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October 30, 2008

Robert Sperling
(202) 622-6500

TIGTA Releases Review of the IRS Private Debt Collection Program Procedures

The Internal Revenue Service (IRS) performed well during the 2008 Filing Season despite the challenges of late and unexpected tax legislation, concludes a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

In December 2007, the Congress passed legislation limiting the number of taxpayers subject to the Alternative Minimum Tax (AMT). This action prompted the IRS to revise its tax forms, instructions, and publications to accommodate the passage of the AMT "patch." Additionally, as a result of the Economic Stimulus Act of 2008, the IRS had to quickly develop processes to both educate taxpayers on how to receive the stimulus payment and prepare employees on processing tax returns filed solely to obtain the payment.

TIGTA concluded that, even with the additional challenges generated by enactment of these two significant tax laws, the IRS implemented these changes correctly with no significant delays in the processing of tax returns during the 2008 Filing Season. In fact, the Service processed nearly 84 percent more paper Forms 1040A (the simplified U.S. Individual Income Tax Return) during the 2008 season than it did the previous year due to returns filed by taxpayers not normally required to file so they could receive the economic stimulus payment.

"To its credit, overall the IRS was able to meet the challenges of the 2008 Filing Season and accurately process most returns in a timely manner," commented TIGTA Inspector General J. Russell George.

TIGTA recommended that the IRS: identify improperly claimed deductions; inform taxpayers regarding possible eligibility for a sales tax deduction; and implement procedures to correctly address "dual benefit" education credit and deduction cases.

In response to the report, the IRS plans to update computer programs to identify taxpayer returns where improper deductions may be claimed, ensure IRS employees are correctly addressing education "dual benefit" cases, and plans to add a cautionary statement on sales tax deduction eligibility to a tax form