What IRS Can Do To Collect More Delinquent Taxes

GGD-82-4: Published: Nov 5, 1981. Publicly Released: Nov 5, 1981.

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GAO reviewed and evaluated the Internal Revenue Service's (IRS) policies, procedures, and practices for collecting delinquent taxes and evaluating its collection activities to determine IRS effectiveness in collecting delinquent taxes from taxpayers who claim that they cannot immediately pay their taxes in full. IRS districts and their respective regions and service centers were selected for review on the basis of obtaining a geographical mix of districts considering the size of the district, available GAO resources, and the impact of conducting the review on the IRS collection activities. Samples of installment agreements and currently not collectible cases were also reviewed.

At the end of fiscal year 1979, about $3 billion of the IRS accounts receivable was classified as currently not collectible, and taxpayers were making installment payments against $270 million in delinquencies. A review of installment agreements showed that nearly 15 percent of the taxpayers could have paid their liabilities immediately with savings. Inadequate determinations of ability to pay severely hamper the effective use of installment agreements. Further, classifying accounts as currently not collectible is a greater problem since these taxes may never be collected. IRS has made limited use of voluntary payroll deductions, considered one of the best means of making payments, and has taken inadequate enforcement action when taxpayers miss payments. Closing codes on accounts classified as currently not collectible were set too high in 39 percent of the cases reviewed, thereby precluding prompt follow-up action to collect delinquencies for those accounts which could be reactivated. About 40 percent of the currently not collectible cases in four districts reviewed were audit cases, indicating that audit cases pose a bigger collection problem than other accounts. Many delinquent accounts closed by field divisions could have been closed by branch office personnel. IRS has yet to establish uniform criteria to help revenue officers decide when to consider using and when to accept offers in compromise. In addition, the IRS procedures for collecting liabilities on offers not accepted have not been very effective.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should determine what resources are needed to work a delinquent account adequately and ensure accurate and reliable financial information, request the additional resources from Congress, and inform Congress of the cases IRS will not be able to work under various staffing levels.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Not Implemented

    Comments: The program was discontinued since this report was issued.

    Recommendation: The Commissioner of Internal Revenue should develop an evaluation system that would consider dollars collected, case disposition, cost of collecting through installments to determine the effectiveness of the program, reasons for defaults, and possible corrective action.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish procedures to enforce installment agreements better before defaulted agreements will be reinstated and give collection employees a guide on acceptable reasons for missed payments.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Not Implemented

    Comments: IRS believes that current instructions are adequate. A follow-up should be considered at a later date, depending on actions on the other recommendations.

    Recommendation: The Commissioner of Internal Revenue should place more emphasis on the use of payroll deductions as a means to collect the monthly installment payments.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish installment payments based on taxpayers' ability to pay regardless of whether the payments cover interest charges and increase payments when possible.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should develop a more detailed quality review of financial statements to ensure that: (1) all information is considered in arriving at the decision to grant an installment agreement or classify the account as currently not collectible, and (2) the information is mathematically correct.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  7. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should require employees to use dates when liabilities are paid off to increase the amount of installment agreement payments, obtain advance-dated installment agreements, or reactivate currently not collectible accounts.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  8. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should require taxpayers to provide proof of income and certain expense items which may be questionable.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  9. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should require taxpayers to provide information on credit card expenses to ensure that expenses are not duplicated and are for necessities.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  10. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish more specific guidelines for employees to use in evaluating and analyzing financial statements, including guidelines defining the necessity and amount of expenses.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  11. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should develop a guide based on equity in assets, gross income, income over expenses, and amount of tax liability to identify cases with loan potential and require taxpayers meeting this potential to seek loans and provide written documentation of rejections.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  12. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish more specific guidelines for setting closing codes for accounts classified as currently not collectible due to financial hardship to ensure that prompt and timely follow-up is made to collect delinquent taxes.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  13. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should require the Examination and Collection Divisions to make arrangements for referring taxpayers to Collection or having Examination personnel obtain financial statements from those taxpayers who agree to but are unable to pay their tax delinquencies in full.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  14. Status: Closed - Not Implemented

    Comments: IRS has completed its pilot test and does not intend to take further action.

    Recommendation: The Commissioner of Internal Revenue should establish a more comprehensive means of setting goals and measuring performance, including such criteria as dollars collected and type of disposition.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  15. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should take strong collection action when appropriate based on more accurate and reliable financial information to resolve delinquencies in the best interest of the government.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  16. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should set up procedures to ensure that financial information developed during the offer investigation is used in follow-up collection action and that accounts previously classified as currently not collectible are reactivated when financial information indicates that collection is possible.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  17. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should periodically evaluate the effectiveness of the compromise program as a collection tool.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  18. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should ensure that the IRS review of currently not collectible accounts includes a procedure to determine if revenue officers are suggesting offers in appropriate cases.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  19. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish specific policies and procedures showing when and how compromises should be used as an effective collection tool. These procedures should identify how assets should be evaluated to arrive at a minimum acceptable compromise amount.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  20. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should conduct a comprehensive study to determine the most effective use of offers in compromise and the type of case where offers should be suggested.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  21. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish more specific guidelines for office branches to use in processing delinquent accounts to ensure that they take all available collection actions before transferring the cases to the field office.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  22. Status: Closed - Not Implemented

    Comments: IRS stated that the costs of implementing a statistical information system by various tax classifications would not be effective. GAO intends to look at this matter in the near future.

    Recommendation: The Commissioner of Internal Revenue should develop a statistical information system for audit-originated cases to be used to determine potential problems and as feedback for the Examination Division to show the collection outcome of audit cases.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  23. Status: Closed - Not Implemented

    Comments: Discussions were held between collection, examination, and computer services as to the desirability and feasibility of developing a technique code. IRS decided not to pursue further development of the code for collection action and plans no further action.

    Recommendation: The Commissioner of Internal Revenue should develop a system to code delinquent accounts resulting from audits issued to the field to show whether the delinquency resulted from a no-contact audit.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  24. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should discontinue the current installment-agreement-by-mail program except for those accounts which would ordinarily not be sent to a district office for intensified collection action.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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