REPORT: IRS SOFT ON TAX LIENS
Washington, D.C. - The Internal Revenue Service basically dismissed over $1.4 billion in delinquent taxes between 2002 and 2008 without filing tax liens to collect them, according to a new report from the Treasury Inspector General for Tax Administration that faulted IRS revenue officers for not documenting valid reasons why they decided not to file tax liens in many cases.
The IRS protects its claims against taxpayers who owe delinquent taxes by filing federal tax liens that establish the IRS's priority among secured creditors for the taxpayers' equity. Liens are generally filed on balance-due cases in which a taxpayer has received a notice demanding payment and has not paid. However, revenue officers can decide not to file liens when a taxpayer is in bankruptcy, has died without assets, when a corporation is defunct, or for a variety of other reasons. They are required to document a decision on whether a lien should be filed and include an explanation when one is not filed, and are also supposed to attempt initial contact with a taxpayer or the taxpayer's representative within 45 days after they are assigned the taxpayer's modules.
According to the report, the IRS did not make lien determinations for 210 open modules at two collection field offices representing a balance due of $6.4 million. In addition, IRS revenue officers did not document valid reasons for not filing liens when closing as "currently not collectible" an estimated 2,297 modules, with $72 million in delinquent taxes.
The report also found that liens were not filed on shelved modules within a certain dollar threshold, even though an IRS study has shown a benefit in doing so. TIGTA's analysis found that between 2002 and 2008, the IRS shelved, without filing liens, modules representing approximately $1.4 billion in delinquent taxes. Shelved modules are placed in a "currently not collectible" status and no collection work is conducted.
TIGTA made eight recommendations that the IRS ensure that its revenue officers document their reasons for not filing liens against delinquent taxpayers.
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