limitations in the data being reported. Further, in analyzing audit and
document matching rates by income level, we did not adjust the income
levels for the effects of inflation over the 1993 to 2002 period because
detailed data on taxpayer income was not available during the timeframes
for the assignment. All data used in the report are final except for the
number of tax returns filed in 2002. Because this number is preliminary,
the final math error contact rate for fiscal year 2002 may differ somewhat
from what we report. In addition, you asked us to analyze two newer IRS
efforts* voluntary compliance agreements and soft notices. Appendix IV
describes the two newer efforts.
We did our work at IRS*s national office in Washington, D. C., and offices
in New Carrolton, Maryland, and Atlanta, Georgia, between August 2002 and
December 2002 in accordance with generally accepted government accounting
standards. We requested comments on a draft of this report from IRS (see
app. V).
Whether audits and other enforcement programs vary from each other depends
on a number of factors. With regard to legal characteristics, audits and
other enforcement programs are all authorized to contact taxpayers about
apparent noncompliance and to determine and adjust taxpayers* tax
liability. However, audits have the broadest authority to detect possible
noncompliance, significant powers to obtain information, and the most
restrictions on how IRS is to interact with taxpayers. With regard to
operational characteristics, the extent to which audits are operationally
similar to or different from other enforcement programs varies depending
on the type of audit. Audits done in taxpayer locations and IRS offices
are not similar operationally to other enforcement Similarities and
Differences among IRS Enforcement Programs Depend on the Type of Audit
Page 9 GAO- 03- 378 IRS Enforcement Reporting programs and audits done
through correspondence with the taxpayer, while still different, are more
operationally similar to some of the other
programs. IRS officials were unaware of any research on whether taxpayers
perceive differences among IRS*s enforcement programs. However, looking at
audits and other enforcement programs from the taxpayers* perspective, IRS
officials and officials we interviewed who represent taxpayers believe
that taxpayers may not perceive distinctions among many of the enforcement
programs.
In a general sense, the IRC provisions for enforcement are similar in that
they authorize IRS to contact taxpayers about apparent noncompliance and
to determine and adjust taxpayers* tax liability. However, the IRC
provisions grant IRS the authority to review all matters that may affect a
taxpayer*s tax liabilities under audits but only certain specified tax
issues under other enforcement programs. The IRC also establishes more
rules* including significant powers to obtain information as well as
restrictions on those powers* that govern the nature of audit contacts
with taxpayers than for the other programs.
The IRC does not explicitly limit the tax issues to be covered by an
audit, unlike for the other enforcement programs. Under the authority of
section 7602, audits can cover any issue on a tax return, including those
that the
other programs cover. 7 In contrast, the IRC specifies the scope of legal
authority for the three other enforcement programs. For example, after
five statutory expansions since 1976, math error authority 8 now covers 11
tax issues (see app. I). Document matching* which grew primarily through
the 1980s as Congress authorized more information reporting* now covers
over 20 types of individual income as well as certain tax credits and
deductions (see app. II). 9 The IRC also specifically authorizes
7 For example, an audit might address unreported income, which is the
focus of document matching, because document matching can only verify
individual income reported on information returns. According to IRS,
information returns only report 80 percent of all
individual income reported on tax returns. 8 IRC sec. 6213 grants math
error authority for issues such as calculation errors, entries that are
inconsistent with or exceed statutory limits, various omissions of
information, or incorrect use of an IRS table. 9 IRC sec. 6041, 6044,
6045, 6049, 6050, and 6051, among others, authorize information reporting
to help identify a discrepancy on individual income such as wages,
interest, dividends, pension distributions, and gross proceeds from stock
sales. Legal Characteristics:
Audits Have the Broadest Scope, Significant Powers to Obtain Information,
and the Most Detailed Restrictions
Page 10 GAO- 03- 378 IRS Enforcement Reporting the nonfiler program to
pursue unfiled tax returns that should have been filed. 10 The IRC also
establishes more rules governing IRS*s contacts with individual taxpayers
under the audit program than it does for the math
error, document matching, and nonfiler programs. These rules give IRS
significant powers to obtain information needed to determine an
individual*s tax liabilities when doing an audit and, in turn, places
restrictions on the use of those powers. If resolving issues raised under
the other enforcement programs requires that IRS auditors become involved,
the contacts with taxpayers become audits subject to these greater powers
and restrictions. For example, if a taxpayer who receives a math error
notice files a claim for IRS to abate the tax assessment, IRS could audit
that claim. Similarly, if a taxpayer responds to a document matching
notice with materials that cannot be readily and immediately used to
settle the discrepancy, the case could be referred to audit staff.
The greater powers that IRS has under audit compared with the other
programs include the authority to examine books and records and take
testimony for purposes of determining the tax liability of a tax return.
IRS also has the power to use a summons to compel taxpayers and third
parties to provide books and records, and to enter premises to examine
objects subject to taxation. 11 Given these greater powers, the law also
places more restrictions on
audits to protect taxpayer rights. 12 For example, the law restricts IRS
from doing unnecessary audits or generally doing more than one inspection
of taxpayers* books for each tax year. The law also governs the time and
place of an audit and burden of proof on IRS. In addition, the Internal
Revenue Service Restructuring and Reform Act (RRA) of 1998 (P. L. 105-
10 IRC sec. 6020 grants this authority to IRS and allows IRS to prepare a
return for a taxpayer who did not file as required and process that return
to assess taxes owed. 11 IRC sections 7602 through 7606 and 7609 grant
these powers. 12 IRC sections 7602, 7605, 7609, and 7491 address these
restrictions.
Page 11 GAO- 03- 378 IRS Enforcement Reporting 206) added several
requirements, such as informing taxpayers of their rights during audits.
13 On the other hand, RRA also added a provision that creates a legal
similarity for all four enforcement programs because it affects any IRS
employee, including those making audit or nonaudit contacts. Section 1203
of RRA lays out the conditions under which any IRS employee is to be fired
for any of 10 specific acts or omissions. Many of these conditions involve
contacts with taxpayers* such as harassing taxpayers or taxpayer
representatives, violating their civil rights, or threatening to audit a
taxpayer for personal gain. These restrictions were intended to protect
taxpayers in their interactions with IRS.
Another legal provision creates a similarity between audits and two of the
three other programs. Except for the math error program, when IRS proposes
a change in taxpayers* liabilities, it is required to send a notice 14
informing taxpayers of their rights, such as the right to appeal
additional
taxes that IRS proposes. The IRC does not provide taxpayers a right to
appeal assessments created under math error authority because that
authority generally applies to obvious errors made by taxpayers on their
returns. However, IRS informs taxpayers receiving a math error notice that
they may file a claim to ask IRS to abate (reduce) the tax assessment if
they believe IRS erred.
The extent to which audits are operationally similar to or different from
other enforcement programs varies depending on the type of audit. Compared
with other enforcement programs, audits done in taxpayers* locations or
IRS offices are more likely to deal with multiple and complex issues,
require more skill and judgment by IRS employees, require a greater number
of interactions with taxpayers, and take more IRS staff time.
Correspondence audits also tend to differ from other enforcement programs
in these operational characteristics but to a lesser degree, and in some
cases correspondence audits and document matching contacts with
13 The Restructuring Act also restricted the audit technique that can be
used to identify unreported income; requires IRS to explain taxpayer
rights including the right to be represented during audits; requires IRS
to disclose the general criteria for why the return
was selected for audit; and restricts the ability to summon a third party
for an audit. 14 Publication 1 (Your Rights as a Taxpayer) explains the
rights that taxpayers have in contacts with IRS. Operational
Characteristics: Audits at IRS Offices or Taxpayer Locations Differ the
Most from Other Enforcement Programs
Page 12 GAO- 03- 378 IRS Enforcement Reporting taxpayers can be very
similar in these characteristics. Table 1 provides an overview of key
operational dimensions across the enforcement programs.
Table 1: Operational Dimensions of IRS Enforcement Contacts Contact What
triggers the contact?
How many contacts occur between IRS and the taxpayer?
How much skill and judgment is required by IRS staff? When is the initial
contact
sent to the taxpayer?
Audits computer analysis of potentially noncompliant returns
referrals from inside or outside IRS
projects on specific areas of known noncompliance
likely requires multiple exchanges via notices/ letters, telephone, and/
or face- to- face meetings
skilled review of simpler issues and more sophisticated analysis of
complex issues
usually within 1 year after the return is filed but may occur later as
long as IRS finishes the audit within 3 years after the return is filed
Document Matching computer identification of error
based on information received from third parties on income paid
one notice from IRS and possible exchanges via letters or telephone
some skill/ judgment within 1 year after the return was filed
Non- filer computer identification of those who did not file or who
stopped filing
referrals from inside or outside IRS one notice from IRS
and probable exchanges via letters, telephone, or meetings
some skill/ judgment usually within 1 year after the return was to be
filed
Math Error computer identification of error using taxpayer information on
their tax returns or forms
one notice from IRS little skill/ judgment as part of the initial
processing for the tax return
Source: GAO analysis. Note: Of the three types of audits, the simplest
usually covers one to two tax issues handled by a lower- graded auditor
and correspondence. More complex audits are done by meeting with taxpayers
in IRS field offices. The most complex audits are done through field
visits to taxpayer locations.
Reviewing these operational dimensions helps highlight similarities and
differences across the four types of enforcement.
Contact triggers: All enforcement contacts use computers to identify a
potential compliance issue. However, audits are more likely to be
triggered by other means such as a special compliance project or referrals
from inside or outside of IRS.
Number of contacts: Once any potential compliance issues are found, the
fewest contacts with taxpayers to resolve the issues are likely under the
math error and document matching programs because they have relatively
simple issues. Correspondence audits might need more than one contact,
depending on the complexity of the issue( s) being audited and taxpayers*
responses. The number of contacts in the nonfiler program can vary
depending on whether taxpayers respond to an IRS notice by filing a
Page 13 GAO- 03- 378 IRS Enforcement Reporting return, or explaining why a
return was not required. 15 Some may not respond, possibly leading IRS to
send a second notice or create a
substitute return and send it to that taxpayer. Audits at IRS offices or
taxpayer locations are likely to have the most contacts with taxpayers
through meetings, notices, or the telephone because they tend to cover
several, more complex issues.
IRS staff skill and judgment: Audit contacts* especially those done in
IRS offices or in taxpayer locations* require the most staff skill and
judgment to analyze taxpayers* testimony and books and records. Being more
automated and usually dealing with simpler issues, other enforcement
programs rely on less staff skill and judgment. Document matching staff
might have to analyze taxpayers* explanations for why they do not owe more
tax but are to refer the case to the audit program if an
explanation requires detailed analysis or includes books and records. The
nonfiler program requires limited skill and judgment when automated
processes send the notices or generate substitute returns. More skill and
judgment is required when IRS staff manually create substitute returns or
when taxpayers respond to a notice by saying that they do not have to file
a return.
Timing of initial contact: Math error contacts are made as the return is
being processed and identify errors that must be corrected to finish
processing the return. Document matching and nonfiler contacts usually
occur within 1 year after the return is filed or is to be filed. Audits
usually start within 1 year after a return is filed but can start later as
long as IRS finishes the audit within 3 years after the return is filed.
Another operational characteristic is the average time spent by IRS staff.
Figure 1 shows that audits use more staff time per case than document
matching contacts. 16 For fiscal years 1993 through 2002, the staff time
ranged from roughly an hour per document matching case to up to
30 hours per field audit. (see Table 9 in app. III for details.) IRS does
not separately track the time spent on math errors from the rest of the
returns filing process or on nonfilers from other work done by collection
staff.
15 Taxpayers are not always required to file a tax return such as when
their income is too low. 16 Document matching staff time includes the time
to resolve discrepancies before and after
contacting taxpayers.
Page 14 GAO- 03- 378 IRS Enforcement Reporting Figure 1: Average Direct
Staff Hours by Type of Audit and for Document Matching Cases, Fiscal Years
1993 through 2002
Note: Fiscal year 2002 data are estimated.
Looking across all of these operational dimensions in general, audits that
take place in IRS offices or in taxpayer locations differ the most from
other enforcement programs. They differ primarily because they are more
likely to deal with multiple complex tax issues, require more skill and
judgment by IRS employees, require a greater number of interactions with
taxpayers, and take more IRS staff time. Although correspondence audits do
differ from other enforcement programs on these characteristics, they do
not differ as much from other enforcement programs as do the audits in
IRS field offices or taxpayer locations. The closest similarity between
correspondence audits and the other programs is with the documentmatching
program. In comparison to the document matching program, correspondence
audits in some cases may deal with about the same number of issues, have
the same number of interactions with taxpayers, and require similar skill,
judgment, and time on the part of IRS staff. Correspondence audits are
less similar to contacts under the math error and nonfiler programs than
to document matching. Math error contacts
Hours 0 5
10 15
20 25
30 35
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Year
Field audit Office audit Correspondence audit Document matching
1 2
Source: GAO analysis of IRS data.
Page 15 GAO- 03- 378 IRS Enforcement Reporting deal with straightforward
issues that must be corrected as a return is processed as opposed to
contacting the taxpayer up to one year later
about issues in the return. Nonfiler contacts deal with taxpayers who have
not filed a return at all as opposed to seeking to correct issues related
to a filed return. In addition to the four major enforcement programs,
starting in the mid1990s,
IRS created two new programs intended to help individual taxpayers file
accurate tax returns. IRS sends so- called *soft notices* on duplicate
claims for dependent exemptions and missing self- employment tax
reporting. The soft notices do not require taxpayers to take action but
are intended to educate them about the potential errors and encourage them
to correct their returns, if necessary. The other new program is the
voluntary compliance agreements program. These agreements are negotiated
with certain employers with the goal of increasing their employees*
compliance in reporting tip income. As discussed in appendix IV, while
these programs attempt to improve compliance, they have
significant differences from the four major enforcement programs and IRS
has little data on their use. However, IRS was able to provide us with
data that it sent taxpayers 1.2 million soft notices on duplicate
dependent claims in 2002.
IRS officials were not aware of any research, and our search of the tax
literature and press did not uncover research, on whether taxpayers
perceive distinctions between audits and other enforcement programs. Of
the four major enforcement program contacts, IRS officials said that they
could see how some taxpayers might view two types of contacts*
document matching and correspondence audits* as similar in that both tend
to cover one or two tax issues that are fairly simple, contact taxpayers
through the mail, and give taxpayers the same appeal rights. Otherwise,
these officials did not see how taxpayers could view the enforcement
contacts as similar, especially the math error contacts.
Although they had not surveyed taxpayers, officials we interviewed from
six groups that represent taxpayers or help prepare their tax returns
believed that many individuals perceive no distinction among the programs.
For example, one representative attributed this to the conclusion that
taxpayers view all IRS notices as stating the same thing* that the
taxpayer owes more taxes. No Research Identifies
Whether Taxpayers Perceive Distinctions in Enforcement Programs but
Officials Believe That Distinctions May Not Be Made
Page 16 GAO- 03- 378 IRS Enforcement Reporting From fiscal years 1993
through 2002, the rates for the four enforcement programs often did not
follow consistent patterns from one program to
another or from year to year within programs. Comparing just 1993 with
2002, the contact rates for two programs* audits and document matching*
were significantly lower, the rate for math errors was significantly
higher, and the rate for nonfilers was essentially the same. By taxpayer
income level, the audit rate for higher and middle income taxpayers
generally declined over the 10- year period* with the sharpest
declines for higher income taxpayers. The rate for the lowest income
taxpayers increased sharply between 1993 and 1995 and then generally fell,
ending virtually the same as in 1993. The document matching contact rate
by income class followed very similar patterns with the rates for all
income levels dropping over the 10- year period. The enforcement contacts
increased or decreased because of several reasons, including statutory
changes, staffing declines, and priorities in the use of staff among the
programs.
As figure 2 shows, the math error program contact rates rose or fell from
year to year; however, it*s the only enforcement program that had a
significantly higher contact rate in fiscal year 2002 than in 1993. This
is true even without counting certain math error contacts for which IRS
lacks data over the 10- year period. Using only the math error count,
which is consistent throughout the 10 years, the math error contact rate
rose 33 percent (from 3.59 percent to 4. 79 percent). Document matching
contact rates went down and up at various times but ended 45 percent lower
(from 2.37 percent to 1.30 percent) in 2002 compared to 1993. The nonfiler
rates also went up and down but ended in 2002 about where they were in
1993. Comparing 1993 to 2002, the audit contact rate dropped 38 percent
(from 0.92 percent to 0.57 percent), even though it rose significantly
between 1993 and 1995. Over the 10 years, the math error rate exceeded the
rate for each of the three other programs, and the audit rate was the
lowest rate, except in fiscal years 1995, 1996, and 1997. The trends
in the number of contacts in all four programs generally follow the trends
in the rates. Appendix III provides details about the contact numbers and
rates for all four programs. Enforcement Program
Contact Rates Did Not Follow Consistent Patterns
Enforcement Program Contact Rates Varied from Program to Program and Often
from Year to Year within Programs
Page 17 GAO- 03- 378 IRS Enforcement Reporting Figure 2: IRS Enforcement
Contact Rates, Fiscal Years 1993 through 2002
Notes: The math error (revised) line includes math error contacts from
masterfile notices that IRS*s reports had excluded. Data on such math
errors were not available prior to fiscal year 1997. The figure does not
include additional contacts for math errors related to the rate reduction
credit during 2002.
Fiscal year 2002 data is estimated. The trend line in Figure 2 shows a
revised math error contact rate that includes masterfile 17 notices IRS
had been sending throughout this period but had not been reporting as math
errors. In data made publicly available on math error contacts, 18 IRS had
excluded roughly 2 million masterfile
17 The masterfile is IRS*s historical record of transactions involving
each taxpayer*s account. 18 IRS letter to respond to questions from the
Senate Finance Committee, March 26, 2001.
Rate (percent) 0 1
2 3
4 5
6 7
8 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Year
Math error Document matching Audit Math error (revised)
Nonfiler Source: GAO analysis of IRS data.
Page 18 GAO- 03- 378 IRS Enforcement Reporting math error contacts
annually for fiscal years 1997 through 2002. 19 When included, the math
error contact rate increases (e. g., from 4.97 percent to 6.5 percent in
1997). These math error contacts arise from IRS*s match of
filed tax returns to its masterfile accounts to identify tax returns that
misreport taxes already paid such as in previous years or estimated tax
payments. IRS officials said that the masterfile errors were not reported
as math errors because they are identified through a different process at
a later time compared to other math errors during the processing of tax
returns. In our discussions, these officials agreed that both types of
errors are identified under the same math error authority, are
indistinguishable to taxpayers being contacted, and should be similarly
counted and reported. IRS also did not include in its published report
about 8 million notices sent in fiscal year 2002 to correct errors in tax
returns reporting the rate
reduction credit. 20 If these notices had been included, the math error
contact rate would have nearly doubled to 12.5 percent. The Economic
Growth and Tax Relief Reconciliation Act of 2001 authorized tax rate
reductions as well as an advance tax refund, called the rate reduction
credit. Because the rate reduction credit applied for only 1 year, this
error is unlikely to recur according to IRS officials. As a result, we did
not include this information in figure 2.
Figure 3 shows that the contact rates generally declined in the audit and
document matching programs for all taxpayer income levels between fiscal
years 1993 and 2002. For the math error and nonfiler programs, data on
contact rates by income level were not available, and IRS officials said
that it would take some time and effort to develop math error and nonfiler
contact rates by income levels. (See table 7 in app. III for details on
contact rates by income levels.)
19 IRS had not collected data on these masterfile math errors prior to
fiscal year 1997. 20 U. S. General Accounting Office, Tax Administration:
Advance Tax Refund Program was a Major Accomplishment, but Not Problem
Free, GAO- 02- 827 (Washington, D. C.: Aug. 2,
2002), U. S. General Accounting Office, IRS*s 2002 Tax Filing Season:
Returns and Refunds Processed Smoothly; Quality of Assistance Improved
GAO- 03- 314 (Washington, D. C.: Dec. 20, 2002), and Internal Revenue
Service, Tax Compliance Activities Report, June 24, 2002, prepared in
response to a directive in the House Report accompanying the legislation
(P. L. 107- 67). Audit and Document
Matching Contact Rates Across Income Levels Have Generally Declined
Page 19 GAO- 03- 378 IRS Enforcement Reporting Figure 3: IRS Individual
Audit and Document Matching Contact Rates by Income Level, Fiscal Years
1993 through 2002
Note: Data by income level for the math error and nonfiler programs are
not available.
As figure 3 shows, because the audit contact rate declined (from 3.89
percent to 0.86 percent) for higher income (more than $100,000)
individuals and remained virtually the same (from 0.77 percent to 0.78
percent) for the lowest income (less than $25,000) individuals between
fiscal years 1993 and 2002, the rates for the highest and lowest income
individuals essentially converged in 2001 and 2002. Over the same time,
the document matching contact rate generally declined for all three
income groups with fairly similar year- to- year patterns and with higher
income individuals being contacted at the higher rate.
The divergent trends between the growing rate of math error contacts and
the declining or relatively stable rates for the other enforcement
programs can be attributed to how the programs have been affected by
statutory
changes, fewer enforcement staff, and priorities for using available
staff. Math error contacts grew over the fiscal year 1993 through 2002
period in part because Congress expanded the types of tax issues covered
by the math error authority. For example, in 1996, Congress gave IRS
authority to Statutory Changes, Fewer Staff, and Resource
Priorities Explain Trends in Math Error, and Other Enforcement Contact
rates
Document matching rates (percent)
0 1
2 3
4 5
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Year Year
$100,000 and over $25,000 to under $100,000 Under $25,000 Source: GAO
analysis of IRS data.
Audit rates (percent)
0 1
2 3
4 5
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Page 20 GAO- 03- 378 IRS Enforcement Reporting shift a number of earned
income tax credit issues from its audit program to its math error program
in that year. As a result, in 1997, IRS shifted over
700,000 cases involving missing or invalid social security numbers (SSN)
on tax returns from the audit program to the math error program. Under
this and other statutory expansions, IRS was making hundreds of thousands
of math error contacts with taxpayers by 2002 that were not made in 1993.
A second statutory change played a role in the diverging trends among the
enforcement programs. In RRA, Congress took steps to better ensure that
taxpayer rights were protected by revising certain audit processes, such
as informing taxpayers about their rights and generally how they were
selected for audit. According to IRS officials, the changes contributed to
the decline in audits because IRS auditors had to spend more time to
handle nonaudit duties, to be trained in new procedures and taxpayers*
enhanced rights, and to do new tasks. 21 Those changes contributed to
reductions in the number of audits that each auditor completed, meaning
they were less productive in closing audit cases. Finally, declines in
enforcement staffing and priorities for using staff also
contributed to trends in enforcement program contacts. IRS has reported
that from 1993 to 2001, enforcement staffing levels declined about 24
percent. These staffing declines affected not only the audit program but
also the document matching and nonfiler programs because those programs
require that IRS staff screen most notices before they are sent and follow
up when taxpayers respond to notices. 22 Given declining staff
resources, IRS has restricted the number of notices sent when it finds
probable noncompliance under the document matching and nonfiler programs.
In contrast, IRS allocated enough resources over this period to the math
error program to continue sending these notices. IRS officials said that
IRS must resolve math errors to process tax returns and adjust the tax
liability so that taxpayers are in compliance. 23 21 Also see GAO- 01-
484.
22 We did not analyze the portion of potentially noncompliant tax returns
that IRS could not check due to resource limitations. In its September
2002 progress report to the IRS Oversight Board, IRS presented data
showing that it is checking compliance on a decreasing portion of
potentially noncompliant returns. 23 To ensure efficient returns
processing, returns with small dollar value discrepancies are
accepted as filed and taxpayers are not sent math error notices.
Page 21 GAO- 03- 378 IRS Enforcement Reporting Although widespread
agreement exists that enforcement programs help ensure voluntary tax
compliance, evidence is limited about the degree to
which enforcement overall or by type of program affects taxpayer
compliance. No studies are available that measure the burdens that
taxpayers experience when contacted under IRS*s enforcement programs.
Over the years, many tax practitioners and academics have suggested that
enforcement programs are critical for ensuring voluntary compliance.
However, measuring the effects of enforcement programs on compliance is a
difficult task. IRS officials identified only one study that attempted to
estimate the effects of its enforcement programs on compliance; no more
recent work is underway or planned to measure these effects. Relying on an
econometric analysis of taxpayer behavior* using various assumptions,
IRS and non- IRS data for 1982 through 1991, and alternative measures of
compliance* this IRS study estimated the effects of various IRS programs
across the general taxpayer population. The study suggested that audits
had a positive impact on compliance in reporting information on tax
returns and that document matching had a positive effect on compliance in
filing required returns. We did not have time to analyze the
reasonableness of the study*s approach, assumptions, and results.
To obtain current information on taxpayers* compliance in filing tax
returns and reporting correctly on them, IRS developed its National
Research Program (NRP). 24 This program is designed to yield reliable
estimates of the compliance levels of individual taxpayers while
addressing concerns about the burden such a measurement program can impose
on taxpayers. NRP*s design was completed in fiscal year 2002, and IRS will
be auditing taxpayers* returns under the program during fiscal year 2003.
25 IRS plans to use the NRP results to update tools to select individual
tax returns for audit, to allocate resources, to estimate the impacts of
legislative and administrative changes on voluntary compliance and tax
revenue, and to identify potential ways to improve voluntary compliance.
Although NRP should yield useful data, it was not designed to 24 IRS had
measured the voluntary compliance of individual taxpayers periodically,
last
doing so for tax year 1988. IRS stopped because of various congressional
and other concerns about the measurement program. 25 See U. S. General
Accounting Office, Tax Administration: New Compliance Research Effort Is
On Track, but Important Work Remains, GAO- 02- 769 (Washington, D. C.:
June 27,
2002). Limited Evidence
Suggests IRS Enforcement Programs Do Increase Compliance; No Measures
Available on Enforcement Program Burden
Page 22 GAO- 03- 378 IRS Enforcement Reporting measure the effect that
each major enforcement program could have on voluntary compliance.
In addition, IRS has been working to produce more comprehensive estimates
of burden that individual taxpayers face in meeting their tax obligations.
IRS developed a system in 1984 for estimating the burdens taxpayers face
in filing IRS forms, and began efforts during the 1990s to create a better
model for estimating such compliance burdens. IRS recently announced that
the new burden model is ready to be tested and likely will replace the old
model during fiscal year 2003. Although the model should provide better
estimates of individual taxpayer burdens in completing and filing tax
returns, it is not designed to estimate the postfiling burdens related to
IRS*s enforcement efforts. IRS expects to model these postfiling burdens
but does not yet know when that phase of its burden estimation project
will begin.
IRS*s public reporting on its enforcement programs for individual
taxpayers does not provide a complete perspective on its efforts to
enforce tax laws because that reporting heavily focuses on audits. IRS*s
audit rate is often cited in the press and is often the focus of
congressional and other debates concerning how well IRS is enforcing the
tax laws. However, over time the audit rate has become increasingly less
complete as a measure of IRS*s efforts to enforce tax laws because IRS*s
other enforcement programs have expanded their coverage of issues once
covered under audits.
At least two options exist for expanding reporting: changing the
definition of audits to include other enforcement efforts and reporting
more data on each enforcement program separately. The second option would
achieve more complete and balanced reporting without incurring some of the
disadvantages that could come from expanding the definition of audits. IRS
officials plan to expand public reporting for fiscal year 2002 on IRS*s
major enforcement programs to the extent that data are available and cost
effective to extract. IRS*s Public Reporting
on Its Enforcement Programs Is Incomplete
Page 23 GAO- 03- 378 IRS Enforcement Reporting IRS publishes extensive
data on audits but only limited data on other enforcement programs in its
Data Book. 26 Table 2 summarizes the data
annually published on the enforcement programs involving individual
taxpayers.
Table 2: Data Published on IRS Enforcement Programs for Individual
Taxpayers, Fiscal Year 2001
Enforcement program IRS published data
Audit Number and/ or rate of audits by
type of tax (e. g., individual income, gift)
type of return filed (e. g., Form 1040, Form 1040A)
taxpayer income class
type of audit (e. g., field, correspondence)
type of auditor (e. g., tax auditor, revenue agent)
whether the tax liability changed
total and average amount of recommended additional tax
whether taxapayers agreed with the recommended tax change Selected data
on audits
resulting in tax refunds
preventing tax refunds on the basis of taxpayers* efforts to recoup
taxes previously assessed or paid Document Matching number of
information returns received number of taxpayer contacts
amount of additional tax assessed Nonfiler number of taxpayer
delinquency investigations
completed
number of initial nonfiler notices sent
additional assessments for the substitute for returns program Math error
No data are published Source: IRS Data Book, fiscal year 2001.
As shown, IRS publishes no data on IRS*s math error program* which affects
millions of individual taxpayers annually. Compared with audits, public
reporting on the document matching and nonfiler programs is much more
limited. IRS officials said that IRS publicly reports more data on audits
because IRS has had a separate audit case- tracking system for many
years that produces such data. Also, they said that requests to publicly
report more data on the other programs had not been made. 26 IRS annually
compiles data about its enforcement activities in its Data Book. IRS also
publishes that data on its public Web site and may use some of that data
in other publications such as budget documents. Limited Public Reporting
on IRS*s Enforcement Programs
Page 24 GAO- 03- 378 IRS Enforcement Reporting IRS has not changed Data
Book reporting on its enforcement programs to keep up with changes in its
enforcement programs over the years. With its
focus on audits, the reporting may lead others to focus on audits and
thereby to have an incomplete understanding of IRS*s enforcement efforts.
For example, trends in the audit rate alone are difficult to use to assess
IRS*s enforcement presence because that rate does not measure the same
phenomenon today as it did earlier. Even within the 10- year period we
reviewed, some of the tax issues that formerly had been checked only under
the audit program migrated into the other enforcement programs. This type
of migration was more pronounced in the 1980s as the document matching
program expanded substantially.
Although the scope of what IRS does under audits has changed considerably
over the past few decades, and even within the past 10 years, the audit
rate remains an often- cited statistic when Congress and others consider
how well IRS is enforcing the tax laws. For instance, during annual
oversight hearings on IRS*s performance, members of Congress often raise
questions about changes in the audit rate. Over the past several years,
these hearings have included concerns about the declining audit
rate and its possible affect on taxpayers* compliance. The IRS
Commissioner also expressed concern about the decline in audits. However,
the Commissioner said that he did not believe the audit rate needed to
increase to the same level as a number of years ago because IRS has other
programs to enforce the tax laws that were not available, or as broad in
scope, in past years.
To the extent that IRS*s audit rate is the major source of information
available to taxpayers on IRS*s enforcement efforts, the public cannot be
fully aware of the extent to which IRS enforces tax laws and thus may
misjudge the chances that noncompliance is likely to be detected.
Taxpayers who are aware only of the audit rate would not be aware that IRS
often contacts more taxpayers under each of its other enforcement
programs* and IRS always contacts far more taxpayers in these other
programs combined* than it does under the audit program. As discussed
earlier, although the degree to which enforcement encourages voluntary
compliance is difficult to measure, it is widely believed that public
knowledge about enforcement efforts helps prompt higher levels of
voluntary compliance. Although he did not specifically cite possible
increases in voluntary compliance, in a letter issued in March 2001, the
IRS
Page 25 GAO- 03- 378 IRS Enforcement Reporting Commissioner said that only
focusing on audits substantially understates IRS*s capacity to find
errors. 27 While greater awareness of the scope of IRS*s efforts to
enforce the tax law may encourage compliance, it could also increase
taxpayers*
awareness of the trends in these efforts. It is not clear how taxpayers
would interpret and react to the differing trends among IRS*s enforcement
programs. For the period from 1993 through 2002, trends in IRS*s
individual enforcement programs often varied from year to year as well as
between the programs. Therefore, the compliance signals to taxpayers
from publicizing data on the trends in these other programs probably would
be different* and more mixed* than the signal they receive based
exclusively on the audit rate.
In addition, awareness of the fuller range of IRS*s enforcement efforts
may not affect compliance of all groups of taxpayers equally. This could
occur, for example, when the contact rates under the enforcement programs
differ, as they do under the audit and document matching programs for
different income groups. Further, to the extent that taxpayers know that
IRS can only understand their tax situation through a traditional audit,
their compliance might be less affected by fuller reporting on IRS*s other
enforcement efforts. The IRS Commissioner has said that the decline in the
traditional audit rate is of concern in part because a growing portion of
taxpayers and a growing amount of income is not well identified through
such programs as document matching and nonfiler. Of two options we
identified for expanding public reporting on IRS*s enforcement efforts,
providing data on each major program separately avoids certain
disadvantages of aggregating data into one broad audit program. After we
discussed the tradeoffs of these options with IRS officials, they said
they plan to expand public reporting for each of the nonaudit enforcement
programs.
One option for expanding reporting on IRS*s enforcement programs would be
to define all of IRS*s enforcement programs to be audits for statistical
reporting. If the programs were all defined to be audits, IRS might report
a consolidated *audit rate* that would represent all of IRS*s contacts
with taxpayers. Consolidated reporting might also be done on such things
as
27 IRS*s letter dated March 26, 2001. Expanding Public
Reporting on Enforcement Programs Does Not Require Redefining Audits
Page 26 GAO- 03- 378 IRS Enforcement Reporting the additional tax revenues
identified through the contacts and the staff time invested by IRS.
This option could have several advantages. For instance, it would provide
for more complete reporting on IRS*s overall enforcement efforts in a
single *rate.* Another advantage to expanding the definition of an audit
is that the major enforcement programs have an overall similarity in what
they intend to achieve. Moreover, some document matching and math error
checks now cover some tax issues that had been covered under audit
authority. Thus, because audits do not measure the same thing over time,
expanding the definition would create a more consistent measure of the
extent to which IRS is enforcing tax laws.
However, combining all enforcement programs under one definition poses a
number of potential disadvantages. For example, IRS*s legal authority and
operational rules, as well as taxpayers* rights, vary across enforcement
programs. If all enforcement programs were called audits, IRS staff and
taxpayers could become confused about the rights and restrictions that
govern contacts with taxpayers. Labeling all enforcement programs as
audits might confuse taxpayers about whether IRS could examine their books
and records for a specific tax year (an action taken under IRS*s current
audit authority) if they had already been contacted
under document matching and/ or math error programs. If all enforcement
programs were called audits and aggregate reporting was done, IRS would
face a challenge in ensuring that taxpayers and others are not misled. For
example, a single audit rate would cover the range from intense audits
covering multiple tax issues to the correction of simple math errors
arising from inadvertent miscalculations by taxpayers. Given the higher
number of math errors being detected by IRS over time, if taxpayers
interpreted a revised audit rate as representing the former rather than
the latter situation, they would be misled about IRS*s true level of tax
return scrutiny. Another challenge for IRS would be in reporting audit
results like tax dollars assessed and time spent per audit. Considerable
variability already exists in these results for audit* e. g., field
audits take significantly more staff hours than correspondence audits.
These differences would be more extreme under a consolidated audit
reporting system that included document matching, nonfiler, and math error
contacts. Finally, the IRS would need to account for potential double
Page 27 GAO- 03- 378 IRS Enforcement Reporting counting because taxpayers
can be contacted through more than one enforcement program for the same
return. 28 In addition, labeling all IRS enforcement programs as audits
might suggest
that the programs are in some sense substitutable in detecting
noncompliance and encouraging voluntary compliance. Although the document
matching and nonfiler programs do replace part of what had previously been
done by auditors, these programs do not completely substitute for audits.
Math error program contacts are even less of a substitute for audit.
Combining all of these efforts suggests an equivalence* one math error
contact with a taxpayer is equivalent to a complex, intense audit of a
taxpayer books and records* that is not
correct. Therefore, if audits dropped even further than they have in
recent years, but math error contacts rose even faster, some might assume
that IRS is doing better at enforcing tax laws while others might
disagree.
Because of such disadvantages, IRS officials said that they do not favor
changing the audit definition to include the other enforcement programs at
this time. Specifically, they said any changes would create confusion
about IRS*s enforcement activities and could distort any comparisons
because the programs significantly differ.
Instead of expanding the audit definition, IRS has already expressed
support for greater reporting on the full range of IRS*s enforcement
efforts. For example, in 2001, the IRS Commissioner stated that IRS*s goal
is to make public reporting on nonaudit enforcement efforts as informative
and meaningful as possible. 29 This approach generally avoids the
disadvantages associated with reporting IRS*s enforcement efforts under
one consolidated, redefined audit program. At the same time, it would
provide more complete reporting to the public.
In December 2002, IRS officials told us that they plan to try to report
more data on other enforcement programs to the extent that the data are
available and cost- effective to extract. Officials expect that this
expanded reporting will begin with the fiscal year 2003 Data Book if the
necessary statistical tables cannot be produced in time for the 2002
edition that is to
28 IRS does not track how many taxpayers are contacted by more than one
program for a tax return. 29 IRS*s letter dated March 26, 2001.
Page 28 GAO- 03- 378 IRS Enforcement Reporting be published in early
calendar year 2003. The expanded information will also be available on the
IRS Web site. These officials said that they would attempt to report the
number of cases
closed, the staff time expended, and the tax amounts adjusted for document
matching and for the automated substitute for return program (ASFR)
component of the nonfiler program. For document matching, IRS plans to
account for not only the cases in which taxpayers were contacted but also
in which IRS staff resolved the apparent income discrepancy
without contacting taxpayers. For ASFR, IRS is planning to adjust the data
for cases in which IRS abated the additional tax amounts assessed after
taxpayers later filed a tax return. For both programs, IRS officials said
that reporting the data by the taxpayer*s level of income is doubtful. For
math errors, IRS officials said that they could report the number of
notices, staff time, and tax amounts assessed but that reporting other
data is questionable either because the data are not collected or are
difficult or costly to extract. IRS has no plans to analyze whether
changes could be made to cost- effectively extract or collect other data
to facilitate understanding of and comparisons among these nonaudit
enforcement programs.
Although research is not conclusive about the extent to which taxpayers
comply with the law based on their perception of whether noncompliance
will be caught, it is widely believed that those perceptions do contribute
to the overall level of compliance by taxpayers. On the basis of this
belief,
observers in Congress and elsewhere have been concerned as IRS*s oftcited
audit rate has declined in recent years.
To an unknown, but real extent, the long- term decline in the audit rate
is attributable to the movement of some tax issues from IRS*s audit
program into its other enforcement programs. This movement has been
facilitated by changes in technology, and has enabled IRS, for some tax
issues, to more universally check whether taxpayers have accurately
reported their tax liabilities. Although much of the movement of IRS*s
audits into other programs occurred during the 1970s and 1980s, this trend
continued during the fiscal year 1993 through 2002 period.
Given these changes in IRS*s enforcement operations, policymakers in
Congress and elsewhere, as well as taxpayers, would be better informed
about the scope of IRS*s efforts to enforce tax laws if IRS were to expand
its annual public reporting to include the full range of its enforcement
programs. Toward this end, some interest has been expressed in having
Conclusions
Page 29 GAO- 03- 378 IRS Enforcement Reporting IRS report a new audit rate
that would aggregate IRS*s various enforcement programs into a total,
revised audit rate. Although such a
measure would attempt to provide a more comprehensive picture of IRS*s
overall effort to detect compliance problems, the advantages of doing so
do not clearly outweigh potential disadvantages. For instance, expanding
the definition of an audit would package enforcement activities that are
so disparate that the consolidated reporting could be misleading. However,
policymakers and taxpayers could be better informed about of
the extent of IRS*s efforts to enforce the tax laws without combining data
on all of IRS*s enforcement programs into one set of aggregate measures.
IRS*s commissioner set fuller reporting of IRS*s enforcement efforts as an
IRS goal, and IRS officials plan to move to fuller reporting of
enforcement program results, perhaps as early as in the 2002 IRS Data
Book, which will be published in early calendar year 2003. IRS officials
expect that this expanded reporting will use only readily available data
on the enforcement programs.
Because the document matching, math error, and nonfiler programs now cover
many tax issues formerly covered by audits and they annually contact far
more taxpayers than audits, expanded reporting on these programs, using
readily available data, is an appropriate first step. However, the readily
available data for the nonaudit programs is incomplete compared to data
reported on audits. For example, the data do not cover all nonfiler
contacts or the results of the programs by taxpayer
income. IRS has no plans to determine whether it could cost- effectively
extract or collect additional data in order to more completely present
program results, and facilitate comparisons across the programs or with
any new programs, as they evolve.
In the case of the math error program, total data that includes math
errors identified during initial processing of tax returns as well as
errors found in comparing tax return data to data in IRS*s masterfiles
should be reported. Excluding data on math errors found in comparing
returns to IRS*s
masterfiles materially understates the volume of math error contacts with
taxpayers.
Page 30 GAO- 03- 378 IRS Enforcement Reporting The Acting Commissioner of
Internal Revenue should determine whether additional data on each
nonaudit program can be cost
effectively extracted or collected to make future annual reporting on
enforcement programs more complete and comparable.
provide information on all types of math error contacts when publishing
data on IRS*s math error program.
The Acting Commissioner of Internal Revenue provided written comments on a
draft of this report in a January 27, 2003, letter, which is reprinted in
appendix V. The Commissioner agreed with our recommendations. We are
heartened that IRS has already begun to identify additional data to report
on its enforcement programs. Given the differing nature of IRS*s
enforcement programs, we encourage IRS to provide information that is as
comparable as possible among the programs.
As arranged with your office, we plan no further distribution of this
report until 30 days from the date of its issue, unless you publicly
announce its contents earlier. After that period we will send copies to
the Chairman and Ranking Minority Member, House Committee on Ways and
Means; and Chairman and Ranking Minority Member, Senate Committee on
Finance. We will also send copies to the Acting Secretary of the Treasury;
Acting
Commissioner of Internal Revenue; the Director, Office of Management and
Budget; and other interested parties. Copies of this report will be made
available to others on request. In addition, the report will be made
available at no charge on the GAO Web site at http:// www. gao. gov.
If you have any questions, please contact me or Tom Short on (202) 512-
9110. Key contributors to this report are acknowledged in appendix VI.
Sincerely yours,
Michael Brostek Director, Tax Issues Recommendations to
the Acting Commissioner of Internal Revenue
Agency Comments
Appendix I: Development of the Math Error Program
Page 31 GAO- 03- 378 IRS Enforcement Reporting As early as the first
codification of the Internal Revenue law in 1939, Congress granted IRS
*math error* authority so that IRS does not have to provide the taxpayer
with a statutory notice of deficiency 1 for math errors. In general, these
are errors that must be corrected for IRS to process the
tax return. A 1976 statutory revision defined the authority to include not
only mathematical errors but other obvious errors such as omissions of
data needed to substantiate an item on a return. In the 1990s, Congress
extended the authority five times to help determine eligibility for
certain tax exemptions and credits. Table 3 summarizes the legislative
authority on math error provisions for individual tax returns.
Table 3: Legislative Authority on Math Error Provisions for Individual Tax
Returns Basis of Authority Provision Year
Internal Revenue Code Provided a basic *math error* exception to the
deficiency procedures whereby the Service could notify a taxpayer that on
account of a mathematical error an amount of tax in excess of that shown
on the return was due without first sending a notice of deficiency, which
gives the taxpayer the right to judicial review. As early
as 1939 Tax Reform Act of 1976 (P. L. 94- 455) Expanded the definition of
math errors to include
1. an error in addition, subtraction, multiplication, or division shown on
the return; 2. incorrect use of an IRS table if the error is
apparent from the existence of other information on the return; 3.
inconsistent entries on the return; 4. an omission of information required
to be supplied on the return in order to substantiate an
item on that return; and 5. entry of a deduction or credit item in an
amount
which exceeds a statutory limit which is either (a) a specified monetary
amount or (b) a percentage, ratio, or fraction if the items entering into
the application of that limit appear on that return.
1976 Small Business Job Protection Act of 1996 (P. L. 104- 188)
Extended math error authority to the omission of a correct Taxpayer
Identification Number (TIN) required for the dependent care credit or the
deduction for personal exemptions.
1996 Personal Responsibility and Extended math error authority to the
omission of a
TIN for the earned income tax credit. 1996
1 In general, IRS sends taxpayers a written notice, called a statutory
notice of deficiency, which states that additional tax will be assessed
and provides 90 days for them to respond. The proposed tax is
automatically assessed if the taxpayer does not respond or does not file
an appeal. Appendix I: Development of the Math Error Program
Appendix I: Development of the Math Error Program
Page 32 GAO- 03- 378 IRS Enforcement Reporting Basis of Authority
Provision Year
Work Opportunity Reconciliation Act of 1996 (P. L. 104- 193) Taxpayer
Relief Act of 1997 (P. L. 105- 34) Extended math error authority to the
omissions of
correct TINs for the child tax credit and the higher education tuition tax
credit, and to information required for the earned income tax credit for
taxpayers who previously made improper claims. 1997
Tax and Trade Relief Extension Act (1999 Appropriations Act (P. L. 105-
277)) Extended math error authority to the inclusion of a
TIN on a return which allows IRS to determine ineligibility for the
dependent care credit, child tax credit, or earned income tax credit on
the basis of the statutory age restrictions of those credits 1999 Economic
Growth and Tax Reconciliation Act of 2001 (P. L. 107- 16)
Extended math error authority to include an entry on a return claiming the
earned income tax credit when, according to the Federal Registry of Child
Support Orders, the taxpayer is not the custodial parent of the child
being claimed. This provision,
effective January 1, 2004, includes a sunset provision of December 31,
2010.
2001 Source: GAO analysis of legislation.
According to IRS officials, math error authority applies to obvious errors
where most taxpayers do not dispute IRS*s decisions. However, if taxpayers
do disagree with the changes in taxes assessed, they can request an
abatement (reduction) of the additional taxes. The math error process also
generates lower administrative and other costs because it is highly
automated and requires little contact with taxpayers, according to IRS
officials.
Appendix II: Use of Information Returns and Document Matching at IRS
Page 33 GAO- 03- 378 IRS Enforcement Reporting IRS has endorsed the
concept of matching information returns to income tax returns for the
purpose of identifying unreported income since the
1960s. Prior to the 1960s, employers had reported on wages paid to
employees by the name of the employee. To facilitate matching, Congress
required a TIN* generally a social security number for individual
taxpayers* that is unique to each taxpayer, unlike a name. IRS and those
filing information returns (i. e., payers of income) need accurate TINs
for the system to work well. 1 Filing of information returns on magnetic
media or other electronic means combined with greater IRS computer
capacity also has facilitated the matching process.
In 1962, Congress recognized that underreporting of nonwage income, such
as interest and dividend income, was a serious problem. To correct it,
Congress required information reporting on interest and dividend income.
Congress substantially expanded information reporting requirements during
the 1980s and added a few requirements during the 1990s. Table 4 lists
each major statute expanding information returns authority.
1 These payers file the information returns on income paid with IRS as
well as the taxpayers receiving the income to induce their voluntary
compliance in reporting the income on their tax returns. Appendix II: Use
of Information Returns and Document Matching at IRS
Appendix II: Use of Information Returns and Document Matching at IRS
Page 34 GAO- 03- 378 IRS Enforcement Reporting Table 4: Major Legislation
Affecting the Information Returns Program Statute Description
Public Law 87- 397 (enacted 1961) Required taxpayers to provide IRS and
payers of income with a TIN and established penalties for failure to do
so. Revenue Act of 1962 (P. L. 87- 834) Required information returns
reporting for interest and dividend income.
Required payers to furnish copies of the information returns to those
receiving interest and dividend income. Combined Old- Age, Survivors, and
Disability Insurance- Income Tax Reporting Amendments of 1975 (P. L. 94-
202)
Directed IRS and Social Security Administration (SSA) to implement an
annual wage reporting system, which enhanced IRS*s machine processing
efficiency because SSA had the equipment and capacity, which IRS did not,
to process a large volume of Forms W- 2. The Economic Recovery Tax Act of
1981 (P. L. 97- 34) Expanded the requirement that payers furnish all types
of information returns to the
taxpayer receiving a payment. Increased the penalties for failure to
provide copies of such returns to the taxpayer and to IRS. The Tax Equity
and Fiscal Responsibility Act of 1982 (P. L. 97- 248) Expanded information
reporting to include state and local income tax refunds, and
proceeds from brokers and barter exchanges. Mandated 10 percent
withholding on interest, dividends, patronage dividends, and original
issue discount.
Expanded and increased penalties for failure to (1) file information
returns, (2) provide copies to payees, and (3) provide a payer or payee
TIN. Required backup withholding at a 15 percent rate in some instances
where a payee failed to provide a correct TIN to a payer.
Authorized the Secretary of the Treasury to prescribe regulations to
define which returns are to be filed on magnetic media. Interest and
Dividend Tax Compliance Act of 1983 (P. L. 98- 67) Repealed the mandatory
withholding requirements of the Tax Equity and Fiscal
Responsibility Act of 1982. Expanded and revised backup withholding to
include a 20 percent rate if (1) the payee does not furnish the payer with
a TIN, (2) IRS notifies the payer that the TIN is incorrect,
(3) the payee underreports interest or dividend income and IRS notifies
the payer, or (4) the payee does not properly certify that he or she is
not subject to backup withholding for interest and dividend income and
that the TIN provided to the payer is correct. Strengthened TIN and
failure to file penalties. Expanded the magnetic media filing
requirements. Tax Reform Act of 1984 (P. L. 98- 369) Required information
reporting for foreclosures and abandonments of property which
secure indebtedness and for mortgage interest. Provided penalties for
failure to file and furnish such information returns. Tax Reform Act of
1986 (P. L. 99- 514) Required real estate brokers to file an information
return on any real estate transactions.
Required federal executive agencies to file information returns on persons
receiving contracts from them. Required persons making royalty payments
aggregating $10 or more during any calendar year to file information
returns on such payments and provide a copy of such return to the taxpayer
who receives such royalties.
Required TINs for dependents claimed on tax returns. Increased maximum
penalties for failure to file information returns and to provide copies to
taxpayers from $50,000 to $100,000. Added penalty for including incorrect
information or for omitting required information on information returns.
Appendix II: Use of Information Returns and Document Matching at IRS
Page 35 GAO- 03- 378 IRS Enforcement Reporting Statute Description
Technical Corrections to Tax Reform Act of 1986 (P. L. 100- 647) Required
that information returns filed by partnerships having tax- exempt partners
to
include reporting of unrelated business taxable income. Omnibus Budget
Reconciliation Act of 1989 (P. L. 101- 239) Imposed a uniform penalty of
$50 per offense to a maximum of $250,000 per year on any
person who fails to file timely and correct information returns, and to a
maximum of $100,000 per year on any person who fails to (1) furnish
correct payee statements or (2) meet other requirements. Omnibus Budget
Reconciliation Act of 1993 (P. L. 103- 66) Required certain financial
entities (such as Federal Deposit Insurance Corporation,
Resolution Trust Corporation, and National Credit Union Administration) to
file information returns on discharges of indebtedness of $600 or more.
Health Insurance Portability and Accountability Act of 1996 (P. L. 104-
191) Established Medical Savings Accounts (MSAs).
Required information returns for MSAs. Provided penalties for failure to
file/ furnish the returns. Tax Relief Extension Act of 1999 (P. L. 106-
170) Required information reporting for indebtedness discharged by any
organization for which
a significant trade or business is the lending of money. Source: GAO
analysis. IRS did not perform extensive document matching until 1974 when
IRS
established a program to match information returns against tax return data
to identify potential income underreporting. Even so, IRS used
laborintensive, paper- driven methods. For example, clerks had to manually
create case files for each potential underreporter, and IRS staff had to
review the case files to determine if income was underreported. Clerks
entered the results of these file reviews into systems, which generated
notices to taxpayers. In 1987, IRS began to automate the document
matching process. At that time IRS established the Automated Underreporter
Program that allows access to computerized information, reducing the need
for hard copy documents and clerks, and enabling a faster response to
taxpayer inquiries. By tax year 2000, almost 1.5 billion information
returns were filed with
IRS. Table 5 lists the major types of information returns filed for 1983
and 2000. 2 2 Among other reasons, we used 1983 because it was the first
year after a major expansion
of the information reporting requirements.
Appendix II: Use of Information Returns and Document Matching at IRS
Page 36 GAO- 03- 378 IRS Enforcement Reporting Table 5: Major Types of
Information Returns Filed for Tax Years 1983 and 2000 Information Returns
Filed (millions)
Form Number Title Source 1983 2000
1098 Mortgage Interest Statement Banks and Mortgage Companies a 80.2 1098-
E Student Loan Interest
Statement Educational Institutions and Financial Institutions
a 9.6 1098- T Tuition Payments Statement Educational Institutions a 19.8
1099- A Acquisition or Abandonment
of Secured Property Various Entities a 0.4 1099- B Proceeds from Broker
and
Barter Exchange Transactions Brokers 10.0 329.4 1099- C Cancellation of
Debt Various Entities a 0.8 1099- G Certain Government and
Qualified State Tuition Program Payments
State Governments 36.0 63.7 1099- DIV Dividends and Distribution Brokers,
Corporations 82.0 130.6 1099- INT Interest Income Banks 296.0 261.1 1099-
MISC Miscellaneous Income Various Entities 39.0 77.7 1099- OID Original
Issue Discount Banks, Corporations, and Other
Financial Institutions 2.0 4.8 1099- PATR Taxable Distributions
Received from Cooperatives Cooperatives 2.0 1.6 1099- R Distributions from
Pensions,
Annuities, Retirement or Profit- sharing Plans, IRAs, Insurance Contracts,
Etc.
Various Entities 6.0 65.8 1099- S Proceeds from Real Estate
Transactions Various Entities a 2.9 1099- SSA Social Security Benefits
Social Security Administration a 48.4 1099- RRB Railroad Retirement
Benefits Railroad Retirement Board a 0.6 5498 IRA Contribution Information
Banks, Brokers, and Insurance
Companies 18.0 94.9 5498- MSA Medical Savings Accounts or
Medicare Plus Choice MSA Information
Trustees or custodians of MSAs or Medicare Plus Choice MSAs
a 0.1 CTR Currency Transaction Report Financial Institutions and
Shareholders and Beneficiaries a 14.4
K- 1 Partner*s Share of Income, Credits, Deductions, Etc. Partnerships
15.0 19.1 W- 2 Wage and Tax Statement Employers 165.0 247.2 W- 2G Certain
Gambling Winnings Gaming Establishments 1.0 5.8 W- 2P Annuities, Pensions,
Retired
Pay, or IRA Payments Various Entities 18.0 N/ A Other Various Various
Entities 1.0 1.7
Total 691.0 1,480.6
Source: IRS and Statement of Johnny C. Finch, Senior Associate Director,
General Government Division, GAO, Before the Subcommittee on Commerce,
Consumer, and Monetary Affairs, Committee on Government Operations, House
of Representatives, on IRS* Information Returns Matching Program, April
29, 1986. a Information return not required for tax year 1983.
Appendix II: Use of Information Returns and Document Matching at IRS
Page 37 GAO- 03- 378 IRS Enforcement Reporting In 2002, IRS re- instituted
matching 3 of income reported by flow- through entities such as trusts,
partnerships, and S- corporations on Schedule K- 1
to income reported on tax returns by the related partners and
beneficiaries. Schedule K- 1 shows the income distributed to partners and
beneficiaries, who receive a copy as well as IRS. According to IRS,
information provided on Schedule K- 1 is important for determining whether
recipients of flow- through income have properly reported that income on
their tax returns. IRS expects the matching of Schedule K- 1 data to
increase accurate reporting of trust income on future tax returns by
providing information that IRS can use to detect possible unreported
income and to induce taxpayers to voluntarily comply. Under K- 1 matching,
IRS sent 69,097 notices to taxpayers in 2002 for tax year 2000. In most
cases, the taxpayers did not owe additional tax for various reasons
(e. g., taxpayers reported the income differently than expected). IRS does
not yet have complete results from this new matching program. IRS
officials told us that K- 1 matching has been suspended for one year to
analyze the matching criteria and results.
3 IRS had done very limited K- 1 matching, relying on electronically filed
schedules K- 1, but stopped this matching in the mid- 1990s due to
resource and other constraints.
Appendix III: Individual Audit and Other Enforcement Program Data
Page 38 GAO- 03- 378 IRS Enforcement Reporting Table 6: Number and Rates
of Individual Audit and Other Enforcement Contacts, Fiscal Years 1993
through 2002 1993 1994 1995 1996
Audit contacts Field audits 250,712 364,016 338,605 252,430 Office audits
505,539 456,216 458,880 509,434 Correspondence audits 302,715 405,475
1,121,952 1,179,696 Revenue officer examiner audits a a a a
Total audits 1,058,966 1,225,707 1,919,437 1,941,560 Returns filed
(previous calendar year) 114,718,900 113,754,400 114,683,400 116,059,700
Audit rate 0.92 1.08 1.67 1.67 Other enforcement contacts Math errors
4,088,000 4,059,000 6,102,000 4,750,771
Math errors (masterfile notices) b b b b Math errors (revised) c c c c
Document matching 2,723,830 2,645,075 2,711,086 1,930,326 Nonfiler
1,603,969 1,931,781 1,756,325 1,302,432
Math error rate 3.59 3.54 5.26 4.01 Math error rate (revised) d d d d
Document matching rate 2.37 2.33 2.36 1.66 Nonfiler rate 1.40 1.70 1.53
1.12
Appendix III: Individual Audit and Other Enforcement Program Data
Appendix III: Individual Audit and Other Enforcement Program Data
Page 39 GAO- 03- 378 IRS Enforcement Reporting 1997 1998 1999 2000 2001
2002
209,781 168,054 124,518 91,586 77,950 88,896 505,834 383,366 235,625
145,975 115,971 111,695 803,628 625,021 715,789 366,657 529,241 538,779 a
16,339 24,341 13,547 8,594 4,543 1,519,243 1,192,780 1,100,273 617,765
731,756 743,913 118,362,600 120,342,400 122,546,900 124,887,100
127,097,400 129,948,400 1.28 0.99 0.90 0.49 0.58 0.57
5,983,944 5,668,906 6,552,290 5,751,462 6,082,967 6,265,455 1,834,232
1,894,170 1,965,405 2,010,514 2,026,802 2,061,830 7,818,176 7,563,076
8,517,695 7,761,976 8,109,769 8,327,285 931,354 1,726,098 1,770,695
1,353,545 1,161,901 1,687,800 1,917,212 2,313,633 1,890,794 1,251,375
1,371,401 1,882,475 4.97 4.63 5.25 4.53 4.68 4.79 6.50 6.17 6.82 6.11 6.24
6.36 0.79 1.43 1.44 1.08 0.91 1.30 1.62 1.92 1.54 1.00 1.08 1.45
Source: GAO analysis of IRS data. Note: To compute individual audit and
other enforcement rates, we used two methods. We used IRS*s method for
computing audit rates, which equals the proportion of IRS audits closed in
a fiscal year as compared to returns filed in the previous calendar year.
For example, as shown in the table above, the audit rate for 1993 is
computed by dividing total audits (1, 058,966) by the number of returns
filed in the previous calendar year (114,718,900) to compute the audit
rate (0.92). IRS has not stated a method for computing math error,
document matching, and nonfiler rates. For the document matching and
nonfiler programs, we used the IRS audit rate method because document
matching and nonfiler contacts generally occur in the year after a return
is filed. For the math error program, we compared the math errors notices
to the returns filed in that year because identifying math errors is part
of IRS* returns processing system. For example, the math error rate for
1993 is computed by dividing the number of math errors (4,088,000) by the
number of returns filed in 1993 (113,754,400) to compute the math error
rate (3.59). Note: IRS estimates that the number of returns filed in 2002
is about 130,905,000. Final data for fiscal year 2002 were not available
at the time of publication of this report. We used the estimate of
130,905,000 returns filed to compute the math error rate and the math
error rate (revised) for fiscal year 2002. a IRS did not publish data on
revenue officer examiner audits prior to 1998.
b Data for math error masterfile notices do not exist prior to fiscal year
1997. c The number of math error (revised) contacts are the same as the
number of math error contacts for fiscal years 1993 through 1996 because
data for the number of masterfile notices does not exist for these years.
d The math error (revised) contact rate is the same as the math error
contact rate for fiscal years 1993
through 1996 because data for the number of masterfile notices does not
exist for these years.
Appendix III: Individual Audit and Other Enforcement Program Data
Page 40 GAO- 03- 378 IRS Enforcement Reporting Figure 4: Individual Audit
and Other Enforcement Contacts, Fiscal Years 1993 through 2002
The absolute number of contacts with taxpayers under the four enforcement
programs follows the same general year- to- year and overall pattern as
for contact rates. Similarly, as with the contact rates, the number of
audits and the number of document matching contacts were lower (30 and 38
percent, respectively) in fiscal year 2002 than in 1993. The number of
nonfiler contacts also was somewhat higher (17 percent) in 2002 than in
1993 and the number of math error contacts* not counting
math errors identified from masterfile comparisons* was significantly
higher (53 percent) in 2002 than in 1993.
Appendix III: Individual Audit and Other Enforcement Program Data Page 41
GAO- 03- 378 IRS Enforcement Reporting
Appendix III: Individual Audit and Other Enforcement Program Data
Page 42 GAO- 03- 378 IRS Enforcement Reporting Table 7: Number and Rates
of Individual Audit and Document Matching Contacts by Income Level, Fiscal
Years 1993 through 2002
1993 1994 1995 1996 Audit contacts $100,000 and over 204,079 172,483
179,871 210,032 $25,000 to under $100,000 361,787 347,200 510,764 552,011
Under $25,000 493,100 706,024 1,228,802 1,179,503 Document matching
contacts $100,000 and over 213,070 263,287 285,767 238,330 $25,000 to
under $100,000 1,337,067 1,378,983 1,339,480 914,540 Under $25,000
1,173,693 1,002,805 1,085,839 777,456 Returns filed $100,000 and over
5,240,200 5,635,300 6,058,100 6,546,700
$25,000 to under $100,000 45,333,900 45,640,000 46,506,400 47,865,000
Under $25,000 64,144,800 62,479,100 62,118,900 61,648,000 Audit rate
$100,000 and over 3.89 3.06 2.97 3.21
$25,000 to under $100,000 0.80 0.76 1.10 1.15 Under $25,000 0.77 1.13 1.98
1.91 Document matching rate $100,000 and over 4.07 4.67 4.72 3.64 $25,000
to under $100,000 2.95 3.02 2.88 1.91 Under $25,000 1.83 1.61 1.75 1.26
Appendix III: Individual Audit and Other Enforcement Program Data
Page 43 GAO- 03- 378 IRS Enforcement Reporting 1997 1998 1999 2000 2001
2002
200,070 164,314 128,398 99,547 91,550 112,266 423,548 349,378 226,261
148,306 157,296 183,847 895,625 679,088 745,614 369,912 482,910 447,800
131,348 228,934 231,482 208,839 218,981 275,088 469,761 863,408 891,237
674,154 597,034 786,172 330,449 633,756 647,976 470,552 345,886 429,879
7,301,900 8,156,600 9,178,000 10,368,600 11,610,500 13,020,183 49,805,300
51,389,100 53,389,200 55,729,700 57,268,000 59,216,431 61,255,400
60,796,700 59,979,700 58,788,800 58,218,900 57,208,333 2.74 2.01 1.40 0.96
0.79 0.86 0.85 0.68 0.42 0.27 0.27 0.31 1.46 1.12 1.24 0.63 0.83 0.78
1.80 2.81 2.52 2.01 1.89 2.11 0.94 1.68 1.67 1.21 1.04 1.33 0.54 1.04 1.08
0.80 0.59 0.75 Source: GAO analysis of IRS data.
Notes: Returns filed consists of previous calendar year data. Number of
returns filed in 2002 (calendar year 2001 data) is estimated.
Appendix III: Individual Audit and Other Enforcement Program Data
Page 44 GAO- 03- 378 IRS Enforcement Reporting Figure 5: Number of
Individual Audit and Document Matching Contacts by Income Level, Fiscal
Years 1993 through 2002
Note: Fiscal year 2002 data is estimated.
The absolute number of audits by income group generally follows the same
year- to- year and overall pattern, as do the contact rates for the income
groups. However, the change in the number of audits conducted in fiscal
year 1993 compared to 2002 is not as dramatic for the upper and
middle- income groups as was the change in their audit rates. The number
of audits for the higher income group declined by 45 percent between 1993
and 2002 while the rate at which this group was audited declined 78
percent. The number of audits of the middle- income group declined 49
percent, while the rate at which this group was audited declined 61
percent. The rate at which these groups were audited fell more than did
the absolute number of audits because the number of taxpayers in each
group expanded over the 10- year period. Higher income taxpayers grew in
numbers by 148 percent between 1993 and 2002 and middle- income taxpayers
grew by 31 percent.
As with the absolute number of audits by income group, the number of
document matching contacts by income group generally follows the same Year
Year
$100,000 and over $25,000 to under $100,000 Under $25,000 Source: GAO
analysis of IRS data.
Document matching 0 200,000
400,000 600,000
800,000 1,000,000
1,200,000 1,400,000
1,600,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Audit
0 200,000
400,000 600,000
800,000 1,000,000
1,200,000 1,400,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Appendix III: Individual Audit and Other Enforcement Program Data
Page 45 GAO- 03- 378 IRS Enforcement Reporting year- to- year and overall
pattern as do the document matching contact rates. However, comparisons of
the number of document matching
contacts in fiscal year 1993 to those in 2002 differ substantially from
comparisons of document matching contact rates for those years for one
income group* the higher income taxpayers. The number of document matching
contacts with the higher income taxpayers increased by 29 percent between
1993 and 2002, whereas the contact rate for this group
fell by 48 percent. The percentage changes in numbers and rates of
contacts for the other two groups were more similar. Middle- income
document matching contacts fell 41 percent between fiscal year 1993 and
2001 while their document matching contact rate declined 55 percent.
Lowest income taxpayer document matching contacts fell 63 percent, while
their contact rate declined 59 percent.
Appendix III: Individual Audit and Other Enforcement Program Data
Page 46 GAO- 03- 378 IRS Enforcement Reporting Table 8: Number and Rates
of Individual Audits by Type of Audit and Income Level, Fiscal Years 1993
through 2002 1993 1994 1995 1996 1997
Field audits Under $25,000 80,881 189,748 161,800 85,153 49,053 $25,000 to
under $100,000 82,731 98,393 100,501 80,509 66,558 $100,000 and over
87,100 75,875 76,304 86,768 94,170
Office audits Under $25,000 248,704 244,952 250,656 238,561 231,944
$25,000 to under $100,000 201,924 167,594 171,438 221,207 223,646 $100,000
and over 54,911 43,670 36,786 49,652 50,244
Correspondence audits Under $25,000 163,515 271,324 816,346 855,789
614,628 $25,000 to under $100,000 77,132 81,213 238,825 250,295 133,344
$100,000 and over 62,068 52,938 66,781 73,612 55,656
Returns filed Under $25,000 64,144,800 62,479,100 62,118,900 61,648,000
61,255,400 $25,000 to under $100,000 45,333,900 45,640,000 46,506,400
47,865,000 49,805,300 $100,000 and over 5,240,200 5,635,300 6,058,100
6,546,700 7,301,900
Field audit rate Under $25,000 0.13 0.30 0.26 0.14 0.08 $25,000 to <
$100,000 0.18 0.22 0.22 0.17 0.13 $100,000 and over 1.66 1.35 1.26 1.33
1.29
Office audit rate Under $25,000 0.39 0.39 0.40 0.39 0.38 $25,000 to <
$100,000 0.45 0.37 0.37 0.46 0.45 $100,000 and over 1.05 0.77 0.61 0.76
0.69
Correspondence audit rate Under $25,000 0.25 0.43 1.31 1.39 1.00 $25,000
to < $100,000 0.17 0.18 0.51 0.52 0.27 $100,000 and over 1.18 0.94 1.10
1.12 0.76
Appendix III: Individual Audit and Other Enforcement Program Data
Page 47 GAO- 03- 378 IRS Enforcement Reporting 1998 1999 2000 2001 2002
35,891 26,228 21,433 16,784 15,480 49,891 35,540 28,666 26,159 33,093
82,272 62,750 41,487 35,007 40,323
171,918 95,308 57,017 42,016 31,192 170,341 109,696 68,740 54,526 56,509
41,107 30,621 20,218 19,429 23,994
460,795 608,154 284,981 420,346 399,175 124,451 73,996 45,346 73,189
92,293 39,775 33,639 36,330 35,706 47,311
60,796,700 59,979,700 58,788,800 58,218,900 57,208,333 51,389,100
53,389,200 55,729,700 57,268,000 59,216,431 8,156,600 9,178,000 10,368,600
11,610,500 13,020,183
0.06 0.04 0.04 0.03 0.03 0.10 0.07 0.05 0.05 0.06 1.01 0.68 0.40 0.30 0.31
0.28 0.16 0.10 0.07 0.05 0.33 0.21 0.12 0.10 0.10 0.50 0.33 0.19 0.17 0.18
0.76 1.01 0.48 0.72 0.70 0.24 0.14 0.08 0.13 0.16 0.49 0.37 0.35 0.31 0.36
Source: GAO analysis of IRS data.
Note: Revenue officer examiner audits are not included. See table 6.
Appendix III: Individual Audit and Other Enforcement Program Data
Page 48 GAO- 03- 378 IRS Enforcement Reporting Table 9: Average Direct
Staff Hours by Type of Audit and For Document Matching Cases, Fiscal Years
1993 through 2002 Program 1993 1994 1995 1996 1997 1998 1999 2000 2001
2002
Field audit 17.81 12.69 13.99 20.21 21.84 22.08 24.84 27.64 30.83 28.87
Office audit 4.47 4.51 4.27 4.56 4.34 4.49 5.66 7.09 8.91 9.37
Correspondence audit 1.43 1.15 0.74 0.73 0.83 0.91 1.08 1.80 1.79 1.71
Document matching 0.80 0.81 1.09 0.98 0.53 0.52 0.57 0.61 0.57 0.61
Source: GAO analysis of IRS data.
Note: Revenue officer examiner audits are not included. See table 6.
Appendix IV: Soft Notices and Voluntary Compliance Agreements
Page 49 GAO- 03- 378 IRS Enforcement Reporting In addition to the four
major enforcement programs, IRS started two programs in the mid- 1990s to
help ensure that taxpayers file timely and
accurate returns, and to minimize the need for enforcement. Through the
soft notice program, IRS has been sending notices for apparent errors on
two tax issues* duplicate claims for one allowable dependent exemption and
unfiled self- employment tax returns. IRS uses soft notices when it has
information to indicate that some taxpayer made an error but not enough
information to know for sure, such as which taxpayer overclaimed a
dependent. Soft notices are intended to stimulate taxpayers to correct the
error without IRS having to invest audit time.
In addition, IRS uses the voluntary compliance agreements program to
address known compliance problems in reporting tip income. To improve
compliance of employees in industries where tip income is a part of wages,
IRS had been auditing the tax returns of tipped employees, which burdened
the employees and employers as well as IRS. To minimize these burdens
while also addressing the compliance problems, IRS began to explore new
methods to achieve voluntary compliance by tipped
employees, such as voluntary compliance agreements. IRS has negotiated
three types of agreements with certain employers (e. g., restaurants) to
improve compliance by their individual employees in reporting tip income.
These three types of agreements follow.
The Tip Rate Determination Agreement (TRDA) requires that IRS and the
business agree upon a tip rate for various occupations in the business and
that at least 75 percent of employees in the business agree to report at
that rate on their income tax return.
The Tip Reporting Alternative Commitment (TRAC) does not require a tip
rate to be determined, but does require that the business create written
statements to record employee tips and send the statements to IRS. This
agreement covers all employees and requires that the business educate
employees about their obligation to report their tip income.
The Employer- designed Tip Reporting Alternative Commitment Agreement
(EmTRAC) requires that businesses establish tip reporting procedures and
prepare a statement on a regular basis (no less than monthly) to reflect
all tips for each employee. The business must establish an education
program to train employees about their obligation to report tip income.
Appendix IV: Soft Notices and Voluntary
Compliance Agreements
Appendix IV: Soft Notices and Voluntary Compliance Agreements
Page 50 GAO- 03- 378 IRS Enforcement Reporting In general, these two
programs are similar to the four major enforcement programs in that they
attempt to correct noncompliance. They differ
because, rather than enforcing the tax laws, both attempt to reduce the
need for enforcement. In sum, their differences tend to outnumber their
similarities, as discussed below.
Similar to the four enforcement programs, IRS sends soft notices to inform
taxpayers of potential errors. However, the soft notice does not require
taxpayers to take any action, and IRS takes no action to verify the error
or assess tax. Instead, the notice asks taxpayers to examine the potential
error and file an amended return if they confirm the error. Also, the
notice informs taxpayers that IRS will monitor these types of errors and
might contact them if they do not alter their reporting in the future. The
similarity between the voluntary compliance agreements and the
other enforcement programs is that they attempt to correct noncompliance.
Unlike the other programs, these agreements occur before a return is filed
and do not involve sending any notices to taxpayers. IRS believes that
these agreements enhance voluntary compliance so that IRS can avoid the
need to take enforcement action and assess additional taxes after a return
is filed. IRS assures the businesses that IRS will not audit their books
and records as long as they abide by the agreement. However, IRS may still
audit the books and records of a tipped employee and report any changes to
the business. IRS officials said that current procedures require follow-
up to check adherence to these agreements, but the officials were not sure
about the extent to which this has been occurring.
IRS has limited data for the soft notice and voluntary compliance
agreement programs, as follows.
In 2002, IRS sent 1.2 million soft notices to taxpayers on duplicate
dependent claims on 2001 tax returns; in 1998, IRS sent 1.6 million soft
notices on these duplicate claims and on self- employment tax for 1996 and
1997 returns. 1 This involved 329,000 notices sent to taxpayers who
reported self- employment income but had not filed a schedule SE or paid
self- employment tax. IRS did not provide data on these notices for any
later years. 1 GAO/ GGD- 00- 7.
Appendix IV: Soft Notices and Voluntary Compliance Agreements
Page 51 GAO- 03- 378 IRS Enforcement Reporting Through 2001, TRDAs and
TRACs covered 48,348 establishments in the casino, beauty, and food and
beverage industries. IRS did not have data on the number of individual
taxpayers covered by these agreements because
the agreements are made with employers rather than directly with the
individual taxpayers.
Appendix V: Comments from the Commissioner of Internal Revenue
Page 52 GAO- 03- 378 IRS Enforcement Reporting Appendix V: Comments from
the Commissioner of Internal Revenue
As part of its comments, IRS included an enclosure that provided
additional data on nonaudit contacts. We did not include this enclosure as
part of IRS*s written comments because the data provided did not
materially affect our conclusions and recommendations.
Appendix V: Comments from the Commissioner of Internal Revenue Page 53
GAO- 03- 378 IRS Enforcement Reporting
Appendix VI: GAO Contacts and Staff Acknowledgments
Page 54 GAO- 03- 378 IRS Enforcement Reporting Michael Brostek, (202) 512-
9110 Tom Short, (202) 512- 9110
In addition to those named above Susan Baker, Grace Coleman, Susan Conlon,
Brendan Culley, Michele Fejfar, Leon Green, Marshall Hamlett, Shirley
Jones, and Jay Pelkofer made key contributions to this product. Appendix
VI: GAO Contacts and Staff
Acknowledgments GAO Contacts Staff Acknowledgments
Related GAO Products Page 55 GAO- 03- 378 IRS Enforcement Reporting U. S.
General Accounting Office. Tax Administration: Advance Tax Refund Program
Was a Major Accomplishment, but Not Problem Free.
GAO- 02- 827. Washington, D. C.: August 2, 2002. U. S. General Accounting
Office. Tax Administration: New Compliance Research Effort Is on Track,
but Important Work Remains. GAO- 02- 769. Washington, D. C.: June 27,
2002.
U. S. General Accounting Office. Tax Administration: Impact of Compliance
and Collection Program Declines on Taxpayers. GAO- 02- 674. Washington, D.
C.: May 22, 2002.
U. S. General Accounting Office. IRS Audit Rates: Rate for Individual
Taxpayers Has Declined But Effect on Compliance Unknown. GAO- 01- 484.
Washington, D. C.: April 25, 2001. U. S. General Accounting Office. Tax
Administration: Information on
Selected IRS Tax Enforcement and Collection Efforts. GAO- 01- 589T.
Washington, D. C.: April 5, 2001.
U. S. General Accounting Office. Tax Administration: IRS* Use of Nonaudit
Contacts. GAO/ GGD- 00- 7. Washington, D. C.: March 16, 2000.
U. S. General Accounting Office. Tax Administration: IRS Is Working to
Improve Its Estimates of Compliance Burden. GAO/ GGD- 00- 11. Washington,
D. C.: May 22, 2000.
U. S. General Accounting Office. IRS Audits: Weaknesses in Selecting and
Conducting Correspondence Audits. GGD- 99- 48. Washington, D. C.: March
31, 1999.
U. S. General Accounting Office. Tax Administration: IRS* Audit and
Criminal Enforcement Rates for Individual Taxpayers Across the Country.
GAO/ GGD- 99- 19. Washington, D. C.: December 23, 1998.
U. S. General Accounting Office. Internal Revenue Service: Results of
Nonfiler Strategy and Opportunities to Improve Future Efforts.
GAO/ GGD- 96- 72. Washington, D. C.: May 13, 1996. U. S. General
Accounting Office. Tax Administration: Audit Trends and Results for
Individual Taxpayers. GAO/ GGD- 96- 91. Washington, D. C.: April 26, 1996.
Related GAO Products
Related GAO Products Page 56 GAO- 03- 378 IRS Enforcement Reporting
Statement of Johnny C. Finch, Senior Associate Director, General
Government Division, GAO, Before the Subcommittee on Commerce,
Consumer, and Monetary Affairs, Committee on Government Operations, House
of Representatives, on IRS* Information Returns Matching Program, April
29, 1986.
(440155)
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