United States Government Accountability Office GAO November 2011 Report to the Secretary of the Treasury_PART3 potx

Management Discussion and Analysis Page 25 GAO-12-165 IRS’s Fiscal Years 2011 and 2010 Financial Statements INTERNAL REVENUE SERVICE Management Discussion and Analysis For the Fiscal Year Ended September 30, 2011 3 Return Preparer Initiative One of the most important initiatives that the IRS has undertaken in recent memory is the return preparer initiative, which is now being implemented. In September 2010, the IRS launched the new online PTIN (Preparer Tax Identification Number) application system. The system is up and running with over 735,000 preparers already registered in the system. More than just an identification number, the PTIN registration process gives the IRS an important and better line of sight into the return preparer community than the IRS has ever had before. It allows for leveraging information to better communicate, analyze trends, spot anomalies, and potentially detect fraud. The registration process will help IRS build, in several years, a publicly- accessible database of preparers who are authorized to prepare returns. This is an extremely important tool for consumers as they will be able to search the database to ensure that their preparer is registered. In 2011, the IRS also: ♦ Amended Circular 230 to create a new registered tax return preparer credential, extend ethical rules to all paid preparers, create new rules applicable to continuing education providers, broadened the definition of practice to include return preparation, and numerous other revisions. The IRS provided return preparer initiative outreach and education by arranging to have agency officials make presentations and provide outreach at key stakeholder events and use a range of communication tools for sharing information. The IRS also maintains an enforcement presence in the return preparer com- munity. FY 2011 accomplishments include: ♦ Completing 240 undercover visits. ♦ Conducting 93 Knock and Talk visits with identified at-risk preparers. ♦ Initiating 378 Return Preparer Program (RPP) investigations. ♦ Achieving 163 RPP convictions. ♦ Issuing 10,000 letters and visiting more than 5,000 preparers for noncompliance with multiple areas of concern that include EITC, e-file, and certified acceptance agents. Fiscal Year (FY) 2011 Performance In FY 2011, the IRS achieved an overall success rate of 84% in meeting or exceeding the targets for 27 of its 32 performance measures, a 27% increase compared to FY 2010. Two of the five measures that fell below the target were within 1% of the target. Detailed information on performance is contained in Appendix B, Performance Measurement Data; and Appendix C, Explanation of Shortfalls. Actual Performance Measures 83% 83% 56% 89% 50%50% 0% 25% 50% 75% 100% FY 2010 FY 2011 Taxpayer Service Enforcement Business Systems Modernization Collections related to enforcement activities totaled $55.2 billion for FY 2011, a 17% increase over FY 2005. IRS Enforcement Revenue ($ Billions) 47.3 48.7 59.2 56.4 48.9 57.6 55.2 0 10 20 30 40 50 60 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Research studies and analytics provide measures of taxpayer compliance and the tax gap, which influences taxpayer compliance and IRS enforcement activities. In FY 2011, the National Research Program (NRP) completed individual reporting compliance studies that will be used to update tax gap estimates scheduled to be released in FY 2012. Updated estimates also incorporate an enhanced methodology to calculate the individual income tax nonfiling gap. NRP also delivered data for the S-corporation reporting compliance study and updated payment compliance estimates for tax years 2006 through 2009. For the first time in 30 years, the IRS also began designing a corporate income tax reporting compliance study to obtain valuable information on the compliance behaviors of corporate filers. The study will cover a sample of corporate returns from tax year 2010. The IRS continues to improve its methods to identify noncompliance. In FY 2011, the Compliance Data Warehouse (CDW), an IRS system that integrates tax data from numerous sources to enable quick and easy access by IRS researchers via third-party tools, was named the 2011 Best Practices Awards winner, in the category of government/non-profit, by the Data Warehousing Institute. CDW was honored for demonstrating best practices in business intelligence, data warehousing, or related areas of data management. This is the fourth industry award for CDW in the last four years. This is trial version www.adultpdf.com . important tool for consumers as they will be able to search the database to ensure that their preparer is registered. In 2011, the IRS also: ♦ Amended Circular 230 to create a new registered. meeting or exceeding the targets for 27 of its 32 performance measures, a 27% increase compared to FY 2010. Two of the five measures that fell below the target were within 1% of the target. Detailed. easy access by IRS researchers via third-party tools, was named the 2011 Best Practices Awards winner, in the category of government/ non-profit, by the Data Warehousing Institute. CDW was honored