TIGTA: Potential underreported tax not being addressed

The Treasury Inspector General for Tax Administration (TIGTA) found that billions of dollars of potential underreported taxes were not being addressed by the Combined Annual Wage Reporting (CAWR) Program because most discrepancy cases were not being worked. TIGTA initiated the audit to evaluate whether the IRS-CAWR Program’s document-matching process accurately identified and selected the most productive cases and found that the IRS worked only 17 percent of the discrepancy cases found. The remaining 114,088 (83 percent) discrepancy cases had a potential underreported tax difference of more than $7 billion. In addition, discrepancy case selection processes did not ensure that priority was given to working discrepancy cases with the highest potential tax assessment.

TIGTA recommended, among other things, that the IRS: (1) evaluate the current agreement and workload processes with the Social Security Administration to determine if changes could be made; and (2) revise its case selection criteria to include auto-generated cases with the highest potential tax assessment. The IRS agreed with six of the seven recommendations but did not agree to include prior-year discrepancy cases when current-year discrepancy cases were selected for the same employer. (TIGTA Report: Case Selection Processes Result in Billions of Dollars in Potential Employer Underreported Tax Not Being Addressed (Reference Number: 2017-40-038).)

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