IRS gives up too soon on debt cases

The IRS is often giving up too quickly in its efforts to find delinquent taxpayers, according to a new federal report.

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Treasury’s inspector general for tax administration found that there was no evidence that IRS employees took all the necessary steps to locate a taxpayer owing money in more than half the cases it examined.

The IRS closed almost half a million cases in 2012 because a delinquent taxpayer couldn’t be found, amounting to roughly one out of every six cases where the agency officially ruled it couldn’t collect a debt.

Those 482,611 cases added up to roughly $6.7 billion in lost revenue — about 22 percent of the more than $30 billion in unpaid balances that year.

Russell George, the tax administration inspector general, suggested the IRS’s handling of the cases could decrease revenues and public trust in the agency.

“If the IRS does not take all of the required research steps prior to closing cases, there is increased risk that the government’s interest may not be protected and that taxpayers will not be treated equitably,” George said in a statement. 

The inspector general found that IRS employees didn’t conduct all the necessary research in 57 percent of the 250 cases the agency closed without collecting a taxpayer’s debt.

The amount of research the IRS is supposed to complete before closing a case without collecting varies based on which part of the agency is involved and how much a taxpayer owes.

The steps that should be taken include trying to find a taxpayer through the mail, tracking vehicle and property records, and business records, when applicable.

The inspector general found that the IRS’s automated collection system generally did better in following the required steps than field workers.

It also found that some research steps were almost completely ignored. For instance, IRS workers only examined utility records in only two of the 46 cases it was required.

The IRS agreed with the inspector general’s recommendations, which included reviewing previous cases. But the inspector general also said that the IRS’s planned response didn’t fully incorporate his office’s recommendations.

In a statement, the IRS said it had already improved its procedures for closing these sorts of cases, and that it believed that the inspector general overstated the amount of revenue that was in jeopardy.

The agency said it “has already taken action to develop a checklist of research requirements for revenue officers and group managers to verify all necessary actions prior to case closure.”

This post was updated at 2:15 p.m.