GAO Reports  
GGD-95-151 June 16, 1995

Tax Administration: IRS' Partnership Compliance

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) partnership compliance activities, focusing on: (1) the extent of partnership compliance with tax laws; and (2) steps IRS is taking or could take to improve partnership compliance.

GAO found that: (1) the most current partnership compliance data showed that individual partners owed an additional $2.4 billion in taxes in 1982; (2) IRS will not have more current partnership compliance data until October 1998 when it completes its audits of tax year 1994 partnership returns; (3) IRS relies exclusively on audits to detect partnership noncompliance, which has proven to be an inadequate strategy; (4) relatively few partnership returns have been audited in recent years because IRS has focused its resources on corporate audits; (5) partnership audits have resulted in audit adjustments more frequently than other business audits; (6) IRS could not measure the amount of net taxes assessed per partnership because it did not maintain data on the specific results of partnership audit adjustments; (7) IRS discontinued its delinquent partnership return program in 1989, but it plans to reinstate the program in 1996; (8) IRS does not have a computer document matching program for partnerships, but may develop one in its modernization efforts that will be completed in 2001; and (9) IRS is training revenue agents to identify partnership compliance issues, since it takes an average of 12 months to complete each partnership audit.

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