The I.R.S. Collects Little of What People Don’t Pay “Voluntarily”

A new GAO financial audit of the IRS includes some interesting numbers about their success in collecting from people who don’t pay what the IRS says they owe.

“The unpaid assessment balance includes amounts owed by taxpayers who file returns without sufficient payment as well as amounts assessed through the IRS enforcement programs.” More than half of this (57%) “consists of interest and penalties and is largely uncollectible.”

Of the total unpaid balance, 23% are taxes and penalties that the IRS has independently assessed without the taxpayer or a court agreeing to the assessment (for instance if someone doesn’t file a tax return and so the IRS generates its own estimate of what the person owes). “Due to the lack of agreement, they have less potential for future collection…”

Another 40% is considered a “write-off” — because the taxpayer is dead, bankrupt, out-of-business, vanished-into-thin-air, or something of the sort.

The remaining 37% is further divided into a “collectible” portion (23% of the 37%, only 8.5% of the total) and an “uncollectible” portion (77% of the 37%)—

…due primarily to the taxpayer’s economic situation, including individual taxpayers who are unemployed, are currently in bankruptcy or have other financial problems. Except for bankruptcy situations, the IRS may continue collection actions for 10 years after the assessment. Thus, these accounts may still ultimately have some collection potential if the taxpayer’s economic condition improves.