Summaries of Tax-Related Products Issued
in Fiscal Year 1992 by Subject Matter

Compliance

Millions in Savings
Possible From VA's
Matching Program
With SSA and IRS

GAO/HRD-92-37, 12/23/91

In a report to the Chairmen, Senate Committee on Finance, Senate and
House Committees on Veterans Affairs, and House Committee on Ways
and Means, GAO reported on the progress the Department of Veterans
Affairs (VA) had made in implementing its authority to verify
beneficiary-reported income with IRS tax data and SSA earnings records.
Section 8051 of the Omnibus Budget Reconciliation Act of 1990 granted VA
access to tax records. Section 8051(d) required the Comptroller General to
report on the effectiveness of using tax records to verify eligibility for VA
benefits. This report responded to that requirement.

GAO reported that VA's first computer match of income reported under the improved pension and parents' dependency and indemnity compensation programs with IRS data on unearned income (such as dividends and interest) for tax year 1989 confirmed the potential for substantial savings. Initial results showed that nearly $340 million more in unearned income was reported to IRS than to VA by the same beneficiaries for that tax year. VA officials also expected additional savings to result from matches with SSA earnings data.

GAO reported that VA (1) was notifying beneficiaries of the discrepancies
found in reported income and would take action to suspend or terminate
benefits; (2) had taken appropriate steps to safeguard the data received
from both the IRS and SSA; (3) was following the procedures established by
law to protect the beneficiaries' rights and afford them due process; and
(4) in disputed cases, was prepared to verify income discrepancies with
third parties, such as financial institutions and past and present employers.
GAO told the committees that despite the promising initial results, start-up
for the matching program had been slow. Nearly one-third of the time the
law allowed VA to use IRS and SSA data had been spent gaining access to the
data. VA and IRS completed their matching agreement in June 1991 and VA
received initial IRS data in July 1991. VA finalized an agreement with SSA in
July 1991 but did not receive Social Security data until March 1992. Finally,
GAO reported that progress in matching had been limited to benefits
programs. VA Health Administration officials had not notified beneficiaries
of their intent to verify income and were still considering how to

Related GAO Product(s)

Summaries of Tax-Related Products Issued

in Fiscal Year 1992 by Subject Matter

implement the law most effectively. Health officials cite the lack of a systemwide database and staff for its lack of progress.

GAO/HRD-89-24, 03/16/88

Summaries of Tax-Related Products Issued

in Fiscal Year 1992 by Subject Matter

IRS' Implementation of Certain Compliance Initiatives

Recommendation(s)

GAO/GGD-92-45FS, 01/30/92 and GAO/GGD-92-118, 07/31/92

IRS' fiscal year 1991 appropriation included $191 million for 3,476 additional staff to implement 9 compliance initiatives that were expected to produce an additional $5.7 billion in enforcement revenue during the 5 years ending with fiscal year 1995. At the request of the Chairman and Ranking Minority Member of the Senate Committee on the Budget, GAO monitored the results of three of those initiatives. The three were designed to (1) increase collection staff so that IRS could collect additional delinquent accounts, (2) increase examination staff so that IRS could audit more returns, and (3) revise IRS' training program for revenue agents so that experienced staff could spend less time training new staff and more time doing audits.

GAO reported that the fiscal year 1991 results for the three initiatives were mixed and that IRS' most recent revenue projection for the three initiatives (March 1992) was about 25 percent less than the revenue target in the President's fiscal year 1991 budget submission. Most of that reduction was attributable to the collection initiative. IRS could not provide complete documentation on how the original 5-year revenue target for that initiative was calculated. According to IRS, however, the reduction in the collection initiative resulted from a combination of staffing reductions, changes in productivity assumptions, and failure to account for the costs associated with using experienced staff to train new hires.

GAO concluded that the quarterly reports IRS prepared to track the results of the various initiatives did not provide Congress and other interested parties with enough meaningful information on the impact of those initiatives. That was because the tracking system focused on revenues gained from staffing increases authorized by the initiatives but did not account for reductions in revenue that occurred as a result of reductions to baseline staffing. AS GAO has said in the past, it does little good for Congress to approve additional staffing with the intent of generating additional revenue if that benefit is eroded by reductions to baseline staffing.

The Commissioner of Internal Revenue should report the net revenue effect of the staffing increases that Congress authorized in fiscal year 1991 to congressional oversight, budget, and appropriation committees. In doing so, IRS needs to revise its tracking approach so that it (1) compares the total examination and collection staffing levels that Congress

Summaries of Tax-Related Products Issued
in Fiscal Year 1992 by Subject Matter

Federal Agency Tax
Compliance Problems
Remain:
Improvements Are
Planned

GAO/GGD-92-29, 02/18/92

In a report to the Chairman, Subcommittee on Oversight, House
Committee on Ways and Means, GAO updated information provided the
Subcommittee in 1990 on the status of federal agency accounts in IRS'
accounts receivable inventory. GAO reported that tax payment and
processing problems identified in its earlier review were still occurring. Of
the $268.5 million in federal agency accounts receivable included in IRS'
June 1991 accounts receivable inventory, at least $245.1 million, or
91 percent, was attributable to tax payment and processing errors and did
not reflect money owed. GAO found that one agency's mistake caused a
single erroneous assessment of $212.4 million. Available information
indicated that 1 of the 12 federal agencies GAO selected for detailed
analysis may have to pay about $200,000 in late tax payments to resolve its
account balance.

GAO also reported that the late filing of employment tax returns was still prevalent. Of the 525 agency accounts in IRS' accounts receivable inventory on June 22, 1991, 270 accounts, or 52 percent, had 1 or more late-filed employment tax returns. In its earlier work, GAO reported that two-thirds of the agencies' accounts sampled had a late filed employment tax return. Not only is late-filing of tax returns a measure of noncompliance by the agencies, but late filing of tax returns also impairs IRS' ability to detect late and insufficient payments and errors because IRS does not complete processing and reconciling tax information until a tax return has been filed for the quarterly period.

GAO also reported that other problems previously identified continued to occur at the agencies and caused their accounts to show up in IRS' accounts receivable inventory. For example, checks issued by the Department of the Treasury for payment of agencies' taxes continued to get lost as they moved through the Federal Tax Deposit system. Agencies continued to make mistakes in paying their taxes and filing their quarterly tax returns, and mistakes eventually showed up in their accounts at IRS. Likewise, IRS' mistakes in processing agency payments continued to result in erroneous receivables.

GAO also pointed out that resolving erroneous receivables can take long
periods of time. In fact, 17 of the 63 agency accounts with balances of
$100,000 or more in IRS' accounts receivable inventory from the previous
study still had unresolved amounts due a year later. The majority of the
unresolved accounts had been part of IRS' accounts receivable inventory