IRS' Information Returns Matching Program

GAO discussed the status of the Internal Revenue Service's (IRS) Information Returns Program, a concept of matching information returns to income tax returns for the purpose of identifying unreported income. GAO focused on: (1) trends in information returns received and matched; (2) information returns not used in the process; (3) follow-up efforts on underreporter and nonfiler cases; (4) enforcement of the returns reporting requirements; and (5) efforts to improve returns processing. GAO found that: (1) the volume and type of returns have increased because of the importance Congress has attached to the program; (2) millions of returns still go unused in the matching program because of incorrect data and management problems in handling the returns; (3) since IRS case follow-up is limited due to budgetary restraints, IRS does not follow up on all potential underreporter cases and only does partial follow-up for a number of nonfiler cases; (4) IRS enforces and monitors information reporting requirements through the existing examination process because it does not have a separate audit program; (5) IRS recognizes that it can do more to increase enforcement and is currently developing a program to identify reporting violators; and (6) IRS has taken initiatives to use magnetic media filing and electronic data transcription to promote more efficient return processing and reduce costs.