GAO Report Criticizes IRS On Debt Management

by Leroy Baker, Tax-News.com, New York

03 November 2009

The US Internal Revenue Service has been urged to improve its notice process for collecting unpaid taxes after a Government
Accountability Office (GAO) report found the agency lacks measures to ensure that its collection process works effectively.

"Although the notice phase is a key part of IRS's approach and strategy for resolving billions of dollars of individuals' unpaid tax debt, (the) IRS lacks certain internal controls to assure that notices to individuals are achieving the most benefits - such as debt collected or unpaid debt cases otherwise resolved - with the resources being used," a summary of the report stated.

The GAO also noted that the IRS had scarce information on the rationale or data to support what the agency identifies as the five business rules that most affect taxpayers. Furthermore, some of the rules were up to 15 years old, insufficiently communicated to collection officials, and had not been evaluated since the 1980s.

According to the IRS, USD23bn in unpaid individual income tax debt existed in 2001, the most recent estimate, and the report's findings prompted strong criticism of the agency from Senate Finance Committee Chairman Max Baucus (D-MT), for whom closing the 'tax gap' is a priority issue.

"This represents a breakdown in one of the agency’s most basic functions and places an unfair burden on Americans who pay their taxes on time and in full,” stated Baucus.

“It is absolutely critical the IRS conduct its collection functions with an eye toward efficiency that stays mindful of the burden on taxpayers. Establishing measures to continually monitor and improve their tax collection process will help meet this goal. I intend to track the agency’s progress on this issue as we work toward closing the US tax gap once and for all,” he added.

IRS Commissioner Doug Shulman agreed with the GAO’s recommendations.

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