IRS' Efforts to Ensure Corporate Tax Compliance

GAO discussed the Internal Revenue Service's (IRS) Coordinated Examination Program (CEP) to audit large corporations. GAO noted that: (1) between 1982 and 1992, the corporate tax gap will have grown over 3 times faster than the individual tax gap; (2) small corporations voluntarily paid 61 percent of the tax they owed in 1987, compared to 82 percent in 1980; (3) reasons for the decline in compliance included major changes in tax laws, the lack of information returns to IRS and corporations for payments to corporations, and the decline in audit coverage of small corporations; (4) IRS estimated that large corporations appealed 80 percent of taxes recommended and won 75 percent of the appealed amounts; (5) IRS lacked a system to identify the amounts of CEP-recommended taxes that were appealed, assessed, and ultimately collected; (6) IRS training has not kept pace with changing tax laws; (7) IRS was still auditing returns filed several years ago; and (8) ways IRS could better manage CEP and ensure that large corporations pay their fair share of taxes included simplifying troublesome sections of the Internal Revenue Code, providing accurate information on CEP effectiveness, and improved IRS employee training.