WASHINGTON -- The Internal Revenue Service (IRS) could potentially collect additional

revenue each year by reducing the time elapsed between notices it sends to taxpayers who owe

taxes, the Treasury Inspector General for Tax Administration (TIGTA) concluded in a report

publicly released today.

The IRS sends a series of balance due notices to taxpayers with unpaid tax liabilities. TIGTA

determined that the first notice was the most effective notice, by a wide margin, because the first

notice closed the most cases, collected the most money, and generated the most taxpayer

responses.

Also, while the IRS allows 35 days between notices for the taxpayer to respond, TIGTA found

that the time between notices can be reduced to reflect taxpayer response times. As these

liabilities progress within the notice stream, the probability of collection diminishes. By

reducing the time between sending notices by seven days, TIGTA estimated the notice stream

could potentially collect an additional $363 million each year, although a study analyzing the

impact of reducing the time would be needed to quantify the benefits. In addition, taxpayers

could potentially save $1.8 million each year in interest payments.

TIGTA also found that the notice stream does not always treat taxpayers with more than one

delinquency the same. As a result, the IRS may not use collection resources most effectively.

"The notice stream is the least costly of the IRS's three-phase approach to collecting unpaid

taxes," said J. Russell George, Treasury Inspector General for Tax Administration. "While the

notice stream collects billions of dollars in delinquent taxes annually, reducing the time between

notices could potentially result in the collection of millions more. Further, if the IRS does not

effectively pursue collection of unpaid tax through the notice stream, it could create an unfair

burden on the majority of taxpayers who fully pay their taxes on time," Mr. George added.

TIGTA recommended that the IRS consider reducing the time between each notice by seven

days and establishing a business rule to address taxpayers with multiple balance due modules

entering the notice stream at the same time. IRS officials agreed with the recommendations and

said they are open to modifying the time between each notice, subject to budget constraints and

programming issues. In their response, IRS officials also stated that 35 days between notices

were necessary to process taxpayer inquiries and correspondence. In its report, TIGTA had

noted the IRS has controls in place to prevent the next notice from being sent when taxpayers'

correspondence is being processed.