Those actions included deployment of staff from the Examination function to work on nonfiler cases, an increased emphasis on nonfiler activities by other IRS functions, elimination of aged cases from inventory, cooperative working arrangements with states and the private sector, and implementation of a refund hold program. Was the Nonfiler Strategy a Success? According to IRS, the Nonfiler Strategy was generally a success. Among other things, IRS cited (1) a decrease in the nonfiler inventory, (2) creation of the refund hold program, (3) elimination of unproductive cases that allowed IRS to focus its enforcement resources more effectively, (4) elimination of backlogs in the automated SFR inventory, (5) increases in the number of returns secured from and dollars assessed against individual nonfilers during the 2 years of the Strategy (fiscal years 1993 and 1994) compared with the year before the Strategy (fiscal year 1992), and (6) a closer working relationship between IRS and outside stakeholders and professional associations. Opportunities to Improve Future IRS Nonfiler Efforts

Our review of the Nonfiler Strategy identified several areas where we think opportunities exist for IRS to enhance future efforts directed at nonfilers. However, IRS’ procedures still call for sending several notices to a potential nonfiler before IRS attempts to make telephone contact. IRS staff must then review the results of the match to determine what action to take. IRS has a project directed at reducing the time it takes to match data on information returns with data on income tax returns and thus shortening the time before the first notice is issued by several months. Those data are not projectable. We believe that IRS could move even further in that direction if, as recommended by an internal study group, it reduced the number of notices sent to nonfilers and moved nonfiler cases more quickly to a telephone call site—similar to its Early Intervention Project for delinquent taxes.
Why GAO Did This Study

GAO reviewed the results of the Internal Revenue Service's (IRS) Nonfiler Strategy and opportunities to improve any similar future efforts.

What GAO Found

GAO found that: (1) IRS actions to achieve its Nonfiler Strategy's goals included deploying examination staff to work on nonfiler cases, increasing other IRS functions' emphasis on nonfiler activities, eliminating old cases from inventory, establishing cooperative relationships with states and the private sector, and implementing a refund hold program; (2) IRS believes that its Nonfiler Strategy was generally a success, since it reduced its nonfiler inventory, eliminated unproductive cases, increased the number of returns from and dollars assessed against individual nonfilers, and created closer working relationships with outside stakeholders and professional associations; (3) although IRS reduced its nonfiler inventory, there are not enough data to determine voluntary compliance improvement or the program's cost-effectiveness; (4) returns from business nonfilers and collection of delinquent taxes decreased during the two years the strategy was in effect; (5) IRS made measuring the strategy's success more difficult by failing to establish measurable goals; (6) at least 38 percent of nonfilers who eventually filed a return became recidivists in the following year; (7) future IRS nonfiler efforts could be improved by shortening the time before first notices and telephone contacts are made, using lower-grade staff to pursue nonfiler cases, and revising notices sent to recidivists to increase their urgency; and (8) IRS has reduced the time before sending first notices and developed special recidivist procedures, but it continues to send several notices before making telephone contact.