Summary: GAO reviewed the Internal Revenue Service's (IRS) efforts to detect business tax nonfilers, focusing on whether: (1) state employment tax information data could aid IRS in investigating business nonfilers; and (2) IRS continued to send business tax forms to known invalid addresses.
GAO analyzed 201 selected businesses in California that IRS identified as potential nonfilers, and found that: (1) IRS could use California state employment tax information to verify businesses' statements about their employment tax liability and to estimate their federal employment tax liability; (2) the state's employment tax information could help IRS to quickly close investigations of nonfilers that have little or no tax liability; (3) 21 of 100 businesses had 31 delinquent federal employment tax returns because they paid wages during periods for which they reported paying no wages; (4) IRS mailed publications to nonfilers with invalid addresses because a computer code that automatically generated mailing lists was still on the master file; and (5) it was unable to estimate the cost of the erroneous mailing because IRS did not track the numbers of publications forwarded to invalid addresses.
