Both the Government Accountability Office and the Treasury Inspector General for Tax Administration have some advice for the Internal Revenue Service.On the heels of an IRS decision to focus on S corporations in order to zero in on the compliance problems of small businesses, the TIGTA issued a report calling on the IRS to improve its efforts against employment tax noncompliance. The GAO also weighed in in the same week with its report, "Tax Compliance: Better Compliance Data and Long-term Goals Would Support a More Strategic IRS Approach to Reducing the Tax Gap."

Employment tax represents a significant portion of IRS receipts, as well as an estimated significant portion of the tax gap, according to the TIGTA. Taxpayers filed over 30 million employment tax returns in fiscal year 2004, accounting for the largest component of business tax returns, and second only to individual returns in terms of all returns filed.

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