Treasury Inspector General for Tax Administration
June 28, 2012
TIGTA - 2012-27
Contact: David Barnes
WASHINGTON – The Internal Revenue Service (IRS) mails lien notices to taxpayers in a timely manner as required by law. However, it does not always follow its own regulations for notifying taxpayer representatives and processing undelivered lien notices, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
TIGTA is required by law to determine annually whether lien notices issued by the IRS comply with the legal guidelines in Internal Revenue Code Section 6320 and related guidance in the Federal Tax Liens Handbook. TIGTA auditors reviewed a statistically valid sample of 105 Notices of Federal Tax Lien (NFTL) filed for the 12-month period ending June 30, 2011, and determined that the IRS mailed taxpayers lien notices in a timely manner as required.
However, the IRS did not always follow its own regulations for notifying representatives of the filing of NFTLs. IRS regulations require that taxpayer representatives be given copies of all correspondence issued to taxpayers. TIGTA estimated that 43,817 taxpayers may have been adversely affected because the IRS did not follow requirements to notify the taxpayers’ representatives of the taxpayers’ rights related to liens.
Additionally, when an initial lien notice is returned undelivered and a different address is available for the taxpayer, the IRS does not always meet its statutory requirement to send the lien notice to the taxpayer’s last known address. From a judgmental sample of 250 undelivered lien notices, TIGTA identified four cases for which a new lien notice should have been sent to the taxpayer’s updated address because IRS systems reflected that the address was updated prior to the NFTL preparation. These cases could involve legal violations because the IRS did not meet its statutory requirement to send lien notices to the taxpayer’s last known address.
“After filing Notices of Federal Tax Lien, the IRS must notify the affected taxpayers in writing, at their last known address, within five business days of the lien filings,” said J. Russell George, Treasury Inspector General for Tax Administration. “However, as noted in previous audits, the IRS did not always follow its own internal guidelines for notifying taxpayer representatives of the filing of the NFTL. Therefore, the rights of some taxpayers may have been violated when the IRS did not notify their representatives of lien filings.”
In TIGTA’s Fiscal Year 2009 lien notice audit, we recommended that the IRS enhance its systems to ensure taxpayer representatives timely received lien notices. However, the IRS corrective action has not been implemented yet. In the report released publicly today, TIGTA recommended that the IRS improve the controls and oversight for the processing of undelivered lien notices to ensure they are researched timely, and ensure the use of undelivered lien notice mail status codes is consistent in the procedures for the Automated Collection System and the Collection Field function.
The IRS agreed with TIGTA’s recommendations and plans to 1) make changes to the respective internal guidelines to improve documentation and support the timely resolution of undeliverable notices, and 2) evaluate the use of mail status codes against resource demands to determine if implementation is feasible.
In its response to the report, the IRS included general comments about taxpayer rights that TIGTA believes warrant additional comment. These comments and TIGTA’s response are included in the report.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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