Tax Administration: Changes Needed to Cope With Growth in Offer in
Compromise Program (Letter Report, 12/23/93, GAO/GGD-94-47).

The Internal Revenue Service's (IRS) Offer in Compromise Program
involves compromises on tax debts as a result of doubts about liability
or collectibility.  Amounts collected through the program are small
relative to IRS' overall collections--$106 million in accepted offers
versus about $24 billion in overall collections in fiscal year 1992.
Nonetheless, the program has grown rapidly since IRS began promoting it
in February 1992.  IRS believes that the program improves taxpayer
compliance and will boost collections but has no way of measuring
whether the program is achieving these ends. Such information is crucial
because the program's growth may strain IRS' collection resources and
because the program could undermine voluntary compliance should
taxpayers conclude that the program is too liberal.  One effect of the
program's growth has been added costs for IRS to investigate all
taxpayer offers.  The mounting number of offers and limited collection
resources underscore the need for IRS to streamline the investigation of
low-dollar cases, reduce inefficient manual monitoring of deferred
payments receipts, and obtain authority to determine which offers need
to be reviewed by legal counsel.  Despite new IRS procedures clarifying
its policy on offers, acceptance rates for offers continue to vary
widely at IRS district offices.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-47
     TITLE:  Tax Administration: Changes Needed to Cope With Growth in 
             Offer in Compromise Program
      DATE:  12/23/93
   SUBJECT:  Tax administration systems
             Collection procedures
             Financial management systems
             Tax violations
             Tax law
             Program evaluation
             Taxpayers
             Debt collection
             Data collection operations
             Voluntary compliance
IDENTIFIER:  IRS Offer in Compromise Program
             
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