An estimated 24,237 taxpayers may have been adversely affected because the Internal Revenue Service did not follow requirements to notify the taxpayers’ representatives of the taxpayers’ rights related to notices of federal tax liens, according to a new report.
The report, from the Treasury Inspector General for Tax Administration, was generally positive and found that in most cases the IRS mailed out the notices about tax liens being filed and the rights of taxpayers to appeal the tax liens. IRS employees also typically followed the correct procedures when a notice could not be delivered by the post office.
TIGTA pointed out that IRS regulations require that taxpayer representatives be provided copies of all correspondence issued to the taxpayer. However, for six of the 36 sample cases that TIGTA audited for its annual review of IRS compliance for which the taxpayer had an authorized representative, the IRS did not notify the taxpayers’ representatives of the NFTL filings. TIGTA estimated that 24,237 taxpayers may have been adversely affected because the IRS did not follow the requirements to notify taxpayer representatives, such as accountants and attorneys, of the taxpayers’ rights related to the tax lien notices.
TIGTA reviewed a statistically valid sample of 133 NFTLs filed for the 12-month period beginning July 1, 2013, and ending June 30, 2014, for the report. It determined that the IRS timely and correctly mailed the taxpayers the notices of tax lien filing and appeal rights, as required by the Tax Code.
In addition, while IRS employees usually followed the right procedures when working on undelivered lien notices, TIGTA noted that more actions could be taken by the employees. IRS procedures require address verification and, if necessary, resolution of undelivered lien notices within 14 calendar days of receipt.
TIGTA selected a sample of 189 undelivered lien notices that were returned to IRS facilities in Cincinnati (99 lien notices) and Fresno (90 lien notices) last October and November. For 15 (three in Fresno and 12 in Cincinnati) of these 189 undelivered lien notices, IRS employees did not perform the required research within 14 calendar days of receipt of the returned lien notice, according to the report.
The envelopes for a majority of the 12 lien notices that the IRS’s Cincinnati Campus did not research on a timely basis were marked by the U.S. Postal Service as both undelivered and unclaimed. IRS procedures do not address how to handle returned lien notices marked in this manner, the report noted. IRS management told TIGTA that campus employees follow undocumented procedures to treat envelopes marked this way as unclaimed. As a result, these accounts were not researched to determine whether the IRS sent the notices of federal tax liens to the taxpayer’s last known address.
TIGTA recommended the IRS establish procedures requiring the lien unit to verify that all lien requests for which the checkbox on Form 12636, Request for Filing or Refiling Notice of Federal Tax Lien, Line 4, is blank. The IRS should also establish procedures to research taxpayer accounts in a timely manner if the envelopes of returned lien notices are marked with multiple reasons for return and ensure the notice was mailed to the taxpayer’s last known address, the report suggested.
IRS management agreed with the recommendations and has taken or plans to take corrective actions, according to the report.
“For the third time in the past five years, you found that we fully complied with the statutory requirement of timely notification of taxpayers,” wrote Karen Schiller, commissioner in charge of the IRS’s Small Business/Self-Employed Division, in response to the report. “This is evidence of the IRS’s commitment to protecting taxpayer rights. You also found that, absent a few exceptions, our employees followed the procedures to process undelivered lien notices and provided taxpayer representatives a copy of the notice. In fact, your findings regarding processing of undelivered lien notices showed we improved from prior years’ audits by properly documenting research of undelivered NFTLs reviewed and accurately updating accounts with correct transaction and action codes.”
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