Expediting Tax Deposits Can Increase the Government's Interest Earnings

Gao ID: GGD-84-14 November 21, 1983

GAO reviewed Department of the Treasury and Internal Revenue Service (IRS) cash management procedures to determine whether tax receipts could be deposited more quickly, expediting availability of funds to the Treasury.

Under the Federal Tax Deposit (FTD) system, certain taxpayers are required to deposit tax remittances directly into Treasury accounts at authorized depositaries, using preprinted cards to make FTD payments. If taxpayers do not have the cards or need to change the information contained on them, the Internal Revenue Service (IRS) accepts the payments rather than requiring direct deposit. This results in the funds' being unavailable to the Treasury while IRS processes the payments and reduces interest earnings. While IRS has reduced the forgone interest associated with the processing of undeposited payments, Treasury officials are concerned that taxpayers are sending payments to IRS because withdrawal of the funds from taxpayer bank accounts is delayed by IRS processing time. GAO also found that IRS district offices are responsible for processing and depositing taxes received by revenue officers and agents, including IRS field offices. The delays caused by transfer of payments from field offices to district offices lead to more forgone interest. Another factor affecting deposit time is check sorting. Banks sort checks by the location of the bank paying the check before presenting each check for payment. Installing check-sorting equipment at IRS locations could expedite deposit times. IRS currently decides whether to install check-sorting equipment at each location on a case-by-case basis.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Johnny C. Finch Team: General Accounting Office: General Government Division Phone: (202) 512-7824


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.