GAO Questions IRS Case Selection Process for Collections

GAO Questions IRS Case Selection Process for Collections

The Internal Revenue Service’s Automated Collection System lacks key controls for selecting which delinquent tax cases to pursue, according to a new report by the Government Accountability Office.

The IRS's ACS is one of the main means for pursuing taxpayers who have failed to fully pay their taxes or file their tax return in a timely manner, the GAO noted. However, the collections staff has fallen victim to budget cuts. From fiscal years 2012 through 2014, ACS staff has declined 20 percent while the number of unresolved collection cases at year-end has increased 21 percent. Given those trends, the GAO noted, the IRS needs to make informed decisions about the collection cases it pursues to ensure the program is meeting its objectives and mission.

The ACS has a multistep, automated process to prioritize and select cases of unpaid taxes and unfiled tax returns to pursue. It assesses cases to determine the order to work on cases based on the IRS's collection program priorities, the likelihood the case will be resolved, and the type of tax and the amount owed. The ACS also reviews cases to determine what action to take based on whether a levy source or contact information is known for taxpayers. The system will then contact taxpayers according to its assigned priority and may issue a levy or lien against the taxpayer.

ACS managers balance the cases that are worked on to ensure the ACS achieves its case closure and taxpayer service measures. These decisions include how many notification and enforcement actions to take and how many cases to assign to IRS staff so that cases are worked on in a timely manner. About half of the cases closed in the ACS in fiscal year 2014 were high priority, such as when employers failed to pay federal employment taxes.

Of the 3.5 million cases closed or transferred out of the ACS in fiscal year 2014, the IRS collected nearly $6.2 billion. The IRS generally had more success in collecting from individual taxpayers than from business taxpayers, according to the GAO. However, because the IRS has not identified its objectives for the collection program or the ACS, the GAO acknowledged it is difficult to assess the program's overall effectiveness. Read more on Accounting Today.