Tax Administration

For several years, Congress and others have been concerned about declines in the Internal Revenue Service's (IRS) compliance and collection programs. Taxpayers' willingness to voluntarily comply with the tax laws depends in part on their confidence that their friends, neighbors, and business competitors are paying their share of taxes. GAO found large and pervasive declines in five of the six compliance programs and in both collection programs between fiscal years 1996 and 2001. Factors contributing to the declines in the program and in collection coverage include declines in IRS staffing, increased workloads, and increased procedural controls mandated by Congress to better safeguard taxpayer interests. The declines in IRS's compliance and collection programs had several impacts. The likelihood that taxpayer noncompliance would be detected and pursued by IRS declined and the length of time that taxpayers owed back taxes at the time that they were assigned to collection increased between 1996 and 2001. The amount of penalties and interest continued to accumulate on deferred collection cases, making future payment increasingly demanding if subsequently pursued by IRS. Strategic assessments, which were prepared to provide a basis for decisions on significant program changes in IRS dealings with individual and small business taxpayers, identified the risk of declining compliance as a major trend, issue, or problem for IRS. The assessments could not quantify the impact that the initiatives may have on taxpayer compliance because IRS has yet to implement a system to measure taxpayer compliance.

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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