WASHINGTON - The Internal Revenue Service (IRS) did not always use the Federal Payment Levy Program to collect taxes when it was possible, and could have potentially collected approximately $1.14 million in Federal payments from delinquent contractors, according to an audit report that the Treasury Inspector General for Tax Administration (TIGTA) issued today.
The Federal Payment Levy Program (FPLP) allows the IRS to systemically collect back taxes from Federal contractors at a minimal cost. Between Fiscal Years 2012 and 2016, the number of IRS employees decreased by 15 percent. Efficient use of automated tools, such as the FPLP, can help the IRS focus more on priorities such as tax collection and customer service.
TIGTA initiated this audit to determine whether the IRS is taking appropriate and effective levy actions for Federal contractors who owe back taxes, and found that 8 (18 percent) of 45 individual Federal contractor accounts and 19 (28 percent) of 68 sampled business Federal contractor accounts were improperly excluded from the FPLP for more than one year while they were in the IRS's Automated Collection System (ACS) inventory. They were excluded because the IRS made changes to the FPLP inventory selection criteria, but did not apply the changes to modules already in ACS inventory.
Three additional accounts were improperly excluded because of a programming problem. The IRS could have potentially collected approximately $1.14 million in Federal payments from these 30 accounts. Further, the Internal Revenue Manual was not correctly updated to alert employees to manually update tax modules for FPLP inclusion when they manually assign cases to specific ACS inventories.
The Department of the Treasury's Bureau of the Fiscal Service (BFS) administers the FPLP and works with other Federal agencies to increase the number of agencies that participate. Some agencies do not participate in the FPLP because they do not utilize the BFS, and consequently, their contractors' delinquent tax debts are not offset through the FPLP. TIGTA's analysis identified 193 Federal agencies that appear not to participate in the FPLP, but neither the BFS nor the IRS could confirm TIGTA's count or provide a list of non-participating agencies.
"If continuous levies are not processed through the Federal Payment Levy Program for Federal contractors, there is a risk that Federal contractors who owe taxes might incorrectly receive payments from the Federal Government," said J. Russell George, the Treasury Inspector General for Tax Administration. "It is important that the IRS use all available tools to hold delinquent federal contractors accountable for nonpayment of taxes," he added.
TIGTA made four recommendations in the report. IRS management agreed with all four recommendations and plan to take corrective action.