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Budget (OMB) and Clinger-Cohen Act 4
requirements; and, in some instances, the
business cases did not comply with the IRS’
Exhibit 300 Business Case Guide. As a
result, senior IRS executives and
Department of the Treasury and OMB
officials should not rely on the data in these
business cases to manage and fund projects.
The IRS prepares about 30 business cases
each year to support funding for its major
Information Technology (IT) investments.
To make business cases more reliable and
useful, the IRS should ensure existing
guidance is followed in computing costs for
IT projects and work performed by
contractors is adequately reviewed before
acceptance. In addition, the IRS should
require a comprehensive evaluation of all
vendor proposals and an assessment of
three viable alternatives for IT investments.
The IRS should also hold IT Project
Managers accountable to ensure that all
sections of a business case are consistent,
accurate, and complete, and correct all
software problems that lead to incorrect
earned value 5 calculations. The IRS agreed
with these recommendations and has taken
action to change its BY 2007 submissions.
Report Reference No. 2005-20-074
Tax Compliance Initiatives
The IRS recognized that underreporters
account for the largest portion of the tax
gap. 6 As a result, the IRS developed an
extensive Employment Tax Strategy that
addresses many facets of employment
tax compliance. The seven-pronged
approach includes Tip Income, Non-Filers,
Workload Identification, Collection,
Legislative Initiatives, Education, and
Reporting Compliance. 7
However, while approximately two-thirds
of the Federal Government’s revenue
receipts are reported on Forms 941
(Employer’s Quarterly Federal Tax Return),
the IRS has not evaluated the extent of tax
underreporting on these forms for at least
15 years. Currently, according to the IRS,
there are 720,612 Forms 941 nationwide
that do not balance with the Forms W-2
data for TY 2003. These inaccuracies
could represent significant amounts of
unpaid tax as the table below illustrates.
Results of Employment Tax Forms
When Reviewed
IRS Function
Year
Returns
Reviewed
Additional
Tax Assessed
CAWR TY 2002 58,416 $905,249,357
EXAMINATION FY 2004 17,698 $422,264,000
Source: The Combined Annual Wage Reporting (CAWR)
program is an IRS program that helps the Social Security
Administration ensure all workers get credit for the wages
they earn towards retirement benefits. Additionally this
program can be used to identify unreported and unpaid tax.
4 Pub. L. No. 104-106, 110 Stat. 642 (codified in
scattered sections of 5 U.S.C., 5 U.S.C. app., 10
U.S.C., 16 U.S.C., 18 U.S.C., 22 U.S.C., 28 U.S.C.,
29 U.S.C., 31 U.S.C., 38 U.S.C., 40 U.S.C., 41
U.S.C., 44 U.S.C., 49 U.S.C., 50 U.S.C.).
5 Earned value management is a method of analysis
that provides management with an objective
measurement of how well an IT investment in the
development stage is progressing in terms of
planned costs and schedule.
TIGTA recommended that the IRS develop
methodologies within the Employment Tax
6 The tax gap includes nonfilers, underreporters of
tax, and underpayers of tax.
7 Reporting compliance can be measured by
comparing the tax reported by a taxpayer with what
should be reported.
10 April 1, 2005 to September 30, 2005