The IRS failed to take all required steps for collecting unpaid taxes from people it can’t locate in over half the cases that investigators studied, according to a federal report released Monday.
The study does not estimate how much money that costs the government overall. But it says that in 2012, the IRS declared $6.7 billion in unpaid taxes to be uncollectable — involving nearly 483,000 tax returns — because it couldn’t find the taxpayer.
In tracking down those with overdue bills, IRS workers are supposed to take up to 10 actions like tracing postal, motor vehicle, court and other records. But in a study of 250 cases involving self-employed people and small businesses, investigators said that 57 per cent of the time, they found no evidence that agency workers had completed all required research before declaring the money uncollectable. In addition, 7 per cent of the cases lacked a required, public warning that the government was putting a lien on a taxpayer’s property, according to the report. The report was written by the Treasury Inspector General for Tax Administration, which audits the IRS.
IRS officials said that they generally agreed with the report but contested some of its findings. They took issue with investigators’ estimate of the value of some of the unpaid taxes, saying it “overstates the amount of potential unprotected revenue” when lien notices are not filed.The investigators’ report conceded that even if the IRS did a better job of tracking down those owing money, “It may be difficult for the IRS to collect on these outstanding liabilities considering that these taxpayers have already proven to be difficult to contact or locate.” The study estimated that about $53 million was at stake in cases where required notices had not been filed warning taxpayers the government was filing a lien against them. In a response included in the report, IRS officials said that the unpaid taxes at stake in cases where lien notices had not been issued was “significantly less” than $53 million. They also said they believed that “the government’s interest is adequately protected” by the lien notices they have filed. IRS officials said they were implementing some of the report’s recommendations, such as creating a checklist of research steps that workers are required to take.
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