IRS Practice and Procedure Change: IRS Matching Programs

2012 was a breakthrough year for IRS automated matching programs. In 2012, it’s likely that the IRS exceeded the 4.7 million individual CP2000 (under-reporter) notices that it sent in 2011. In 2012, this was the only major IRS compliance program that generated increased enforcement revenue over 2011. However, the IRS was not limited to information matching on individual returns.

In 2012, the IRS initiated a business information-matching program and a Form 1099-K matching program. The IRS sent new notices in late 2012 questioning businesses on the accuracy of their returns, based on information statements filed under business employer identification numbers (EINs). The IRS also matched Forms 1099-K to business returns and sent inquiries to taxpayers with potential discrepancies, requesting explanations for possible unreported income.

The IRS’ business information-matching initiative is in the first of several phases. In 2013, the IRS will learn from, fine-tune and expand this opportunity to address small business under-reporting, which is the taxpayer segment of most interest to the IRS in closing the tax gap.

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