TIGTA Says IRS Efforts on International Tax Compliance Succeeding

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By Jason Bramwell

The IRS International Campus Compliance Unit (CCU) has improved international tax compliance of individuals to the tune of 18,000 audits conducted and approximately $36 million in additional taxes assessed for fiscal years 2011 through 2013, according to a report released publicly on November 13 by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS Large Business and International (LB&I) Division established the CCU in October 2010 to expand audit coverage of tax returns with international aspects and increase compliance among international individual taxpayers. The unit also addresses and resolves less complex issues through correspondence examinations and serves as the first point of contact for initiatives involving soft notices or contracts with taxpayers regarding their taxes.

The CCU's primary goal is to increase coverage of international tax return filings or international tax issues reported or underreported on Form 1040, US Individual Income Tax Return, or Form 1040NR, US Nonresident Alien Tax Return.

In its report, The International Campus Compliance Unit is Improving Individual Tax Compliance, TIGTA examined whether the benefits envisioned by establishing the CCU to improve international individual tax compliance are being achieved. 

The IRS watchdog found the IRS successfully planned the CCU and followed general government guidelines and steps for implementing a new business process during the planning. The IRS is still developing inventory selection criteria for the CCU. 

According to the report, for fiscal year 2011 through March 13, 2013, the CCU conducted almost 18,000 audits and assessed approximately $36 million in additional tax. Also, the percentage of no-change closures decreased from 22 percent in fiscal year 2012 to 12.2 percent in fiscal year 2013, while the percentage of agreed assessments increased from 44.3 percent in 2012 to 53.9 percent in 2013.

"Even though the CCU reviewed 4,437 fewer tax returns in fiscal year 2012 than it did in fiscal year 2011, it assessed $5.4 million more in taxes, for an average of approximately $2,000 more per tax return", TIGTA stated in the report. 

J. Russell George, Treasury Inspector General for Tax Administration, said in a written statement that the program appears to be headed in the right direction.

"As globalization expands, so do concerns about the international tax gap – that is, taxes owed but not collected on time from a US person or foreign person whose cross-border transactions are subject to US taxation", he said.

George noted that more needs to be done, adding that despite the CCU's early accomplishments, it does not have specific performance measures for its operations.

"Ideally, an agency should have measures for all its major processes to track costs, quality, and timeliness", he said.

TIGTA recommended the IRS enhance the performance measures for the CCU to more specifically reflect the work performed by unit examiners. The IRS agreed, stating that it plans to evaluate the current performance measures and CCU inventory results to determine how to enhance the performance measures that are specific to work performed by CCU examiners.

The IRS also plans to use these performance measures to establish effective performance goals and measure the CCU's success in achieving them. 

"As your report indicates, the IRS continues to realign and expand its international efforts under the LB&I Division", wrote Paul DeNard, acting commissioner of the LB&I Division, in response to TIGTA's findings. "We expect that these efforts will improve international tax compliance by focusing on high-risk international issues and examination cases in a consistent and efficient way." 

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