TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION
PROGRESS HAS BEEN MADE IN IMPROVING
THE ACCURACY OF TRUST FUND RECOVERY PENALTY TRANSACTIONS; HOWEVER, SIGNIFICANT
WORK REMAINS
Issued on September 21, 2007
Highlights
Highlights of Report Number: 2007-10-183 to the Internal Revenue Service Commissioner
for the Small Business/Self-Employed Division and the Chief Financial Officer.
IMPACT ON TAXPAYERS
The Government Accountability
Office has repeatedly reported that the Internal Revenue Service’s (IRS) accounting
for trust fund recovery transactions needs to be improved. TIGTA identified two areas management should
address to help assure the accuracy of these types of transactions in the
future: reconsider the projected
completion date for the data cleanup effort and evaluate the accuracy of
transactions posted during the data cleanup.
The accurate posting of transactions to taxpayer accounts with Trust Fund
Recovery Penalty (TFRP) assessments is critical to ensuring IRS records
regarding taxpayer balance-due amounts are correct. Inaccurate account balances could result in
incorrect information being provided to taxpayers attempting to resolve their
delinquencies.
WHY TIGTA DID THE AUDIT
This audit is part of our discretionary audit coverage and
was requested by the Chief Financial Officer.
The review was conducted to determine whether the IRS has developed an
effective methodology to improve its ability to readily and accurately account
for TFRP transactions.
WHAT
TIGTA FOUND
Progress is being made in addressing the reliability of TFRP
transaction information recorded in taxpayer accounts. Specifically, as part of its efforts to
address the long-term material weaknesses associated with the processing of
TFRP-related transactions, the IRS plans to begin implementing systemic posting
of payments on TFRP assessments to all related accounts beginning in
March 2008. In preparation for
implementation of the systemic cross-posting of payment transactions, the IRS
initiated a large-scale cleanup of taxpayer accounts with these assessments.
While the ongoing cleanup should significantly improve the
reliability of existing information in taxpayer accounts, TIGTA identified two
areas that IRS management should address to help assure the cleanup and conversion
are successful. First, the projected
timetable for completion of the data cleanup needs to be reconsidered. Based on present staffing and prior
production rates, the estimated remaining accounts will not be completed until significantly
later than the current estimated completion date of January 2008. Also, the action plan guiding the cleanup does
not include any steps or dates relating to confirming the impact of the cleanup
on the overall accuracy of taxpayer accounts.
Second, additional consideration should be given to
evaluating the accuracy of transactions posted during the data cleanup. The IRS stated that accounts will be reviewed
only once as part of the manual cleanup. While this decision is understandable in light
of the amount of resources assigned to the cleanup effort, it puts the IRS at
risk of not identifying all material errors in taxpayer accounts prior to
conversion to systemic processing.
WHAT TIGTA RECOMMENDED
TIGTA recommended the
IRS reevaluate the estimated completion date for the data cleanup and the
timing of subsequent planned events, amend the TFRP action plan to include an
evaluation of the impact of the cleanup on the overall accuracy of taxpayer
accounts, and evaluate the feasibility of conducting a final review of all TFRP
accounts for errors after the cleanup is completed.
In their response to the report, IRS officials stated they agreed
with the recommendations. They have
reevaluated the estimated completion date for the cleanup and updated the TFRP action
plan to include monitoring of error reports. Based on additional staff being trained, the
IRS anticipates meeting the January 2008 completion date. Management plans to perform a final
assessment of the cleanup results at project completion to evaluate the
feasibility of conducting another review of all TFRP accounts prior to converting
to a systemic payment posting process.
READ THE FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2007reports/200710183fr.html.
Email
Address: Bonnie.Heald@tigta.treas.gov
Phone Number: 202-927-7037
Web Site:
http://www.tigta.gov