Years of budget cuts are having a negative impact on the ability of the Internal Revenue Service to collect delinquent taxes, according to a new government report.
The IRSs Automated Collection System is responsible for answering incoming taxpayer calls and working the inventory of taxpayer delinquent accounts, the report from the Treasury Inspector General for Tax Administration (TIGTA) noted.
Since fiscal year 2010, the ACS workforce has declined by 39 percent due to attrition or reassignment, TIGTA found. Because those resources are needed to answer telephone calls, fewer resources are available to work on the inventory of past-due taxes.
This has contributed to unfavorable trends in several ACS business results, the report noted, including the amount of new inventory of cases of uncollected taxes outpacing closures of such cases; the inventory of delinquent tax cases taking longer to close; more cases being closed as uncollectible; fewer enforcement actions being taken; and more aged cases being transferred to a holding file queue that the IRS maintains of uncollected taxes.
In addition, the IRS has not established performance metrics to measure the effect that answering incoming calls has had on compliance business results, TIGTA pointed out. Capturing such data would allow ACS management to assess the impact of prioritizing call handling.
"IRS management should take steps to ensure that inventory routing and ACS resource capabilities are aligned with overall IRS tax administration priorities and their vision for the role of the ACS in the collection enforcement strategy, said TIGTA Inspector General J. Russell George in a statement.
TIGTA recommended that the IRS re-examine the ACSs role in the collection workflow process, including inventory delivery to the ACS as well as case retention criteria, and align ACS resources accordingly.
The IRS should also request a study to determine the impact of the policy change to not require Notice of Federal Tax Lien determinations on certain unpaid balances, according to TIGTA. The IRS should also establish performance metrics for ACS call handling data to measure the impact that answering taxpayer calls has on compliance business results, the report suggested.
IRS officials agreed with the recommendations and plan to take corrective actions.
"We recognize the critical role ACS plays in our collection program and, while it is our intent that ACS's role not be diminished going forward, the current budget environment requires us to continually evaluate our programs and priorities in light of declining resources," wrote Karen Schiller, commissioner of the IRSs Wage & Investment Division, in response to the report.
"To that end, the Wage & Investment and Small Business/Self-Employed Divisions are currently realigning our compliance programs. As part of this effort, we are creating a single collection organization within the Small Business/Self-Employed Division. The executive lead of this new collection organization will have end-to-end accountability for the collection program and will be responsible for reducing redundancies in our collection processes and improving taxpayer services while identifying emerging collection issues. While we are continuing to develop the structure and the concept of operations for this new collection organization, ACS will be a key component. And, as part of our work on the concept of operations for the new collection organization, we will be reviewing our ACS program to determine whether the collection responsibilities and authorities currently assigned to our ACS employees need to be enhanced. We are proud of ACS's contributions to our collection program and it is our intent that ACS's role be enhanced going forward.
In further response to the report, the IRS pointed out that budget cuts are having an impact on its ability to collect revenue and taxes.
"This report dramatically illustrates the bottom-line impact that IRS budget reductions have on revenue collection and unpaid taxes," the IRS said in a statement emailed to Accounting Today, a Collections & Credit Risk sister publication. "With the IRS funding down by $850 million since Fiscal 2010 and priority programs such as identity theft requiring more resources, staffing for Automated Collection System fell from 2,824 in 2010 to 1,730 in 2013. At the same time, the report notes that tax collection in this program fell by $400 million. This is a clear example that deep cuts to the IRS budget hurts tax collection and threatens the nation's revenue collection."