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Treasury Inspector General for Tax Administration

Press Release

April 25, 2011
TIGTA - 2011-22
Contact: Karen Kraushaar
(202) 622-6500

TIGTA: Taxpayer Payments Were Improperly Transferred to the Excess Collection File

WASHINGTON – The Internal Revenue Service (IRS) improperly transferred taxpayer payments to the Excess Collection File (XSF), according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The XSF is a control file containing nonrevenue receipts (i.e., receipts received for items other than taxes) and tax payments that cannot be applied to a taxpayer account. Once the payment is moved to the XSF, it is no longer associated with the taxpayer’s account.

TIGTA examined two statistically valid samples (small dollar transfers and transfers over $1 million) of taxpayer payments transferred to the XSF and determined that the documentation was insufficient to support the transfer in most of the sampled cases. As a result, TIGTA estimates that more than $604 million was improperly transferred into the XSF. TIGTA also found that managerial approval was not always obtained in the sample of transfers over $1 million, and estimates that IRS employees transferred more than $145 million to the XSF without managerial approval.

Taxpayers who submit a tax payment when the IRS is barred from making an assessment must be refunded their payment if they make a timely claim for a refund. Some of these types of payments were transferred to the XSF, and TIGTA estimates 224 taxpayers were not adequately notified of their rights to have their payments refunded, involving more than $116 million transferred to the XSF.

“The IRS must improve all procedures associated with the Excess Collection program to ensure more consistent processing, approval, and communication with taxpayers,” said J. Russell George, Treasury Inspector General for Tax Administration. “Until the IRS takes corrective action, there is an increased risk that taxpayers will not recover their payments,” he added.

TIGTA made five recommendations in the report. The IRS agreed with all of those recommendations and plans to take corrective actions.

To review the report, including the scope, methodology, and IRS response go to: http://www.treas.gov/tigta/auditreports/2011reports/201130020fr.pdf.


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