Tax Administration:

Opportunities to Increase Revenue Before Expiration of the Statutory Collection Period

GGD-91-89: Published: Sep 30, 1991. Publicly Released: Sep 30, 1991.

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Pursuant to a congressional request, GAO provided information on Internal Revenue Service (IRS) accounts receivable that are written off because the collection statute of limitations has expired, focusing on: (1) the amount of the accounts receivable that has been or possibly will be written off; (2) the potential impact of the November 1990 extension of the collection statute of limitations; and (3) IRS procedures for managing accounts receivable nearing the end of their collection periods.

GAO found that: (1) although IRS establishes and resolves billions of dollars of accounts receivable each year, a substantial portion remains outstanding at the end of each year; (2) annual write-offs of assessed taxes, assessed or accrued interest, and penalties for IRS individual and business files grew from $2.3 billion to $4.6 billion between fiscal years 1986 and 1990; (3) about $46 billion, or 49 percent, of the IRS $93-billion individual and business accounts receivable inventory as of September 30, 1990, could be uncollected and ultimately written off because of the expiration of the collection statute of limitations; (4) of the remaining $47 billion, projections show that IRS could collect about $23 billion and could abate or otherwise resolve about $24 billion; (5) while IRS requires local reviews of decisions to suspend collection activities, it does not centrally analyze the local results to identify systemic problems; (6) although IRS sent reminder notices to taxpayers whose accounts were suspended earlier in the collection process, IRS does not send reminder notices to all taxpayers whose accounts were suspended later in the collection process; and (7) if collection procedures do not change, IRS could collect an additional $1.7 billion from its September 30, 1990 accounts receivable inventory as a result of extending the collection period from 6 to 10 years.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS rejected this recommendation in its 60-day letter because it believed that it had sufficient information on the accounts likely to be written off and that potential revenue from these accounts was minimal. GAO continues to believe that information about these accounts would help IRS purify its accounts receivable inventory and allow more efficient collection efforts.

    Recommendation: The Commissioner of Internal Revenue should develop more specific information on the validity and characteristics of accounts written off to determine whether additional cost-effective collection measures can be developed and applied.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS has identified the vital items for CNC cases and included them in the Collection Quality Measurement System Program. Reports can now be generated to provide data at the district, regional, and national level.

    Recommendation: The Commissioner of Internal Revenue should systematically collect and analyze local review results on the decisions to classify accounts as currently not collectible to help identify potential systemic problems that may need correction.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: In February 1992, IRS began sending reminder notices to taxpayers with accounts suspended in the queue.

    Recommendation: The Commissioner of Internal Revenue should ensure timely completion of IRS plans to send reminder notices to taxpayers with accounts suspended in the queue to increase collections of those accounts receivable.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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