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GAO: IRS Should Improve Noncompliance Analysis of Tax-Exempt Entities

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IRS
IRS

The Government Accountability Office (GAO) is recommending the Internal Revenue Service (IRS) improve its documentation on the use of data for analyzing noncompliance among tax-exempt organizations. Exempted entities often provide membership benefits and handle charitable activities, according to GAO.

The agency said in a recent report that it studied IRS’s use of analytical models to select organizations to examine and document potential noncompliance from fiscal years 2016 through 2019.

According to the watchdog, IRS “has not fully implemented or documented internal controls in its established processes for analyzing data for examination selection.”

In addition, GAO noted that IRS didn’t establish measurable objectives and failed to regularly evaluate its examination selection process, resulting in deficiencies that affected the accuracy, validity and consistency of recorded data.

GAO said that without such documentation, IRS can’t “support its use of data in examination selection in all cases.”