GAO Reports  
GGD-97-6 October 16, 1996

Tax Administration: Alternative Filing Systems
(Summary Only)

GAO reviewed the possible benefits, impediments, and costs of establishing a tax agency reconciliation filing system, focusing on: (1) the estimated number of taxpayers that would not have to prepare returns in such a system; (2) the system's operational characteristics; (3) potential advantages and disadvantages to taxpayers and the Internal Revenue Service (IRS); and (4) major impediments to and costs in establishing this type of system under existing federal tax laws.

GAO found that: (1) about 51 million taxpayers, or 45 percent of all taxpayers who filed 1992 tax returns, met the criteria for having returns prepared for them under the reconciliation system; (2) the general operational concept for the reconciliation system includes the provision and verification of information about taxpayers and their dependents, IRS preparation of tax returns, taxpayer review of tax returns, and IRS corrections to tax returns; (3) the reconciliation system could reduce taxpayer time and cost to prepare returns, reduce the amount of paper documents that IRS has to process, and reduce IRS processing and compliance costs; (4) the reconciliation system could reduce the need for tax preparers, although some taxpayers may require assistance in providing taxpayer information or reviewing prepared returns; and (5) major impediments to implementing a reconciliation system include the amount of time IRS takes to process returns, some state tax administration systems' dependence on federal tax information, and taxpayer distrust of IRS to accurately prepare returns and quickly provide refunds.

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