TIGTA: IRS Does Not Adequately Research 57% of Cases, Losing Billions in Taxes Wrongly Labeled Uncollectible

The Treasury Inspector General for Tax Administration yesterday released Delinquent Taxes May Not Be Collected Because Required Research Was Not Always Completed Prior to Closing Some Cases As Currently Not Collectible (2014-30-052):

If an IRS employee is unable to contact or unable to locate (UTC/UTL) a delinquent taxpayer, the collection case may be closed as currently not collectible (CNC). If all of the required research steps are not taken prior to the case closure, there is a risk that the Government’s interest may not be protected and that taxpayers will not be treated equitably.

In Fiscal Year 2012, the IRS closed 482,611 tax modules involving approximately $6.7 billion as CNC–UTC/UTL.  This audit was initiated to determine whether these cases were adequately researched, documented, and approved to ensure that all actions were taken to collect outstanding taxpayer liabilities.

Required case actions were not always completed before closing cases as CNC–UTC/UTL.  Of a stratified sample of 250 cases reviewed, there was no evidence that employees completed all of the required research steps for 57 percent of the cases prior to their closing.  Moreover, 7 percent of the cases did not have a Notice of Federal Tax Lien (NFTL) filed on all delinquent tax periods as required. Collection Field function (Field) employees did not complete all research in 165 of the 204 Field cases, while Automated Collection System function employees did not complete all research in eight of the 38 Automated Collection System cases

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