Tax Policy

Federal Tax Deposit Requirements Should Be Simplified Gao ID: GGD-90-102 July 31, 1990

Pursuant to a congressional request, GAO evaluated the federal tax deposit (FTD) requirements for withheld income and social security taxes, focusing on whether the Internal Revenue Service (IRS): (1) appropriately and accurately assesses and abates deposit penalties; and (2) guidance to employers on complying with the deposit requirements was adequate.

GAO found that: (1) one-third of the nation's employers are assessed at least one FTD penalty annually, due to either insufficient funds to make timely deposits or failure to understand the complexities of the deposit requirements; (2) variable deposit dates made it difficult for employers to predict with certainty when their deposits were due; (3) IRS cannot be assured that its penalty calculations are accurate; (4) placing all employers under the same deposit requirement would enhance employer compliance and IRS administration of the FTD system; (5) IRS could clarify its instructions on the deposit requirements so that employers could more readily determine when they should make deposits; and (6) IRS could make it easier for taxpayers to understand the deposit requirements if publications included clear and comprehensive examples of each deposit rule.


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