Tax Administration

The Internal Revenue Service (IRS) has sent millions of collection notices to taxpayers each year requesting payment of tax assessments and related penalties and interest. Some taxpayers have complained that IRS sent collection notices for the same tax assessment after the payment has been made--a practice that incurs unnecessary costs for the agency and imposes burdens on taxpayers. GAO found that 39 percent of the nearly 15 million taxpayers who were sent collection notices from January through November 1999 received multiple collection notices for the same assessment. IRS sent almost all of these multiple notices because, according to IRS records, it had not received payment of the tax assessments in full. Yet, in the case of five percent of these taxpayers (270,000 individuals), IRS sent at least one notice after the agency had received payment in full of the assessment. IRS provided several explanations for why it sent notices after full payments. Some taxpayers paid too late to stop a subsequent notice. Others paid on time, but IRS did not record the payment soon enough to stop a subsequent notice. In other cases, an error by IRS or the taxpayer, such as recording a payment in the wrong account or using the wrong social security number, caused IRS to send a notice after a full payment.

GAO noted that: (1) of the 14.8 million individual taxpayers who were sent Individual Masterfile collection notices from January 1999 through November 1999, about 5.8 million (39 percent) were sent multiple collection notices for the same assessment; (2) IRS sent multiple notices to about 5.5 million (95 percent) of these taxpayers because, according to IRS records, it had not received payment of the tax assessments in full; (3) according to IRS' records, the remainder of these taxpayers, about 270,000 (5 percent), were sent at least one notice after IRS had received full payment of the assessments; (4) IRS provided three basic reasons to explain why it sent notices after full payments to the estimated 270,000 taxpayers; (5) some taxpayers paid too late to stop a subsequent notice; (6) others paid on time, but IRS did not record the payments soon enough to stop a subsequent notice; (7) in addition, for some taxpayers, an error by IRS or the taxpayer, such as recording a payment in the wrong account or using the wrong Social Security Number, led to IRS' sending a notice after full payment; and (8) IRS has not identified the root causes for all of these errors.