Small Business: Taxpayers Face Many Layers of Requirements (Testimony,
04/12/99, GAO/T-GGD-99-76).

Pursuant to a congressional request, GAO discussed small business tax
issues, focusing on the: (1) federal filing, reporting, and deposit
requirements that apply to small businesses; (2) actual experience of
small businesses in meeting these requirements, including their
involvement in the Internal Revenue Service's (IRS) enforcement
processes; (3) burden small businesses can face in complying; and (4)
IRS' efforts to reduce small businesses' compliance burden and improve
customer service, especially IRS' planned reorganization.

GAO noted that: (1) small businesses are subject to multiple layers of
filing, reporting, and deposit requirements; (2) GAO identified more
than 200 different Internal Revenue Code (IRC) requirements that
potentially apply to small businesses; (3) the requirements reflect IRS'
administration of a variety of tax and other policies; (4) GAO also
found that it is highly unlikely that any business would need to comply
with all or even most of these requirements; (5) those that apply would
depend on how the small business is organized; (6) limitations in IRS
information systems prevented GAO from fully determining the extent to
which small businesses filed the various forms and schedules or their
involvement in key stages of IRS' enforcement processes; (7) IRS has
dozens of discrete databases, so many that it is difficult to determine
what data are in them; (8) many of the IRS databases do not allow for a
detailed analysis of the information they contain; (9) the limitations
hinder IRS' ability to effectively manage its activities and serve small
businesses and, as IRS has acknowledged, will continue to be a serious
impediment until the systems are improved; (10) although IRS does not
have a reliable method to measure compliance burden, there is common
agreement that the burden is significant for small businesses; (11) past
GAO surveys and case studies illustrate that much of the burden can be
traced to the IRC itself; (12) IRS has long tried to reduce small
businesses' compliance burden and improve customer service to these
taxpayers; (13) IRS also has worked to make filing and reporting easier
and to increase IRS employees' expertise and understanding of small
business tax issues and practices; (14) most recently, IRS has begun an
extensive modernization effort that is intended to substantially improve
customer service, thereby making it less burdensome for small businesses
and other taxpayers to meet their tax obligations; (15) one of the most
visible signs of IRS' commitment to improve its services to small
businesses is the establishment of a separate operating unit dedicated
to this group of taxpayers; (16) IRS will need to consistently follow
results-oriented management principles, integrate the principles into
its day-to-day activities and culture, and hold managers at every level
accountable for doing the same; and (17) IRS must develop and use
organizational and individual performance systems that support IRS' new
mission statement and implement information systems that support
customer service management in a reorganized environment.

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

 REPORTNUM:  T-GGD-99-76
     TITLE:  Small Business: Taxpayers Face Many Layers of Requirements
      DATE:  04/12/99
   SUBJECT:  Small business
             Tax law
             Reporting requirements
             Federal agency reorganization
             Voluntary compliance
             Taxpayers
             Customer service
             Tax administration systems
             Performance measures
IDENTIFIER:  IRS Market Segment Specialization Program
             IRS Simplified Tax and Wage Reporting System
             

Small Business: Taxpayers Face Many Layers of Requirements (Testimony,
04/12/99, GAO/T-GGD-99-76).

Pursuant to a congressional request, GAO discussed small business tax
issues, focusing on the: (1) federal filing, reporting, and deposit
requirements that apply to small businesses; (2) actual experience of
small businesses in meeting these requirements, including their
involvement in the Internal Revenue Service's (IRS) enforcement
processes; (3) burden small businesses can face in complying; and (4)
IRS' efforts to reduce small businesses' compliance burden and improve
customer service, especially IRS' planned reorganization.

GAO noted that: (1) small businesses are subject to multiple layers of
filing, reporting, and deposit requirements; (2) GAO identified more
than 200 different Internal Revenue Code (IRC) requirements that
potentially apply to small businesses; (3) the requirements reflect IRS'
administration of a variety of tax and other policies; (4) GAO also
found that it is highly unlikely that any business would need to comply
with all or even most of these requirements; (5) those that apply would
depend on how the small business is organized; (6) limitations in IRS
information systems prevented GAO from fully determining the extent to
which small businesses filed the various forms and schedules or their
involvement in key stages of IRS' enforcement processes; (7) IRS has
dozens of discrete databases, so many that it is difficult to determine
what data are in them; (8) many of the IRS databases do not allow for a
detailed analysis of the information they contain; (9) the limitations
hinder IRS' ability to effectively manage its activities and serve small
businesses and, as IRS has acknowledged, will continue to be a serious
impediment until the systems are improved; (10) although IRS does not
have a reliable method to measure compliance burden, there is common
agreement that the burden is significant for small businesses; (11) past
GAO surveys and case studies illustrate that much of the burden can be
traced to the IRC itself; (12) IRS has long tried to reduce small
businesses' compliance burden and improve customer service to these
taxpayers; (13) IRS also has worked to make filing and reporting easier
and to increase IRS employees' expertise and understanding of small
business tax issues and practices; (14) most recently, IRS has begun an
extensive modernization effort that is intended to substantially improve
customer service, thereby making it less burdensome for small businesses
and other taxpayers to meet their tax obligations; (15) one of the most
visible signs of IRS' commitment to improve its services to small
businesses is the establishment of a separate operating unit dedicated
to this group of taxpayers; (16) IRS will need to consistently follow
results-oriented management principles, integrate the principles into
its day-to-day activities and culture, and hold managers at every level
accountable for doing the same; and (17) IRS must develop and use
organizational and individual performance systems that support IRS' new
mission statement and implement information systems that support
customer service management in a reorganized environment.

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

 REPORTNUM:  T-GGD-99-76
     TITLE:  Small Business: Taxpayers Face Many Layers of Requirements
      DATE:  04/12/99
   SUBJECT:  Small business
             Tax law
             Reporting requirements
             Federal agency reorganization
             Voluntary compliance
             Taxpayers
             Customer service
             Tax administration systems
             Performance measures
IDENTIFIER:  IRS Market Segment Specialization Program
             IRS Simplified Tax and Wage Reporting System