The Government Accountability Office found in a recent review of the Internal Revenue Service’s Compliance Assurance Process that though the program was established to cut costs and reduce uncertainty, it has not evaluated whether the goals are being met.
Created in 2005, CAP was established to reduce the resources and time used by the IRS to audit corporate tax returns, that, for a large company, can take up to four or more years on average to complete. The lengthy audits can also create years of uncertainty about a large company’s tax liability.
Under CAP, in a phase called Compliance Maintenance, compliant and cooperative taxpayers can receive a streamlined IRS audit of their tax return. The GAO report found that the IRS did not have complete or consistent CAP data, making it difficult or impossible to track tax issue resolution and resource savings to determine the efficacy of the system.
The report also found that the IRS has been moving taxpayers into the Compliance Maintenance phase without documenting a plan to ensure that it has the ability to process the returns in an expedited manner, as intended.
Without verification that the IRS audit staff understands guidance issued in May, the report said, IRS does not have “reasonable assurance” that the audit staff understand the ideal candidate for the program and when a candidate should be removed from the program.
“GAO recommends that IRS evaluate the process, develop measures and targets for the goals, consistently capture data to track goal progress, track resolution of tax issues and resource savings, develop a plan to expand Compliance Maintenance and verify that audit staff understand attempts to clarify related guidance,” the GAO said, adding that the IRS agreed with the recommendations.