Tax Policy

Options for Speeding Tax Refunds and Reducing IRS' Interest Costs Gao ID: GGD-86-72 July 28, 1986

GAO examined the requirements under which the Internal Revenue Service (IRS) pays taxpayers interest on tax refunds to determine whether changes to the requirements for paying interest on various types of refunds or to IRS operating procedures could speed up the payment of tax refunds and reduce the government's interest costs.

GAO found that: (1) IRS paid $1.5 million in interest while processing the amended return refunds that it issued within 45 days; (2) IRS took almost twice as long to process refunds on amended returns that it subjected to a detailed examination as it did to process returns that it subjected to normal processing procedures; (3) only 12 percent of the detailed examinations resulted in additional tax assessments; and (4) the increased interest costs associated with delaying these refunds amounted to $37.6 million. GAO estimated that IRS paid at least $3 million in interest costs during 1983 on non-income-based returns that it processed within 45 days of receipt.

Recommendations

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