BUSINESS
05/13/2013 07:53 pm ET | Updated Feb 13, 2014

IRS Suffers From Weak Internal Financial Controls: GAO

AP

May 13 (Reuters) - The U.S. Internal Revenue Service suffers from weaknesses in a number of its internal financial controls, said a report released on Monday by the Government Accountability Office, the investigative arm of the U.S. Congress.

The GAO report cited weaknesses in the tax agency's calculation of unpaid tax assessments and other problems.

As of September 2012, 46 of 69 previous GAO recommendations for improvement at the IRS remained unfinished, the report said.

The results were more bad news for the IRS, which is already grappling with a controversy over its admission on Friday that low-level IRS agents had targeted politically conservative groups' applications for tax-exempt status for extra scrutiny.

At a press conference President Barack Obama called that practice "outrageous," if true. Congressional Republicans were rushing to hold hearings and investigate the issue.

The GAO said a major IRS problem is the way it estimates the amount of taxes owed but unpaid. GAO testing of a sample of these balances found errors totaling $829 million, it said.

The GAO flagged other issues, as well. Among them: erroneous refunds going to dead taxpayers. Of a sample of refunds sent to dead taxpayers, 88 percent were invalid, the GAO said.

Many of these errors were the result of identity theft, an ongoing problem for the IRS, the report said.

The IRS, which received an advance copy of the report, agreed with its new recommendations for improvement, the GAO said.

The findings were based on GAO audits of the IRS financial statements for both the fiscal year ended September 30, 2012 and the fiscal year ended September 30, 2011. (Reporting by Nanette Byrnes; Editing by Kevin Drawbaugh and Christopher Wilson)

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