Treasury Inspector General for Tax Administration
September 27, 2011
TIGTA - 2011-61
Contact: Karen Kraushaar
WASHINGTON – Although the Internal Revenue Service (IRS) has been following procedures for processing streamlined installment agreements, those procedures have allowed for the inconsistent processing and treatment of taxpayers, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
TIGTA reviewed whether the IRS consistently applied streamlined installment agreement requirements to all taxpayers. According to the report, the streamlined installment agreement program has brought in large amounts of revenue with minimal IRS processing while decreasing taxpayer burden by reducing the amount of documentation required. Approximately 3.1 million taxpayers entered into streamlined installment agreements in Fiscal Year 2010, resulting in approximately $5.9 billion in collections.
However, due to inconsistencies, some agreements will not be paid off when expected, according to the report. In addition, auditors found that the IRS has not consistently communicated to taxpayers the options about how to avoid user fees associated with these agreements. Taxpayers paid more than $1 million in user fees that could have been avoided, and thousands of taxpayers may have been surprised to learn they still owed taxes after they completed the terms of their streamlined installment agreements, according to the report.
“The inconsistent processing and treatment of taxpayers may contribute to the inefficient use of IRS resources and jeopardize the IRS’s ability to collect tax liabilities,” said J. Russell George, Treasury Inspector General for Tax Administration. “Inconsistencies can also create an economic hardship for taxpayers and may lead to future tax liabilities,” he added.
TIGTA auditors estimated that at least 90,000 taxpayers using a streamlined installment agreement to pay back taxes may still owe the Internal Revenue Service (IRS) after they complete the terms of their agreement. Streamlined installment agreements allow taxpayers owing tax liabilities equal to $25,000 or less to make payments over a 60- month period or by the collection statute expiration date. However, because the IRS does not consider current and future accruals of penalties and interest when computing streamlined installment agreement payments, many accounts will not be fully paid within the 60-month period.
TIGTA recommended that the IRS revise its streamlined installment agreement procedures. The IRS agreed with TIGTA’s recommendations and plans to take steps to address TIGTA’s concerns.
Read the report.
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