Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 19, 1990 TAG: 9004190208
SECTION: NATIONAL/INTERNATIONAL PAGE: A6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The General Accounting Office said 29 percent of the abatements - the formal term for forgiven penalties - issued by the IRS on its most common penalties in 1988 were necessary to correct IRS errors in assessments.
In addition, GAO said, IRS counts as abatements a variety of computer-generated account adjustments. For example, the agency could impose a penalty for failure to file a return, then discover a credit on the taxpayer's account that would prompt a reduction in penalty.
"These adjustments may overstate the number of abatements by almost 80 percent and their dollar value by almost 40 percent," GAO said in a report to IRS Commissioner Fred T. Goldberg Jr.
The GAO study concentrated on the two most common penalties imposed by the IRS. The penalty for failure to pay taxes on time was imposed on 8.4 million taxpayers in 1988; the penalty for failure to file a return was imposed 2.9 million times that year.
The IRS reported it forgave 2.5 million of that 11.3 million total, or 22 percent. However, GAO found that 80 percent of the abatements actually were computer adjustments worth about $954 million.
"The remaining 500,000 abatements, worth about $1 billion, were taxpayer-requested abatements which required IRS personnel to make a decision regarding whether to reverse, or `forgive' the penalty assessment, on the basis of information supplied by taxpayers," the report said.
The GAO said the the IRS agreed with its recommendation that the computer-generated adjustments not be reported as abatements.
"IRS errors in making penalty assessment and abatement decisions can increase taxpayer frustration and generate an additional administrative burden for IRS," the auditors said. "This is of particular concern in today's environment of growing taxpayer dissatisfaction and limited IRS resources."
The IRS also agreed with a recommendation that tax auditors be required to fully document reasons for abating penalties. GAO inspectors found that in many cases, justifications for abatements were inadequate to help in finding and correcting problems in processing returns.
The IRS estimated that 6 million couples and individuals filed for automatic extension of time to file this year's returns.
by CNB