More on the Taxpayer Advocate's Report

• Published date: 01 September 2014
• Date: 01 September 2014
• DOI: http://doi.org/10.1002/jcaf.21993
• Author: Caroline D. Strobel

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© 2014 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.21993

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Caroline D. Strobel

More on the Taxpayer Advocate’s Report

In the last column I reported

on the Taxpayer Advocate’s

Report to Congress earlier this

year. I am going to continue the

discussion of that report as well

as some other comments about

this important federal agency.

AUTOMATED COLLECTION

SYSTEM

The Automated Collection

System (ACS) is a computerized

inventory system that manually

and systemically sends notices

to taxpayers, issues liens and

levies, and answers calls in an

effort to resolve balance due

accounts. ACS collects tax

largely by offsetting taxpayers’

refunds and eliminates much of

its inventory by passing cases to

other parts of the IRS. ACS’s

failure to resolve cases can be

attributed in part to its counter-

productive approach to working

cases and the types of cases it is

assigned. Rather than applying

the appropriate type of contact

for each taxpayer, ACS gener-

ally relies on notices of intent

to levy or systemically gener-

ated levies, which are often not

effective.

In fiscal year 2013, ACS col-

lected $5.4 billion on delinquent

accounts, but about 47% came

through automatic refund off-

sets, not from ACS employees’

direct efforts. ACS transferred

approximately three times

what it collected, $16.1 billion,

in unresolved tax liabilities to

other IRS collection operations.

Although 46% fewer levies were

issued in 2013, collections actu-

ally increased slightly. A review

showed that 75% of ACS lev-

ies were unproductive. An IRS

study showed that taxpayers’

rate of response to a letter was

nearly three times greater than

the response to a levy. Rather

than apply the levy treatment,

ACS should attempt to talk to

the taxpayer by making an out-

going call or sending a notice,

and then consider a levy. This

strategy would reduce the risk of

causing the taxpayer economic

hardship, prevent the liability

from becoming too big to be

resolved, and reduce the need

for more extreme collection

measures.

The National Taxpayer

Advocate recommends that

ACS better segment taxpayers,

identifying which groups of

taxpayers would respond best to

which particular action, include

soft notices that would discuss

payment options up front, and

send out a monthly (or no less

than quarterly) notice to inform

taxpayers of the tax they owe

and payment options. There is

a need to train a core unit that

can work and resolve small busi-

ness cases when the field cannot

take on more assignments. ACS

assistors should be required to

present all collection alternatives

to the taxpayer upfront in all

cases.

TRUST FUND ACCOUNTS

The withholding of payroll

taxes from employee’s wages

and the prompt payment of

these trust fund taxes (payroll

taxes) are vital components

of the voluntary compliance

system. Trust fund tax delin-

quencies can quickly become

unmanageable for business

taxpayers. The IRS provides

inadequate attention and ser-

vice for emerging trust fund

collection cases. The IRS per-

sists in assigning these cases to

employees who are not fully

equipped to resolve them. Con-

sequently, the use of collection

options such as installment

agreements or offers in compro-

mise are exceptionally rare and

frequently not available to busi-

ness taxpayers until their debts

become uncollectible.

The National Taxpayer

Advocate recommends that

the IRS reconcile assignment