TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION
THE PROCESS TO SEPARATE JOINT TAX
ACCOUNTS FOR INNOCENT SPOUSE CASES HAS BEEN IMPROVED; HOWEVER, ADDITIONAL
ACTIONS ARE NEEDED
Issued on March 9, 2007
Highlights
Highlights of
Report Number: 2007-40-053 to the
Internal Revenue Service Commissioner for Wage and Investment Division.
IMPACT ON TAXPAYERS
The Internal Revenue Service (IRS)
separates joint tax accounts to help protect Innocent Spouses from collection
enforcement actions against the spouses who owe the liabilities. The IRS has taken a number of actions to
improve this process so enforcement actions are suspended on the Innocent Spouse
and continued on the other spouse.
However, IRS employees did not always ensure proper actions were taken
(or taken timely) on taxpayer accounts while Innocent Spouse claims were being
processed.
WHY TIGTA DID THE AUDIT
This
audit was initiated to evaluate the new “mirroring” process of separating joint
tax accounts while the claims were being processed, to protect the rights of
spouses requesting relief.
Because of
limitations in the original IRS computer system, it was difficult for the IRS
to process Innocent Spouse claims and properly show each spouse’s separate tax
liability. It was also difficult to stop
collection enforcement actions against the taxpayer requesting Innocent Spouse
relief and to continue collecting from the other spouse, who owed the tax liability. The IRS implemented programming changes (the
mirroring process) to help treat each taxpayer separately and ensure the rights
of both taxpayers, as well as the Federal Government’s interests, are
protected.
WHAT
TIGTA FOUND
IRS
employees did not ensure proper actions were taken or taken timely in
27 percent of the taxpayer accounts reviewed. The IRS did not always take action or take
timely action to:
·
Suspend collection
activity against the taxpayer requesting Innocent Spouse relief.
·
Resume collection activity for the nonrequesting
spouse.
·
Prevent refunds from
being issued to the nonrequesting spouse.
·
Allow refunds to be issued to the nonrequesting spouse
once the tax liability had been fully paid.
During our
review, IRS management recognized that there was a high error rate related to inputting
transaction and action codes when separating joint accounts and took actions to
address the problem, including the following:
·
Established
account processing guidelines.
·
Refined computer
programs to resolve transaction posting issues.
·
Established inventory
and unpostable case lists to monitor accounts.
·
Conducted training.
These steps
should help reduce the number of transaction and action codes that are not
properly input to taxpayers’ accounts during the mirroring process. However, based on the results of our sample,
the actions taken thus far have not eliminated all the input errors.
Many of the
errors identified could have been prevented if IRS management had ensured
employees effectively monitored and worked their inventory and unpostable
lists. However, IRS managers only spot
checked case lists for trends or obvious problems, which did not appear to be adequate
to ensure problems were resolved.
As a result,
some taxpayers requesting Innocent Spouse relief may not have been protected
from enforced collection actions, and the Federal Government’s interests may
not have been protected.
WHAT TIGTA RECOMMENDED
TIGTA
recommended the IRS establish a consistent, formal methodology for managerial
reviews of inventory and unpostable case lists to ensure any identified issues
are resolved by IRS employees.
IRS officials agreed with our recommendation and will
establish criteria for and begin managerial reviews of inventory and unpostable
case lists.
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/200740053fr.html.
Email
Address: Bonnie.Heald@tigta.treas.gov
Phone
Number: 202-927-7037
Web Site: http://www.tigta.gov