Tax Administration

Pursuant to a congressional request, GAO reviewed Internal Revenue Service (IRS) efforts to prevent, identify, and collect employment tax delinquencies, focusing on whether problems exist in the overall IRS strategy for addressing employment tax delinquencies.

GAO found that: (1) IRS did not have a centralized effort for preventing, identifying, or collecting delinquent employment taxes; (2) IRS could not ensure that its resources were effectively allocated to address employment tax delinquencies, since its efforts were scattered throughout various functional areas with no central focus or assigned responsibility; (3) IRS could not effectively target its prevention programs, since it had not developed the information necessary to determine the employers most likely to be delinquent or the effectiveness of its employment tax delinquency efforts; (4) one of two IRS primary prevention programs, the Federal Tax Deposit Alert Program, was not targeted at those most likely to be delinquent, produced numerous unproductive alerts, and did not have any significant effect on promoting employment tax compliance; (5) limited staff resources prevented IRS from investigating many of the leads and cases brought to its attention; (6) the number of employment tax audits done by the IRS examination function fell from 109,000 in fiscal year (FY) 1979 to a low of about 24,000 in FY 1988 before rising to 42,000 in FY 1990; (7) most programs designed for collecting delinquent employment taxes were ineffective because they were generally untimely or used infrequently; and (8) IRS relied primarily on collection to ultimately resolve the delinquencies.

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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