Washington, D.C. - The IRS plans to take a closer look at businesses that fail to file tax returns, and identify more of them.
The agency cannot develop a comprehensive estimate of the number of businesses that do not file returns because it lacks data about the population of all businesses, but it could use the inventory of business non-filers it already has on hand to determine noncompliance, according to a new report by the Government Accountability Office, which noted that the IRS identifies several million potential business non-filers each year, more than it can thoroughly investigate.
Until recently the IRS has not had a way to prioritize the cases in its large inventory. But the IRS modernized its business non-filer program last year by incorporating income and other data in its records indicating business activity. The IRS's Business Master File Case Creation Non-filer Identification Process, or BMF CCNIP, now assigns each case a code based on this data. The IRS uses the code to select the cases to work, with the goal of securing returns from non-filers.
The GAO identified several opportunities to enhance the IRS's identification and pursuit of non-filers. For example, the new selection codes provide a quick way to verify taxpayer statements that a business has ceased operations and does not need to file a return. IRS Collections staff have been instructed to use the codes when making case closure decisions. They were previously instructed to use other income data, but the GAO's analysis indicated that this may not have been done in all cases.
Non-IRS data on various businesses could be used to verify taxpayer statements about whether a return should have been filed.
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