Treasury Inspector General for Tax Administration
October 24, 2012
TIGTA - TIGTA - 2012-60
Contact: David Barnes
WASHINGTON – Some Internal Revenue Service (IRS) employees are closing delinquent taxpayer accounts without following proper procedures and without managerial approval, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).
This audit was initiated because of a referral from TIGTA’s Office of Investigations. The objective of the audit was to determine whether controls over balance-due accounts closed as currently not collectible in the Field Assistance Office are sufficient to ensure that all actions are appropriate.
Some taxpayers try to resolve their delinquent account by working with an assistor at one of the IRS’s walk-in offices, called Taxpayer Assistance Centers. If the taxpayer has no ability to pay, the taxpayer account could be closed as currently not collectible.
TIGTA found that delinquent taxpayer accounts were closed as currently not collectible without IRS managerial approval and without detection. An analysis of two samples of taxpayer accounts closed in the Taxpayer Assistance Centers as currently not collectible identified that the accounts were not worked according to procedures. Because cases lacked documentation, such as financial statements and case history notes, it could not be determined whether the correct decision was made to close the cases as currently not collectible. The total assessed balance for the statistical sample of 136 taxpayer accounts was approximately $2.5 million, of which almost $800,000 involved incorrect closing codes, which could result in lost revenue.
TIGTA’s analysis of 136 currently not collectible cases found that closed cases were not correctly input in the IRS’s databases. Some had incorrect closing codes while others had closing codes that were either higher or lower than warranted based on case documentation.
“If taxpayer accounts are closed inappropriately, taxpayers may be burdened and the IRS may not be able to collect taxes owed when a taxpayer’s income increases,” said J. Russell George, Treasury Inspector General for Tax Administration.
TIGTA recommended that the IRS: 1) ensure that assistors follow established procedures; 2) clarify internal guidelines requiring management approval of cases in the Accounts Management Services System history section; 3) conduct a risk analysis to determine the risk of not segregating duties; and 4) implement security reviews and reports that can be used to evaluate the assistors’ use of system command codes.
The IRS agreed with the recommendations and is planning remedial action.
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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