IRS Seizures

To collect unpaid taxes in 1997, the Internal Revenue Service (IRS) seized property from 8,300 delinquent taxpayers who owed the federal government about $1.1 billion. GAO found that IRS' use of its seizure authority produced mixed results in terms of targeting the most noncompliant taxpayers and then bringing them into compliance. Seizures target the more noncompliant taxpayers?statistically, the greater the amount of unpaid taxes or the number of outstanding tax delinquencies, the greater the likelihood of seizure. The likelihood of seizure varied by location. Seizures were as much as 17 times more likely for delinquent taxpayers in some IRS district offices than in others. Many seizures improved compliance with the tax laws (42 percent of taxpayers had their full tax liability resolved after IRS seized their assets), although some seizures produced little for the government. For 22 percent of affected taxpayers, the seizures generated little revenue for the government and contributed little to resolving the taxpayers' delinquencies. In reviewing seizure cases, GAO found examples in which IRS revenue officers' use of discretion in deciding whether and how to conduct a seizure was questionable. For example, in one case, IRS seized two assets from a taxpayer, both of which were disproportionately greater in value than the amount needed to satisfy the taxes owed. IRS' use of seizure authority is in transition while the agency adapts to the requirements of the IRS Restructuring and Reform Act, which is designed to better protect taxpayers from unwarranted collections if other collection alternatives are available. GAO's review of IRS' processes for protecting the rights of taxpayers in planning and conducting seizures found implementation breakdowns and, in some instances, inadequate process requirements. Because the impact of seizures on taxpayers can be severe and the number of seizures are likely to rise in the future, GAO makes recommendations to deal with the weaknesses that persist in IRS' collection process.

GAO noted that: (1) IRS' use of seizure authority produced mixed results in terms of targeting the most noncompliant taxpayers and then bringing them into compliance; (2) GAO's review of a sample of fiscal year 1997 seizures showed the following: (a) seizures targeted the more noncompliant taxpayers; (b) seizures were as much as 17 times more likely to occur for delinquent individual taxpayers in some IRS district offices than others; (c) many seizures improved compliance with the tax laws; and (d) some seizures produced little revenue to the government and contributed little to resolving the taxpayers' delinquencies; (3) in reviewing 115 sample seizure cases, GAO found examples in which IRS revenue officers' use of discretion in deciding whether and how to conduct a seizure was questionable; (4) GAO recognizes that some revenue officer discretion is necessary and that the adversarial nature of seizure cases can limit the information available to revenue officers when making seizure decisions; (5) nevertheless, some of the decisions made by revenue officers were questionable; (6) IRS' use of seizure authority is in transition while IRS adapts to the Restructuring Act requirements; (7) revenue officers have expressed concerns about a lack of guidance on when to make seizures in light of the act, and the number of seizures has declined about 98 percent; (8) IRS officials expect the number of seizures to rebound as changes to the seizure program are implemented and revenue officers adapt to the new requirements; (9) GAO's review of IRS' processes for protecting taxpayer rights and interests in planning and conducting seizures identified implementation breakdowns and, in some instances, inadequate process requirements; (10) breakdowns and inadequate processes were also identified in the postseizure processes for controlling assets, selling assets, and reviewing actions taken; (11) because of the severe impact that seizures may have on taxpayers, GAO views any breakdown in the seizure process as a weakness; (12) GAO's comparison of the weaknesses found in the pre-Restructuring Act seizure program with the changes IRS is making shows that some significant weaknesses are not being fully addressed; (13) with respect to controlling the use of seizure authority, it is unclear whether continued reliance on manual reviews of revenue officer case files, which failed to prevent process departures in the past, would be sufficient to prevent departures from process requirements in the future; and (14) only limited guidance is being provided to revenue officers on how to carry out and document some of the new seizure guidelines.

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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