Tax Administration:

Extent and Causes of Erroneous Levies

GGD-91-9: Published: Dec 21, 1990. Publicly Released: Dec 21, 1990.

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Jennie S. Stathis
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Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) use of levies initiated through its Automated Collection System (ACS), focusing on: (1) the extent and causes of erroneous levies; and (2) IRS controls to prevent erroneous levies or mitigate their effects.

GAO found that: (1) IRS erroneously levied the assets of 4,600, or 1.5 percent of individual taxpayers, and 7,800, or 5.7 percent of businesses during fiscal year 1986; (2) delays and errors in recording tax payments were the two primary causes of erroneous levies; (3) IRS could improve its controls and significantly reduce the number of erroneous levies by instituting a nationwide levy verification program; (4) IRS refunded most of the erroneously collected levies with interest; (5) 3 IRS service centers established a system to manually review levies identified through ACS with the more up-to-date information in the IRS Integrated Data Retrieval System; and (6) IRS computer modernization initiatives could help in the long run by providing more accurate and up-to-date information.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS issued instructions to its fund officers to verify information before issuance of levies.

    Recommendation: The Commissioner of Internal Revenue should establish a nationwide levy verification program that would determine whether there are: (1) overpayments in the taxpayer's other accounts; (2) pending payments; and (3) changes in the status of the taxpayer's account.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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