IRS' Audits of Individual Taxpayers and Its Audit Quality Control System Need To Be Better

The quality of the Internal Revenue Services (IRS) audits of taxpayers' individual income tax returns needs to be improved. When IRS does less than quality audits some taxpayers may pay more than they owe, tax revenues may be lost, and voluntary compliance may suffer.

The IRS system for identifying and correcting less than quality audits is not as effective as it should be. In fact, the system led IRS to believe that audit quality was not in need of improvement. IRS definition of audit quality does not provide adequate measurement criteria. Most of the reasons for quality problems are connected to the time pressure exerted by management, whether real or perceived, to do audits as quickly as possible. Several weaknesses have kept IRS from receiving accurate and complete audit quality information. Reviewers have no standards to follow when reviewing audit cases. Management receives an incorrect picture of audit quality and reviews are inconsistent in their quality assessments. Reviewers sometimes expedite the review process by resolving questions over the telephone. The quality control system was unable to provide IRS with needed information. The data provided were not sufficient to tell the level of audit quality being attained or in identifying problem areas which need attention. Consequently, IRS cannot make informed decisions on necessary corrective actions or adequately consider audit quality when deciding how many audits to do.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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