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Tax Administration: IRS Needs to Strengthen Its Approach for Evaluating the SRFMI Data-Sharing Pilot Program

GAO-09-45 Published: Nov 07, 2008. Publicly Released: Dec 08, 2008.
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Highlights

The State Reverse File Match Initiative (SRFMI) is one of the Internal Revenue Service's (IRS) data-sharing strategies to reduce the estimated $345 billion gross federal tax gap. SRFMI matches federal and state taxpayer data to identify noncompliant taxpayers--individuals and businesses who do not file tax returns or do not report all of their income. IRS's document-matching program has proven to be a highly cost-effective way of identifying underreported income, thereby bringing in billions of dollars of tax revenue while boosting voluntary compliance. Based on concerns about whether IRS is fully using data from state and local governments to reduce the tax gap, GAO was asked to assess IRS's plan for evaluating the effectiveness of the SRFMI pilot taxpayer data-sharing program. To address these objectives, GAO consulted social science and evaluation literature, published GAO guidance, and IRS guidance; reviewed and analyzed SRFMI planning and evaluation documents; and interviewed IRS officials about IRS's plans to evaluate SRFMI.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service The IRS's Commissioner of Internal Revenue should ensure that IRS develops an evaluation plan to accurately and reliably assess the SRFMI pilot program's results. This plan should address all components of the pilot program and include key evaluation features of a sound plan: (1) well-defined, clear, and measurable objectives; (2) criteria or standards for determining pilot program performance; (3) clearly articulated methodology, including sound sampling methods, determination of appropriate sample size for the evaluation design, and a strategy for comparing the pilot results with other efforts; (4) a clear plan that details the type and source of data necessary to evaluate the pilot, methods for data collection, and the timing and frequency of data collection; and (5) a detailed data-analysis plan to track the program's performance and evaluate the final results of the project.
Closed – Implemented
In January 2010, IRS developed a comprehensive evaluation plan for the State Reverse File Match Initiative (SRFMI) that addresses all components of the pilot program and includes key evaluation features. By following this documented plan, IRS will be able to determine the benefits of using state taxpayer data for compliance purposes and make better decisions about the program's future.

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Topics

Data collectionData integrityDocumentationEvaluation criteriaFederal taxesstate relationsIncome taxesInternal controlsPerformance managementPerformance measuresPersonal income taxesProgram evaluationProgram managementStandards evaluationStrategic planningTax administrationTax administration systemsTax nonpaymentTax returnsTax violationsTaxesVoluntary complianceData sharingTax gap