Tax Administration:

Millions of Dollars Could Be Collected If IRS Levied More Federal Payments

GAO-01-711: Published: Jul 20, 2001. Publicly Released: Aug 21, 2001.

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The Internal Revenue Service (IRS) seeks to apply the law fairly to all taxpayers. Under the continuous levy program, however, taxpayers who receive federal payments are treated differently depending on whether the payments are made by the Federal Management Service (FMS) on behalf of other agencies or directly by the agencies themselves. Delinquent taxpayers receiving payments from FMS generally are subject to continuous levy, while those receiving payments directly from federal agencies are not. Although it may prove impractical to treat similarly all delinquent taxpayers who receive federal payments, progress--and substantial additional revenues--could be achieved in this area. FMS plans to include salaries at the U.S. Postal Service and salaries and retirement payments at the Defense Department (DOD) in the continuous levy program. There are similar plans to include all vendor payments from the Postal Service, DOD, and the Centers for Medicare and Medicaid Services. Discussions among FMS, IRS, and the agencies could ensure that all of these payments all included in the continuous levy program as soon as possible. These discussions could also speed the inclusion of some categories of vendor payments. The continuous levy program could also benefit if IRS were to begin sharing with FMS the different names that businesses use for tax purposes--an approach that IRS already uses for individual taxpayers in the program. In the meantime, until the program is expanded to include more direct payments from agencies, IRS could take steps to ensure that all delinquent taxpayers receiving payments are subject to potential collection activity. DOD and CMS have data on hand that they could share with IRS to strengthen IRS' ability to identify taxpayers whose federal payments could be levied under the program.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To enhance the value of agency payment data that are available for the continuous levy program, the Commissioner of Internal Revenue should provide FMS with a file of all business names that IRS has for each business taxpayer that owes federal taxes and meets the program criteria.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: Recommendation was implemented as of January 1, 2002. Through an IRS Request for Information Systems (COL-1-0084), a secondary name control file is being transmitted to FMS along with the current EIN and name control file for Business Master File (BMF) taxpayers.

    Recommendation: To increase the potential for collecting delinquent federal taxes owed by federal vendors, the Commissioner of Internal Revenue and the Commissioner of FMS should jointly initiate specific discussions with USPS, DOD, CMS officials to develop plans for obtaining vendor payments from the respective agencies for the continuous levy program. The discussions should cover plans for including all of the agencies' vendor payments in the continuous levy program, as well as options for including some of their vendor payments in the program on an accelerated basis.

    Agency Affected: Department of the Treasury: Financial Management Service

    Status: Closed - Implemented

    Comments: Since December 2002, DFAS vendor payments have been processed through the FMS Treasury Offset Program (TOP) and thus have been available for levy through the Federal Payment Levy Program (FPLP). Although USPS vendor payments are not yet processed through TOP and thus are unavailable for levy via FPLP, such discussions have been initiated with USPS. However, no such discussions have been initiated with CMS.

    Recommendation: To increase the potential for collecting delinquent federal taxes owed by federal vendors, the Commissioner of Internal Revenue and the Commissioner of FMS should jointly initiate specific discussions with USPS, DOD, CMS officials to develop plans for obtaining vendor payments from the respective agencies for the continuous levy program. The discussions should cover plans for including all of the agencies' vendor payments in the continuous levy program, as well as options for including some of their vendor payments in the program on an accelerated basis.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: Since December 2002, DFAS vendor payments have been processed through the FMS Treasury Offset Program (TOP) and thus have been available for levy through the Federal Payment Levy Program (FPLP). Although USPS vendor payments are not yet processed through TOP and thus are unavailable for levy via FPLP, such discussions have been initiated with USPS. However, no such discussions have been initiated with CMS.

    Recommendation: To ensure that IRS has updated information on vendor payments to aid in identifying possible levy sources for use under its general levy authority, the Commissioner of Internal Revenue should work with DOD and CMS to develop the means for these agencies to periodically provide IRS with vendor information that is more current than that which IRS receives now through annual information returns.

    Agency Affected: Department of the Treasury: Internal Revenue Service

    Status: Closed - Implemented

    Comments: IRS Information Technology Services determined that it was unfeasible to obtain vendor information periodically from DOD and CMS to aid in identifying possible levy sources. However, as an alternative, since January 2003 when a levy takes place via the Federal Payment Levy Program, the federal payment source is downloaded into IRS's levy source data system for the purpose of initiating paper levies when determined to be necessary by IRS collection employees.

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