Employment Deposit Experience Holds Lessons to Improve Future Interactions With Stakeholders

Although the final employment tax deposit regulations were well received, certain stakeholders were dissatisfied with various aspects of the process used as Treasury and IRS developed the revisions. IRS officials say that they informally communicate with stakeholders while regulations are being developed. According to Treasury and IRS officials, although regulatory guidance did not require officials to do so, they used some measures of simplicity as the employment tax deposit regulations were revised to make judgments concerning the balance between achieving simplicity and obtaining other regulatory objectives. Objectives, Scope, and Methodology

Our objectives were to determine (1) whether Treasury and IRS developed the employment tax deposit regulations by applying principles from IRS’ Compliance 2000 approach, which is designed to improve voluntary taxpayer compliance, reduce taxpayer burden, and increase IRS’ attention to the needs of those affected by its actions; (2) whether, and, if so, how the process used by Treasury and IRS to develop and revise the regulations could be improved; and (3) how Treasury and IRS officials know when their efforts to develop and revise regulations result in regulations that are sufficiently simple and easy to follow. After Treasury and IRS officials considered the written and oral comments on the proposed regulations, the final regulations were issued on September 24, 1992. These regulations replaced the existing employment tax deposit process with a new one that is considered to be significantly simpler and easier to understand and comply with. Further, under the final regulations, employers can determine their deposit status for an entire calendar year rather than for each quarter.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the revised federal employment tax deposit regulations issued by the Department of the Treasury and the Internal Revenue Service (IRS) on September 24, 1992, focusing on: (1) whether the Treasury and IRS developed the regulations by applying principles from the IRS Compliance 2000 initiative; (2) how the revision process could be improved; and (3) how Treasury and IRS officials know when their efforts to develop and revise regulations result in regulations that are sufficiently simple and easy to follow.

What GAO Found

GAO found that: (1) the new tax deposit regulations are considered to be significantly simpler and easier for stakeholders to understand and comply with than the proposed regulations; (2) the new regulations provide most employers with a fixed deposit rule that they can follow for an entire calendar year; (3) in keeping with Compliance 2000, IRS obtained stakeholders' input throughout the revision process; (4) although stakeholders are satisfied with the final employment tax deposit regulations, certain stakeholders are dissatisfied with various aspects of the regulatory development process; (5) although Treasury and IRS officials are not always able to interact with all stakeholders to the extent the stakeholders desire, Treasury and IRS officials could improve their future communications with stakeholders by directing drafters' attention to stakeholders' concerns; and (6) IRS officials used some measures to gauge the simplicity of the revised regulations and to balance simplicity with other regulatory objectives while revising the employment tax deposit regulations.