IRS May Have Violated over 32,000 Taxpayers’ Tax Lien Rights

An estimated 32,552 taxpayers may have been harmed because the Internal revenue Service did not follow legal requirements to notify them and their representatives of their rights related to tax liens in a timely fashion, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found that the rights of some taxpayers may have been violated or jeopardized because the IRS failed to prove it sent notices of federal tax liens on a timely basis. Section 6320 of the Tax Code requires the IRS to notify taxpayers in writing, at their last known address, within five days of the filing of a Notice of Federal Tax Lien. Each year, TIGTA is legally required to determine whether the IRS’s tax lien notices comply with the statutory requirement. The IRS also has its own procedures for notifying taxpayers’ representatives when federal tax liens are filed.

However, the IRS may not have always complied with this statutory requirement and it did not always follow its own procedures for timely notifying taxpayer representatives of the filing of lien notices, TIGTA found.

TIGTA reviewed a sample of 125 federal tax liens filed for the 12-month period ending June 30, 2010, but could not determine whether all of these notices were mailed on a timely basis. In addition, the report found that the IRS did not always follow its own procedures for notifying taxpayers’ representatives that federal tax lien notices had been filed.

Based on the sample, TIGTA estimated that 32,552 taxpayers may have been adversely affected. In situations when a lien notice was returned as undeliverable, TIGTA found that the IRS did not always resend these undeliverable notices, even though it had updated the addresses for the taxpayers.

“Taxpayers have the right to receive timely notification of the filing of federal tax liens,” said TIGTA Inspector General J. Russell George in a statement. “The IRS must ensure that the rights of these taxpayers are adequately protected.”

TIGTA made one recommendation to the IRS in its report, and the IRS agreed with the recommendation. TIGTA recommended that IRS officials ensure that procedures to address the handling of undelivered lien notices are consistent. The IRS said it plans to re-evaluate their procedures to ensure they are consistent across the functions and support the timely resolution of undelivered notices.

“We continue to explore ways to enhance our systemic processes to ensure notices are sent, as required, to the most current addresses of the taxpayers and pursuant to policy, to authorized representatives,” wrote IRS deputy inspector general for audit Michael R. Phillips in response to the report. “We also continue to strive to simplify and unify our procedural approach to handling notices that are returned by the Postal Service. We concur that the timely and proper issuance of lien Collection Due Process notices is of utmost importance. You sampled 125 cases and found no instances in which a notice was sent to the wrong address.”