On Dave Ridley’s videobloggish project “The Ridley Report” he recently did a special on his filing of a “Peace Tax Return” in lieu of the tax return and money the IRS would have preferred:
The Government Accountability Office released a new report: Tax Debt Collection: IRS Has a Complex Process to Attempt to Collect Billions of Dollars in Unpaid Tax Debts.
Senators Max Baucus and Chuck Grassley, the top Democrat and Republican on the Senate Finance Committee, issued a press release to convey their outrage or what-have-you. Grassley summarized the new report this way:
For , while collections increased by $10 billion, unpaid debts increased by the same amount. During this same time, the IRS wrote off from 31 percent to 46 percent of unpaid debts because it essentially ran out of time to collect these debts. For , the IRS classified only $100 billion out of $290 billion of unpaid tax debts as collectible. Of the $100 billion potentially collectible debt, the IRS is actively pursuing only $25 billion with $2.5 billion being shelved because of a claimed lack of resources. The longer a debt is outstanding, the less likely it will be collected. Any business person can tell you that. Knowing that the IRS isn’t going to collect the debt also gives tax cheats additional incentives not to pay.
The senators conclude: “When all is said and done, over half of the tax debt inventory that the IRS resolves will come from writing off the tax or being prevented from collecting it under the 10 year statute of limitations.” The numbers in the report specify this a little more precisely: 20–28% of these tax debts were “abated… which may have been appropriate” and 31–46% were “written off due to statutory limits on how long IRS could pursue the debt.” Only between 34–41% of the tax debts that were “resolved” involved the IRS actually getting its hands on the money.
Expect the next Congress to try to come up with some ways to squeeze a little more blood from that stone.
The report has some interesting background details on the IRS collection process, and a nice flowchart (see page 7 of the report) of how tax debts get routed around (and sometimes stall) in the process.
Here, for instance, is the initial phase of the process for people who do not file, spelled out nicely:
IRS first is to send a “30-day letter” that includes a proposed assessment of tax, penalty, and interest. The letter is to instruct the taxpayer on possible ways to respond, such as by accepting the proposed assessment; filing an original return; providing evidence that there is no filing requirement; or appealing the proposed assessment to IRS’s Office of Appeals. If no response is received to the 30-day letter within the allotted time, IRS is to send a 90-day statutory notice. The statutory notice is to contain information similar to the 30-day letter and information on the taxpayer’s right to petition the Tax Court. If IRS does not receive a response within the allotted time, the tax, penalty, and interest on the return are to be assessed. IRS’s practice is to send up to four balance-due notices at 5-week intervals for the amount owed. Six weeks after the fourth balance-due notice, IRS is to forward any unpaid accounts to IRS staff who are to try to collect the unpaid amounts through other phases of the collection process — the telephone or in-person contact phases.
There were also some nuggets of information about new IRS enforcement-related projects. A few caught my eye:
- Electronic Lien — to process over a million liens each year
- Streamline and expedite lien filing, reduce lost lien reports, and ensure prompt payment of lien filing fees by making process electronic.
- Reduce costs for lost lien research and analysis by 15 percent in and 40 percent in . Similar savings in these 2 years in lien filing fees. Collect additional revenue by raising IRS’s priority against other creditors.
- Bulk Electronic Levy
- Automate the process for delivering levy notices to and processing responses and remittances from financial institutions and large employers, including the posting of levy payments to taxpayer accounts.
- Reduce the cycle time for sending levies. Reduce mailing costs. Expedite posting of payments to taxpayers’ accounts.
- Camera cell phones
- Improve (1) productivity of revenue officers in determining asset valuation, (2) communication between IRS and taxpayers, and (3) employee safety on field visits.
- Increased employee and taxpayer satisfaction.
I assume that last bit means that when the IRS comes a-callin’, they’ll be whipping out their phone cameras to snap a quick picture inside your doorway or outside your driveway so they can look at the photos later and see if anything is worth stealing.
Thanks to Check Your Premises for plugging The Picket Line.