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Open Recommendations (206 total)

Tax Fraud and Noncompliance: IRS Can Strengthen Pre-refund Verification and Explore More Uses

GAO-18-224
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service Based on the assessment in Recommendation 5, the Acting Commissioner of Internal Revenue should implement any identified changes to improve pre-refund compliance checks. (Recommendation 6)
Open
In September 2019, IRS provided results for a pilot encouraging voluntary compliance through expanded systemic verification using W-2 data. In the pilot, IRS sent soft notices to a targeted group of taxpayers whose returns under-reported income compared to W-2 data. In its analysis, IRS reported that some taxpayers voluntarily amended their returns after receiving the soft notice, resulting in a net increase in tax revenue. IRS continued this pilot in 2020, 2021, and 2022, and provided additional data on results of the pilot. In January 2023, IRS officials told us that they would not continue the pilot in 2023 due to insufficient resources. However, in April 2023, IRS released its Inflation Reduction Act Strategic Operating Plan, which included an initiative to notify taxpayers and tax professionals of potential mismatches for simple types of income (W-2 and 1099 NEC) and processing errors. This initiative included milestones in fiscal years 2024 and 2025. We will follow up with IRS to determine the status of the initiative. If IRS implements this initiative based on its assessment of the costs and benefits from the pilot results, or assesses and implements additional options to address other fraud and noncompliance before issuing refunds, it would satisfy our recommendation.

Tax Administration: Better Coordination Could Improve IRS's Use of Third-Party Information Reporting to Help Reduce the Tax Gap

GAO-21-102
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1 Open Recommendations
1 Priority
Agency Affected Recommendation Status
Internal Revenue Service
Priority Rec.
The Commissioner of Internal Revenue should develop a collaborative mechanism to coordinate among the internal stakeholders who are responsible for the intake, processing, and use of information returns, as well as to improve outreach to external stakeholders in relation to information returns. (Recommendation 9)
Open
IRS neither agreed nor disagreed with this recommendation. In July 2021, IRS reported that the new organizational structure described in its January 2021 Taxpayer First Act Report to Congress would provide for collaboration and coordination on the delivery of IRS-wide programs, such as those involving information returns. According to the report, IRS will consolidate compliance functions currently dispersed across multiple business units into a single division, which may help identify compliance related trends across taxpayer segments. IRS aims for this consolidation to reduce duplicative activities related to case selection and performance monitoring, among others. As of February 2024, IRS has not finalized a deadline to complete the reorganization. Until then, IRS reported that in the interim, the Deputy Commissioner for Services and Enforcement is to facilitate coordination among internal stakeholders. Until IRS implements a collaborative mechanism with a coordinated approach to using information returns, IRS risks missing opportunities to improve the effectiveness of its development, intake, processing, and use of information returns.

Security of Taxpayer Information: IRS Needs to Address Critical Safeguard Weaknesses

GAO-23-105395
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner for Internal Revenue should ensure that PGLD monitor contractor UNAX and unauthorized disclosure cases and trends and take action, as appropriate. (Recommendation 10)
Open
IRS agreed with this recommendation and as of March 2024, reported the agency would implement it by April 2024. Specifically, IRS reported that PGLD has established a regularly meeting, cross-functional team with relevant stakeholders to address and implement recommended changes. Additionally, IRS reported that PGLD has increased IRS's automation capabilities to track and monitor contractor UNAX incidents through IT systems. Implementing this recommendation would help IRS to determine if contractor UNAX case amounts are changing and identify any trends across cases that could be used to target prevention efforts.

Employment-Related Identity Fraud: Improved Collaboration and Other Actions Would Help IRS and SSA Address Risks

GAO-20-492
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should assess and document the feasibility of incorporating additional checks into its automated checks of employment-related identity fraud for populations at risk of employment-related identity fraud, such as children, elderly, deceased persons, and individuals associated with multiple wage records. (Recommendation 2)
Open – Partially Addressed
IRS initially neither agreed nor disagreed with GAO's May 2020 recommendation but in September 2020 agreed with it. IRS now reviews all W-2s, not just the first two, when identifying mismatches in returns filed with an Individual Taxpayer Identification Number. However, as of January 2024, IRS does not consider other characteristics, such as individuals with multiple wage records, in its checks for employment-related identity fraud. Doing so would require the development of new codes or the modifications of existing ones. By assessing and documenting the feasibility of incorporating additional checks--such as multiple wage records or wage records for children under 14--into its checks of employment-related identity fraud, IRS may be able to develop a method for identifying additional taxpayers at risk of this type of fraud.

Information Security: IRS Needs to Rectify Control Deficiencies That Limit Its Effectiveness in Protecting Sensitive Financial and Taxpayer Data

GAO-18-391
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should take steps to improve the implementation of IRS's information security program by documenting access authorizations for non-unique accounts. (Recommendation 2)
Open
During GAO's audit of FY 2020 IRS financial statements, IRS did not submit this recommendation for closure, nor did the agency provide evidence that it had implemented this recommendation. When IRS indicates that it has implemented this recommendation, we will review relevant IRS actions.

Abusive Tax Schemes: IRS Could Improve Its Reviews of Offshore Insurance Audits and Investigations

GAO-22-104180
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should have LB&I adopt formal managerial reviews of micro-captive insurance promoter investigations, establish a reliable way to store and track managerial review data of promoter investigations that allows it to isolate high priority cases, issue guidance on how often and by what method such investigations should be subjected to managerial review, and use the data to assess the quality of its promoter investigations. (Recommendation 5)
Open
In a letter from October 2022, IRS disagreed with this recommendation, stating that LB&I promoter investigations already are subject to 100 percent managerial review. However, as mentioned in GAO's report, these reviews are not all documented in a way that LB&I could compile and analyze. The IRM requires that managers evaluate and recommend changes to their penalty program, which includes micro-captive promoter investigations. However, LB&I lacks an electronic method to identify, document, and analyze managerial reviews of such investigations for trends, anomalies, or potential deficiencies. In April 2024, we requested additional feedback from IRS. GAO will continue to monitor IRS for additional action. By implementing this recommendation, IRS will gain a more thorough understanding of promoter case quality and better detect potential emerging quality issues.

Private Debt Collection Program: IRS Could Improve Results and Better Promote Equitable Outcomes for Taxpayers

GAO-24-106140
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of Internal Revenue should assess IRS's performance against its standards for equity and take actions to address any identified issues. (Recommendation 3)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Tax Administration: Taxpayer Input Could Strengthen IRS's Online Services

GAO-20-71
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1 Open Recommendations
1 Priority
Agency Affected Recommendation Status
Internal Revenue Service
Priority Rec.
The Commissioner of the IRS should direct the Commissioner of W&I to work with the Director of OLS to ensure that future decisions regarding whether to renew the Free File agreement incorporate findings from a comprehensive examination of the benefits and costs of the agreement as it relates to long term plans for IRS's online services, including plans to file amended returns electronically. (Recommendation 7)
Open
IRS agreed with this recommendation. A March 2021 IRS analysis addressed a portion of the recommendation by identifying potential benefits, such as lower costs of processing electronic returns compared to paper ones. However, IRS did not discuss how the Free File program should be coordinated with online services offered to taxpayers, such as online accounts. In August 2022, Congress provided IRS with $15 million in the Inflation Reduction Act of 2022 to study the possibility of an IRS-run online filing system. In May 2023, IRS issued its report to Congress on a potential free direct file system. IRS concluded that there is taxpayer interest in an IRS-run free direct file option and IRS is technically capable of delivering such a system. IRS also plans to use a pilot program to gather data to assess issues identified in the report before deciding whether to deploy a full-scale direct file system. To fully implement this recommendation, IRS needs to evaluate the results of its planned direct file pilot as part of a benefit-cost analysis of the current Free File agreement. Without a more rigorous examination, IRS is not positioned to manage the risks of its reliance on the Free File agreement nor consider how Free File fits within its portfolio of IRS-provided online services.

Information Technology: IRS Needs to Complete Modernization Plans and Fully Address Cloud Computing Requirements

GAO-23-104719
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of the IRS should ensure that IRS establishes time frames for addressing the disposition of legacy systems for the Enterprise Data Platform modernization initiative and follow through to document a complete modernization plan. (Recommendation 2)
Open
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Information Technology: IRS Needs to Complete Planning and Improve Reporting for Its Modernization Programs

GAO-24-106566
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1 Open Recommendations
Agency Affected Recommendation Status
Internal Revenue Service The Commissioner of the IRS should complete plans for its modernization programs that include (1) milestones to complete the modernization, (2) a description of the work necessary to complete the modernization, and (3) details regarding the disposition of the legacy system, if applicable. (Recommendation 2)
Open
IRS agreed with this recommendation. In its March 2024 letter responding to our draft report, IRS stated that, for each program, it will document the milestones to complete the modernization, describe the work necessary to develop the new system or to modernize the legacy system, and detail the disposition of the legacy system, if applicable. GAO will continue to monitor IRS actions to implement this recommendation.
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