Tax Administration

Opportunities to Increase Revenue Before Expiration of the Statutory Collection Period Gao ID: GGD-91-89 September 30, 1991

Pursuant to a congressional request, GAO provided information on Internal Revenue Service (IRS) accounts receivable that are written off because the collection statute of limitations has expired, focusing on: (1) the amount of the accounts receivable that has been or possibly will be written off; (2) the potential impact of the November 1990 extension of the collection statute of limitations; and (3) IRS procedures for managing accounts receivable nearing the end of their collection periods.

GAO found that: (1) although IRS establishes and resolves billions of dollars of accounts receivable each year, a substantial portion remains outstanding at the end of each year; (2) annual write-offs of assessed taxes, assessed or accrued interest, and penalties for IRS individual and business files grew from $2.3 billion to $4.6 billion between fiscal years 1986 and 1990; (3) about $46 billion, or 49 percent, of the IRS $93-billion individual and business accounts receivable inventory as of September 30, 1990, could be uncollected and ultimately written off because of the expiration of the collection statute of limitations; (4) of the remaining $47 billion, projections show that IRS could collect about $23 billion and could abate or otherwise resolve about $24 billion; (5) while IRS requires local reviews of decisions to suspend collection activities, it does not centrally analyze the local results to identify systemic problems; (6) although IRS sent reminder notices to taxpayers whose accounts were suspended earlier in the collection process, IRS does not send reminder notices to all taxpayers whose accounts were suspended later in the collection process; and (7) if collection procedures do not change, IRS could collect an additional $1.7 billion from its September 30, 1990 accounts receivable inventory as a result of extending the collection period from 6 to 10 years.

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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