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IRS Falls Short in Collection Efforts

October 1, 2014

A new report released by the Treasury Inspector General for Tax Administration (TIGTA) reveals inconsistencies in Internal Revenue Service collection efforts. This report follows an audit conducted for fiscal year 2012, which concluded that the agency failed to follow basic protocols in determining taxpayers as Currently Not Collectable (CNC). In instances where the IRS is unable to find individuals who owe back taxes, CNC status is assigned – effectively closing the cases.

Currently Not Collectible status is often assigned to taxpayers who are experiencing financial hardship and are completely unable to make any payment toward their debt. While the tax debt is not forgiven or reduced and penalties and interest continue to accrue, CNC status temporarily exempts the taxpayer from repaying their tax debt and protects them from collection actions like garnishment or levy. However, Currently Not Collectible is also assigned to cases in which the IRS is unable to locate the taxpayer or their financial accounts; the TIGTA’s investigation concerns these cases.

Of the 250 cases reviewed, TIGTA determined that 57 percent had missing steps prior to being classified as not collectable. Additionally, seven percent of the surveyed cases showed that delinquent taxpayers did not have a Notice of Federal Tax Lien. Finally, the Collection Field failed to conduct proper research in 165 of the 204 audited cases.

Russell George, Treasury Inspector General for Tax Administration, expressed concern that the deficiencies found in the report illustrated neglect for the Government’s interest and inequitable treatment of taxpayers. TIGTA conducted the review to confirm that the IRS was thoroughly completing steps and following proper protocols in taxpayer collection efforts. Following the audit, TIGTA made several recommendations to the IRS in the interest of improving procedures.

The IRS has been tasked with ensuring that agents fully complete investigations before closing cases. Also, TIGTA has requested that managers retain documentation that all mandatory steps are taken prior to cases being closed. TIGTA encouraged the IRS to analyze the results of extra efforts taken to ensure case completion.

In 2012 alone, nearly 500,000 cases were closed by the IRS as Currently Not Collectible, with an estimated $6.7 billion in question. The Internal Revenue Service has indicated that they intend to take TIGTA’s recommendations and work toward improving existing procedures. It remains to be seen what exactly this will mean for taxpayers, but it is highly likely that those who may have been over looked in the past will be pulled into active collections.

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