Summary: Pursuant to a legislative requirement, GAO studied the effects of the Internal Revenue Service's (IRS) Refund Offset Program on voluntary tax compliance, focusing on: (1) IRS improvements to its methodology; and (2) ways to make future studies more precise.
GAO found that: (1) IRS improved its studies of the effects of offsetting refunds on taxpayer compliance by incorporating previous filing behavior into its analysis to establish patterns to compare with post-offset filing patterns; (2) the IRS methodology was limited because it did not consider whether the offset and control groups exhibited similar taxpayer compliance characteristics before the offsets; (3) although IRS improved the quality of its study data and its documentation of study programming requirements, some limitations remained; (4) although IRS matched its offset and control groups on some tax characteristics, there was a risk of bias in its findings because it did not account for all relevant preexisting differences; and (5) IRS did not use updated information to measure the level of IRS enforcement action required to make taxpayers compliant and to assess whether noncompliance was temporary or permanent.
