Tax Administration:

Periodic Evaluation Needed if IRS Uses Levies to Collect Deferred Accounts

GGD-89-34: Published: Feb 14, 1989. Publicly Released: Feb 14, 1989.

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In response to a congressional request, GAO evaluated the Internal Revenue Service's (IRS) planned use of levies to collect taxes on individual deferred accounts.

GAO found that: (1) IRS developed a plan for more actively collecting deferred individual taxpayer accounts that would levy taxpayer assets, but did not decide how to use its resources to monitor deferred accounts and handle subsequent inquiries; (2) although one alternative was to monitor the accounts using the Automated Collection System (ACS), some ACS sites experienced computer capacity problems that might be exacerbated by additional monitoring; (3) IRS also considered using its Integrated Data Retrieval System (IDRS) to monitor the deferred accounts, but limited IDRS terminal availability would require more staff time; (4) although IRS did not levy any taxpayer assets on deferred accounts, it estimated that levies would generate an additional $13.6 million nationwide over a 1-year period and that annual levies would total about $3 million; (5) IRS also concluded that levies would be cost-effective, would enhance cash flow and cash management, and could foster voluntary compliance; (6) IRS did not make the program changes needed to implement the levies, since IRS computer services had higher priority collection work; and (7) IRS did not plan to levy businesses, since it did not evaluate the potential for using levies against business accounts.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS completed a study in August 1989 and decided not to implement a nationwide program of using levies to collect deferred accounts. Therefore, the recommendation should be closed.

    Recommendation: If a nationwide levy program is implemented for deferred accounts, the Commissioner of Internal Revenue should establish procedures for periodically evaluating the program's effectiveness.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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