Tools the IRS May Use (But Often Does Not) to Locate Delinquent Taxpayers

The Treasury Inspector General for Tax Administration issued a report that finally went public , the gist of which is that the IRS is writing off many tax debts as “uncollectible” without really trying all that hard to collect them first.

The report says that in , the IRS gave up on 482,611 outstanding tax debts (representing about $6.7 billion dollars) as uncollectible because the taxpayer could not be found or could not be contacted. The Inspector General analyzed a sample of these cases and found that in more than half of them, “there was no evidence that [IRS] employees completed all of the required research steps” before giving up.

The report gives some insight into what sorts of investigative tools the IRS uses (or is supposed to use) to track down hard-to-find taxpayers. These are (using terminology as used in the report):

  • telephone directories
  • IRS’s Information Returns Processing data [basically, the agency’s record of the past nine years of tax returns]
  • send a postal tracer
  • motor vehicle records
  • employment commissions
  • courthouse records for real and personal property
  • local licensing when the taxpayer owns a business
  • online resources (Accurint) [which “includes motor vehicle records, courthouse records, and licensing information”]
  • Integrated Data Retrieval System tax return research, if the due date of the last filed return was within the past two years
  • Currency and Banking Retrieval System research when Integrated Data Retrieval System research reflects that a taxpayer has filed a Foreign Bank Account Reporting form, and possible use of a Tax Attache for International accounts

Other items mentioned in the Internal Revenue Manual include:

  • “Local management may require that additional information sources be checked, for example U.S. Coast Guard and local licensing agencies where boat ownership is common.”
  • “A field call to the taxpayer’s last known address”
  • “…check utility companies, to see who is paying the bills at the taxpayer’s address and how the bills are paid, for a possible levy source”
  • “secure and analyze a full credit report”
  • “Request a passport check when the taxpayer travels outside the United States frequently or there is reason to believe the taxpayer travels outside the United States frequently… [and] Consider requesting that a taxpayer be placed on the Department of Homeland Security lookout list if you have been unable to locate or contact the taxpayer and if they live outside the U.S. or travel outside the U.S.

Both of these sources, alas, redact the dollar amounts that mark thresholds at which the IRS either turns up the heat or throws in the towel.