The Internal Revenue Service’s Levy Process Can Be Improved
to Ensure Compliance With the Internal Revenue Code
March 2002
Reference
Number: 2002-10-078
This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.
March
29, 2002
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT
DIVISION
COMMISSIONER, SMALL
BUSINESS/SELF-EMPLOYED
DIVISION
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for Audit
SUBJECT: Final Audit Report - The Internal Revenue Service’s Levy Process Can Be Improved to Ensure Compliance With the Internal Revenue Code (Audit # 200110021)
This
report presents the results of our review of the processing of levies when
closing a case as currently not collectible (CNC) due to economic
hardship. The overall objective of this
review was to determine if the Internal Revenue Service (IRS) is complying with
the Internal Revenue Code (I.R.C.) when processing levies on cases closed as
CNC due to economic hardship.
The
Congress believed that taxpayers should not have collection activity taken
against them once the IRS has determined that the tax owed is
uncollectible. As a result, the
Congress included a provision in the IRS Restructuring and Reform Act of 1998
(RRA 98) that added I.R.C. § 6343(e) (2000), requiring the IRS
to release a wage levy as soon as practicable upon agreement with the taxpayer
that the tax is not collectible. A different provision,
I.R.C. § 6343(a) (2000), requires the IRS to release a levy when it
determines that the levy is creating an economic hardship to the taxpayer.
In
summary, we determined that the IRS is not always releasing levies as required by
the I.R.C. or the intent of the law because we identified cases in which the
IRS received levy payments after the CNC (hardship) determination. In addition, we identified cases that should
not have been closed as CNC (hardship) because the IRS either did not determine
that an economic hardship existed or appeared to disregard the taxpayer’s
ability to make payments. Finally, we
identified numerous cases that had non-levy payments erroneously recorded as
levy payments on the IRS’ management information system.
We
recommended that the IRS improve controls to ensure IRS personnel identify
levies at the time a case is closed as CNC (hardship) and release levies as
required. In addition, the IRS should
strengthen procedures to ensure cases are closed as CNC (hardship) only when
appropriate. Finally, the IRS should
clarify guidelines to ensure payments received by IRS personnel are accurately
coded on the IRS’ computer system.
Management’s
Response: IRS management has agreed to the
recommendations presented and is proposing a number of actions to address the
problems identified in our report.
These proposed actions include procedural and systemic changes to help
ensure levies are properly released.
Furthermore, IRS management plans to strengthen guidance on the
appropriate use of hardship closing codes and for managers to ensure a hardship
condition exists prior to approving a CNC (hardship) determination. IRS management also plans to issue a
memorandum that reiterates the need to follow procedures when applying levy
payments. Management’s complete
response to the draft report is included as Appendix VI.
Copies
of this report are also being sent to the IRS managers who are affected by the
report recommendations. Please contact
me at (202) 622-6510 if you have questions or Daniel R. Devlin, Assistant
Inspector General for Audit (Headquarters Operations and Exempt Organizations
Programs), at (202) 622-8500.
Levies Are Not Always Being Released as Required by the Internal
Revenue Code
Currently Not Collectible (Hardship) Case Closures Are Not Always Appropriate
Payments Are Being Erroneously Recorded as Originating from a Levy Action
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Outcome Measures
Appendix V – Results of Detailed Case Analysis
Appendix VI – Management’s Response to the Draft Report
The Internal Revenue Code (I.R.C.) § 6331 (2000) authorizes the Internal Revenue Service (IRS) to collect taxes by levy upon a taxpayer’s property or rights to property if the taxpayer neglects or refuses to pay the tax within 10 days after receiving a notice and demand to pay the tax. The IRS can levy a taxpayer’s salary and wages, bank accounts, or other money that is owed to the taxpayer.
The I.R.C. § 6343 (a) (2000) requires the IRS to release a levy when it determines that the levy is creating an economic hardship due to the financial condition of the taxpayer. This provision covers all types of levies; however, it does not specify when the levy must be released. If a taxpayer’s income does not exceed necessary living expenses and the taxpayer does not have the ability to pay the tax owed, the IRS can close a case as currently not collectible (CNC) due to economic hardship.
Some taxpayers contended the IRS was not immediately releasing wage levies at the time the CNC (hardship) determination was made but collected at least one period of wages before releasing the levy. The Congress believed that taxpayers should not have collection activity taken against them once the IRS has determined that the tax owed is uncollectible. As a result, the Congress included a provision in the IRS Restructuring and Reform Act of 1998 (RRA 98) that added I.R.C. § 6343(e) (2000) requiring the IRS to release a wage levy as soon as practicable upon agreement with the taxpayer that the tax is not collectible. This provision applies only to wage levies imposed after December 31, 1999. We believe the intent of the law could also apply to restricting the imposition of any new levies on a taxpayer immediately after a CNC (hardship) determination.
The CNC (hardship) closing action stops IRS personnel from actively working the case and suspends collection action until a taxpayer’s ability to pay improves. An IRS report shows that during Fiscal Year (FY) 2001, the IRS closed approximately 207,461 taxpayer accounts as CNC (hardship), with over $2.2 billion in taxes owed.
Revenue officers work in the Collection Field function (CFf) and make personal (i.e., face-to-face) contact with taxpayers. The Integrated Collection System (ICS) is used to track collection actions taken on taxpayers’ accounts by CFf personnel. IRS employees who only make telephone contact with taxpayers work in Automated Collection System (ACS) call sites in IRS Customer Service offices. The ACS is used in the call sites to track collection actions taken on taxpayers’ accounts.
In FY 2000, the IRS filed 215,946 levies, of which 141,049 (65 percent) levies were issued through the ACS and 74,897 (35 percent) levies were issued through the ICS.
The IRS initiated several actions to ensure compliance with I.R.C. § 6343(e), including the revision of internal guidelines and the enhancement of the ICS to alert IRS personnel when a wage levy should be released prior to closing a case as CNC (hardship).
The audit was performed at the IRS National Headquarters Small Business/Self-Employed (SB/SE) Division and the Wage and Investment (W&I) Division. Audit work was performed from April through November 2001 in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
Based on our detailed analysis of 330 cases worked by the CFf and/or ACS, we determined that the IRS is not always releasing levies for tax accounts placed in CNC (hardship) status as required by I.R.C. § 6343 (a) or (e), or the intent of the law. We identified 15 cases in which the IRS collected approximately $19,400 as a result of levy payments received after the CNC (hardship) determination. In these cases, the IRS was collecting levy payments for taxpayers who were facing an economic hardship situation.
In the 15 exception cases, 2 involved a wage levy issued after December 31, 1999, and could be a violation of taxpayers’ rights. For the remaining 13 cases, taxpayer burden was adversely affected by the failure to timely release the levy. These 13 cases involve burden to the taxpayer rather than a potential violation of taxpayers’ rights because there is no time frame in I.R.C. § 6343 (a) for the IRS to release the levy after a CNC (hardship) determination.
In addition, neither the Treasury Inspector General for Tax Administration nor IRS officials could determine if levies were properly released after the case was closed as CNC (hardship) on 46 cases because insufficient IRS levy data were available. As a result of the insufficient data, we were unable to determine if these cases involved levies (wage or non-wage) or voluntary payments. If these payments were the result of wage levies, the IRS could have violated taxpayers’ rights.
Overall, we identified 2 primary deficiencies that contributed to the incorrect handling for 12 of these 15 cases. Specifically:
· The ACS does not systemically notify examiners of open levies when they close a case as CNC (hardship). Instead, examiners must review ACS case history information to determine if a levy release is required - (three cases).
· The ICS levy process does not always ensure levies are released as required - (nine cases).
The remaining three exception cases occurred due to isolated circumstances.
The ACS does not systemically identify open levies when a case is closed as CNC (hardship)
In 3 of the 15 exception cases, ACS personnel issued the levy and subsequently closed the case as CNC (hardship). The ACS histories on these three cases reflected the issuance of a levy, but there was no indication that the applicable tax examiners considered releasing the levy prior to closing the case as CNC (hardship). There is no systemic prompt in the ACS, similar to the warning message displayed on the ICS, to alert personnel of the need to release a levy prior to closing a case as CNC (hardship).
In 1 of the 3 cases, 12 wage levy payments, totaling $900, were received over a 1-year period after the case was closed as CNC (hardship).
The ICS levy process does not
always ensure levies are released as required
CFf personnel are not always
releasing levies prior to closing cases as CNC (hardship). Detailed analysis showed that CFf personnel:
·
Did not always effectively identify levies prior to
closing cases as CNC (hardship) - (five cases).
·
Closed some wage levies rather than releasing them before
closing cases as CNC (hardship) - (two cases).
· Did not always release non-wage levies when appropriate before closing cases as CNC (hardship) - (two cases).
CFf personnel did not always effectively identify levies
prior to closing cases as CNC (hardship). Two of the 15 exception cases involved a
levy issued by ACS personnel but the CNC (hardship) determination was made by
CFf personnel. Although the ICS was
programmed to display a warning screen for cases closed as CNC (hardship), this
programming change identifies only wage levies issued by CFf personnel. As a result, the warning screen is not
displayed for cases closed as CNC (hardship) if ACS personnel initiated the
levy or if CFf personnel issued a non-wage levy.
For example, a case was transferred from the ACS to the
CFf with an open ACS levy (although no levy-related payments had been received
at the time of the transfer). The CFf
employee entered in the ICS case history that it was not in the government’s
best interest to pursue this low dollar, low priority, and probably
uncollectible account any further and closed it as CNC (hardship). No mention was made in the case file of the
open ACS levy. However, the first of 5
levy payments was received approximately 2 weeks after the CNC (hardship)
action. These 5 levy payments totaled
approximately $1,525 and were received over a 6-month period after the CNC
(hardship) action. The tax owed was
fully paid after three levy payments; however, the levy payments continued
because the levy was not released.
Consequently, 2 refund checks, totaling about $430 (including interest
payments), were returned to the taxpayer.
When a case is transferred from the ACS to the CFf,
not all ACS case information, including any open levy data, is systemically
input to the ICS. As a
result, CFf personnel must manually review Integrated Data Retrieval System
(IDRS) information to identify these levies.
In another 3 of the 15 cases where the levy was not
released, we could not determine who issued the levy. However, CFf personnel could have performed additional research
to identify the levy source and to ensure the levy’s release prior to the CNC
(hardship) closure.
For example, CFf personnel recorded on the ICS that levy payments were being received but the levy source was unknown. About 2 months after making that entry, the employee closed the case as CNC (hardship) and there was no documentation in the case file that the employee attempted to release the levy. As a result, 6 levy payments, totaling about $480, were received over a 10-month period after the CNC (hardship) closing. As of September 2001, the levy payments were still being received by the IRS for this case.
CFf
personnel closed some
wage levies rather than releasing them before closing cases as CNC (hardship). In 2 of the 15 exception
cases, the wage levy payments occurred after the case was closed as CNC
(hardship) because CFf personnel closed wage levies on the ICS, rather than
releasing the levies as required. When
a levy is closed on the ICS, it is removed from
active status on the system; however, the levy is still in effect because it
has not been released.
In addition to the I.R.C, the Internal Revenue Manual
(IRM) requires employees to release the Notice of Levy when the levy is
creating an economic hardship.
Furthermore, an IRS publication that is usually sent to each taxpayer
along with a final bill for the taxes owed states that the IRS must release a
levy if the IRS determines that the levy is creating an economic hardship on
the taxpayer. In limited situations, CFf personnel can close a levy on the ICS. However, CFf guidelines state that closing a
Notice of Levy should not be substituted for issuing a levy release where
appropriate.
On one case, the CFf employee closed the wage levy on the ICS after contacting the taxpayer’s employer. It appears the ICS warning screen was not displayed when the case was as closed CNC (hardship) because the levy was closed rather than released. As a result, 2 wage levy payments, totaling approximately $2,700, were received after the CNC (hardship) closing.
On another case, the CFf employee closed the levy in April
2000 and subsequently closed the case as CNC (hardship) because the taxpayer
had little income and was on an indefinite leave of absence from the
employer. However, the IDRS showed that
wage levy payments were received in February and March 2000. There was no indication on the ICS that the
CFf employee was aware of the payments.
Six wage levy payments, totaling approximately $1,240, were received
prior to the
CNC (hardship) closing and 6 wage levy payments, totaling about $815, were
received over a 1-year period after the CNC (hardship) closing. It appears the ICS warning screen was not
displayed because the levy was closed rather than released.
The IRS is at risk of violating taxpayers’ rights by its practice of closing, rather than releasing, levies in these types of cases.
CFf personnel did not always release non-wage levies when appropriate before closing cases as CNC (hardship). As stated previously, the IRS enhanced the ICS to check for open wage levies when employees close a case as CNC (hardship). However, this warning screen is not displayed for non-wage levies issued by CFf personnel. In 2 of the 15 exception cases, CFf personnel issued a non-wage levy and subsequently closed the case as CNC (hardship). Documentation in the case files did not indicate that CFf personnel considered releasing the non-wage levy.
For example, a CFf employee closed a non-wage levy in June 2000 and closed the case as CNC (hardship) in August 2000. However, 13 non-wage levy payments, totaling approximately $1,190, were received over a 1-year period after the case was closed as CNC (hardship). As of September 2001, the levy payments were still being received by the IRS for this case.
1. SB/SE Compliance management should take additional actions to ensure that open levies are identified and released as appropriate when ACS personnel close a case as CNC (hardship). Depending on the availability of programming resources, management should consider enhancing the ACS to display a warning message when a case with a levy is closed as CNC (hardship).
Management’s Response: The Office of Filing and Payment Compliance, SB/SE, updated its hardship procedures to require employees to document in cases forwarded for manager approval whether a levy release is needed. Also, they requested an ACS system change that will result in a levy release reminder message being generated when a CNC (hardship) determination is made.
2. SB/SE Compliance management should ensure that revenue officers review available information to properly identify levies issued by ACS personnel and ensure the levies are appropriately released prior to closing a case as CNC (hardship).
Management’s Response: The Office of Filing and Payment Compliance, SB/SE, will update procedures requiring a review of the ACS to determine if levies should be released. In addition, the ACS employees will be instructed to record levy release information on the ACS.
3.
Before approving a CNC (hardship) case closure, SB/SE
Compliance management should review the case file to ensure levies are
released, if appropriate, in compliance with the I.R.C. The revenue officer should document in the
case history the reason why a levy was closed rather than released.
Management’s Response: The Office of
Filing and Payment Compliance, SB/SE, will request an ICS change that will
enable revenue officers to document the reason a levy is closed but not
released. In addition, procedures will
be revised to include a review of the levy disposition prior to the approval of
the CNC (hardship) determination.
4.
SB/SE Compliance management
should research the 46 cases in which insufficient levy data were
available to ensure the IRS is complying with I.R.C. § 6343.
Management’s Response: The Office of
Filing and Compliance, SB/SE, will perform additional research on the 46 cases.
Based upon our analysis of 330 cases closed as CNC
(hardship), we identified a separate issue in 37 (11 percent) cases where the
IRS either did not determine that an economic hardship existed or appeared to
disregard the taxpayer’s ability to make payments. As a result, the cases should not have been closed as CNC
(hardship). For example:
·
Twenty-four
cases were closed without any case documentation supporting that the IRS
contacted the taxpayer and/or obtained current asset or financial information
from the taxpayer.
·
Ten cases
were closed as CNC (hardship) even though the IRS’ analysis of each case did
not support an economic hardship determination. In these cases, the IRS continued to receive periodic levy
payments after the case was closed as CNC (hardship).
·
Three cases
were closed by the group manager without any documented case research or
assignment to a revenue officer.
The IRS’ policy provides for
removing a delinquent tax account from active inventory if, after all required
steps in the collection process have been taken, the account is determined to
be currently not collectible. Before
closing a case as CNC (hardship), IRS personnel are required to obtain and
analyze information on the taxpayer’s assets,and the taxpayer’s financial
information if the taxpayer’s liability exceeds a certain dollar amount. Currently not collectible determinations
generally require the approval of the immediate manager to ensure the
investigation met established standards.
If the IRS determines that the taxpayer has some ability to pay or agrees to
make payments, various collection options can be considered, including
installment agreements. However, as of
April 1998, the IRS could no longer accept an installment agreement if it would
not fully pay the tax liability before the collection statute expiration date
(CSED). The I.R.C. § 6502 (2000)
prohibits the IRS from taking
further collection activity after a collection statute expires.
IRS Compliance management believed that some of the 37 cases were closed as CNC (hardship) because installment or levy payments would not satisfy the tax liability before the CSED. As a result, an installment agreement or other collection option could not be used to close these cases out of active inventory. The CNC (hardship) closing action was used as an alternate means of removing cases from active inventory. In two cases, wage levy payments continued after the CSED, which could violate taxpayers’ rights.
Although we do not know the extent of incorrect CNC case closings, it may adversely affect the accuracy of statistical reports capturing this type of information. IRS management uses these reports for budget planning, program evaluation, operational control, and analysis of resource allocation.
5.
SB/SE Compliance management should issue guidelines
instructing field personnel how to close cases in which the taxpayer has some
ability to pay but the payments will not fully pay the tax liability before the
CSED.
Management’s Response: The Office of
Filing and Payment Compliance, SB/SE, will update procedures to allow
installment agreements if at least one of a taxpayer’s balance due accounts can
be satisfied. In addition, they have
requested legislation to allow agreements even if none of a taxpayer’s balance
due accounts can be fully satisfied, in order to allow monthly payments when
taxpayers have the ability to pay.
6.
SB/SE Compliance management
should ensure that a hardship determination is made before approving cases
closed as CNC (hardship).
Management’s Response: The Office of
Filing and Payment Compliance, SB/SE, will strengthen guidance on the appropriate
use of hardship closing codes and for managers to ensure a hardship condition
exists prior to approving a CNC (hardship) determination.
The IRS’ enforcement statistics on revenue generated from levies are inaccurate. Numerous non-levy payments (e.g., voluntary payments from taxpayers) are being erroneously recorded as levy payments. During our analysis of 330 cases closed as CNC (hardship), we identified 197 (60 percent) that had non-levy payments erroneously recorded as levy payments. For these 197 cases, as many as 1,700 payments may have been erroneously recorded as levy payments as of September 30, 2001.
IRS computer systems have been programmed to accept a two-digit Designated Payment Code (DPC) that identifies the source of a payment (e.g., levy, seizures, etc.). Data from this type of input are accumulated on a national basis to determine the revenue effectiveness of specific collection activities.
Collection payments are processed in IRS offices known as campuses. If the payments are the result of an ACS collection action, they are sent directly from the taxpayer or employer to a post office box for an IRS campus. IRS campus personnel, who are not directly involved with the ACS collection activity, process the payment and enter the DPC data. If the payments are the result of a CFf action, they are sent to a CFf employee who completes a payment voucher and enters the DPC data. Because the payments are generally sent to the CFf employee responsible for the collection action, the employee should be able to correctly enter the DPC data. Once the CFf employee is satisfied that the levy payments are being consistently received, responsibility for the payments is transferred elsewhere and the case is usually removed from the active ICS inventory. IRS guidelines require that the IDRS be used to research taxpayers’ accounts and verify proper application of payments.
Detailed analysis of the 197 cases with erroneously recorded levy payments showed that 173 (88 percent) involved ACS-related collection actions. Of these 173 tax cases:
· Payments were processed at 3 IRS campuses for 161 (93 percent) cases.
· Similar payment amounts were recorded not only as a levy but also as either a miscellaneous payment and/or with no DPC for 149 cases.
According to Customer Account Services officials from the W&I Division, the IRM does not provide detailed guidelines for processing ACS levy-related payments. An official from an IRS campus stated that its day shift processes most payments received from the ACS post office box as levy payments while its night shift processes the same type of payments as miscellaneous payments.
Before the ACS can issue a levy, it must issue a Notice of Intent to Levy and a Notice of Your Right to a Hearing to the taxpayer. A Transaction Code (TC) 971, Action Code 69, systemically records the Notice of Intent to Levy on the IDRS. Before levying, ACS personnel are required to check that this transaction code is on each tax period included on the levy. Of the 173 cases involving ACS-related collection actions, 122 (71 percent) did not have the TC 971, Action Code 69 on the tax account. Thus, the payments were most likely not from a levy source. If IRS personnel researched the IDRS for this transaction code, they could better ensure that payments are accurately recorded.
The Office of Revenue Analysis has a project underway involving DPCs. The goal of the project is to be able to respond to potential questions about the correlation between enforcement revenue and specific collection actions, such as levies. As a result of the non-levy payments recorded as levies, the IRS’ management information system may not accurately show the amount of revenue collected from the levy process.
7.
W&I Customer Account Services management should clarify
internal guidelines to ensure the sources of payments are accurately coded on
the IRS’ computer system.
Management’s Response: Submission Processing, W&I, will issue a
memorandum to the field reiterating the need to follow procedures when applying
levy payments.
Appendix I
Detailed Objective, Scope, and Methodology
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant Inspector General for Audit
(Headquarters Operations and Exempt Organizations Programs)
Nancy Nakamura, Director
Jeffrey M. Jones, Audit Manager
Margaret Anketell, Senior Auditor
Kenneth Forbes, Senior Auditor
Cheryl Medina, Senior Auditor
Jeffery Smith, Senior Auditor
Donald Martineau, Auditor
Michael McGovern, Auditor
Appendix III
Commissioner N:C
Director,
Compliance, Small Business/Self-Employed Division S:C
Director, Customer Account Services, Small Business/Self-Employed Division S:CAS
Director, Compliance, Wage and Investment Division W:CP
Director, Customer Account Services, Wage and Investment Division W:CAS
Chief Counsel CC
National Taxpayer Advocate
TA
Director, Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk
Analysis N:ADC:R:O
Office of Management Controls N:CFO:F:M
Audit Liaisons:
Director, Compliance, Small
Business/Self-Employed Division S:C
Director, Customer Account Services, Small Business/Self-Employed Division S:CAS
Director, Compliance, Wage and Investment Division W:CP
Director, Customer Account Services, Wage and Investment Division W:CAS
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration. These benefits will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measure:
· Taxpayer Rights – Potential; 2 taxpayer accounts in which wage levy payments totaling approximately $3,500 were not released after the cases were closed Currently Not Collectible (CNC) due to economic hardship (see page 3).
Methodology Used to Measure the Reported Benefit:
We obtained a computer extract on March 28, 2001, that identified 4,257 cases the Internal Revenue Service (IRS) both imposed a levy on and closed as CNC (hardship) after December 31, 1999. Using this extract, we judgmentally sampled 210 cases in which either a levy payment continued for over 45 days after the case was closed as CNC (hardship) or more than 1 levy payment was received after the CNC (hardship) closure. In addition, we judgmentally sampled 120 cases in which a levy payment was imposed within 30 days of the case being closed as CNC (hardship) and either a levy continued for over 45 days or more than 1 levy payment was received after the CNC (hardship) closure. Based upon this detailed analysis of 330 cases, we identified 2 cases in which the IRS did not release wage levies as required by Internal Revenue Code (I.R.C.) § 6343 (e). For these two cases, we researched the Integrated Data Retrieval System to identify levy-related payments received by the IRS after the case was as closed CNC (hardship).
Type and Value of Outcome Measure:
· Taxpayer Burden – Actual; 13 taxpayer accounts in which levy payments totaling approximately $15,900 were not released after the case was closed as CNC (hardship) (see page 3).
Methodology Used to Measure the Reported Benefit:
We obtained a computer extract on March 28, 2001, that identified 4,257 tax cases the IRS both imposed a levy on and closed as CNC (hardship) after December 31, 1999. Using this extract, we judgmentally sampled 210 cases in which either a levy payment continued for over 45 days after the case was closed as CNC (hardship) or more than 1 levy payment was received after the CNC (hardship) closure. In addition, we judgmentally sampled 120 cases in which a levy payment was imposed within 30 days of the case being closed as CNC (hardship) and either a levy continued for over 45 days or more than 1 levy payment was received after the CNC (hardship) closure. Based upon this detailed analysis of the 330 cases, we identified 13 cases in which the IRS did not release levies as required by I.R.C. § 6343 (a). For these 13 cases, we researched the Integrated Data Retrieval System to identify levy-related payments received by the IRS after the case was closed as CNC (hardship).
Type and Value of Outcome Measure:
· Reliability of Information – Actual; 37 taxpayer accounts that were inappropriately closed as CNC (hardship) (see page 8).
Methodology Used to Measure the Reported Benefit:
We obtained a computer extract on March 28, 2001, that identified 4,257 cases the IRS both imposed a levy on and closed as CNC (hardship) after December 31, 1999. Using this extract, we judgmentally sampled 210 cases in which either a levy payment continued for over 45 days after the case was closed as CNC (hardship) or more than 1 levy payment was received after the CNC (hardship) closure. In addition, we judgmentally sampled 120 cases in which a levy payment was imposed within 30 days of the case being closed as CNC (hardship) and either a levy continued for over 45 days or more than 1 levy payment was received after the CNC (hardship) closure. Based upon this detailed analysis of 330 cases, we identified 37 taxpayer accounts cases that should not have been closed as CNC (hardship).
Type and Value of Outcome Measure:
· Taxpayer Rights – Potential; two taxpayer accounts in which wage levy payments continued after the collection statute expiration date (see page 8).
Methodology Used to Measure the Reported Benefit:
We obtained a computer extract on March 28, 2001, that identified 4,257 cases the IRS both imposed a levy on and closed as CNC (hardship) after December 31, 1999. Using this extract, we judgmentally sampled 210 cases in which either a levy payment continued for over 45 days after the case was closed as CNC (hardship) or more than 1 levy payment was received after the CNC (hardship) closure. In addition, we judgmentally sampled 120 cases in which a levy payment was imposed within 30 days of the case being closed as CNC (hardship) and either a levy continued for over 45 days or more than 1 levy payment was received after the CNC (hardship) closure. Based upon this detailed analysis of 330 cases, we identified 2 taxpayer accounts in which wage levy payments continued after the collection statute expiration date.
Type and Value of Outcome Measure:
· Reliability of Information – Actual; 197 taxpayer accounts with payments that were erroneously coded as levy payments on the IRS’ computer system (see page 11).
Methodology Used to Measure the Reported Benefit:
We obtained
a computer extract on March 28, 2001, that identified 4,257 cases the IRS both
imposed a levy on and closed as CNC (hardship) after December 31, 1999. Using this extract, we judgmentally sampled
210 cases in which either a levy payment continued for over 45 days after the
case was closed as CNC (hardship) or more than 1 levy payment was received
after the CNC (hardship) closure. In
addition, we judgmentally sampled 120 cases in which a levy payment was imposed
within 30 days of the case being closed as CNC (hardship) and either a levy
continued for over 45 days or more than 1 levy payment was received after the CNC
(hardship) closure. Based upon this
detailed analysis of 330 cases, we identified 197 taxpayer accounts that had
non-levy payments erroneously coded as levy payments.
Appendix V
Results of Detailed
Case Analysis
|
Non-Compliance With Internal Revenue Code (I.R.C.) § 6343 or the Intent of the Law (see page 3) |
15 |
|
Complied With I.R.C. § 6343 or the Intent of the Law |
35 |
|
Insufficient Data to Determine Compliance With I.R.C. §
6343 |
46 |
|
Improperly Closed As Currently Not Collectible (Hardship) (see page 8) |
37 |
|
Erroneously Coded As Levy Payment |
197 |
Total
|
330 |
Appendix VI
Management’s Response to the Draft Report
The response
was removed due to its size. To see the
complete response, please go to the Adobe PDF version of the report on the
TIGTA Public Web Page.