The IRS plans to extend a pilot program that matches federal and state taxpayer data to spot individuals and businesses that don't pay enough taxes without knowing how effective it is, auditors report.
The Internal Revenue Service doesn't have a plan to evaluate the
effectiveness of a data-sharing pilot program even though it plans to
launch the program in 45 states in July 2009, the Government
Accountability Office said.
Under the State Reverse File Match Initiative, the IRS matches federal and state taxpayer data to detect individuals and businesses that do not file tax returns or report all their income, GAO auditors wrote in a report released Dec. 8.
Agencies are increasingly sharing taxpayer data to help verify applicant-provided information, the GAO report states. The IRS' data-matching program has been a cost-effective way of capturing underreported income and bringing in billions of dollars of tax revenue while boosting voluntary compliance, GAO said.
Thirteen states — including California, New York and Ohio —participated in the first three phases of the pilot program, the report states.
IRS officials said they plan to evaluate the program results so they can decide whether to expand data sharing with states, GAO auditors wrote. However, the IRS has little documentation related to its evaluation and no standards or criteria on which to base the pilot program's performance and determine whether it should be incorporated into IRS’ compliance activities, GAO said.
IRS officials plan to use research results to help formulate standards to determine the pilot program's success, but they did not provide a target date for accomplishing that, GAO said.
And although the IRS has begun formulating plans for developing a sampling approach and determining appropriate sample size, problems such as delays in information technology assistance and time limits for using taxpayer data have delayed progress, GAO said.
“Without a sound assessment of pilot program results, IRS may make poor decisions about the program’s future,” said Michael Brostek, director of GAO’s tax issues strategic issues team.
IRS officials said they would develop an evaluation plan to reliably assess the pilot program’s results and include the key evaluation features that GAO recommended.
Those features include:
- Clear and measurable objectives.
- A plan that details the type and source of data necessary to evaluate the pilot program.
- Methods for collecting data and determining the frequency of collection.
- A detailed data-analysis plan to track the program’s performance and evaluate its results.