Tax Administration

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) collection of 100-percent penalties, assessed as 100 percent of the amount of withheld taxes which businesses failed to pay.

GAO found that IRS: (1) sent 100-percent penalty cases directly to revenue agents for collection, bypassing its Automated Collection System (ACS), which provided more efficient case management and more timely and effective collection of other delinquent taxes and penalties; (2) in March 1989, successfully tested ACS for processing 100-percent penalty cases in two districts, finding that the improved computerized recordkeeping, telephone technology, and management control made for more efficient use of resources and revenue agents; (3) spent an average of $247 to close, via revenue agents, 100-percent penalty cases, while it spent only $57 on cases processed through ACS; (4) did not maintain financial information investigating agents obtained from businesses for collection agents' subsequent use for levying purposes; (5) did not enter such information into ACS; (6) in about 9 percent of 793 cases, collected an incorrect amount of money to satisfy the delinquencies, due to inadequate accounting and internal controls; (7) lacked adequate documentation to determine whether it had under- or over-collected some of the penalties; and (8) was in the initial stage of developing procedures to monitor accounts receivable for 100-percent penalty cases.

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.

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