TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

Fiscal Year 2018 Statutory Review Of Compliance With
Legal Guidelines When Issuing Levies

Final Report issued on September 7, 2018

Highlights of Reference Number:  2018-30-068 to the Commissioner of Internal Revenue.

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 (RRA 98) requirement to notify taxpayers prior to issuing levies.  The overall objective of this audit was to determine whether the IRS complied with the IRS RRA 98 requirements and IRS policy 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 pursuant to Internal Revenue Code Section 6330.

WHAT TIGTA FOUND

Systemic levies issued by the Automated Collection System (ACS) were suspended in January 2016 due to resource constraints.  Since then, levy proceeds decreased by 70 percent, or almost $966 million.  In addition:

-       Aggregate balances due on all ACS taxpayer delinquent accounts grew by $5.1 billion to $55.4 billion, a 10 percent increase.

-       Dollars written off due to collection statute expiration while cases were in the ACS increased from $1.17 billion to $4.33 billion, a 271 percent increase.

-       912,124 cases were shelved, a 211 percent increase (some of these cases were assigned to private collection agencies starting April 2017).

Tests of the population of 87,090 taxpayers with ACS paper levies identified five cases in which ACS employees levied the taxpayer before waiting 30 days after providing the notice of Collection Due Process rights to the taxpayer.  The IRS took corrective action in June 2018.

Tests of the population of 59,355 taxpayers with ACS paper levies in which additional tax was assessed prior to the levies identified 783 (1 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.  A programming fix was implemented in January 2018.

Tests of a statistical sample of 31 taxpayers with systemic levies issued by revenue officers identified five (16 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.  A programming fix to correct the problem by preventing revenue officers from incorrectly identifying Federal contractor levies is scheduled to be implemented by January 2019.

WHAT TIGTA RECOMMENDED

TIGTA recommended that IRS management restart ACS systemic levies for the most significant taxpayer delinquent accounts and ensure that the planned January 2019 programming fix is implemented and effectively prevents employees from incorrectly identifying Federal contractor levies.

In response to the report, IRS management stated that they restarted the ACS systemic levy program on July 17, 2018, and agreed to monitor and test the planned programming fix.

READ THE FULL REPORT

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

https://www.treasury.gov/tigta/auditreports/2018reports/201830068fr.pdf.

 

Phone Number   /  202-622-6500

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

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