**GAO-09-555**                      Published: May 14, 2009. Publicly Released: Jun 15, 2009.                  

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## Highlights

Individual taxpayers who misreport charitable cash contributions they deduct on their tax returns contribute to the tax gap, the difference between tax amounts taxpayers report and pay voluntarily and on time and the amounts they should pay under the law. The Internal Revenue Service (IRS) most recently estimated a gross tax gap of $345 billion for tax year 2001. One approach that tends to result in high levels of taxpayer compliance is information reporting to IRS by third parties on taxpayer transactions. GAO was asked to (1) provide information on characteristics of individual taxpayer misreporting of charitable cash contributions, (2) provide information on actions that IRS takes to address misreporting, and (3) evaluate potential benefits and challenges associated with requiring information reporting for charitable cash contributions. To meet its objectives, GAO used data from IRS's tax year 2001 National Research Program (NRP) compliance study of individual taxpayers, reviewed IRS guidance and enforcement data, and interviewed IRS officials and representatives from charities or organizations that represent charities. GAO made no recommendations in this report. In email comments on a draft of this report, IRS agreed with GAO's overall conclusion that requiring information reporting for charitable cash contributions may not be an effective way to improve compliance.

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## Topics

Tax Policy and Administration

Financial disclosureFinancial institutionsFinancial managementFinancial recordsIncome taxesInformation disclosurePersonal income taxesRecordsReporting requirementsTax administrationTax creditTax exempt statusTax information confidentialityTax lawTax returnsTaxpayersVoluntary complianceData collection