Posted On June 02, 2015

TIGTA criticizes IRS premature closing of some collection cases

The Treasure Inspector General for Tax Administration (TIGTA) has come out with another report critical of the internal operations of the Internal Revenue Service. It is reported that some collection employees of the IRS do not take all necessary steps to determine whether the  agency could collect the debt before closing out the file. The report found that, in a sample of 162 corporate collection cases, the IRS agents did not complete the proper collection protocol in about 15 percent of the cases. The study is an average sampling, and for several reasons, is relevant to all taxpayers, including those in Nevada.

The extent of the problem can be seen, for example, by the fact that in 2013 the agency closed out 264,840 corporate or business tax modules involving about $4 billion. The cases were closed with the notation of CNC-defunct, meaning that they were currently not collectible.  According to the report, IRS employees did not always obtain the necessary financial information or fully research the companies prior to closing out the case.

These defective procedures were signed off by the employees’ supervisors. Agency regulations specify a full protocol of procedures that must be conducted prior to closing out a company on the basis of CNC-defunct. Due to the findings, TIGTA has recommended proper training of IRS personnel, including field collection employees and managers.

That is a conclusion that one would expect to be a minimum requirement for employees to be authorized to act on such matters. One of the key things that the collections employees are looking for with respect to businesses nationwide, including in Nevada, is the situation where employment tax deposits may have been missed. The IRS responded to TIGTA by suggesting that it is coming up with special procedures to focus in on employment taxes prior to a company being financially defunct.

Source: accountingtoday.com, “IRS May Be Closing Corporate Tax Debt Cases Too Soon“, Michael Cohn, May 27, 2015