Challenges Remain For IRS On Enforcement, Says GAO

by Leroy Baker, Tax-News.com, New York

12 November 2004

Whilst the Government Accountability Office’s recent report on the accounts of the Internal Revenue Service welcomed new measures by the Tax-Exempt and Government Entities Division to tackle the spread of tax avoidance schemes, it noted that challenges remain for the IRS on the enforcement front.

According to the GAO, the IRS TE/GE division has identified a number of abusive transactions which include municipal bonds, government urban development programs, S-Corporation employee stock plans and consumer credit counselling organizations, among others.

The report observed that one of the major steps taken by the IRS in its fight against the proliferation of these schemes is the creation of a steering committee which coordinates and communicates the division’s efforts in identifying abusive tax shelter schemes.

In its unqualified opinion on the IRS accounts for the fiscal years 2003 and 2004, the GAO praised the “continued extraordinary efforts of IRS senior management and staff to compensate for serious internal control and financial management deficiencies".

However, the report noted that the agency’s most serious weaknesses remained in its continued reliance on outdated automated systems “whose numerous limitations render IRS unable to develop cost-based performance or other information to support informed decision making throughout the year".

The government watchdog also suggested that abusive transactions remain a “continuing challenge” which is given a “very light enforcement priority" by the IRS.

Recommended