A U.S. Government Accountability Office (GAO) report released on Septmember 10, 2015, found that the Internal Revenue Service (IRS) lacks written documentation of its collection program objectives and methodology. The GAO study concluded that these deficiencies make it difficult to assess the program’s effectiveness.
According to the report, the IRS estimated that for tax year 2006, the $450 billion gross tax gap included $46 billion due in delinquent tax liabilities and $28 billion due in unfiled tax returns. One of the primary means by which IRS pursues delinquent taxpayers is through the Automated Collection System (ACS). ACS, which in 2014 represented just over 25% of IRS collection program staff, is largely a call center operation that uses automated calls and letters to remind taxpayers of their tax delinquency. ACS also handles incoming calls from taxpayers responding to delinquency notices and enforcement actions.
The report states that ACS has experienced significant declines in staffing, with full time equivalents decreasing by 20 percent (from 3,672 to 2,932) from fiscal years 2012 through 2014, and that unresolved collection cases at the end of each year increased by 21 percent (from 4.2 million to 5.1 million).
As workload and staffing move in opposite directions, IRS must decide which cases to prioritize over others to ensure ACS carries out the IRS collection program mission through the fair and equitable application of the tax laws. Given this environment, the GAO was asked to review the IRS process for prioritizing and selecting collection cases to pursue in ACS.
The GAO report outlined four recommendations to the IRS:
- Establish, document and implement objectives for the collection program and ACS and define key terms such as “fairness” as it applies to collection activities, which can be communicated to IRS staff.
- Establish and implement clear guidance and documentation for the ACS case prioritization and selection process, including inventory, risk, and priority designations and changes to those designations over time, and communicate them to appropriate IRS staff.
- Establish, document and implement procedures to complete periodic evaluations of the ACS case prioritization and selection proces and structure.
- Establish, document, and implement a plan and time frame to ensure follow-up for ad-hoc evaluations of the ACS case prioritization and selection process.
In response, the IRS basically agreed to look into all of this, and if it finds it appropriate, will make changes.
In 2009 the IRS cancelled a Private Debt Collection (PDC) pilot program, citing that the agency could do a better job – at a lower cost – in-house, and anticipated hiring over 1,000 new collection personnel in the current year to do the job.
A year later, the GAO said the study the IRS used to support its decision to cancel the program was “not soundly designed.”
In 2011 the Treasury Inspector General for Tax Administration (TIGTA) found - among other things – that the IRS did not take action on 47 percent of a sample of unpaid tax cases returned from the cancelled PDC program.
Here in 2015, it seems that the promised increase in IRS collection staff has not materialized — at least not in the ACS program.
Also of interest is that this is the second example in as many weeks of a government agency being found to lack appropriate written policies and procedures. When such deficiencies are found in regulated entities, those organizations are often fined or otherwise sanctioned in some way. Depending on the nature of the deficiency, perhaps this is appropriate. What’s the appropriate consequence for a government agency? In this case, it seems they get to say, “okay, we’ll look at it, and if WE think it makes sense we will make some changes.”
And gosh, isn’t this a dictionary definition of “the pot calling the kettle black”?