GAO Cites Glaring IRS Errors in U.S. Taxpayer Records : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

GAO Cites Glaring IRS Errors in U.S. Taxpayer Records

(11/17/00 3:45:29 PM PT)

WASHINGTON -- The extent of errors in the Internal Revenue Service's records of taxpayer accounts in fiscal 1999 was 'significant,' the General Accounting Office said.

The Congressional watchdog agency cited several cases to underscore its concerns, including one where the IRS erroneously assessed a penalty of nearly $250 million against a business partnership because the IRS had incorrectly entered the number of partners in its records.

'Instead of calculating a penalty for the partnership's failure to promptly file its tax return based on its actual number of partners -- two -- IRS erroneously calculated the penalty using 999,000 as the number of partners,' the GAO said in a report released Friday.

'In another case, IRS applied a tax deposit made by a taxpayer to the wrong taxpayer account,' the GAO said. 'As a result, this taxpayer, who actually owed nothing, was erroneously assessed over $15 million in taxes, which was later abated.'

In yet another case, the GAO related, the IRS erroneously entered a taxpayer's $4,668 adjusted gross income as $466,800. 'As a result, the taxpayer was assessed over $160,000 in taxes when he was actually due a refund,' the GAO said, adding that it took the IRS 18 months to abate this erroneous assessment.

These examples come in just one of a number of areas where the GAO said it found continued serious internal control and financial and operational weaknesses that affect the IRS's ability to manage its operations and produce reliable financial information.

The GAO was troubled, among other things, by what it called the IRS' inability to develop and maintain reliable and timely cost/benefit information to evaluate the relative merits of its various tax collection and enforcement activities.

The GAO urged Congress to consider requiring the IRS to include in any budget request for additional resources for its collection and enforcement activities 'reliable cost-based performance indicators and other relevant aggregate cost/benefit data that demonstrate the benefits of providing such resources.'

According to the GAO, the IRS 'had concerns' about this recommendation.

'We understand that because of concerns about its past collection and enforcement activities, IRS is reluctant to report return on investment information to the Congress,' the GAO said. 'However, we believe that billions of dollars of valid unpaid taxes could be collected in a cost-beneficial manner.'

Copyright (c) 2000 Dow Jones & Company, Inc.

-- Martin Thompson (, November 19, 2000

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