IRS Efforts To Detect and Pursue Corporate Nonfilers

As a follow-on to a review of efforts by the Internal Revenue Service (IRS) to identify individual nonfilers, GAO evaluated the IRS corporate nonfilers program at three IRS district offices.

Generally, the weaknesses found in IRS investigative policies and procedures for securing delinquent corporate income tax returns are similar to those discussed in the earlier report on individual nonfilers. However, effective pursuit of corporate nonfilers requires some special considerations. Because many delinquent corporations are either no longer in business or have suffered losses, they are less likely to owe taxes; therefore, thoroughly investigating them may not be as cost effective as it is for individual nonfilers. At a minimum, IRS could, at little or no additional cost, check telephone and city directories and use State data to locate delinquent corporations. To enhance compliance and verify tax liabilities, IRS should secure all income tax returns from corporations which it locates even when they claim they owe no taxes. Locating delinquent and nonfiling corporations and securing nontaxable returns are necessary to determine whether corporations' claims of no tax liability are accurate, to avoid encouraging future delinquencies by the same corporations, and to keep the corporations on the IRS master file.