Facts and Figures for the IRS Collection Program from TIGTA
TDA collections
Collections early in the life of a debt are critical because the probability of collecting funds diminishes over time. There is a widely accepted principle in the collection industry referred to as the collectibility curve, which measures the probability of collecting funds over time.
In the collection industry, the probability of settling unpaid accounts falls dramatically over time.
Specifically, after six months, collectibility falls to 52 percent, and after 36 months collectibility nears zero. The majority of IRS collections were made within the first 25 weeks (six months).
IRS Accounts Receivable
The amount of gross accounts receivable increased 3 percent (to $412 billion) in FY 2014 and is up 15 percent since FY 2010.
The Collection queue
The number of taxpayers with TDAs in the queue decreased in FY 2014, with approximately 840,000 taxpayers in the queue.
However, the dollar value of the taxes owed by taxpayers in the queue increased from $49.9 billion at the end of FY 2013 to $57.7 billion at the end of FY 2014. This is an increase of nearly 16 percent and is 25 percent more than the
Although many of the cases in the queue may be assigned to be worked, a significant number of taxpayers may be sent only an annual reminder notice in attempt to resolve the delinquency.38
The number of TDI tax periods shelved or surveyed from the queue increased for the fourth straight year, from 597,000 in FY 2013 to 602,471 in FY 2014. The number of TDA tax periods shelved and surveyed decreased 27 percent, from 1.2 million in FY 2013 to 864,979 in FY 2014.
The $7.8 billion in delinquencies that were shelved or surveyed during FY 2014 was 28 percent less than the dollar value shelved or surveyed during FY 2013, which was $10.8 billion.
There is no specific reason for the declines in shelved cases.
Shelved inventory flows are affected by routing decisions, resources, and taxpayer behavior. Changes in these factors affect the number of cases shelved, but with significant lagged effects. According to the IRS, the decline in FY 2013 was an anomaly that did not continue in FY 2014.
Also, numerous changes have occurred since FY 2011 that are affecting the number of shelved cases. For example, in FY 2011, the dollar threshold for ACS cases was lowered to $100,000 (and then later increased to $250,000). This resulted in a significant number of cases being transferred to the queue from the ACS in FY 2011. This is a contributing factor for the increase in shelved cases in FY 2013.
The use of Enforcement, that is, liens, levies, and seizures
The IRS’s use of liens continued its downward trend in FY 2014.
The overall use of liens decreased 11 percent in FY 2014 compared to the use of liens in FY 2013.
Liens issued by the ACS (199,000) and Field Collection (332,000) decreased 3 percent and 16 percent, respectively, in FY 2014. This represents the fewest number of NFTLs filed since FY 2005.
Trends in Compliance Activities Through Fiscal Year 2014
Recent changes in lien determination thresholds are the most likely cause for the decrease in this enforcement action.
Field Collection increased the threshold for lien filing determinations from $5,000 to $10,000, and the ACS increased its lien filing determination threshold to $25,000. TIGTA recently reported that while the threshold increases were made to help individuals and small businesses meet their tax obligations without adding unnecessary burden, risk remains in potentially leaving taxpayer assets unprotected from other third-party creditors.40
The IRS’s use of levies increased 7.6 percent from FY 2013, from 1.85 million to 1.99 million. The ACS increased its use of levies in FY 2014 by 17 percent from FY 2013. Field Collection decreased its use of levies by 10 percent in FY 2014, which is most likely the result of working fewer cases.
The IRS continues to limit its use of seizures.
During FY 2014, the number of seizures decreased by 21 percent from FY 2013 (to 432).
This is the fewest number of seizures since FY 2005, when there were 512 seizures.
The number of seizures still remains far below the number prior to implementation of the IRS Restructuring and Reform Act of 1998.
The use of payment options
When taxpayers cannot fully pay their tax obligations on time, the IRS offers alternate payment arrangements, such as installment agreements and offers in compromise.
While taxpayers must meet certain criteria to participate in these options, the IRS recently expanded the criteria as part of its Fresh Start Initiatives to allow more taxpayers to participate.
These Fresh Start Initiatives, implemented beginning in February 2011, were meant to help struggling taxpayers get a fresh start with their tax liabilities by providing more payment options to taxpayers.
The number of new offer in compromise receipts submitted by taxpayers decreased 6,282 from 74,217 in FY 2013 to 67,935 in FY 2014, a decrease of 8 percent.
The number of offers in compromise accepted decreased for the first time in the past five years. Accepted offers decreased 13 percent, from 31,000 in FY 2013 to 27,000 in FY 2014. However, accepted offers in FY 2014 were still up more than 90 percent since FY 2010.
The dollar value of accepted offers increased more than 38 percent in the same time frame, although they decreased 8 percent between FY 2013 ($195 million) and FY 2014 ($179 million).42
The total number of installment agreements increased for the first time since FY 2011, up 1 percent from the previous three million taxpayers entering installment agreements during FY 2013.
In FY 2014, the dollar value of liabilities associated with taxpayers entering into installment agreements decreased for the second year in a row to $23.7 billion, a 3.4 percent
Trends in Compliance Activities Through Fiscal Year 2014
In addition, the number of taxpayers establishing direct debit installment agreements increased more than 16 percent (to 507,682) in FY 2014, and the dollar value of direct debit installment agreements increased by more than 18 percent.
Collections made through installment agreements increased in each of the past five years.
During FY 2014, more than $11.3 billion was collected from installment agreements, which is 33 percent more than the $8.5 billion collected in FY 2010 and nearly 2 percent more than the $11.1 billion collected in FY 2013. Of this amount, $2.8 billion was collected from direct debit installment agreements, which is 194 percent more than the $948 million collected during
FY 2010.
Michael D. Sullivan
Fresh Start Tax LLC
