**GAO-08-99**                      Published: Dec 19, 2007. Publicly Released: Jan 25, 2008.                  

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## Highlights

U.S. source income flows to recipients offshore through foreign financial institutions and U.S. withholding agents. The Internal Revenue Service (IRS) established the Qualified Intermediary (QI) program to improve tax withholding and reporting on such income. QIs are foreign financial institutions that contract with IRS to withhold and report U.S. tax. GAO was asked to (1) describe program features, (2) assess whether weaknesses exist in the U.S. withholding system for U.S. source income, and (3) identify any weaknesses in QI external reviews and IRS's use of program data. GAO interviewed agency officials and private practitioners and reviewed the latest IRS data on U.S. source income flowing offshore.

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## Topics

Tax Policy and Administration

Auditing standardsData collectionData integrityFederal taxesFinancial institutionsNoncomplianceProgram evaluationReporting requirementsTax administrationTax evasionTax lawTax return auditsTax returnsTax violationsTaxesWithholding taxesWaste, fraud, and abuse