IRS doesn’t do enough to collect on tax debts: audit
The IRS wrote off nearly $7 billion in tax debts in cases where it said it couldn’t locate the taxpayer in 2012, but an audit released Monday found that more than half of the time the agency gave up too soon and didn’t show it had done everything needed to prove it could never get the money.
IRS agents deemed $6.7 billion in 2012 as “currently not collectible” because the taxpayer couldn’t be located anymore. But the inspector general that oversees the IRS took a sample of cases and found that in 57 percent of them, the employees didn’t go through all the steps required to prove the debt was truly unable to be collected.
“If the IRS does not take all of the required research steps prior to closing cases, there is increased risk that the government’s interest may not be protected and that taxpayers will not be treated equitably,” said J. Russell George, the Treasury Inspector General for Tax Administration.
The required steps vary depending on how much debt is owed.
Investigators found something as simple as having an electronic checklist of steps required — which some IRS auditors did have, and others didn’t — made a difference.
IRS agents also weren’t always filing liens against property in cases when they deemed the dollar amount to be below their threshold. But the IRS wasn’t taking into account aggregate debt, when a taxpayer owed enough over several years to put it over a $10,000 threshold.
The inspector general said that could have left more than $50 million in debts that should have been subject to a lien, but weren’t.
In its official response, the IRS said it thought the inspector general was overstating the size of the problem of liens that should have been filed — though one key part of their reasoning was redacted from the report, so it’s unclear exactly why they believe the issue isn’t as bad.
Overall, the IRS agreed with the report’s recommendations, acknowledging what it called “some documentation and managerial review shortcomings” that it would try to fix.
IRS agents deemed $6.7 billion in 2012 as “currently not collectible” because the taxpayer couldn’t be located anymore. But the inspector general that oversees the IRS took a sample of cases and found that in 57 percent of them, the employees didn’t go through all the steps required to prove the debt was truly unable to be collected.
“If the IRS does not take all of the required research steps prior to closing cases, there is increased risk that the government’s interest may not be protected and that taxpayers will not be treated equitably,” said J. Russell George, the Treasury Inspector General for Tax Administration.
The required steps vary depending on how much debt is owed.
Investigators found something as simple as having an electronic checklist of steps required — which some IRS auditors did have, and others didn’t — made a difference.
IRS agents also weren’t always filing liens against property in cases when they deemed the dollar amount to be below their threshold. But the IRS wasn’t taking into account aggregate debt, when a taxpayer owed enough over several years to put it over a $10,000 threshold.
The inspector general said that could have left more than $50 million in debts that should have been subject to a lien, but weren’t.
In its official response, the IRS said it thought the inspector general was overstating the size of the problem of liens that should have been filed — though one key part of their reasoning was redacted from the report, so it’s unclear exactly why they believe the issue isn’t as bad.
Overall, the IRS agreed with the report’s recommendations, acknowledging what it called “some documentation and managerial review shortcomings” that it would try to fix.
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