Classifiers Are Eliminating Less Productive Tax Returns From the Audit Stream, but Their Work Needs Closer Monitoring
August 25, 2010
Reference Number: 2010-30-096
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
Phone Number |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Web Site |
http://www.tigta.gov
HIGHLIGHTS
CLASSIFERS ARE ELIMINATING LESS
PRODUCTIVE TAX RETURNS FROM THE AUDIT STREAM, BUT THEIR WORK NEEDS CLOSER
MONITORING
Highlights
Final
Report issued on August 25, 2010
Highlights of Reference Number:
2010-30-096 to the Internal Revenue Service Commissioner for the
Small Business/Self-Employed Division.
IMPACT ON TAXPAYERS
Internal
Revenue Service (IRS) statistics show that fewer audits initiated by updated scoring
formulas are being closed with no recommended tax changes. This indicates the IRS is better focusing its
audit resources on tax returns posing the greatest compliance risk and not
burdening compliant taxpayers with an audit.
WHY TIGTA DID THE AUDIT
The audit
was initiated because the IRS is investing considerable effort to obtain
current compliance data needed to update the Discriminant Index Function (DIF)
formulas. Assigning a DIF score is the
first part of a multistep process designed to select tax returns for which an
audit is most likely to result in a material tax change. After the DIF assigns a score, the returns
with the highest scores are reviewed by classifiers.
Classifiers
have a critically important role in the process because they use their
experience and judgment to determine which DIF-initiated tax returns warrant an
audit and which can be accepted as filed. The objective of this audit was to determine
how well classifiers in the Small Business/Self-Employed Division are assessing
the compliance risk on individual tax returns selected by the updated DIF formulas.
WHAT TIGTA FOUND
Classifiers
are doing a good job of eliminating less productive tax returns from the DIF
audit stream. However, reviews to
monitor the quality of their work were not always conducted in accordance with
IRS procedures. This warrants attention
because the IRS is phasing out the manual classification process and moving to
an automated process where classifiers will be widely dispersed across the
country. As a result, these reviews will
be important for assuring classifiers are learning and adapting to the new
automated environment while consistently applying their expertise and skills
during the classification process.
WHAT TIGTA RECOMMENDED
TIGTA
recommended that the Director, Examination Planning and Delivery, Small
Business/Self-Employed Division: 1) issue
a memorandum to managers reemphasizing the existing requirements for
controlling and monitoring the quality of the classification process, 2) establish
a mechanism to monitor how well managers are
complying with the existing requirements, and 3) develop and implement a
data collection instrument to ensure an adequate sample of tax returns is
reviewed.
IRS management agreed with
the recommendations and plans to take appropriate corrective actions. The Director, Examination Planning and
Delivery, Small Business/Self-Employed Division, plans to issue a memorandum to
Examination Area Directors on the topic of sample return reviews to be done
during the classification process. Also,
the Director, Examination Planning and Delivery, Small Business/Self-Employed
Division, plans to recommend that Examination Area Directors include a review
of the quality of the classification process in their respective Examination
Area Operational Reviews. To ensure an
adequate sample of classified/selected returns is reviewed, IRS management plans
to develop a data collection instrument to be used for collecting this
information.
August 25, 2010
MEMORANDUM FOR Commissioner, Small Business/Self-Employed Division
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report –
Classifiers Are Eliminating Less Productive Tax Returns From the Audit Stream,
but Their Work Needs Closer Monitoring (Audit # 201030025)
This report presents the results of our review to determine
how well classifiers in the Small Business/Self-Employed Division are assessing
the compliance risk on individual tax returns selected by the updated Discriminant
Index Function formulas. This audit was
conducted as part of our Fiscal Year 2010 Annual Audit Plan and addresses the
major management challenge of Tax Compliance Initiatives.
Management’s complete response to the draft report is included as Appendix VI.
Copies of this report are also being sent to the Internal
Revenue Service managers affected by the report recommendations. Please contact me at (202) 622-6510 if you
have questions or Margaret E. Begg, Assistant Inspector General for Audit
(Compliance and Enforcement Operations), at (202) 622-8510.
Classifiers
Eliminated Less Productive Tax Returns From the Audit Stream
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Classification Quality Review Record (Form 5126)
Appendix
V – Examination Classification Checksheet (Form 6754)
Appendix
VI – Management’s Response to the Draft Report
Abbreviations
|
CDE |
Compliance Data Environment |
|
DIF |
Discriminant Index Function |
|
FY |
Fiscal Year |
|
IRM |
Internal Revenue Manual |
|
IRS |
Internal Revenue Service |
|
PSP |
Planning and Special Programs |
|
PY |
Processing Year |
|
SB/SE |
Small Business/Self-Employed |
Assigning a DIF score is the first part of a
multistep process designed to select returns for which an audit is most likely
to result in a material tax change.
The Internal Revenue Service (IRS) is
investing considerable effort in obtaining current compliance data needed to
measure voluntary compliance and update the Discriminant Index Function (DIF)
formulas that are used to score individual tax returns according to their audit
potential. Assigning a DIF score is the
first part of a multistep process designed to select returns for which an audit
is most likely to result in a material tax change. After the DIF assigns a score, the returns with the
highest scores are reviewed by classifiers.
These classifiers, who are experienced examiners on a temporary assignment, have a critically important role in the process because they use their experience and judgment to determine which DIF-initiated returns will be selected for audit consideration (selected) and which can be accepted as filed (accepted). If a return is accepted by the classifier, it is eliminated from the DIF audit stream and returned to IRS storage files.
However, if the decision is made to select a return, the classifier makes a judgment call as to whether the audit should be done in the field or in an IRS office. In general, field audits involve more complex issues related to business individuals. When the decision is made that the return should be audited in an IRS office, the classifier will additionally identify the issues to be covered during the audit by completing an Examination Classification Checksheet (Form 6754).[1]
After returns are selected, they are forwarded to audit groups for final review. During this final review, a decision is made to either initiate an audit or accept the return as filed, eliminate it from the DIF audit stream, and return it to IRS storage files. If an audit is initiated, the audit process typically involves the IRS notifying the taxpayer of the audit and its scope, evaluating the taxpayer’s supporting information, and advising the taxpayer (or his or her representative) of the audit findings.
This
review was performed in the IRS Small Business/Self-Employed (SB/SE) Division
Headquarters Office in New Carrollton, Maryland; the Compliance Data
Environment (CDE)
Classifiers are doing a good job of eliminating less productive returns from the DIF audit stream. However, reviews to monitor the quality of their work were not always conducted in accordance with IRS procedures. This situation warrants attention because the IRS is phasing out the manual classification process and moving to an automated process where classifiers will be widely dispersed across the country. As a result, these reviews will be important for assuring classifiers are learning and adapting to the new automated environment while consistently applying their expertise and skills during the classification process.
Classifiers Eliminated Less Productive Tax Returns From the Audit Stream
One measure of audit productivity that continues to trend
favorably since the updated DIF formulas were introduced is the additional
taxes recommended for each tax return audited.
Since the updated formulas were introduced in Processing Year (PY)[2]
2006, the recommended additional taxes for DIF-initiated audits increased 72
percent from a low of $4,753 in PY 2003 to $8,193 in PY 2006. As reflected in Figure 1, SB/SE Division
statistics additionally show the percentage of no-change audits initiated under
the new formulas is declining. The reduction in the percentage of no-change
audits is noteworthy because it indicates that the IRS is better focusing its
audit resources on returns posing the greatest compliance risk and not
burdening as many compliant taxpayers with an audit.
Figure 1: SB/SE Division’s Percentage of DIF-Initiated No-Change
Audits for PYs 2001 through 2007
Figure 1 was removed due to its size. To see Figure 1, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.[3]
One factor likely contributing to the favorable productivity trends is the ability of classifiers to eliminate less productive returns from the audit stream. From a universe of 49,646 tax returns for sole proprietors and individuals, we analyzed a statistical random sample of 148 tax returns that were identified by the updated DIF formulas and subsequently accepted by classifiers during Fiscal Years (FY) 2008 and 2009. Our analysis showed that classifiers did a good job of eliminating less productive returns from the audit stream.
In evaluating the 148 tax returns, we followed a 3-step
process. First, we reviewed the tax
return and its individual line items to identify large, unusual, or
questionable items. Second, we used the
IRS’ preliminary cash transaction analysis in comparing the taxpayer’s expenditures to the income
reported on the return. The preliminary
cash transaction analysis is designed to identify differences between expenditures and income, which indicate expenses may
be overstated on the return and/or there may be additional sources of income
that should have been reported. Third, we made a judgment about whether
the tax returns should have been selected or accepted by comparing the
estimated additional taxes that may have resulted if the returns were audited
to the average additional taxes recommended for audits closed by the SB/SE Division
in FYs 2008 and 2009.
Figure 2 shows that the SB/SE Division closed 219,555 audits of various types of individual returns in FYs 2008 and 2009 and recommended an average of $11,337 in additional taxes on a tax return basis. We concluded classifiers made the correct decision to accept 146 (99 percent) of the 148 tax returns analyzed because 1) we did not identify any large, unusual, or questionable items and/or 2) the additional taxes that may have resulted if the tax returns were audited would not likely have exceeded the average yield of examined returns closed in FYs 2008 and 2009.
Figure 2: SB/SE
Division’s Additional Recommended Taxes for
Closed Audits Initiated by the Updated DIF Formulas in FYs 2008 and 2009[4]
|
|
Recommended
|
||
|
Types
of Tax Returns |
Tax
Returns |
Total
Dollars |
Average
Dollars Per Tax Return |
|
Nonbusiness –
Total Positive Income[6] Less Than $200,000 |
38,153 |
$232 |
$6,083 |
|
Sole
Proprietor – Total Positive Income Less Than $200,000 |
146,068 |
$1,419 |
$9,715 |
|
Subtotal – Total
Positive Income Less Than $200,000 |
184,221 |
$1,651 |
$8,962 |
|
Nonbusiness –
Total Positive Income Between $200,000 and $999,999 |
7,481 |
$118 |
$15,771 |
|
Sole
Proprietor – Total Positive Income Between $200,000 and $999,999 |
19,286 |
$385 |
$19,948 |
|
Nonbusiness and
Sole Proprietor – Total Positive Income of $1 Million or Greater |
8,567 |
$335 |
$39,144 |
|
Subtotal – Total
Positive Income of $200,000 or Greater |
35,334 |
$838 |
$23,718 |
|
Grand Total |
219,555 |
$2,489 |
$11,337 |
Source: SB/SE analysis of closed audits from the IRS Audit Information Management System for the SB/SE Division.
In the near future, the IRS anticipates phasing out its manual classification process and moving to an automated process under its CDE project. The CDE project is a part of the IRS’ Business Systems Modernization Program, which intends to modernize outdated information systems and reduce labor- and paper-intensive work processes.
Although we did not review the CDE project in-depth, we did visit the project office where IRS officials demonstrated how the automated classification process is expected to function. They also provided us an overview of its expected benefits. One of the key benefits, according to officials, is that the CDE will provide classifiers with the ability to classify returns online from their individual workstations, which should produce savings since classifiers will no longer need to incur the time and costs of traveling to the IRS campuses[7] to classify returns. In addition, campus personnel will no longer need to spend time retrieving and assembling paper returns and related return information for the classification process or returning paper documents to IRS storage files once the classification process is completed.
As the classification process becomes automated with classifiers widely dispersed across the country, it will be important to assure classifiers are learning and adapting to the new processes while consistently applying their expertise and skills during the classification process. Although the IRS already requires managers to review samples of returns selected and accepted by classifiers, we found the reviews were not always conducted in accordance with established procedures.
Reviews to Control and Monitor the Classification Process Need to Be Conducted in Accordance With Procedural Requirements
Since the updated DIF formulas were introduced, SB/SE Division statistics show that a substantial number of returns the DIF is identifying for audit are subsequently accepted as filed by classifiers. A large percentage (43 percent)[8] of the returns that were accepted by classifiers involved returns reporting sole proprietor activities. In addition, approximately 49 percent[9] of the returns reported income of $200,000 or more, which is a segment of the return population (high-income individuals) the IRS believes needs more audit coverage (see Figure 3).
Figure 3: Individual Returns Selected by the Updated
DIF Formulas
and Subsequently Accepted As Filed by Classifiers in FYs 2007–2009[10]
|
Types of
Tax Returns |
Number of
Tax Returns Accepted as Filed by Classifiers |
|
Nonbusiness –
Total Positive Income Less Than $200,000. |
27,384 |
|
Sole
Proprietor – Total Positive Income Less Than $200,000 |
44,643 |
|
Subtotal – Total
Positive Income Less Than $200,000 |
72,027 |
|
Nonbusiness –
Total Positive Income Between $200,000 and $999,999 |
29,054 |
|
Sole
Proprietor – Total Positive Income Between $200,000 and $999,999 |
15,649 |
|
Nonbusiness
and Sole Proprietor – Total Positive Income of $1 Million or Greater |
24,993 |
|
Subtotal – Total
Positive Income of $200,000 or Greater |
69,696 |
|
Grand Total |
141,723 |
Source: SB/SE analysis of closed
nonexamined tax return data from the IRS Audit Information Management System for the SB/SE
Division.
The primary technique used by the SB/SE Division to control
and monitor the quality of the classification process is the review of returns
by Territory managers in its Office of PSP.
Among other things, the Internal Revenue Manual (IRM) recommends
Included among the manager expectations and responsibilities is a requirement to document the results from reviewing a minimum of 10 percent of the returns classified by each classifier on the Classification Quality Review Record (Form 5126).[11] The purpose for the reviews is to provide assurances that:
For FYs 2008 and 2009,
the documentation maintained by the SB/SE Division for reviewing samples of
returns classifiers selected and accepted was not always readily available. When the documentation was available, it lacked
the information needed to control the quality of the classification process. Specifically, we conducted work at five
of the seven PSP offices and found the following:
In a separate but related issue, the Form 5126 could be enhanced to capture the total number of returns selected and accepted by each classifier. Both items are critical for controlling and monitoring the quality of the classification process because they are needed to calculate the minimum number of classified returns that need to be reviewed and to assure that the requisite number of classified returns was, in fact, reviewed.
The
Government Accountability Office Standards for Internal Control in the
Federal Government[12]
require that agencies establish controls to 1) enforce adherence
to management policies and procedural requirements, 2) maintain records showing
that controls are properly followed, and 3) assure that performance is assessed
on an ongoing basis. If managers are not
conducting reviews and not adequately documenting review results, the IRS
cannot be assured that the controls over the classification process are being
carried out effectively. This, in turn,
increases the risk that the IRS may miss opportunities to make the most efficient use of audit
resources and further reduce burden of audits on compliant taxpayers.
Recommendations
We recommended that the Director, Examination Planning and Delivery, SB/SE Division:
Recommendation
1: Issue a memorandum to
Management’s Response: IRS management agreed with this recommendation. The Director, Examination Planning and Delivery, SB/SE Division, will issue a memorandum to the Examination Area Directors on the topic of sample return reviews to be done during the classification process. The memorandum will stress the importance of monitoring quality by reviewing representative samples of returns selected and accepted during classification, and explain how these reviews should be documented.
Recommendation 2: Establish a mechanism to monitor how well
Management’s Response: IRS management
agreed with this recommendation. The
Director, Examination Planning and Delivery, SB/SE Division, will recommend
that the Examination Area Directors include a review of the quality of the
classification process in their respective Examination Area Operational
Reviews.
Recommendation 3: Develop and implement a data collection instrument to help ensure an adequate sample of tax returns is reviewed.
Management’s Response: IRS management
agreed with this recommendation. To
ensure that an adequate sample of classified/selected returns is reviewed, the
Director, Examination Planning and Delivery, SB/SE Division, will develop a
data collection instrument to be used for collecting this information.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine how well classifiers in the SB/SE Division are assessing the compliance risk on individual tax returns selected by the updated DIF formulas. To accomplish our objective, we:
I. Determined the controls and procedures the IRS has in place to ensure quality selection and classification of DIF returns.
A. Reviewed the IRM, the National Office Examination Classification Guidelines, and local area classification instructions.
B. Discussed with the Staff Assistant to the Director, Examination Planning and Delivery, SB/SE Division, the controls and procedures in place to ensure classification is consistent nationwide and that returns with issues that are material in scope are selected for audit.
C. Reviewed
FYs 2008 and 2009 documentation for classification details and management reviews
for the PSP offices located in
D. Conducted
a site visit to the
II. Assessed how well classifiers evaluated the compliance risk posed for individual tax returns selected by the DIF formulas and subsequently accepted.
A. Selected a statistical sample of 148 individual tax returns for review from the 49,646 returns that were listed on the Audit Information Management System[13] as nonexamined closures (accepted as filed by classification) for FYs 2008 and 2009. The sample had a confidence level of 95 percent, a precision rate of ± 8 percent, and an expected error rate of 50 percent.
B. Tested the reasonableness of computer-processed data by matching a judgmental sample of 20 individual tax returns against the IRS Master File.
C. Reviewed the sample of 148 individual tax returns to identify large, unusual, or questionable items that may have been missed by classifiers.
D. Used a preliminary cash transaction analysis during the review of the 148 individual tax returns to identify potential overstated expenses and/or additional income sources that may not have been considered by the classifiers.
E. Made a judgment about whether the 148 individual tax returns reviewed should have been selected or accepted by comparing the estimated additional taxes that may have resulted if the returns were audited to the average additional taxes recommended in audits closed by the SB/SE Division in FYs 2008 and 2009.
Internal
controls methodology
Internal
controls relate to management’s plans, methods, and procedures used to meet
their mission, goals, and objectives.
Internal controls include the processes and procedures for planning,
organizing, directing, and controlling program operations. They include the systems for measuring,
reporting, and monitoring program performance.
We determined the following internal controls were relevant to our audit
objective: IRS policies, procedures, and
practices for classifying and selecting tax returns for audit and the quality
review system in place to evaluate the accuracy of the classification
process. We evaluated these controls by
reviewing source materials, interviewing management, and reviewing a sample of nonexamined
closed cases and results from quality
review records.
Appendix II
Major Contributors to This Report
Margaret
E. Begg, Assistant Inspector General for Audit (Compliance and
Enforcement Operations)
Frank
Dunleavy, Director
Lisa Stoy,
Audit Manager
Carole
Connolly, Lead Auditor
Cynthia
Dozier, Senior Auditor
Aaron
Foote, Senior Auditor
Jean
Kao, Senior Auditor
Bernard
Kelly, Senior Auditor
Debra
Mason, Senior Auditor
William
Tran, Senior Auditor
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and Enforcement SE
Deputy Commissioner, Small Business/Self-Employed Division SE:S
Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division SE:S:CLD
Director, Examination, Small Business/Self-Employed Division SE:S:E
Director, Examination Planning and Delivery, Small Business/Self-Employed Division SE:S:E:EPD
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Internal Control OS:CFO:CPIC:IC
Audit Liaison: Commissioner, Small Business/Self-Employed Division SE:S
Appendix IV
Classification
Quality Review Record (Form 5126)
The
form was removed due to its size. To see
the form, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.
Appendix V
Examination Classification
Checksheet (Form 6754)
The
form was removed due to its size. To see
the form, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.
Appendix VI
Management’s Response to the Draft Report
DEPARTMENT
OF THE TREASURY
INTERNAL
REVENUE 5ERVICE
COMMISSIONER
SMALL BUSINESS/SELF-EMPLOYED DIVISION
July 26, 2010
MEMORANDUM
FOR MICHAEL R PHILLIPS
DEPUTY INSPECTOR GENERAL FOR AUDIT
FROM:
for Christopher Wagner Faris R. Fink
Commissioner Small Business/Self-Employed Division
SUBJECT: Draft Audit Report -
Classifiers Are Eliminating Less Productive Tax Returns from the Audit Stream,
but Their Work Needs Closer Monitoring (Audit # 201030025)
Thank
you for the opportunity to review your draft report titled, “Classifiers Are Eliminating
Less Productive Tax Returns from the Audit Stream, but Their Work Needs Closer
Monitoring" (Audit# 201030025). We agree with the recommendations contained
in the report and appreciate your acknowledgment of the downward trend in
no-change examinations that have been initiated under the new Discriminant
Index Function (DIF) formulas. We are pleased that your audit work confirmed
our classifiers are doing a good job of eliminating less productive tax returns
from the DIF audit stream.
We
recognize that improvements can be made in documenting and monitoring of the
classification review process. It is important to monitor return classification
to ensure that the most productive returns are being selected for examination. Additionally,
as is noted, the manual classification process is being phased out as Small Business/Self-Employed
moves toward an automated return classification process. Review and monitoring
of the classification process is important to ensure that classifiers are
adapting to the new automated process.
Attached
is a detailed response outlining our corrective actions. If you have any questions,
please contact me, or a member of your staff may contact Charlestine D. Hardy,
Director, Examination Planning and Delivery, at 202-283-2288.
Attachment
Attachment
RECOMMENDATION 1:
The
Director, Exam Planning and Delivery, Small Business/5eIf-Employed Division should
issue a memorandum to PSP Territory managers that reemphasizes: 1) the need to
control and monitor the quality of the classification process by reviewing
representative samples of returns selected and accepted by classifiers and 2)
how the results of the reviews should he documented~.
CORRECTIVE ACTION:
We agree with this recommendation. We will issue a memorandum to the Examination
Area Directors on the topic of sample return reviews to be done during the
classification process. "The memorandum will stress the importance of monitoring
quality by reviewing representative samples of returns selected and accepted
during classification and 2) how the results of the reviews should be documented.
IMPLEMENTATION DATE:
January
15, 2011
RESPONSIBLE OFFICIAL(S):
Director,
Examination Planning and Delivery, Small Business/Self-Employed Division
CORRECTIVE ACTION MONITORING PLAN:
The
Director, Examination Planning and Delivery will advise the Director, Examination
of any delays in implementing this corrective action.
RECOMMENDATION 2:
The
Director, Exam Planning and Delivery, Small Business/Self-Employed Division should
establish a mechanism to monitor how well
CORRECTIVE ACTION:
We
agree with this recommendation. We will recommend that the Examination Area
Directors include a review of the quality of the classification process in
their respective Examination Area Operational Reviews.
IMPLEMENTATION DATE:
January
15, 2011
RESPONSIBLE OFFICIAL(S):
Director,
Examination Planning and Delivery, Small Business/Self-Employed Division
CORRECTIVE ACTION MONITORING PLAN:
The
Director, Examination Planning and Delivery will advise the Director, Examination of any delays in implementing this corrective action.
RECOMMENDATION 3:
The
Director, Exam Planning and Delivery,
Small Business/Self-Employed Division should develop and implement a data collection
instrument to help ensure an adequate sample of tax returns is reviewed.
CORRECTIVE ACTION:
We
agree with this recommendation.
In order to ensure that an adequate sample of classified/selected returns is reviewed,
we will develop a data collection instrument to be
used for collecting
this information.
IMPLEMENTATION DATE:
April
15, 2011
RESPONSIBLE OFFICIAL(S):
Director,
Examination Planning
and Delivery, Small Business/Self-Employed Division
CORRECTIVE ACTION MONITORING PLAN:
The
Director, Examination
Planning and Delivery,
will advise the Director, Examination of any delays
in implementing this corrective
action.
[1] See Appendix V for a copy of Form 6754.
[2] The year in which tax returns and other tax data are processed.
[3] The Audit Information Management System is a computer system used by the IRS to control returns, input assessments/adjustments to the Master File, and provide management reports. The Master File is the IRS database that stores various types of taxpayer account information. This database includes individual, business, and employee plans and exempt organizations data.
[4] Totals do not include examinations conducted during training.
[5] Total dollars and average dollars per tax return are rounded for presentation purposes. As a result, calculations using the numbers will not generate a precise answer.
[6] In general, total positive income is calculated by adding the positive values from income items, such as wages, interest, and dividends reported on tax returns and counting losses as zero.
[7] The data processing arm of the IRS. The campuses process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.
[8] Percentage does not include sole proprietors with total positive income of $1 million or more.
[9] Percentage includes both high income nonbusiness and sole proprietors.
[10] Totals do not include examinations conducted during training.
[11] See Appendix IV for a copy of Form 5126.
[12] (GAO/AIMD-00-21.3.1, dated November 1999).
[13] The Audit Information Management System is a computer system used by the IRS to control returns, input assessments/adjustments to the Master File, and provide management reports. The Master File is the IRS database that stores various types of taxpayer account information. This database includes individual, business, and employee plans and exempt organizations data.