TAX GAP

IRS Could 

Significantly Increase 

Revenues by Better 

Targeting 

Enforcement 

Resources

Report to Congressional Requesters

December 2012

GAO-13-151

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-151, a report to 

congressional requesters

December 2012

TAX GAP

IRS Could Significantly Increase Revenues by Better 

Targeting Enforcement Resources

Why GAO Did This Study

Heightened attention to federal deficits 

has increased pressure on IRS to 

reduce the tax gap—the difference 

between taxes owed and taxes paid on 

time—and better enforce taxpayer 

compliance. Resource limitations and 

concern over taxpayer burden, 

however, prevent IRS from auditing 

more than a small fraction of individual 

income tax returns filed. How IRS 

allocates these limited resources 

demands careful consideration.

As requested, this report (1) describes 

how IRS allocates resources across 

individual taxpayer compliance 

enforcement programs and across 

types of taxpayers within each 

program; (2) estimates the direct 

revenue return on investment for the 

individual taxpayer enforcement 

programs and the extent of variation 

across those programs and across 

types of taxpayers; and (3) determines 

the potential for gains from shifting 

resources from lower-yielding 

programs and types of taxpayers to 

higher-yielding ones.

To accomplish these objectives GAO 

analyzed IRS data on 2007 and 2008 

tax returns, reviewed IRS 

documentation, and interviewed 

appropriate IRS officials.

What GAO Recommends

GAO recommends that IRS review

disparities in the ratios of direct 

revenue yield to costs across different 

enforcement programs and across 

different groups of cases and consider

this evidence as a potential basis for

adjusting its allocation of enforcement 

resources each year. IRS agreed with 

the recommendations.

What GAO Found

The Internal Revenue Service (IRS) spends most of its enforcement resources 

on examinations. Correspondence exams of individual tax returns, which target 

fewer and simpler compliance issues, are significantly less costly on average 

than the broader and more complex field exams. GAO estimated that the 

average cost (including overhead) of correspondence exams opened in 2007 and 

2008 was $274, compared to an average of $2,278 for field exams. IRS spent 

almost 20 percent of the $1.6 billion per year that it devoted to exams on returns 

from taxpayers with positive income of at least $200,000, even though such 

returns accounted for only 3 percent of the 136 million individual returns filed per 

year. (Positive income, a measure that IRS uses to classify returns for exam 

planning purposes, disregards losses that may offset this income).

GAO estimated that, for the 2 years of cases reviewed, correspondence exams

were significantly more productive in terms of direct revenue produced per dollar 

of cost than field exams. As shown in the figure below, both types of exams of 

taxpayers with positive incomes of at least $200,000 were significantly more 

productive than exams of lower-income taxpayers.

Direct Revenue Return on Investment for Different Types of Exams and Groups of Individual 

Income Tax Returns Opened in 2007 and 2008

Note: EITC is the earned income tax credit

GAO demonstrated how these estimates could be used to inform resource 

allocation decisions. For example, a hypothetical shift of a small share of

resources (about $124 million) from exams of tax returns in less productive 

groups shown in the figure to exams in the more productive groups could have 

increased direct revenue by $1 billion over the $5.5 billion per year IRS actually 

collected (as long as the average ratio of direct revenue to cost for each category 

of returns did not change). These gains would recur annually, relative to the 

revenue that IRS would collect if it did not change its resource allocation. This 

particular resource shift would not reduce exam coverage rates significantly and, 

View GAO therefore, should have little, if any, negative effect on voluntary compliance. -13-151. For more information, 

contact James White at (202) 512-9110 or 

whitej@gao.gov
Page i GAO-13-151 Tax Gap

Letter 1 

Background 3

Examinations of Taxpayers with Less than $200,000 in Positive 

Income Accounted for Most of the Total Cost of the Four 

Enforcement Programs 6

Direct Revenue Return on Investment Was Highest for 

Examinations of Taxpayers with at Least $200,000 in Positive 

Income 8

Although Some Caution is Warranted, Exam Resource Reallocation 

Could Produce Significant Direct Revenue Gains 10

Conclusions 15

Recommendations 16

Agency Comments 16

Appendix I Summary Methodology for Data Analysis 18

Appendix II Detailed Tables 21

Appendix III Economic Guidelines for Enforcement Resource Allocation 

Decisions 24

Appendix IV Comments from the Internal Revenue Service 26

Appendix V GAO Contact and Staff Acknowledgments 28

Tables

Table 1: Costs, Direct Revenue, Exam Coverage Rates and NoChange Rates for Different Types and Groups of Exams 

Opened In Fiscal Years 2007 and 2008 (Weighted Average 

of the 2 Years) 21

Table 2: Potential Changes in Direct Revenue and Exam Coverage 

Rates Resulting from a Hypothetical Reallocation of Exam 

Resources 22

Contents 
Page ii GAO-13-151 Tax Gap

Table 3: Ratios of Direct Revenue to Cost for Field Exams Opened 

in 2007 and 2008 after Accounting for Various Factors 23

Figures

Figure 1: Cost Shares and Cost per Case for Four Exam and IRP 

Programs for Cases Opened in Fiscal Years 2007 and 2008 7

Figure 2: Number of Returns, Exam Costs, and Coverage Rates for 

Different Categories of Individual Income Taxpayers 8

Figure 3: Ratios of Direct Revenue to Costs for Different Types of 

Exams and Groups of Individual Income Tax Returns for 

Cases Opened in Fiscal Years 2007 and 2008 9

Figure 4: Changes in Resources and Direct Revenue for Different 

Groups of Individual Income Tax Exams under a 

Hypothetical Reallocation 11

Figure 5: Coverage Rates for Different Types of Exams and Groups 

of Individual Income Tax Returns Before and After 

Hypothetical Reallocation 13
Page iii GAO-13-151 Tax Gap

Abbreviations

AIMS Audit Information Management System 

ASFR Automated Substitute for Return

AUR Automated Underreporter

EITC earned income tax credit 

ERIS Enforcement Revenue Information System

IFS Integrated Financial System

IRP Information Returns Processing

IRS Internal Revenue Service

NRP National Research Program 

SB/SE Small Business/Self-Employed

W&I Wage and Investment

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Page 1 GAO-13-151 Tax Gap

United States Government Accountability Office

Washington, DC 20548

December 5, 2012

The Honorable Max Baucus

Chairman

The Honorable Orrin Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Charles Grassley

Ranking Member

Committee on the Judiciary

United States Senate

Heightened attention to federal deficits has increased pressure on the 

Internal Revenue Service (IRS) to reduce the tax gap—the difference 

between taxes owed and taxes paid on time—and better enforce taxpayer 

compliance. Resource limitations and interest in minimizing taxpayer 

burden, however, prevent IRS from auditing anything but a small fraction 

of the total number of individual income tax returns filed for a given tax 

year. Of the approximately 141 million individual tax returns filed in 2010, 

only 1.1 percent were formally audited. IRS has developed several 

compliance enforcement programs with the goal of increasing taxpayer 

compliance, using resources more efficiently, and minimizing taxpayer 

burden. These programs, which include computer-based matching 

systems and streamlined correspondence audits (which do not involve 

face-to-face meetings with taxpayers) designed for less complex issues, 

fill different roles in the compliance enforcement strategy. Every year IRS 

publishes information regarding the coverage rates and additional taxes 

assessed through these various programs, but relatively little information 

is available on how much revenue is actually collected as a result of these 

enforcement activities (called direct revenue). Even less information is 

available regarding program performance with respect to identifiable 

subpopulations (varying in terms of income levels, and types of income) 

covered by the enforcement programs.

Given the importance of appropriately allocating limited resources, you 

asked us to assess the performance of IRS’s enforcement programs. In 

this report we (1) describe how IRS allocates resources across individual 

taxpayer compliance enforcement programs and across types of 

taxpayers within each program; (2) estimate the direct revenue return on 

investment for the individual taxpayer compliance enforcement programs 

 
 

Page 2 GAO-13-151 Tax Gap

and the extent of variation across those programs and across types of 

taxpayers; and (3) determine the potential for gains from shifting 

resources from lower-yielding programs and types of taxpayers to higheryielding ones.

To describe how IRS allocates resources across individual taxpayer 

compliance enforcement programs and across types of taxpayers within 

each program, we compared the amounts of resources that IRS devotes 

to each of four broad enforcement programs for individuals who file form 

1040 tax returns—Automated Underreporter (AUR), Automated

Substitute for Return (ASFR), correspondence examination, and field 

examination.1 These programs are described below in the background 

section. We also report the cost of cases worked and the percentage of 

total returns covered by correspondence and field exam programs. For 

the correspondence and field exam programs, we make these 

comparisons across the principal groups of individual taxpayers (defined 

in terms of positive income size and characteristics of their returns, such 

as the presence of the earned income tax credit (EITC)) that IRS uses for 

exam planning purposes.2 We use program cost data obtained from IRS’s 

Integrated Financial System (IFS) and data on the number of cases from 

IRS’s Enforcement Revenue Information System (ERIS). We also use 

data on coverage rates from IRS’s Data Book.3 Our analyses to support 

all three of our objectives cover enforcement cases opened in fiscal years 

2007 and 2008 (the latest years of data available at the time of our 

analysis in which the large majority of cases have worked their way 

through the collection process).4

 

1

We exclude the Math Error program from our detailed review because it covers 

100 percent of tax returns filed and, therefore, does not involve the same types of 

resource allocation decisions that are relevant to the other programs.

2

In general, total positive income is the sum of all positive amounts shown for the 

various sources of income reported on the individual tax return and, thus, 

excludes losses.

3

Internal Revenue Service, Data Book, 2009, Publication 55B, Washington, DC, 

March 2010, and Data Book, 2008, March 2009.

4

Although IRS typically reports enforcement data according to the fiscal year in 

which cases are closed, we report our results according to the fiscal year in 

which the cases were opened because that better reflects the populations of 

cases that IRS targeted in their annual exam planning process.
 

Page 3 GAO-13-151 Tax Gap

To estimate the direct revenue return on investment for the individual 

taxpayer compliance enforcement programs, we obtained data from ERIS 

on collections of tax, interest, and penalties directly attributable to specific 

types of exams for different groups of taxpayers, as well as those 

attributable to AUR and ASFR cases. We also obtained cost data from 

IFS for these four programs. For the field exam program, available data 

allow us to incorporate differences in the length, difficulty, and location of 

audits into our cost comparisons. Our return on investment measure is 

computed as the ratio of revenues over costs with the value of the 

revenues discounted for any delays between the year in which IRS 

expended the money on the enforcement cases and the year in which the 

revenues were collected.

To determine the potential for gains from shifting resources from loweryielding programs and types of taxpayers to higher-yielding ones, we use 

our results from the second objective to demonstrate how modest 

reallocations of resources would affect total collections, assuming that 

additional cases examined in a particular group would be approximately 

as productive as the average case in that group. We also interviewed IRS 

officials and reviewed the technical literature on tax enforcement to 

identify factors beyond the direct revenue return on investment that IRS 

should consider when making adjustments to its resource allocations.

We determined for the purposes of this review that the data used were 

reliable. (See app. I for additional information about our methodology.) 

We conducted this performance audit from November 2009 through 

December 2012 in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

In January 2012, IRS estimated that the gross tax gap—the difference 

between taxes owed and taxes paid on time—was $450 billion in tax year 

2006. IRS estimated that it would eventually recover about $65 billion of 

this amount through late payments and enforcement actions, leaving a 

net tax gap of $385 billion. The tax gap has been a persistent problem in 

spite of extensive congressional and IRS efforts to reduce it. In past work 

we have said that reducing the tax gap will not likely be achieved through 

a single solution. Rather, the tax gap must be attacked on multiple fronts 

and with multiple strategies over a sustained period of time. On the 

Background 
 

Page 4 GAO-13-151 Tax Gap

enforcement front, IRS’s efforts to ensure compliance of individual

taxpayers combine several distinct programs that collectively monitor and 

correct noncompliance with income tax filing, reporting, and payment 

requirements. These programs fill different roles in the enforcement 

process and vary in the number of taxpayers covered, the resources 

used, and their level of automation.

IRS’s Math Error program electronically checks all filed tax returns for 

obvious math errors as returns are processed. The Math Error program 

reviews and adjusts items specifically listed in Internal Revenue Code 

section 6213. The specific issues that the program has authority to review 

include calculation errors, entries that are inconsistent with or exceed 

statutory limits, various omissions, inclusions, and entries of information, 

or incorrect use of an IRS table.

IRS collects information on taxpayers from employers, financial 

institutions, and other third parties and compiles these data in the 

Information Returns Processing (IRP) system. The Automated 

Underreporter (AUR) program electronically matches the IRP data 

against the information that taxpayers report on their forms 1040 as a 

means of identifying potentially underreported income or unwarranted 

deductions or tax credits. The matching process takes place months after 

taxpayers have filed their tax returns. For tax year 2010, AUR identified 

approximately 23.8 million potential discrepancies between taxpayer 

income, deduction, and other information reported by third parties and the 

information supplied by taxpayers on their individual income tax returns. 

IRS officials said that resource constraints prevent them from contacting 

taxpayers for all of the cases in which discrepancies are identified. If a 

mismatch exceeds a certain tax threshold, AUR reviewers decide if it 

warrants a notice to the taxpayer asking for an explanation of the 

discrepancy or payment of any additional tax assessed. IRS guidance 

directs reviewers to consider the reasonableness of the taxpayers’ 

responses, but reviewers generally do not examine the accuracy of the 

information in the responses because they do not have examination 

authority. For certain issues, AUR reviewers may refer cases for a 

correspondence examination.

The Automated Substitute for Return (ASFR) program uses data from the 

IRP system to identify persons who did not file returns, construct tax 

returns for certain nonfilers, and assess tax, interest, and penalties based 

on those substitute returns. IRS does not pursue all of the constructed 

returns. Potential cases fall into one of ten priority levels and are worked 

highest-priority first. ASFR officials said they make budget decisions by 

Math Error Program:

Automated Underreporter 

Program: 

Automated Substitute for 

Return Program: 
 

Page 5 GAO-13-151 Tax Gap

taking into account the resources available to the program and determine 

the level of new cases that will be worked over the following year. In fiscal 

year 2011, the ASFR program closed nearly 1.4 million cases. 

Correspondence examinations are formal audits of individual taxpayers 

but do not involve face-to-face meetings with taxpayers. Instead, these 

examinations target specific issues that are limited in scope and 

complexity, easily documented, and can be handled quickly and efficiently 

through correspondence between the taxpayer and the IRS examiner. 

Tax returns are selected as potential cases through automated business 

rules that filter or select tax returns according to predetermined criteria. 

These business rules can detect multiple potential issues, all of which can 

be worked through a single correspondence exam. Examiners have the 

authority to review additional issues on a return even if they were not 

identified by the automatic filters.

Field examinations are conducted in face-to-face meetings between the 

taxpayer and the IRS examiner. These audits are targeted at individual 

returns with broader and more complex issues. Unlike correspondence 

examinations, the field examination program has a classification process 

where an experienced tax examiner will review a potential case to 

determine which, if any, issues should be examined. Individual tax returns 

are selected for field examination in a variety of ways. Some returns are 

selected in the pursuit of specifically identified compliance issues, such as 

abusive transactions or offshore compliance. Others are selected on the 

basis of a statistical formula that attempts to predict the potential for 

additional tax assessments, and yet others are selected randomly for 

research purposes. Regardless of why the return was initially selected for 

audit, an examiner will review the return in its entirety to determine if other 

issues are present.

The responsibility for operating these individual taxpayer enforcement 

programs largely rests with IRS’s Small Business/Self-Employed (SB/SE) 

Division, which handles complex individual returns, and Wage and 

Investment (W&I) Division, which handles simpler returns. SB/SE 

operates parts of all four IRP and exam programs; W&I operates parts of 

three programs, excluding field examinations.

Correspondence Examinations:

Field Examinations:
 

Page 6 GAO-13-151 Tax Gap

Correspondence and field exams accounted for more than 80 percent of 

the total administrative costs of the four programs we reviewed over the 

2-year period we examined. (Total costs include direct examination time, 

training and other offline activities of examiners, supervisory and 

administrative support, and other overhead costs allocable to each 

program.) Based on data for hourly costs and time spent on different 

types of cases that IRS provided, we estimated that the cost per case for 

field exams, $2,278, was many times greater than those for 

correspondence exams, $274, AUR, $52, and ASFR, $72. (See fig. 1.)

Examinations of

Taxpayers with Less 

than $200,000 in 

Positive Income 

Accounted for Most of 

the Total Cost of the 

Four Enforcement 

Programs

Most IRS Enforcement 

Resources are Spent on 

Examinations 
 

Page 7 GAO-13-151 Tax Gap

Figure 1: Cost Shares and Cost per Case for Four Exam and IRP Programs for 

Cases Opened in Fiscal Years 2007 and 2008

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator.

IRS spent almost 20 percent of the $1.6 billion per year that it devoted to 

exams opened in 2007 and 2008 on returns with positive income of at 

least $200,000, even though such returns accounted for only 3 percent of 

the 136 million individual income tax returns filed per year.5

 

5

Exams opened in 2007 and 2008 were generally filed in 2006 and 2007.

The share of 

total cost for these returns was greater than their share of total returns 

because they were examined at above average rates and, compared to 

lower-income returns, field exams were a greater proportion of their 

examinations. (See fig. 2.) 

High-Income Taxpayers 

Representing 3 Percent of 

Returns Filed Accounted 

for Almost 20 Percent of 

Total Exam Costs
 

Page 8 GAO-13-151 Tax Gap

Figure 2: Number of Returns, Exam Costs, and Coverage Rates for Different Categories of Individual Income Taxpayers

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator.

For the 2 years of cases we reviewed, exams (both correspondence and 

field) of taxpayers with positive incomes of at least $200,000 produced 

significantly more direct revenue per dollar of cost than exams of lowerincome taxpayers. Across income groups, correspondence exams were 

significantly more productive than field exams in terms of discounted 

direct revenue per dollar of cost. (See fig. 3 and table 1 in app. II.) We 

estimated that the average direct revenue yield per dollar of cost across 

all correspondence exams of individual taxpayers was $7. In contrast, the 

average direct yield per dollar for field exams of individual taxpayers was 

$1.8. We also estimated that the direct revenue per dollar of cost was 

about $22 for AUR cases and about $31 for ASFR cases.

Direct Revenue 

Return on Investment 

Was Highest for 

Examinations of 

Taxpayers with at 

Least $200,000 in 

Positive Income
 

Page 9 GAO-13-151 Tax Gap

Figure 3: Ratios of Direct Revenue to Costs for Different Types of Exams and Groups of Individual Income Tax Returns for 

Cases Opened in Fiscal Years 2007 and 2008

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator. Direct 

revenue has been discounted over the gap between the year in which IRS incurred the exam costs 

and the year in which the revenue was collected.

Exams that are more complicated than average are likely to require both 

more time to complete and more highly skilled examiners, who cost more 

per hour. In estimating the results for field exams in figure 3, we 

incorporated differences in the amount of time spent on each field exam, 

which is recorded in the ERIS database, but we did not account for 

differences in hourly costs relating to varying skill levels of examiners 

across cases because the data available for that purpose were limited.6

 

6

According to IRS officials, the ERIS data relating to time spent on 

correspondence exams are not reliable for our purposes. On their advice, given 

that neither the time spent on 1040 correspondence exams nor the skill level of 

examiners typically vary significantly from case to case, we used the same cost 

estimate for all cases, which IRS provided to us.

Nevertheless, to test the potential sensitivity of our results to this missing 
 

Page 10 GAO-13-151 Tax Gap

factor, we estimated an alternative set of field exam results, using an

ERIS data element that reflects the expected difficulty of an exam. We 

also tested the effect of differences in locality pay for field examiners in 

different geographic locations. (See app. I for further details.) We found 

that adjusting for skill levels likely reduces some of the differences in 

direct revenue per dollar of cost across field exam categories; adjusting 

for location has a negligible effect. (See table 3 in app. II.) IRS would be 

able to estimate ratios of direct revenue to cost that better incorporate 

differences in the hourly costs across examiners with different skill levels

if data from IRS’s timekeeping system that records the number of hours 

that each employee charged to specific exam cases were matched to 

revenue data for the same cases. 

Our analysis of a hypothetical reallocation of IRS examination resources 

for this 2-year period indicates that a shift of about $124 million in 

enforcement resources could have increased direct revenue by $1 billion 

over the $5.5 billion per year IRS actually collected. This result is based 

on shifting the $124 million from exams of lower-income returns with the 

earned income tax credit (EITC) and lower-income business returns 

without EITC to exams of higher-income returns and lower-income 

nonbusiness returns without EITC. The result holds true as long as the 

average ratio of direct revenue to cost for each category of returns 

remained unchanged.

7

 

7

The results presented in figure 4 and table 2 in appendix II are based on our 

estimates of direct revenue to cost from table 1. If, alternatively, we used the 

ratios for field exams that incorporate the adjustments for difficulty (from table 3) 

the direct revenue yield of our hypothetical reallocation would be about $900 

million.

(See fig. 4.) Similar gains would recur annually, 

Although Some 

Caution is Warranted, 

Exam Resource 

Reallocation Could 

Produce Significant 

Direct Revenue Gains

Modest Reallocations 

Might Raise Billions of 

Dollars in Direct Revenue 

with Little, If Any, Decline 

in Voluntary Compliance
 

Page 11 GAO-13-151 Tax Gap

relative to the revenue that IRS otherwise would collect if it did not 

change its resource allocation and taxpayer behavior remained 

substantially the same.

Figure 4: Changes in Resources and Direct Revenue for Different Groups of Individual Income Tax Exams under a 

Hypothetical Reallocation

Notes: Negative amounts show resources taken away and corresponding revenue lost while positive 

amounts show increases. Dollar figures have been adjusted for inflation to 2011 dollars using the 

GDP deflator. Direct revenue has been discounted over the gap between the year in which IRS 

incurred the exam costs and the year in which the revenue was collected.

We took account of several constraints when designing our hypothetical 

resource reallocation example. First, we did not want to suggest a largescale change because some reallocations cannot be made quickly, 

particularly if they require a different distribution of examiner skills than 

exists in IRS’s current workforce. The $124 million that we shifted 

represents less than 8 percent of the $1.6 billion per year that IRS 

devoted to examinations of individual tax returns for the 2 years we 

studied and we shifted less than 5 percent of existing field exam 
 

Page 12 GAO-13-151 Tax Gap

resources ($1.1 billion per year) to correspondence exams.8 Second, we 

did not want to end up with extreme coverage rates (either high or low) in 

any return category. Therefore, we did not reduce the combined coverage 

rate for any category for which the coverage rate was already close to or 

below 1 percent, and we kept the highest coverage rate (for returns with 

positive incomes of $1 million or more) under 11 percent.9

Exam resource reallocation can also affect tax collections indirectly by 

influencing the voluntary compliance of nonexamined taxpayers. These 

indirect effects are difficult to estimate and IRS has no empirical evidence 

that would allow it to say whether overall voluntary compliance would 

increase or decrease as a result of specific resource reallocations. 

Changes in exam coverage rates are generally believed to affect 

voluntary compliance by altering taxpayers’ perceived risks of being 

audited. The higher the risk of being audited, the less inclined taxpayers 

are to evade taxes. As shown in figure 5, our hypothetical reallocation 

would have increased combined coverage rates in most of the tax return 

categories we examined. For those categories in which coverage rates 

declined, the declines were relatively modest. For these reasons we 

believe that the direct revenue gains associated with our hypothetical 

reallocation would not likely be offset by significant indirect revenue 

losses. However, if larger resource allocations were considered, the lack 

of empirical evidence on the potential changes in voluntary compliance 

could leave IRS uncertain of the extent to which direct revenue gains 

might be offset by negative indirect revenue effects. Although research on 

this issue is challenging, IRS might be able to leverage its existing efforts 

to study voluntary compliance through the National Research Program 

(NRP) to get better information on the influence of enforcement activity on 

voluntary compliance.

(Nevertheless, 

that 11 percent rate is almost twice the current rate for that category.) 

Finally, given that certain compliance issues can be reviewed effectively 

only through a field exam, we did not decrease field exam resources in 

any return category for which we increased correspondence exam 

resources.

 

8

See table 1 in appendix II for details of the existing allocation across groups and 

table 2 for details on the reallocations.

9

The combined coverage rate equals the number of correspondence and field 

exams for a particular group, divided by the number of returns filed by that group.
 

Page 13 GAO-13-151 Tax Gap

Figure 5: Coverage Rates for Different Types of Exams and Groups of Individual Income Tax Returns Before and After 

Hypothetical Reallocation

Our analysis focused upon ratios of average direct revenue to average 

cost. We did not incorporate other potentially important considerations 

due to data constraints. One such consideration is the extent to which the 

ratio of direct revenue per dollar of cost may decline for a particular 

category of exams as additional resources are devoted to that category. 

The revenue yield of each additional return that IRS exams within a 

particular return category may be lower than the average revenueproductivity rates we estimated, particularly if IRS’s return selection 

process for examinations results in returns with the greatest revenue 

potential being worked first and those with the least potential being 

worked last. Little is known about the relationship between marginal and 

average revenue and cost within specific return categories because IRS 

Consideration of 

Additional Factors Could 

Improve Upon Allocation 

Decisions that are Based 

Solely on Ratios of 

Average Direct Revenue to 

Costs 
 

Page 14 GAO-13-151 Tax Gap

currently does not identify the marginal cases worked each year.10

An analysis of the marginal revenue yields for specific categories of 

returns might also enable IRS to reduce the number of audits that result 

in no direct change in tax liability (although they may have beneficial 

effects on voluntary compliance). These no-change cases impose 

burdens on compliant taxpayers. Further, substantial variations across 

return categories in the percentage of exams that result in no change 

could be viewed as inequitable because compliant taxpayers in some 

categories have a greater chance of being burdened than compliant 

taxpayers in other categories. No-change rates in some higher-income 

return categories are already relatively high, compared to rates for lowerincome categories. For example, the no-change rate for correspondence 

exams of tax returns with positive income of $1 million or more was about 

53 percent for fiscal years 2007 to 2008. (See table 1 in app. II.) 

However, the highest no-change rates are associated with 

correspondence exams, which should be less burdensome than field 

exams. High no-change rates could also be associated with declining 

revenue yields in marginal cases; however, without a specific study of 

marginal cases, it is not possible to say whether no-change cases are 

concentrated among the last cases examined in a particular category or 

whether they are spread relatively evenly across exams worked 

throughout the course of the year.

Until 

IRS collects some information on marginal cases, such as how the broad 

characteristics of those returns that would likely be selected (or not 

selected) in a modest program expansion (or contraction) would differ 

from the average return actually audited now, planners would have to rely 

solely upon ratios of average direct revenue to average cost—a less 

accurate basis for estimating the direct revenue consequences of specific 

exam resource allocations.

 

10Marginal revenue and cost are those associated with the marginal cases 

worked in each return category. The marginal cases are those that would not 

have been worked if the resources allocated to a particular category had been 

slightly less, as well as those additional cases that would have been worked if the 

resources for the category had been slightly greater. Some of IRS’s exam 

priorities are related to potential revenue yield; however, IRS also gives high 

priority to returns randomly selected for the National Research Program. This 

random selection process is important to the research that identifies significant 

areas of noncompliance, but it represents one reason to doubt that exam cases 

worked lower down the list of IRS’s priorities always have lower returns than 

those worked earlier. 
 

Page 15 GAO-13-151 Tax Gap

Factors other than revenue yields and IRS budget costs also matter for 

purposes of an overall cost-benefit evaluation of IRS exam activities. 

These activities impose compliance costs on taxpayers and economic 

efficiency costs on society. Return categories with low ratios of direct 

revenue to IRS budget costs could have offsetting advantages in terms of 

lower efficiency and compliance costs; however, no empirical evidence of 

variations in these other effects or costs across the return categories 

exists, nor would it be easy to obtain. (See app. III for further discussion 

of these tradeoffs.)

The results of our analyses suggest that there is potential for IRS to 

increase the direct revenue yield of selected enforcement programs by 

hundreds of millions of dollars per year without significant (if any) adverse 

effect on the indirect effect that examinations have on revenues. 

However, our results are preliminary and limited in scope. The collection 

and analysis of additional data would help to both confirm our basic 

conclusion and assist IRS in more finely adjusting its resource allocation 

decisions. One priority would be to study the feasibility of estimating the 

marginal revenue and marginal costs within each program within each 

taxpayer group. It would be helpful, for example, to estimate at least how 

the broad characteristics of those returns that would likely be selected (or 

not selected) in a modest program expansion (or contraction) would differ 

from the average return actually audited now. Such information would 

help IRS assess the extent to which revenue productivity would likely 

decline, if at all, if more exam resources are devoted to a particular group 

of taxpayers. Another useful project would be to see if some linkage could 

be made between the amounts of time that specific examiners spend on 

each case and the revenue collection amounts for each case that are 

recorded in ERIS. Such a link would enable IRS to estimate ratios of 

direct revenue to cost that better incorporate differences in the hourly 

costs across examiners with different skill levels. The collection or 

estimation of other information that would be useful when allocating 

resources, such as the influence of enforcement activity on voluntary 

compliance, is challenging, which is why little is known about those topics 

to date. Nevertheless, IRS might be able to leverage its existing efforts to 

study voluntary compliance through the NRP to get better information on 

the influence of enforcement activity on voluntary compliance.

In the absence of the additional data identified above, IRS planners can 

use the results of an analysis such as ours in combination with their 

professional judgment to decide whether the potential for direct revenue 

gains more than offsets the potential for reductions in indirect revenue or 

Conclusions 
 

Page 16 GAO-13-151 Tax Gap

in equity and any increases in compliance or efficiency costs. If the 

answer is positive, they can adjust their allocation of resources 

accordingly. Nevertheless, the better empirical basis IRS planners have 

for making such judgments, the more confident they can be that they are 

allocating their limited resources to the best effect.

To better ensure that IRS’s limited enforcement resources are allocated in 

a manner that maximizes the revenue yield of the income tax, subject to 

other important objectives of tax administration, such as minimizing 

compliance costs and ensuring equitable treatment across different 

groups of taxpayers, the Commissioner of Internal Revenue should:

• review disparities in the ratios of direct revenue yield to costs across 

different enforcement programs and across different groups of cases 

within programs and determine whether this evidence provides a 

basis for adjusting IRS’s allocation of enforcement resources each 

year.

As part of this review, IRS should:

• develop estimates of the marginal direct revenue and marginal direct 

cost within each enforcement program and each taxpayer group;

• compile data on the amount of time that specific grades of examiners

and downstream employees spend on specific categories of exams 

that can be identified in ERIS; and

• explore the potential of estimating the marginal influence of 

enforcement activity on voluntary compliance, potentially taking 

advantage of new NRP data.

We requested written comments from the Commissioner of Internal 

Revenue and received a letter from IRS Deputy Commissioner for 

Services and Enforcement on November 29, 2012, (which is reprinted in 

app. IV). IRS agreed with our recommendations and agreed that the 

development of additional key data will require considerable work. In 

recognition of the time it will take to obtain this information, IRS said it will 

consider how to apply interim methods, findings, or approximations.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the Secretary of the Treasury, the Commissioner of Internal 

Recommendations 

Agency Comments
 

Page 17 GAO-13-151 Tax Gap

Revenue, and other interested parties. In addition, the report also will be 

available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-9110 or whitej@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix V.

James R. White

Director, Tax Issues

Strategic Issues
Appendix I: Summary Methodology for Data 

Analysis

Page 18 GAO-13-151 Tax Gap

Our principal analysis compares the costs and direct revenues associated 

with correspondence and field exams that were opened during fiscal 

years 2007 and 2008 across the principal categories of individual 

taxpayers that the Internal Revenue Service (IRS) uses for exam planning 

purposes. These categories, defined in terms of income size and the 

nature of items reported on the returns, are shown in table 1 of 

appendix II.

IRS provided us with total cost estimates for correspondence exams (with 

and without the earned income tax credit (EITC)) and field exams (with 

and without EITC) from its Integrated Financial System. These total cost 

estimates included all direct examiner costs, training and other off-line 

activities of examiners, supervisory and administrative support, and other 

overhead costs allocable to each program. We estimated hourly costs by 

dividing the total costs by the average examination hours per case, which 

IRS provided for correspondence exams (with and without the earned 

income tax credit (EITC)) and field exams (with and without EITC) from its 

Audit Information Management System (AIMS).

1

To estimate the cost for each category of field exams we multiplied the 

hourly cost rates by the number of direct hours reported in the 

Enforcement Revenue Information System (ERIS) for each category of 

exam.

These hourly cost 

estimates are adequate for the relatively high-level comparisons we 

present in this report. IRS would be able to make more precise estimates 

for more detailed categories of exams if data from IRS’s timekeeping 

system that records the number of hours that each employee charged to 

specific exam cases were matched to revenue data for the same cases. 

2 According to IRS officials the ERIS data relating to time spent on 

correspondence exams is not reliable for our purposes.3

 

1

IRS provided six separate estimates for the total costs and the average examination 

hours per case—for Wage and Investment correspondence exams of returns with and 

without EITC, for Small Business/Self-Employed (SB/SE) correspondence exams of 

returns with and without EITC, and for SB/SE field exams of returns with and without 

EITC.

On their advice, 

given that neither the time spent on 1040 correspondence exams nor the 

2

ERIS examination hours data originate in AIMS. 

3

We determined that ERIS data were sufficiently reliable for other purposes identified in 

this report.

Appendix I: Summary Methodology for Data 

Analysis 

Exam Costs
Appendix I: Summary Methodology for Data 

Analysis

Page 19 GAO-13-151 Tax Gap

skill level of examiners typically vary significantly from case to case, we 

used the same cost estimate for all cases, which IRS provided to us. We 

restated the costs for each case in terms of 2011 dollars by adjusting for 

inflation. Due to limitations of the ERIS data our cost estimates do not 

include any downstream costs that IRS’s Collections function may have 

devoted to these cases or any costs associated with examinations of 

pass-through entities that could have improved the productivity of some of 

these 1040 exams. We do not know whether the prevalence of these 

missing costs varies significantly across our exam categories; however, 

we do note that the one category we studied that specifically excluded 

returns with pass-through income had ratios of revenue to costs that were 

greater or equal to the ratios for the one category identified as likely to 

include such returns.4

We aggregated all of the tax, interest, and penalty collections recorded in 

ERIS for the same fiscal years, exam types, and taxpayer categories 

used for the cost side of our analysis. We also included amounts of 

refunds disallowed due to examinations in our definition of revenues. 

These amounts represent revenue saved for the government, even 

though IRS does not have to collect it after the exams.5 We compiled the 

revenue data for each fiscal year in which the collections were made 

(through the end of fiscal year 2011) and restated the revenue in terms of 

2011 dollars by adjusting for inflation.6

 

4

Returns without schedules C, E, F, or form 2106 contain no pass-through income; returns 

with schedule E or form 2106 are the most likely to include such income.

Then we discounted the value of 

collections over the gap between the fiscal year in which IRS incurred the 

exam costs (which we estimated as being the midpoint of the exam) and 

the fiscal year in which the revenue was collected. The purpose of this 

discounting, which is standard practice for cost-benefit analyses, is to 

5

One type of revenue savings that we could not include in our analysis due to data 

limitations was that associated with disallowances of loss or credit carry forwards.

Additionally, corrections that IRS examiners make in taxpayers’ favor should also be 

counted as social benefits arising from the exams because they improve the fairness of 

the tax system’s application; however, such corrections were not identifiable in IRS’s 

databases.

6

Additional collections from these 2007 and 2008 cases could continue to come in after 

2011, which implies that our ratios of revenue to cost may be slightly understated; 

however, the vast majority of collections typically are made within two years of exam 

closures.

Direct Revenues
Appendix I: Summary Methodology for Data 

Analysis

Page 20 GAO-13-151 Tax Gap

account for the time-value of money between the time at which the 

government bears the cost of an activity or investment and the time at 

which it receives the related benefit. (We used a real discount rate for this 

discounting because we had already adjusted all of our figures for 

inflation.)

The first set of estimates that we present in this report do not reflect 

potential differences in costs across exams due to the degree of 

experience demanded of the examiner or the location at which the exam 

was conducted. For a second set of estimates we adjusted the cost of 

field exams for relative difficulty. To do this we used ERIS data on hours 

by grade to compute a weighted average pay rate for all exams (for each 

combination of EITC and non-EITC and field or correspondence for each 

year). We then adjusted costs for each record by multiplying the cost by 

the mid-point pay rate for the grade of the record, divided by the weighted 

average difficulty pay rate for the relevant year and EITC status. For a 

third set of estimates we made this difficulty adjustment for field exams 

and then we also adjusted the costs of both correspondence and field 

exams for location differences by using data on the location of exams, 

hours, and locality pay for each location to compute a national average 

locality pay rate (weighted by the number of hours in each location) for 

each combination of field and correspondence exams of returns with and 

without EITC and a locality pay rate for each location. We then multiplied 

the cost estimate for each exam by the ratio of the national rate over the 

relevant location-specific rate.

The columns labeled “Change in Resources” in table 2 of appendix II

show the amounts of IRS budget resources we moved out of or into 

specified exam categories for our hypothetical reallocation. These shifts 

were guided by the considerations we noted earlier. We estimated the 

revenue effect of each shift by multiplying the gain or loss of resources for 

each category by our estimated ratios of direct revenue to cost for those 

categories. We estimated the effect on the coverage rate within each 

category by multiplying the coverage rate prior to the reallocation by the 

percentage change in each category’s resources caused by the 

reallocation. 

Incorporating Exam 

Difficulty and Location

Effects of a Hypothetical 

Resource Reallocation
Appendix II: Detailed Tables

Page 21 GAO-13-151 Tax Gap

Table 1: Costs, Direct Revenue, Exam Coverage Rates and No-Change Rates for Different Types and Groups of Exams 

Opened In Fiscal Years 2007 and 2008 (Weighted Average of the 2 Years)

Taxpayer group

Correspondence exams Field exams

Combined 

coverage 

rate

Cost

per year 

($ millions)

Direct 

revenue / 

cost

Coverage 

rate

Nochange 

rate

Cost

per year 

($ millions)

Direct 

revenue / 

cost

Coverage 

rate

Nochange 

rate

Individual income tax returns, total 516.4 7.0 0.8% 15.5% 1,093.7 1.8 0.2% 11.5% 1.0%

Returns with total positive income 

under $200,000:

Business and nonbusiness 

returns with earned income tax 

credit by size of total gross 

receipts:

Under $25,000 247.5 5.5 1.8% 11.1% 22.9 1.2 0.1% 13.0% 1.9%

$25,000 or more 15.6 3.2 4.4% 11.1% 84.2 1.0 2.1% 8.5% 6.5%

Nonbusiness returns without 

earned income tax credit

Without Schedules C, E, 

F, or Form 2106

114.4 7.9 0.4% 21.0% 89.8 1.6 0.1% 15.5% 0.4%

With Schedule E or Form 

2106

56.2 6.5 0.9% 10.5% 119.1 1.6 0.3% 7.0% 1.3%

Business returns without 

earned income tax credit:

Nonfarm business returns 

by size of total gross 

receipts:

Under $25,000 32.9 5.7 0.8% 16.0% 128.3 1.2 0.5% 7.5% 1.2%

$25,000 under 

$100,000 

13.8 4.4 1.0% 13.0% 98.7 1.0 1.0% 9.5% 1.9%

$100,000 under 

$200,000

8.2 5.5 2.2% 9.6% 95.6 1.2 2.8% 8.0% 5.0%

$200,000 or 

more

1.0 2.6 0.3% 45.1% 152.4 1.0 2.2% 15.4% 2.5%

Farm returns 1.0 3.5 0.2% 40.1% 17.6 2.0 0.2% 16.6% 0.5%

Returns with total positive income of

at least $200,000 and under $1 

million: 

Nonbusiness returns 14.6 25.6 1.7% 34.9% 72.3 2.9 0.6% 15.9% 2.3%

Business returns 8.2 13.0 1.2% 34.6% 130.9 1.7 1.6% 17.8% 2.9%

Returns with total positive income of 

$1 million or more

3.1 47.2 2.8% 52.7% 81.8 6.0 3.3% 21.3% 6.2%

Source: GAO analysis of IRS data.

Appendix II: Detailed Tables
Appendix II: Detailed Tables

Page 22 GAO-13-151 Tax Gap

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator. Direct 

revenue has been discounted over the gap between the year in which IRS incurred the exam costs 

and the year in which the revenue was collected.

Table 2: Potential Changes in Direct Revenue and Exam Coverage Rates Resulting from a Hypothetical Reallocation of Exam 

Resources

Taxpayer group

Correspondence exams Field exams

Change in 

resources 

($ millions)

Change in 

direct 

revenue 

($ millions)

Coverage 

rate 

before

Coverage 

rate after

Change in 

resources 

($ millions)

Change in 

direct 

revenue 

($ millions)

Coverage 

rate 

before

Coverage 

rate after

Individual income tax returns, 

total (net)

50.0 874.0 -50.0 130.1 

Returns with total positive income 

under $200,000:

Business and nonbusiness 

returns with earned income 

tax credit by size of total 

gross receipts:

Under $25,000 -26.4 -145.5 1.8% 1.6%

$25,000 or more -3.5 -11.3 4.4% 3.4% -14.9 -14.1 2.1% 1.8% 

Nonbusiness returns without 

earned income tax credit:

Without Schedules C, E, 

F, or Form 2106

41.5 328.4 0.4% 0.5%

With Schedule E or 

Form 2106

14.7 94.9 0.9% 1.2%

Business returns without 

earned income tax credit:

Nonfarm business 

returns by size of total 

gross receipts:

Under $25,000

$25,000 under 

$100,000 

-1.7 -7.4 1.0% 0.9% -26.5 -25.4 1.0% 0.7%

$100,000 under 

$200,000

-22.3 -26.8 2.8% 2.1%

$200,000 or 

more 

-28.9 -29.4 2.2% 1.8%

Farm returns

Returns with total positive income 

of at least $200,000 and under $1 

million: 

Nonbusiness returns 14.0 356.7 1.7% 3.3% 9.1 26.5 0.6% 0.7%

Business returns 8.2 106.8 1.2% 2.5%
Appendix II: Detailed Tables

Page 23 GAO-13-151 Tax Gap

Taxpayer group

Correspondence exams Field exams

Change in 

resources 

($ millions)

Change in 

direct 

revenue 

($ millions)

Coverage 

rate 

before

Coverage 

rate after

Change in 

resources 

($ millions)

Change in 

direct 

revenue 

($ millions)

Coverage 

rate 

before

Coverage 

rate after

Returns with TPI of $1 million or 

more 

3.2 151.4 2.8% 5.7% 33.6 200.2 3.3% 4.7%

Source: GAO analysis of IRS data.

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator. Direct 

revenue has been discounted over the gap between the year in which IRS incurred the exam costs 

and the year in which the revenue was collected.

Table 3: Ratios of Direct Revenue to Cost for Field Exams Opened in 2007 and 2008 after Accounting for Various Factors

Taxpayer group

Adjusted

for inflation 

and discounting

Adjusted for inflation, 

discounting and 

difficulty

Adjusted for inflation, 

discounting, difficulty 

and location

Individual income tax returns, total 1.8 1.8 1.8

Returns with total positive income under $200,000:

Business and nonbusiness returns with earned income tax 

credit by size of total gross receipts:

Under $25,000 1.2 1.2 1.2

$25,000 or more 1.0 1.0 1.0

Nonbusiness returns without earned income tax credit:

Without Schedules C, E, F, or Form 2106 1.6 1.7 1.7

With Schedule E or Form 2106 1.6 1.8 1.8

Business returns without earned income tax credit:

Nonfarm business returns by size of total gross 

receipts:

Under $25,000 1.2 1.3 1.3

$25,000 under $100,000 1.0 1.0 1.0

$100,000 under $200,000 1.2 1.2 1.2

$200,000 or more 1.0 1.0 1.0

Farm returns 2.0 1.8 1.9

Returns with total positive income of at least $200,000 and 

under $1 million: 

Nonbusiness returns 2.9 2.7 2.7

Business returns 1.7 1.6 1.6

Returns with TPI of $1 million or more 6.0 5.1 5.0

Source: GAO analysis of IRS data.

Note: Dollar figures have been adjusted for inflation to 2011 dollars using the GDP deflator. Direct 

revenue has been discounted over the gap between the year in which IRS incurred the exam costs 

and the year in which the revenue was collected.
Appendix III: Economic Guidelines for 

Enforcement Resource Allocation Decisions

Page 24 GAO-13-151 Tax Gap

An economic cost-benefit evaluation of IRS’s overall activities would 

involve a comparison of the social costs and social benefits associated 

with those activities.1 IRS’s function is to collect tax revenue that the 

federal government transfers among citizens as cash payments or in the 

form of goods and services. The collection process imposes costs on 

society but produces no direct benefit itself. The government’s use of the 

collected revenue may ultimately produce a net benefit for society if the 

social value of that use exceeds the social cost of raising the revenue. 

IRS has no influence over how tax revenue is used; it can only contribute 

to increasing the net social benefit by increasing the amount of revenue 

collected for a given amount of social cost (or decreasing the social cost 

of raising a given amount of revenue). Specific resource allocation 

choices can be compared on the basis of the amount of revenue they 

produce for a given amount of total social costs.

The social costs of tax collection comprise the following:

• IRS budget costs.

• Tax burden. This is the actual money collected from taxpayers. 

Amounts collected as a result of IRS enforcement activities from 

taxpayers who, otherwise, would have been noncompliant may have a 

zero social cost. The cost that those amounts represent can be 

attributed to the tax law, rather than to IRS enforcement efforts. If 

those additional amounts of taxes due are not collected, the tax 

burdens evaded by noncompliant individuals are offset by the 

additional taxes that compliant taxpayers must pay in order to support 

a given government budget.

• Compliance burden. IRS’s enforcement activities can affect the costs 

that taxpayers incur when complying with the tax law by increasing 

the time and money that they spend preparing their returns and 

interacting with IRS.

 

1

Social costs are the sum of all private costs and any external costs to society 

arising from the production of a good or service. Private costs are incurred by 

producers of goods and services and are reflected in the prices charged to 

consumers for those goods and services. External costs are costs arising from 

production, such as pollution, that are borne by third parties (other than the 

producers or consumers). Similarly, social benefits are the sum of all private 

benefits and any external benefits arising from the production of a good or 

service.

Appendix III: Economic Guidelines for 

Enforcement Resource Allocation Decisions

Components of Total 

Social Costs
Appendix III: Economic Guidelines for 

Enforcement Resource Allocation Decisions

Page 25 GAO-13-151 Tax Gap

• Efficiency costs. IRS’s enforcement activities can alter the tax 

avoidance and evasion behavior of individuals, which affects the 

efficiency of resource allocation in the economy. If an enforcement 

activity increases the aggregate costs of tax avoidance and evasion, 

economic efficiency and the average standard of living is reduced. 

Conversely, if the activity reduces such aggregate costs, economic 

efficiency would improve.

• Equity costs. IRS’s resource allocation can affect how exam-related 

compliance burdens are distributed across different groups of 

taxpayers and also how the risk of noncompliant taxpayers getting 

penalized for evasion varies across groups. It is difficult to know what 

society as a whole would view as an equitable distribution of these 

burdens and risks; therefore it is difficult to assess the equity effects of 

any particular reallocation of resources.

The only component of social costs that can be reliably measured is the 

IRS budget cost, and it is difficult to attribute even that cost to very 

specific enforcement activities (such as specific audits). Consequently, 

IRS planners cannot consider all types of social costs in a rigorously 

quantitative manner when making their resource allocation decisions.

Economists use the term “margin” when referring to the scopes of the 

various types of decisions that individuals make. For example, if IRS 

examination planners were deciding how to allocate the last million 

dollars of their budget between different types of audits, the marginal 

social cost of the choice they made would be a million dollars, plus the 

sum of all other social costs resulting from the IRS activities supported by 

that million dollars. The marginal revenue would be the amount of 

additional tax collections attributable (both directly and indirectly) to those 

activities. The most economically efficient choice would be the one that 

produced the highest ratio of marginal revenue to marginal social cost.

The ratio of marginal revenue to marginal social cost provides a basis for 

comparing the cost of collecting taxes by different approaches. Such 

comparisons can be made across broadly defined approaches (e.g., 

increasing taxpayer services to promote higher voluntary compliance 

versus increasing enforcement efforts to reduce noncompliance). 

Alternatively, as in this study, comparisons could be made across more 

narrowly defined alternatives (e.g., devoting more resources to audits of 

taxpayers with incomes below a certain amount versus devoting those 

resources to audits of taxpayers with incomes above that amount).

Marginal Analysis
Appendix IV: Comments from the Internal 

Revenue Service

Page 26 GAO-13-151 Tax Gap

Appendix IV: Comments from the Internal 

Revenue Service
Appendix IV: Comments from the Internal 

Revenue Service

Page 27 GAO-13-151 Tax Gap
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 28 GAO-13-151 Tax Gap

James R. White, (202) 512-9110 or whitej@gao.gov

In addition to the contact named above, James Wozny (Assistant 

Director), Kevin Daly (Assistant Director), Michael Brostek, Ethan 

Wozniak, Suzanne Heimbach, Sara Daleski, Lois Hanshaw, Karen 

O’Conor, Ray Bush, Elizabeth Fan, and Robert MacKay made key 

contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff

Acknowledgments 

(450795)
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