The Treasury Inspector General for Tax Administration said that although the process to separate joint tax accounts in innocent spouse cases has been improved, additional action needs to be taken.The Internal Revenue Service separates joint tax accounts to help protect innocent spouses from enforcement action that may be taken against the spouse who actually owes the feds.

TIGTA said that the audit was initiated to evaluate a new “mirroring process” instituted as part of the IRS’s revamped computer system. While it was at one time difficult for the IRS to process innocent spouse claims and properly show each spouse’s separate tax liability (and thus making it difficult to stop collection actions being taken against one spouse, but not the other), the changes were designed to help the agency treat each taxpayer separately.

The inspector general found that IRS employees did not ensure proper actions were taken, or taken timely, in 27 percent of the taxpayer accounts reviewed. Among the problems, the IRS did not always:

  • Suspend collection activity against the taxpayer requesting innocent spouse relief;
  • Resume collection activity for the non-requesting spouse;
  • Prevent refunds from being issued to the non-requesting spouse; and,
  • Allow refunds to be issued to the non-requesting spouse once the tax liability had been paid.

During the course of TIGTA’s review, the IRS did revamp the program’s system for inputting transaction and action codes, as well as conducting training for its employees. The IRS agreed with the report’s recommendations to establish a consistent, formal methodology for managerial reviews of inventory and un-postable case lists to eliminate problems in the future.The full report is available online, at http://www.treas.gov/tigta/auditreports/2007reports/200740053fr.pdf.

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