The Use of Schedule K-1 Data to Address Taxpayer Noncompliance Can Be Improved

The Commissioner, Small Business/Self-Employed Division, should conduct periodic outreach to reinforce how Schedule K-1 amounts should be reported on tax returns to prevent underreporter discrepancies. Topics should include when to report Schedule K-1 amounts received from flow-through entities ***********2************* ******2****** to report Schedule K-1 amounts on tax returns, and ****2**** Schedule K-1 amounts causes potential underreporter discrepancies that may require contact from the IRS to resolve. The outreach should be directed to those involved with preparing and submitting tax returns to the IRS (e.g., taxpayers/flow-through recipients, return preparers, tax practitioners, and tax preparation software companies).

The Commissioner, Small Business/Self-Employed Division, should add the development of a BUR automated case management system to the Integrated Modernization Business Plan.

The Commissioner, Wage and Investment Division, should ensure that the computer problem that caused amended Schedules K-1 not to be marked as amended on the IRMF has been corrected.

The Commissioner, Wage and Investment Division, should establish a process to record Schedules K-1 as amended when submitted with an amended flow-through return regardless of whether the Schedule K-1 itself is marked as amended.

The Commissioner, Small Business/Self-Employed Division, should establish a process to track the reasons and trends in AUR closures to identify opportunities to conduct outreach, improve case selection, and update procedures to decrease closures that do not result in tax assessments.