May 4th 2012
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By AccountingWEB Staff
While the IRS has been successful in promoting the Offers in Compromise program that allows taxpayers to settle their tax bills for less than the full amount, the response has created a backlog.
The backup means taxpayers are waiting too long to hear back from the IRS on their offers, according to a new watchdog report. IRS promotion efforts and a poor economy have led to a 28 percent increase in Offer in Compromise requests between the fiscal years 2007 and 2011, according to a report released Thursday by the Treasury Inspector General for Tax Administration, or TIGTA.
The IRS made the forms simpler, more accessible and promoted the program through You Tube videos and other methods. Over the same time period, though, the number of IRS employees processing Offers in Compromise dropped by 10.
“Delays could impact financial and business decisions because taxpayers do not know if or when their tax liabilities will be resolved,” the report said, noting that the Offers in Compromise program is considered one of the most serious problems facing taxpayers.
After reviewing a statistically valid sample of offers, TIGTA concluded:
- In 74 percent of offers, taxpayers were not contacted by the date promised.
- As of October 25, 2011, 7,472 offers were on hold, awaiting assignment to a staff member.
- At one processing site, 37 percent of the offers were more than six months old. These offers were from self-employed taxpayers, and are typically more complicated and are assigned to more experienced staff.
The report said, “Because of the long wait for the offers to be processed, the varying timelines depending on the type of taxpayer, and the location where the offer is assigned, taxpayers are not always being treated equitably.”
TIGTA recommended the IRS put performance measures in place for its streamlined offer procedure. In those cases, IRS staff can make taxpayer contacts by phone rather than mail to expedite the Offer in Compromise request.
The IRS has agreed with the audit recommendations and will take the following actions:
- Better inform taxpayers by lengthening the time by which they will be contacted or issued an interim letter.
- Initiate reassignment of offers between IRS sites as needed.
- Apply most aspects of the streamlined process to the remainder of the Offer in Compromise cases.
Read the full report.