Tax Administration

Improving IRS' Business Nonfiler Program Gao ID: GGD-89-39 March 8, 1989

GAO reviewed the Internal Revenue Service's (IRS) efforts to detect business tax nonfilers, focusing on whether: (1) state employment tax information data could aid IRS in investigating business nonfilers; and (2) IRS continued to send business tax forms to known invalid addresses.

GAO analyzed 201 selected businesses in California that IRS identified as potential nonfilers, and found that: (1) IRS could use California state employment tax information to verify businesses' statements about their employment tax liability and to estimate their federal employment tax liability; (2) the state's employment tax information could help IRS to quickly close investigations of nonfilers that have little or no tax liability; (3) 21 of 100 businesses had 31 delinquent federal employment tax returns because they paid wages during periods for which they reported paying no wages; (4) IRS mailed publications to nonfilers with invalid addresses because a computer code that automatically generated mailing lists was still on the master file; and (5) it was unable to estimate the cost of the erroneous mailing because IRS did not track the numbers of publications forwarded to invalid addresses.

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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