. "6 IRS Data, Data Users, and Data Sharing--Nick Greenia and Mark Mazur." Improving Business Statistics Through Interagency Data Sharing: Summary of a Workshop. Washington, DC: The National Academies Press, 2006.
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Improving Business Statistics Through Interagency Data Sharing: Summary of a Workshop
statements, is vast and contains information on everything from net business profits to charitable contributions made by individuals. Moreover, the regularity of the data provided—annually, quarterly, and even monthly for some returns—and the fact that much of the data are captured electronically and for the universe of filers, makes FTI a potent resource for research and analysis.
The subject of business data can be a broad one, covering corporations, partnerships, and sole proprietorships and both employers and nonemployers. Intuition can be a poor guide for the types of data collected and available. For example, employer data are collected for part-time and full-time sole proprietorships, associated with individual tax returns, corporations, and partnerships, as well as entities that are not typically thought of as businesses, such as nonprofit organizations. Employment data themselves can be compiled at the employer level through the employment tax returns filed by businesses (for example the Form 941 series long used by the Census Bureau). They can also be compiled at the employee level and associated with the related employers through Social Security number/employer identification number (SSN/EIN) crosswalks (for example, using the SSNs and EINs captured from Form W-2, used to report annual wage and salary payments).
Typically, the IRS tracks business data at the EIN or enterprise level, but not at the establishment or place of business level unless they are one and the same. This practice differs from that used by most federal statistical agencies. Tax data accuracy is helped by the IRS compliance programs, including legal disincentives for noncompliance. Nevertheless, given the scope and frequency of the data processed by the IRS, the agency cannot ensure the accuracy of all items or the complete (100 percent) coverage of entities. That is, FTI faces limitations similar to those of data sets maintained by statistical agencies, so the tax data system per se should not be viewed as the panacea for statistical program deficiencies. As experience has shown, there will always be gaps and inconsistencies, even in relatively high-quality data sets.
PURPOSE OF DATA COLLECTION
Fundamentally, FTI is collected for use in administering the tax system, including tax policy analysis in the administration (the Department of the Treasury’s Office of Tax Analysis) and Congress (the Joint Committee on Taxation). The IRS considers the successful administration of the tax system as highly dependent on voluntary compliance by millions and millions of taxpayers. In turn, voluntary compliance is seen as reliant on the protection—including the perceived protection—of taxpayer data confidentiality. Taxpayers share personal information with the IRS and are