TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

ACTIONS CAN BE TAKEN TO PROACTIVELY REDUCE UNPOSTABLE TRANSACTIONS

Final Report issued on March 25, 2020

Highlights of Reference Number:  2020-40-020 to the Commissioner of Internal Revenue.

IMPACT ON TAXPAYERS

The IRS must timely and accurately post transactions relating to taxpayers’ returns and payments to their tax accounts.  Therefore, the IRS established a series of validity checks that a transaction must pass prior to posting to a taxpayer’s account.  This process is crucial to maintaining the integrity of the Master File.

WHY TIGTA DID THE AUDIT

This audit was initiated to assess the IRS’s policies and procedures to identify and assign unpostable transactions for resolution.

WHAT TIGTA FOUND

The IRS’s validity checks identify unpostable transactions and route them to the appropriate functional areas for resolution.  However, management should address the volume of avoidable unpostable transactions that some functions frequently create.  For example, during Calendar Years 2018 and 2019, one function’s systemic process created about 60,000 unpostable transactions that could be avoided.  TIGTA identified that these transactions required the IRS to spend $91,900 in labor costs to resolve the cases.

Inaccurate procedures and a lack of training in one IRS tax processing center resulted in tax examiners erroneously routing 41 unpostable transaction cases to another tax processing center.  This can delay processing of the taxpayers’ returns, which can create a burden for the taxpayers.  For example, taxpayers could lose their tax exempt status if their returns are not posted to their accounts.  In addition, the taxpayers could be issued a balance due notice or failure to file a return notice.

TIGTA also identified that clerks in the unpostable unit in one IRS tax processing center closed 30,016 unpostable transaction cases during the 2019 Filing Season without conducting the required research.  The incorrect closing of these cases resulted from erroneous procedures in a local job aid used by clerks in the Ogden Tax Processing Center.  The job aid used by the clerks was inconsistent with internal guidelines used by unpostable units in the IRS’s other tax processing centers that work these types of unpostable transaction cases.

Management took prompt corrective actions during the review to address most of the deficiencies that TIGTA identified.  For example, management issued a work stoppage e-mail to the Kansas City Tax Processing Center directing it to retain certain unpostable transaction cases in its current inventory.  Management also removed the erroneous procedures from the Ogden job aid and issued an alert to all tax processing centers directing employees to follow the internal procedures when closing unpostable cases.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS:  1) establish procedures in its Post-Processing Section to track and monitor instances of large volumes of repeated unpostable transactions created by functional areas and to coordinate with the functions to reduce the volume of these cases and 2) coordinate with the Ogden Tax Processing Center to provide an Exempt Organization Subject Matter Expert to help train the tax examiners in the Kansas City Business Master File Unpostable Unit.

IRS management agreed with both recommendations and plans to take or has taken corrective actions to establish internal guidance and provide specialized training to tax examiners in the Kansas City Business Master File Unpostable Unit.

READ THE FULL REPORT

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

https://www.treasury.gov/tigta/auditreports/2020reports/202040020fr.pdf.

 

Phone Number   /  202-622-6500

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

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