Baucus Says IRS Must Improve Collection Efficiency

"This report makes clear the IRS lacks a solid game plan for collecting taxes from those who skirt their tax obligations. This represents a breakdown in one of the agency's most basic functions and places an unfair burden on Americans who pay their taxes on time and in full," said Baucus. "It is absolutely critical the IRS conduct its collection functions with an eye toward efficiency that stays mindful of the burden on taxpayers. Establishing measures to continually monitor and improve their tax collection process will help meet this goal. Commissioner Shulman has agreed with the GAO's recommendations and I intend to track the agency's progress on this issue as we work toward closing the U.S. tax gap once and for all."

The GAO studied whether the IRS has objectives, measures and business rules in place to determine the effectiveness of its collection notices and whether improvements could be made to increase the amounts collected. The GAO found the IRS lacked sufficient objectives and measures to determine if collection notice processes resulted in maximum effectiveness and efficiency. The GAO also notes the IRS had scarce information on the rationale or data to support what the agency identifies as the five business rules that most affect taxpayers. Furthermore, some of the rules were up to 15 years old, insufficiently communicated to collection officials and had not been evaluated since the 1980s.

The GAO recommends the IRS define objectives and performance measures with regard to its collection process, including establishing a clear responsibility for reviewing the effectiveness of the process, documentation of the rationale for its business rules and a better understanding of the business rules among IRS collection managers and executives. The GAO notes that achieving compliance through IRS notices is much less costly than other collection enforcement mechanisms and could help significantly reduce the amount of unpaid taxes. In 2001, an estimated $23 billion of the $345 billion gross tax gap was attributable to a failure to collect known individual income tax assessments. The IRS agreed to pursue each of GAO's recommendations.

The Finance Committee has jurisdiction over U.S. tax policy, including IRS oversight.

View the full GAO report, "Tax Debt Collection: IRS Needs to Better Manage the Collection Notices Sent to Individuals," here: http://www.gao.gov/products/GAO-09-976.