Last week, the Government Accountability Office published a report asserting that the IRS needs to do a better job of managing the tax debt collection process. I have included a segment of their report below, but you can download the full PDF at “Tax Debt Collection: IRS Needs to Better Manage the Collection Notices Sent to Individuals.”
According to the IRS, $23 billion in unpaid individual income tax debt existed in 2001, its most recent estimate. The notice phase is the first of IRS’s three-phase process to collect unpaid debt. IRS annually sends notices to millions of individual taxpayers about billions of dollars of unpaid tax debt.
Congress and others have questioned IRS’s collection process’s effectiveness. As requested, GAO is reporting on (1) how well IRS has established objectives, performance measures, and responsibility for reviewing notice-phase performance, and (2) how well IRS’s business rules for sending notices to individuals help assure that the collection notice phase is achieving desired results at the lowest costs. To address these objectives, GAO compared the evidence obtained from IRS documents and responsible IRS collection officials to applicable guidance for internal control standards.
Although the notice phase is a key part of IRS’s approach and strategy for resolving billions of dollars of individuals’ unpaid tax debt, IRS lacks certain internal controls to assure that notices to individuals are achieving the most benefits—such as debt collected or unpaid debt cases otherwise resolved—with the resources being used. Management controls like clearly defined objectives, performance measures, and clear responsibility for reviewing program performance help provide reasonable assurance that the objectives of an agency are being achieved effectively and efficiently. However, IRS has no documented objectives for the notice phase and no performance measures to indicate how well the phase is performing in resolving debt cases or achieving other potential desired results. Further, IRS has not established responsibility for reviewing the performance of the complete notice phase.