IRS Overlooks Hundreds of Big Overdue Accounts

The Internal Revenue Service has shelved hundreds of balance-due accounts for taxpayers who owe more than $1 million.

A new report from the Treasury Inspector General of Tax Administration found that as of Dec. 22, 2007, there were 2,454 individual taxpayers in the IRS’s potentially collectible inventory each owing over $1 million in taxes, interest and penalties. The IRS was actively pursuing 2,006 of the delinquent taxpayers for collection, but TIGTA identified 448 accounts totaling approximately $1.2 billion that were in a queue awaiting field assignment or had been shelved.

Among the 448 accounts, 214 accounts were in a queue or in shelved status for more than a year. Using automated information systems and the IRS’s fiscal year 2007 collection rate to review a statistically valid sample of 155 accounts, TIGTA determined that $12.1 million might be collectible from 27 taxpayers who owed a total of approximately $110 million.

TIGTA determined that three factors contributed to the large dollar accounts lingering in the queue or shelved status. First, IRS officials were working to resolve a programming flaw that allowed accounts to remain in shelved status even when the taxpayer’s account reached a balance of $1 million or more. Second, TIGTA found erroneous codes that were preventing some accounts from appearing in the group managers’ inventory in the IRS’s Entity Case Management System. Third, the Entity system is currently programmed to identify and accelerate accounts with assessments of $1 million or more, but does not take into consideration the related interest and penalty accruals that continue to add to the total account balance owed until they are paid or otherwise satisfied.

TIGTA recommended that IRS officials make programming changes and explore the cost and benefits associated with changing the Entity acceleration criteria of $1 million to include penalties and interest accruals. In response, IRS officials agreed with the recommendations.

For reprint and licensing requests for this article, click here.