Tables

Figure

Table 3.1: Comparison of Estimated and "Actual"
Accounts Receivable Revenues

Table 3.2: Comparison of Estimated and "Actual"
Revenues Generated by Notices and TDAS
Table 3.3: Comparison of Estimated and "Actual"
Revenues Generated by First Notices
Table 3.4: Comparison of Estimated and "Actual"
Revenues Generated by Delinquent Returns
Table 3.5: Comparison of Estimated and "Actual"

Revenues Generated by the IRP Nonfiler Program
Table 3.6: Percent Differences Between Estimated and
"Actual" Results for Components of IRP Nonfiler
Revenue Estimates

Table 4.1: Comparison of Estimated and "Actual" IRP
Underreporter Revenues and Workload

Figure 1.1: Interrelationships Among IRS' Major Revenue-
Generating Enforcement Programs

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26

26

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13

Chapter 1

Introduction

The Internal Revenue Service (IRS) generates revenues for the federal
government when it enforces existing tax laws. For example, it might
identify more taxes owed upon the examination of tax returns. Delibera-
tions on ways to reduce the federal budget deficit often raise the issue of
whether IRS could generate additional revenues by intensifying its
efforts. An increased interest in the revenue-generating capabilities of
IRS' enforcement activities has brought with it an increased scrutiny of
IRS' estimates of the revenues that have been and can be generated by
those activities.

In an August 1988 report to the Senate Budget Committee,' we identified several flaws in IRS' process for estimating the revenues from its Examination program. As a follow-on to that report, the Ranking Minority Member of the Senate Budget Committee asked us to expand our inquiry to IRS' two other major revenue-generating activities-the collection of unpaid taxes and the matching of information on tax returns with information submitted by third parties, such as employers and banks. The Ranking Minority Member also asked us to inquire into IRS' estimates of total enforcement revenues and a model IRS developed for allocating enforcement resources.

IRS' Generation of
Enforcement Revenues
Involves Several
Programs

As shown in figure 1.1, IRS' generation of enforcement revenues involves several interrelated programs including Examination, Collection, the Information Returns Program (IRP), and Appeals/Tax Litigation.2

1Tax Administration: Difficulties in Accurately Estimating Tax Examination Yield (GAO/
GGD-88-119, Aug. 8, 1988).

2IRS has other enforcement programs, such as Criminal Investigation, which also generate revenues.
Those programs are not included in our discussion because, according to IRS, to the extent that their
activities produce enforcement revenues they would be included in the yield of other functions, such
as Examination.