Enclosed below is a copy of the Treasury Inspector General Advisory Committee regarding the broken IRS collection system.
As you will see the system is broken because of lack of manpower.
To those who owe back taxes this is good news and to others is the effect of a poorly run federal government does not address stream of revenue.
The IRS Collection system and methodology
Internal Revenue Service (IRS) uses a three-phase strategy for collecting unpaid tax liabilities until they are either full paid, determined to be uncollectible, or otherwise resolved.
Each phase is worked by different program offices and IRS employees with increasingly higher technical skills.
Notice Stream: Uses a preset number of automatically generated IRS balance due notices that are sent to taxpayers to prompt replies or payments. The notice stream begins with the issuance of the statutory notice, followed by up to three reminder notices if the liability remains unpaid.
Automated Collection System (ACS): Uses IRS contact representatives[1] to collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices.
Contact representatives take enforcement actions on taxpayers to prompt replies or payments from them.
Enforcement actions may include levying financial assets or filing liens against property. Contact representatives also answer telephone calls from taxpayers.
Collection Field function (CFf): Uses IRS revenue officers to contact taxpayers in person to collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices or contacts by the ACS.
Revenue officers take enforcement actions, including levies, liens, and seizures of property.
The ACS has 15 call sites in the Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) Divisions.
The SB/SE and W&I Divisions also have a total of five ACS support sites that support the call sites by resolving written correspondence from taxpayers, taxpayer representatives, and/or third-party contacts.
ACS Call Site and Support Site Locations:
Oakland, California
Fresno, California
Cincinnati, Ohio
Fresno, California
Denver, Colorado
Jacksonville, Florida
Philadelphia, Pennsylvania
Atlanta, Georgia
Des Moines, Iowa
Atlanta, Georgia
SB/SE Division Call Sites
Kansas City, Missouri
Detroit, Michigan
Kansas City, Missouri,and Puerto Rico
W&I Division Call Sites
Brookhaven, New York
Buffalo, New York
Division supports
Philadelphia, Pennsylvania
Austin, Texas
W&I Division ACS Support
Nashville, Tennessee
Seattle, Washington,Puerto Rico
Contact representatives at the ACS call sites are responsible for answering incoming taxpayer calls and working the inventory of Taxpayer Delinquent Accounts, and Taxpayer Delinquency Investigations .
TDAs and TDIs in ACS inventory are created after prior efforts to collect unpaid balances via notices have been unsuccessful.
Cases are systemically assigned a priority based on ACS risk categories.
Once inventory is assigned, the ACS systemically routes the inventory to the appropriate inventory work stream, depending on the type of activity that the cases require.
Inventory cases routed to the ACS fall into one of three work streams:
• Contact (communication is needed with the taxpayer).
• Investigation (information needs to be verified).
• Research (the taxpayer’s location or other information needs to be determined).
Taxpayer calls to the ACS call sites are typically due to one of the following:
• ACS case actions. Taxpayers may call the ACS in response to ACS case actions which include letters to the taxpayer, liens, levies, and predictive dialer callbacks.
• Calls systemically routed from the Accounts Management (AM) function. Taxpayer calls to the AM function toll-free product lines in which the taxpayer’s identification number meets the ACS routing criteria[2] are systemically routed from the AM function to the ACS.
• Calls manually transferred from AM function employees. Taxpayer calls originally routed to an AM function employee who determines that the taxpayer’s identification number meets the ACS routing criteria are manually transferred from the AM function to the ACS.
The Joint Operations Center is responsible for creating the schedules for call handling at each of the ACS call sites.
The number of taxpayer calls that can be answered is dependent on the number of available employees at all ACS call sites.
Not all calls are answered because the ACS does not have the resources to answer 100 percent of incoming taxpayer calls.
The ACS Level of Service goal establishes the percentage of incoming taxpayer telephone calls the ACS expects to answer.
The Joint Operations Center is also responsible for the actual routing of the taxpayer calls to the ACS.
The Joint Operations Center uses a call routing system that links all of the ACS call sites into a single “virtual” call center.
Each taxpayer call is routed to the next available contact representative regardless of where the contact representative is located.
We got a problem Houston
Fewer Resources Contributed to Reduced Revenue and Unfavorable Trends in Several Automated Collection System Business Results.
ACS management places a high priority on answering incoming taxpayer telephone calls because they believe communication with taxpayers helps resolve delinquencies and brings taxpayers into compliance with their tax obligations.
Since Fiscal Year (FY) 2010, the number of ACS contact representatives has decreased by 39 percent.
Because resources are still needed to answer taxpayer telephone calls, fewer resources are available to work new TDA and TDI inventory.
This has contributed to unfavorable trends in several key business results over the past four years.
Specifically, we reviewed ACS business results for FYs 2010 through 2013 and determined that:
· New inventory is outpacing case closures, so the inventory is growing.
· Inventory is taking longer to close, so the cases in inventory are aging.
· Revenue declined and more cases were closed as Currently Not Collectible (CNC).
· Fewer enforcement actions (liens and levies) were taken.
· More, and older, cases were transferred to the Queue, which further reduces the probability of collection by the CFf.
Even though the ACS has significantly reduced resources working inventory, the IRS’s overall Collection practices have remained unchanged.
New inventory continues to be routed to the ACS without interruption.
For example, during FYs 2012 and 2013, the ACS received approximately 6.52 million and 7.07 million new TDAs, respectively.
Nearly 40 percent of the ACS workforce has been lost due to attrition and reassignment since FY 2010.
The inability to hire behind attrition losses over the last three years has caused the ACS to lose 684 (24 percent) of the 2,824 contact representatives who were working in FY 2010.
In addition to ACS employee attrition, three ACS call sites were taken offline in February 2013 to work AM function inventory.
IRS management made this decision to free up AM function resources to address the IRS’s growing inventory of identity theft cases.
The initiative was originally scheduled to continue for three months, but was subsequently extended and was ongoing at the conclusion of our field work.
This reallocation was the equivalent of losing an additional 410 contact representatives because the employees in these three ACS call sites were answering taxpayer questions rather than working ACS inventory.
As a result of this, combined with ACS employee attrition, the number of ACS contact representatives in FY 2013 was 39 percent less than in FY 2010.
Between FYs 2010 and 2012, contact representatives spent approximately 32 percent more of their time answering telephone calls compared with working inventory.
In FY 2013, this difference increased to 52 percent. During this period, total hours spent by contact representatives answering telephone calls and working inventory decreased from 2.7 million to 2.1 million hours.
Several key ACS business results showed unfavorable trends
Inventory is growing
During FYs 2012 and 2013, the ACS received approximately 6.51 million and 7.07 million new TDAs, respectively.
The ACS’s TDA open inventory has grown from 5.94 million to 7.79 million (31 percent) from FY 2010 to FY 2013.
Between FYs 2012 and 2013, the gap between new TDA receipts and closures increased by 47 percent.
Specifically, in FY 2012 new TDAs (6.51 million) outpaced delinquent account closures (4.69 million) by 1.82 million.
In FY 2013, new TDAs (7.07 million) outpaced delinquent account closures (4.40 million) by 2.67 million.
The dollar value of the open inventory grew to $43.92 billion (45 percent) between FYs 2012 and 2013.
Inventory is aging and taking longer to close
Between FYs 2010 and 2013, the average age of TDAs in ACS inventory prior to being transferred out increased by 35 percent, from 46 weeks to 62 weeks.
During the same period, the average time to close a delinquent account being actively worked in the ACS increased from 37 weeks to 39 weeks (5 percent).
Revenue declined while cases closed as uncollectible increased.
If an IRS employee determines that a taxpayer has no ability to make payments on a delinquent account, the case may be closed as CNC.
Classifying a delinquent account as CNC suspends the IRS’s current collection efforts. Since FY 2010, the number of TDAs closed as CNC has increased 13 percent.
As a percentage of all ACS closures, CNCs were approximately 20 percent in FY 2013. Over the past four fiscal years, the number of CNC closures as a percentage of all ACS closures remained relatively consistent, ranging from about 18 to 21 percent.
Fewer enforcement actions were taken
To collect delinquent taxes, ACS contact representatives file liens against taxpayers’ assets (such as property) and issue levies against taxpayers’ wages and bank accounts.
In FY 2011, an IRS study concluded that ACS case actions account for approximately 50 percent of taxpayer calls to the ACS.
ACS management advised us that they take certain steps to control and manage the volume of incoming calls in an effort to assist the ACS in achieving its Level of Service goal. In addition, the Joint Operations Center advised us that under the direction of IRS Headquarters, the ACS decreased the number of enforcement actions taken to proactively reduce the volume of incoming calls.
According to an ACS management report, the enforcement action resulting in the most incoming calls to the ACS is the levy.
The ACS uses levies as a method to collect outstanding taxes from sources such as bank accounts and wages.
Most ACS levy source research is performed systemically by a computer system rather than by an ACS contact representative. ACS management sometimes scales back issuing levies at a controlled rate in an effort to limit incoming calls to a manageable level.
By not issuing these levies immediately, there is a higher risk of decreased collection potential.
As TIGTA previously reported, timing is critical to revenue collection when taking levy action. Certain risks, such as a change in a taxpayer’s financial position, can reduce the amount of revenue ultimately collected when the ACS does not take immediate levy action.
Moreover, levy actions do not always result in taxpayers calling the ACS. Timely levy action may result in taxpayers or third parties submitting tax payments.
However, ACS management does not track whether levy actions actually result in increased call volumes from taxpayers and/or additional taxpayer payments.
More cases were transferred to the Queue
Higher priority balance due accounts that are not successfully resolved by the ACS may be assigned to the CFf for possible face-to-face contact with the taxpayer.
However, because the CFf does not have the resources to resolve all of the cases in the Queue, cases transferred to the Queue by the ACS may never be worked.
These unresolved cases may first be routed to the Queue for a significant period of time until a revenue officer can work them.
Lower priority cases that are not successfully resolved by the ACS and need additional enforcement action are also assigned to the Queue, where they will remain in an inactive status until a change in the case status causes them to be reassigned to the ACS or assigned to a revenue officer.
For example, a new balance due module issued on a current tax year can cause the prior period tax delinquency case to be reassigned to an active status.
As of the end of FY 2013, the Queue inventory included three million TDA tax modules involving 848,241 entities with balance due amounts totaling $49.9 billion.
Because fewer resources are working inventory, more cases are subsequently routed to the Queue.
Specifically, the ACS sent 12 percent more cases to the Queue during FY 2013 than during FY 2012.
As the Queue inventory grows, the number of cases that are removed from inventory and written off as uncollectible is also likely to increase.
Cases can remain in the Queue until the 10-year statute of limitations has expired. However, these cases become less collectible as they get older.
The ACS is taking fewer enforcement actions in order to manage the number of incoming taxpayer calls.
On average, a case is in the notice stream for nearly five months prior to entering ACS inventory.
Cases that are not resolved by the ACS can remain in ACS inventory for more than two years before being systemically routed to either the CFf or the Queue.
TDAs that are routed to the Queue will have aged on average more than three years before being assigned to a revenue officer.
If and when these cases are eventually assigned to the CFf, they have aged and their collection potential has significantly decreased.
And you wonder why the government is broke!
