Summary

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Information Returns Program (IRP) which monitors the accuracy of interest and dividend information that banks and other payers submit on computer tapes and disks.

GAO noted that, for tax year 1983: (1) IRS manual and automated controls were inadequate to ensure accurate coding or posting of interest and dividend information; (2) IRS did not record on the IRP master file approximately 4.1 million unprocessed information returns that could have produced over $3 billion in interest and dividend income; and (3) over 700,000 returns had miscoded interest and dividend income. GAO also noted that IRS had not completed its study of those persons who continually report bad data and the corrective actions needed to prevent this from recurring. GAO found that IRS could take steps to correct these problems by: (1) using automated edit checks; (2) ensuring that its staff knows the importance of analyzing all tapes for correct coding of data; (3) instructing its staff to verify that previous mistakes are not repeated; (4) centralizing its receipt of information returns; (5) recording daily tapes dropped from processing so that followup action can be taken; and (6) assisting payers or transmitters that repeatedly submit miscoded data.