Tax News

CCH (cch.taxgroup.com) reports:

  The IRS failed to take necessary actions to notify taxpayers and their representatives of Notices of Federal Tax Liens (NFTL) filed by the Service, the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report released on June 25. In a separate report, TIGTA determined that the IRS is not properly monitoring Acceptance Agents who obtain individual taxpayer identification numbers (ITIN) for alien individuals.

Notices of Federal Tax Liens

  The IRS attaches an NFTL on taxpayer assets when it has a claim for unpaid taxes. The IRS filed over 700,000 lien notices for the year beginning July 1, 2007, and ending June 30, 2008. After filing a notice, the IRS must, within five business days, notify taxpayers of the lien in writing at their last-known address. In addition, if the taxpayer has an authorized representative on file with the IRS, the Service must notify the representative of the lien within five business days after notice is sent to the taxpayer.

  TIGTA is required to audit the lien program every year. In a sample of 125 cases, TIGTA found that the IRS notified taxpayers within five days in every case. In the previous year, IRS could not demonstrate timely mailing in 3 percent of sampled cases.

  Taxpayers had an authorized representative in 27 of the 125 cases, but the IRS failed to notify the representatives in eight (30 percent) of the 27 cases. While this error rate declined from 76 percent in 2006, TIGTA projected that taxpayer representatives may not have been notified in over 45,000 cases. At TIGTA's recommendation, the IRS is improving its processes for updating its records of taxpayer representatives and for notifying representatives of NFTLs.

  If the lien notice mailed to the taxpayer is returned to the IRS as undelivered mail, employees must research the IRS computer system within five days to check the accuracy of the taxpayer's address. In a sample of 283 undelivered lien notices, the IRS failed to perform timely research in 83 percent of the cases, compared to 33 percent in the previous year. TIGTA indicated that it found similar problems in the previous year and that the IRS had agreed to address the problem but, instead, the IRS's performance declined. The Service agreed to TIGTA's new recommendation to check addresses using the Automated Lien System.

  TIGTA identified 26 cases where the addresses on the lien notice and in the IRS system did not match. In 17 of the cases, the address was updated before notice was sent to the taxpayer, and a new lien notice should have been sent to the updated address. This created potential violations of taxpayers' rights because the IRS did not satisfy the statutory requirement to send the lien notice to the taxpayer's last-known address. TIGTA also determined that the IRS failed to enter appropriate codes in its records to reflect the status of the notices and to determine appropriate actions.

Acceptance Agents

  In the second report, TIGTA examined the use of IRS-approved Acceptance Agents to obtain ITINs for aliens. TIGTA noted that inadequate screening and monitoring increased the risk to taxpayers and the government of potential losses associated with unscrupulous agents. The auditor found that the IRS failed to properly monitor agents. Copies of green cards were lacking for 10 of 12 agents sampled, and required criminal background checks were not performed for 70 of 74 agents. Finally, the IRS failed to visit agents to check on their performance. The IRS agreed to correct these problems.

TIGTA Press Release: TIGTA Releases Audit Report on Acceptance Agent Program

TIGTA Report: Inadequate Management Information Has Adversely Affected the Acceptance Agent Program (Reference Number: 2009-40-087)

TIGTA Press Release: TIGTA Releases Audit Entitled, "Additional Actions Are Needed to Protect Taxpayers' Rights During the Lien Due Process"

TIGTA Report: Additional Actions Are Needed to Protect Taxpayers' Rights During the Lien Due Process (Reference Number: 2009-30-089)