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Treasury Inspector General for Tax Administration

Press Release

November 30, 2010
TIGTA - 2010-75
Contact: Karen Kraushaar
(202) 622-6500

TIGTA: Currency Report Data Can Be A Good Source For Audit Leads

The Internal Revenue Service (IRS) could make better use of currency report data to identify taxpayers with potentially unreported income, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA assessed the IRS’s use of currency reports to address nonfilers and underreporters. Banks and other financial institutions are required to file reports on currency and suspicious transactions. The documents are in turn used by law enforcement officials to assist, deter, detect and prosecute a range of financial crimes, such as narcotics trafficking, tax evasion and financing of terrorist activities.

TIGTA identified a number of individuals who have enough cash to engage in currency transactions totaling at least $20,000, but did not file tax returns even though they appeared to have a filing requirement.

TIGTA also identified a number of other individuals engaged in similar currency transactions who filed tax returns, but reported income that did not appear sufficient to cover their basic living expenses. The difference between their income and expenses raises questions about whether additional income sources should have been reported.

TIGTA estimated that 42,804 potential nonfilers may collectively owe as much as $576 million in delinquent taxes, penalties and interest for 2007. TIGTA also estimated there are 78,770 potential underreporters who may owe as much as $758 million in additional taxes, penalties and interest for 2007.

“Individuals who fail to file required returns or underreport their income can create unfair burdens on honest taxpayers and diminish the public’s respect for the tax system,” said J. Russell George, the Treasury Inspector General for Tax Administration. “The IRS must do more to address this situation,” added George.

TIGTA recommended that, as resources become available, the IRS explore the feasibility of making greater use of currency transaction reports to pursue additional nonfilers and underreporters for audit. IRS management agreed with the recommendation. However, IRS management did not commit to pursuing additional potential underreporters for audit, nor did they agree with the outcome measure because of concerns with the selection criteria used. TIGTA maintains that the potential $1.3 billion of increased revenue is reasonable considering the assumptions used to make the estimate.


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