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MSP #20: IRS COLLECTION EFFECTIVENESS

The IRS’s Failure to Accurately Input Designated Payment Codes for All Payments Compromises Its Ability to Evaluate Which Actions Are Most Effective in Generating Payments

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #20-1

Revise IRM guidance and guidelines for lockbox receipts to require the entry of specific DPCs on all balance due payments.

IRS RESPONSE TO RECOMMENDATION: The IRS receives certain types of payments from taxpayers at its lockbox. 94% of those payments do not require a DPC code. These are payments received with a tax return or estimated tax payments (71%) and installment agreement (IA) payments (23%). For IA payments, the IRS Masterfile System performs a sweep of these accounts and updates the Redesigned Revenue Accounting Control System (RRACS) with the installment agreement payment information through a fully automated process. The remaining 6% of lockbox payments are systemically assigned a DPC code. This ensures that lockbox payments are efficiently processed in compliance with Treasury mandates.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate remains concerned that without sufficient staffing, the IRS will not be able to encourage a flexible use of the OIC program, which is what Congress intended in RRA 98.  Since the revenue officers working these cases are already conducting the financial analysis to determine CNC status, the National Taxpayer Advocate believes that a flexible approach to OIC consideration prior to putting a case in CNC status could further Congress’s intent and protect taxpayer rights.  Increasing OIC staff levels would allow for an efficient resolution of the case for both the taxpayer and the IRS and it would encourage flexible use of the OIC program as a collection alternative. 

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

2
2.

TAS RECOMMENDATION #20-2

Require Submission Processing employees to verify the presence of an appropriate DPC on payments by conducting regular quality reviews.

IRS RESPONSE TO RECOMMENDATION: We agree that a formal and ongoing quality review system is critical to ensuring that Submission Processing employees use the appropriate DPC when required to do so. Verification of the appropriate DPC is already part of our regular quality review process. Please refer to the narrative response for more detailed information.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Employee training is important for increasing awareness and education around ETA offers.  However, some specific guidance within the IRM may prohibit flexible analysis of the taxpayer’s facts and circumstances.  For instance, IRM section 5.8.11.2.2(4) requires that it should not appear to other taxpayers that a non-hardship ETA  OIC places the taxpayer in a better position than if they had complied with their tax obligations.  This may lead to subjective determinations by IRS employees who may have differing standards of what other taxpayers’ attitudes are.  The National Taxpayer Advocate believes that this guidance should be revised in order to ensure it encourages a flexible analysis of the taxpayer’s particular facts and circumstances, which is the intent of Congress. 

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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3.

TAS RECOMMENDATION #20-3

Provide clear and specific guidance about the circumstances under which employees can use a miscellaneous DPC.

IRS RESPONSE TO RECOMMENDATION: While the exact wording in each IRM is slightly different to benefit the intended audience of that IRM, the specific guidance to employees on the appropriate use of the Miscellaneous Payment DPC is consistent between the IRMs. Please refer to the narrative response for more detailed information.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate believes that the use of different language in describing when the miscellaneous code should be used is confusing for IRS employees and results in inconsistent application of the codes.  Failing to provide employees consistent instruction on when the miscellaneous DPC should be used increases the risk of misapplication and compromises the reliability of the DPCs, thereby reducing its usefulness in determining where IRS resources will make the greatest impact.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

4
4.

TAS RECOMMENDATION #20-4

Implement systemic input of most payment codes.

IRS RESPONSE TO RECOMMENDATION: The major challenge facing the IRS in implementing systemic application of DPCs is that not all collection actions are maintained on a single database. The IRS lacks the resources to develop processes which would perform an analysis across the various information systems employed by the IRS to systemically assign a DPC to a payment. In addition, systemic assignment of DPCs may not accurately identify the event which predicated the taxpayer’s payment.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate is disappointed with the IRS’s reluctance to investigate designing programming for systemic input of payment codes.  Without accurate payment coding the IRS is unaware what actions, including processes such as the notice stream and the filing of an NFTL, were most successful in getting the taxpayer to pay on a balance due account.  While the National Taxpayer Advocate acknowledges that it is impracticable to capture every possible reason or action that caused a taxpayer to send in a payment, it should be both practical and possible to capture much more information than we are doing today.  The input of DPCs in most situations would provide a way to track taxpayer behavior and future compliance. The IRS’s refusal to implement this recommendation perpetuates the current state, where the IRS is blindly applying its broad collection powers and
resources rather than analyzing accurate information to determine funding priorities (i.e., what actions — sending a letter, making a phone call, or taking collection action — would yield the best return on investment).

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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