Treasury: IRS’s Use of Schedule K-1 Data to Address Taxpayer Noncompliance Can Be Improved (IRC §7602)

Improvements are needed with the IRS’s process design and collection of Schedule K-1 data to strengthen efforts to address the noncompliance of nonfilers and underreporters, the Treasury Inspector General for Tax Administration said in a heavily redacted report released October 1. Schedule K-1 — used by flow-through entities to report recipients’ allocated share of income, deductions, credits, and other amounts — isn’t submitted directly to the IRS, but is attached to flow-through returns. In its review, included in its fiscal year 2019 annual audit plan, TIGTA found that the IRS didn’t identify approximately 4,000 nonfilers who received $25,000 or more ...