TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

FISCAL YEAR 2016 STATUTORY REVIEW OF COMPLIANCE WITH LEGAL GUIDELINES WHEN ISSUING LEVIES

Final Report issued on July 29, 2016

Highlights of Reference Number:  2016-30-052 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.

IMPACT ON TAXPAYERS

When taxpayers do not pay delinquent taxes, the IRS has authority to work directly with financial institutions and other third parties to seize taxpayers’ assets.  This action is commonly referred to as a “levy.”  The law requires the IRS to notify taxpayers at least 30 calendar days prior to the issuance of a levy and allows taxpayers the opportunity to request a Collection Due Process hearing prior to the first levy on a delinquent account.

WHY TIGTA DID THE AUDIT

This audit was initiated because TIGTA is responsible for annually determining whether the IRS complied with the IRS Restructuring and Reform Act of 1998 requirement to notify taxpayers prior to issuing levies.  The overall objective of this audit was to determine whether the IRS complied with the IRS Restructuring and Reform Act of 1998 requirements to notify taxpayers and their authorized representatives of the right to a Collection Due Process hearing prior to issuing levies and to suspend levy action during the time frames required by I.R.C. § 6330.

WHAT TIGTA FOUND

The IRS is protecting taxpayers’ rights when issuing systemic and manual levies in cases for which additional assessments were not included in the levy.  TIGTA reviewed statistical samples of systemic and manual levies issued by the Automated Collection System and the Integrated Collection System and determined that controls ensured that taxpayers were given notice of their Collection Due Process rights at least 30 calendar days prior to the issuance of the levies.  Tests of a random sample of 30 open notice of intent to levy appeal cases also showed that the IRS suspended or did not take any collection action that involved the same tax period as the notice of intent to levy that was under appeal.

An additional review of statistical samples of taxpayers’ cases that were worked in the Automated Collection System and that had additional tax assessed included in systemic (30 taxpayers) and manual (30 taxpayers) levies determined that there were five45F (17 percent) taxpayers with systemic and six46F (20 percent) taxpayers with manual levies who did not receive a new notice of intent to levy after an additional assessment was made on a tax period listed on the levy.  A programming solution for this problem is scheduled to be implemented in January 2017.

In addition, a review of a statistical sample of 30 taxpayers whose cases were worked in Field Collection and who had additional assessments included in the systemic levies determined that there were 12 (40 percent) taxpayers who did not receive a new notice of intent to levy after an additional assessment was made on a tax period listed on the levy.  Management implemented programming fixes for this problem in February and June 2016.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS provide clarification and reinforcement of the requirements for levies with additional assessments to Field Collection employees and provide training, which includes the topic of manual levies and taxpayer rights, to all revenue officers.  In addition, the IRS should monitor levies with additional assessments until it is determined that all systemic programming fixes are working.

IRS management agreed with all recommendations and plans to monitor the Automated Collection System and the Integrated Collection System accounts until programming changes are completed and to test programming fixes.  IRS management also plans to provide clarification and develop training for revenue officers on the rules for levies with additional assessments.

 

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

http://www.treasury.gov/tigta/auditreports/2016reports/201630052fr.pdf.

 

Phone Number   /  202-622-6500

E-mail Address  /  TIGTACommunications@tigta.treas.gov

Website             /  https://www.treasury.gov/tigta