TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
THE INTERNAL REVENUE SERVICE NEEDS TO IMPROVE THE DEVELOPMENT AND MANAGEMENT OVERSIGHT OF THE COLLECTION FIELD FUNCTION INVENTORY PRIORITIES
Reference No. 2000-30-128
The Collection function of the Internal Revenue Service (IRS) is responsible for collecting unpaid taxes and obtaining returns that are due but have not been filed. Customer Service Representatives (CSR) use the Automated Collection System (ACS) to contact taxpayers by telephone. If the collection issue is not resolved in the ACS function, the CSR transfers the case to the Collection Field function (CFf). Revenue officers (ROs) in the CFf are assigned an inventory of cases and make field (i.e., face-to- face) contacts to attempt to resolve these accounts.
During the past 4 years, the number of ROs available to make field contacts has decreased. Consequently, case inventories increased significantly, and ROs could not work cases timely. In March 1999, the Assistant Commissioner (Collection) issued procedures to establish six priorities for case assignments and to close cases not meeting those criteria. These procedures gave priority to taxpayer requests for face-to-face contacts and for larger dollar cases, especially those for taxes owed by in-business taxpayers for taxes withheld from their employees’ wages.
The objective of this review was to determine whether Collection’s inventory priorities and new procedures to identify, prioritize, and manage CFf cases effectively identified and worked the most important accounts.
The Collection function’s inventory practices do not ensure ROs work the highest priority accounts. Management did not use analytical data to establish the priorities or oversee the program. Further, unassigned inventories have not been reduced and procedures may allow for inconsistent treatment of taxpayers. The Collection function implemented the inventory priorities in March 1999 as a short-term solution to bring the collection inventory into balance with available resources. However, the priorities have evolved into a longer-term solution to alleviate inventory problems.
The Internal Revenue Service Implemented the Collection Field Function Inventory Priorities Without Analytical Data to Support the Decision
National Headquarters Collection management did not analyze data to ensure the CFf priorities would identify casework having the greatest impact on compliance and decrease inventory levels. Although some analysis was performed by a task force with respect to the ACS inventory levels and taxpayer contact issues, no analysis was done to determine if the initiative would be effective in working the most productive cases and reducing unassigned inventory.
The Internal Revenue Service Has No Methodology to Measure the Impact of the Priorities on Collection Field Function Inventory Levels
The National Headquarters is not overseeing the case assignment priorities. As a result, management cannot ensure districts are working only the priority cases and are removing cases from the inventory that do not meet the six priorities. Further, the CFf is not fully using its management information system to help ensure ROs work only the priority cases.
The Internal Revenue Service Has Not Consistently Followed Its Inventory Priorities
Cases continue to remain unassigned for extended periods, and we were unable to determine whether a significant portion of assigned inventory met one of the six priorities. We analyzed all 4,791 unassigned cases in 3 districts and determined that 2,327 (49 percent) of them remained unassigned to a RO for over 60 days. Unassigned group inventory should be limited to inventory that managers expect to assign within 30 days.
In addition, we used the Collection function’s automated inventory system to analyze all 29,119 open cases in 3 districts and determined only 13,551 (47 percent) of them met at least 1 of the CFf inventory priorities. Due to systemic limitations, we could test for only five of the six priorities without obtaining information from a separate automated system. As a result, we did not determine whether the remaining cases met the other priority.
Actions on Closed Cases May Cause Inequitable Taxpayer Treatment and Do Not Ensure the Government’s Interest Is Protected
The March 1999 guidelines do not require ROs to make a determination of whether or not to file a Federal Tax Lien to record the government’s interest in taxpayers’ property. The procedures also allow ROs to close accounts with no automatic reactivation for future collection actions. These procedures differ from those used to close cases not covered by the March 1999 guidelines. As a result, taxpayers subject to normal collection processing (i.e., unable to pay) have liens filed against them and could be subjected to future collection actions. However, other taxpayers (i.e., those meeting the March 1999 guidelines) have no liens filed and probably will never have their accounts reactivated. In addition to inequitable treatment, the government’s interest is not protected on the accounts with no liens filed or on which no follow-up is made.
Summary of Recommendations
Collection management should use existing management information systems to identify high-priority work and develop a methodology to track the success of the inventory prioritization. Collection management should ensure cases are timely assigned and not prematurely closed while potentially lower priority work remains in the open inventory. Collection management should also re-evaluate its lien policy and reactivation process to ensure equitable treatment of all taxpayers and protection of the government’s interest.
Management’s Response: Management’s response was due on August 11, 2000. As of August 18, 2000, management had not responded to the draft report.