Tax Administration:

Delayed Tax Deposits Continue to Cause Lost Interest for the Government

GGD-93-64: Published: Mar 22, 1993. Publicly Released: Mar 22, 1993.

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Pursuant to a congressional request, GAO provided information on the timeliness of Internal Revenue Service (IRS) deposits of tax payments, focusing on: (1) how delays in tax payment deposits affect lost interest; and (2) IRS efforts to reduce deposit delays.

GAO found that: (1) in 1992, two IRS service centers averaged 6.2 days to deposit $5.2 billion in tax payments received from individual tax returns; (2) the government could have earned additional interest income totalling $2.4 million if IRS had deposited the $5.2 billion in tax payments within 24 hours of receipt; (3) IRS failed to assess various options for reducing the time it takes to deposit large tax payments; (4) the Department of the Treasury developed a long-term cash management strategy designed to increase deposit timeliness by using lock boxes and separate return and payment addresses, but implementation depends on taxpayer acceptance of new payment procedures, the cost of printing and distributing vouchers, and the ability of banks to handle the surge in payment volume; (5) IRS needs to examine whether individual service centers' deposit timeliness initiatives merit implementation by other centers and find additional opportunities to speed up deposits; and (6) the government could have realized additional interest income totalling $1.2 million if the two centers had deposited payments with extension requests.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: IRS has concluded that possible alternatives, like the use of a lockbox or the use of post office boxes, are not feasible. As IRS moves further into an electronic environment, other alternatives for handling these tax payments and the associated forms may be identified.

    Recommendation: To speed the deposit of large tax payments, the Commissioner of Internal Revenue should direct the Assistant Commissioner for Returns Processing to expedite deposits of tax payments submitted with applications for filing extensions (Form 4868) starting with the 1994 filing season.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: Two of IRS' 10 service centers collected data during the 1993 peak filing period on the type of mail having the largest tax payments. The data indicated that mail in large envelopes was more likely to contain large tax payments and thus should be prioritized. IRS revised its procedures to require that all centers prioritize mail to speed the deposit of large tax payments.

    Recommendation: To speed the deposit of large tax payments, the Commissioner of Internal Revenue should direct the Assistant Commissioner for Returns Processing to require that service centers collect data during the 1993 peak period to identify: (1) the type of mail having the largest tax payments; and (2) the number of tax payments received at various dollar levels. IRS should then use the data to develop other strategies for identifying and rapidly depositing large tax payments. The analysis should consider reducing below $5,000 the minimum amount of payment that is expedited during the peak period.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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