WASHINGTON -- The Internal Revenue Service is not promptly processing taxpayer checks, resulting in the government losing the benefit of interest earned on timely payments, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS accepts billions of dollars in payments every year from taxpayers paying estimated tax payments in advance of filing their tax returns, submitting payments with their tax returns and paying past due taxes. Most of these payments are made with paper checks. TIGTA assessed the timeliness and accuracy of the IRS's system for electronically processing paper checks.

TIGTA found that the IRS is generally scanning checks and accurately posting checks to taxpayer accounts. However only 13 percent of the 770,504 payments reviewed by TIGTA payments were deposited the next business day through the Treasury Department's Financial Management Service. As a result, the IRS lost $695,115 in interest on the payments that were not promptly processed.

In addition, the codes used by the IRS to track electronic payments do not identify which IRS locations are processing the payments.

TIGTA recommended that the IRS improve its coding to be able to track the locations where the batches of payments were processed and to develop a strategy to get checks deposited as quickly as possible. The IRS agreed with TIGTA's recommendations.

"The timely processing and crediting of payments to appropriate accounts benefits taxpayers as well as the IRS," said J. Russell George, the Treasury Inspector General for Tax Administration. "When payments are not promptly processed, taxpayers lose the benefit of the interest earned that is credited to the Department of the Treasury."