IRS Didn’t Follow Up on Undelivered Tax Liens

The Internal Revenue Service did not always follow its own internal procedures for undelivered tax lien notices, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, noted that after filing Forms 668(Y)(c), Notices of Federal Tax Lien (NFTL), the IRS is supposed to notify the affected taxpayers in writing, at their last known address, within five business days of the lien filings. TIGTA pointed out that taxpayers’ rights to appeal the NFTL filings may be jeopardized if the IRS does not comply with this statutory requirement.

IRS procedures require address verification and, if applicable, resolution of the undelivered lien notices within 14 calendar days of receipt. TIGTA selected a sample of 205 undelivered lien notices returned to the IRS’s Cincinnati and Fresno campuses in February and March 2014. For 61 of the 205 sampled lien notices, employees did not perform the required research to attempt to address the undeliverable issue within 14 calendar days of receipt of the returned lien notice. In addition, the IRS did not always follow internal procedures designed to monitor undelivered lien notices.

On the positive side, TIGTA reviewed a statistically valid sample of 133 NFTLs filed for the 12-month period beginning July 1, 2012, and ending June 30, 2013, and determined that the IRS timely and correctly mailed the taxpayers the notices of lien filing and appeal rights, as required by Section 6320(a) of the Tax Code.

TIGTA recommended that the director of campus compliance services at the IRS’s Small Business/Self-Employed Division should improve the handling of undelivered lien notices by ensuring that Internal Revenue Manual requirements are followed in regards to timely research and documentation, as well as remind Automated Collection System Support function managers to provide feedback to employees regarding timely research and documentation requirements for handling undelivered lien notices when appropriate.

In response to the report, IRS officials agreed with the recommendation and plan to take appropriate corrective action.

“Consistent with the results of your reviews over the past 5 years, you found that we generally followed all applicable statutory requirements and IRS procedures,” wrote Karen Schiller, commissioner of the IRS’s Small Business/Self-Employed Division.