Scope and Methodology

To determine the actions CID has taken since the early 1990s to increase the time spent on tax investigations relative to nontax investigations, we interviewed senior CID officials in IRS’ National Office, officials from both the Tax and Criminal Divisions in Justice, and officials from the Office of the Under Secretary for Enforcement in Treasury. We also reviewed CID’s annual goals and objectives and annual performance reports for fiscal years 1990 through 1996, as well as relevant documentation on the reorganization of its administrative functions and operations. To determine the types of investigations initiated and the results of referrals to U.S. Actions to Increase Direct Investigative Time Spent on Tax Investigations

In the early 1990s, concerns raised in IRS studies regarding CID’s investigative priorities spurred CID to take actions to increase the amount of time its agents spent on tax investigations. Another action CID took to better track the allocation of its resources to tax versus nontax investigations was to consolidate its major program areas and to establish a specific category for tax gap investigations. Since CID began taking these actions, DIT applied to tax gap investigations has increased. 1.) According to data provided by IRS, the percent of time applied to tax gap investigations for fiscal years 1993 through 1996 increased 13 percentage points. CIMIS data show that the percent of tax gap investigations initiated, the percent of tax gap cases referred to U.S. Attorneys for prosecution, and the percent of court sentences based on tax gap cases have all begun to increase since CID increased the time spent on tax gap investigations. However, as of fiscal year 1996, the increases have not been enough to match fiscal year 1990 levels for these indicators. 4.) Attorneys for prosecution, and court sentences by type of criminal investigation. Table II.1: Percent of Total DIT Applied to Tax Gap Investigations by Location in Fiscal Years 1990 Through 1996 Percent of DIT by fiscal years (continued)
Percent of DIT by fiscal years Table II.2: Percent of Total DIT Applied to Narcotics Investigations by Location in Fiscal Years 1990 Through 1996 Percent of DIT by fiscal years (continued)
Table II.3: Percent of Total DIT Applied to Other Fraud Investigations by Location in Fiscal Years 1990 Through 1996 Percent of DIT by fiscal years (continued)

The Number and Results of CID Investigations in Fiscal Years 1990 Through 1996

This appendix presents information on the number of CID investigations that were initiated, the number of investigations in which CID recommended prosecution, and the number of sentences resulting from prosecutions from fiscal year 1990 through fiscal year 1996.
Why GAO Did This Study

GAO reported on the actions the Internal Revenue Service's (IRS) Criminal Investigation Division (CID) has taken since the early 1990s to increase the time spent on tax investigations versus nontax investigations, focusing on: (1) investigations initiated by CID; and (2) referrals to U.S. Attorneys for prosecution and court sentences based on these investigations, for fiscal year (FY) 1990 through FY 1996.

What GAO Found

GAO noted that: (1) between FY 1990 and FY 1992, IRS data show that the percent of time spent on tax gap investigations decreased by 10 percentage points, continuing a downward trend since the early 1980s; (2) on the basis of the recommendations of two IRS studies done in the early 1990s, CID began in October 1993 taking actions designed to increase the amount of time its agents spent conducting tax investigations: (3) specifically, CID reorganized its administrative functions and operations with the intent of better targeting resource allocations; (4) it also consolidated and recategorized its program areas with an objective of better targeting its investigations; (5) in addition, as of FY 1996, CID established goals for the percent of time to be spent on its investigations, particularly for tax gap investigations; (6) since these actions were initiated, the percent of time spent on tax gap investigations has increased by 13 percentage points from a low of 46 percent in 1992 to 59 percent in 1996; (7) overall, the 59 percent in FY 1996 represented a net increase of 3 percentage points over the FY 1990 level; (8) between FY 1992 and FY 1996, there was an increase in the percent of tax gap investigations that CID initiated and in the percent of referrals to U.S. Attorneys for prosecution based on tax gap cases; (9) since FY 1994, the percent of court sentences based on tax gap cases has also increased; (10) however, as of FY 1996 the increases in these indicators have not been enough to match FY 1990 levels.