IRS' Accounts Receivable Inventory

GAO discussed the Internal Revenue Service's (IRS) growing accounts receivable inventory. GAO noted that: (1) the reported amount of money owed the federal government in assessed but unpaid taxes grew from $24 billion in 1983 to $66 billion in 1989; (2) IRS failure to collect billions of dollars in delinquent taxes could result in significant tax revenue losses and could have a serious negative impact on voluntary taxpayer compliance; (3) the accounts receivable inventory is growing faster than IRS ability to collect it; (4) as the IRS accounts receivable inventory gets older, IRS will need to use its most costly collection techniques; and (5) IRS cited such economic factors as increasing numbers of returns filed, tax receipts, and inflation as reasons for the growth in the accounts receivable inventory. GAO believes that IRS needs to: (1) better focus its efforts on collecting more from existing accounts; (2) reduce its backlog by collecting what is owed as quickly and equitably as possible; (3) improve its financial and management information system so that it can report more accurately on the inventory; (4) ensure that its tax system modernization reduces the amount of incorrect information that gets into the system; and (5) take a service-wide approach that focuses on the prevention of delinquencies.

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: Jennie S. Stathis Team: General Accounting Office: General Government Division Phone: (202) 275-6407