Accounting and Controls Need to Be Improved for Excess Collections

The Commissioner, Wage and Investment Division, should reverse the programming change made in 1998 so that the XSF purging criteria counts the number of years the credit should be in the XSF based on the year the payment is received by the IRS.

The Commissioner, Wage and Investment Division, should utilize the general refund statute of limitations (i.e., the later of two years from the date the tax is paid or three years from the date the return was filed) as the standard for moving credits from the XSF and request programming changes that are consistent with this recommendation. In the interim, purge those credits that are older than seven years based on the IRS received date.

The Chief Financial Officer (CFO), in consultation with the Department of the Treasury, should develop an accounting treatment that allows the IRS to account for excess collections in such a way that it can provide management information on the balance of the XSF at any given time.

The Director, Submission Processing, Wage and Investment Division, should request XSF database programming changes that will capture and report data specific to transfers from the XSF. Managers should periodically reconcile the XSF transfer report with Form 8765 requests.

The Director, Submission Processing, Wage and Investment Division, should ensure that Unidentified/Excess Collection function employees comply with documentation requirements pertaining to Form 8765, as well as the Internal Revenue Manual (IRM) requirement to reject Forms 8765 that lack sufficient documentation.