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Tax Research: IRS Has Made Progress but Major Challenges Remain

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Report Type Reports and Testimonies
Report Date June 5, 1996
Report No. GGD-96-109
Subject
Summary:

The Internal Revenue Service (IRS) is changing its tax compliance philosophy. Although it will continue to use audits to catch tax cheats, IRS is exploring methods other than enforcement to induce compliance, such as assistance and education. This new approach involves researching ways to improve compliance for specific market segments--groups of taxpayers who share characteristics or behaviors. The agency wants to boost total compliance to 90 percent by 2001 and believes that its new compliance research approach will help meet this goal. Taxpayer compliance in paying taxes owed has remained steady during the past 20 years at about 87 percent, and IRS estimates tax losses from noncompliance at more than $100 billion. This report (1) reviews the lessons IRS has learned from past compliance efforts in identifying factors most critical to the success of its new compliance research approach and (2) analyzes the status of the new approach and its ability to incorporate these factors.

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