TIGTA Finds Problems with IRS Hardship Program

Due to our nation’s economic downturn, the number of taxpayers who come to the IRS with a documented inability to pay their back taxes has tripled from calendar year 2011 to 2012.  The IRS typically places these accounts into Currently Not Collectible (CNC) status where they remain, protected from IRS enforced collection activity, until the taxpayer’s financial situation improves.

Closing taxpayers’ balance due accounts as currently not collectible is a high-risk action because the balances due from the taxpayers may never be collected.

~ TIGTA 2012-40-108

A recent TIGTA study shows that IRS personnel are approving cases for CNC status incorrectly and without managerial approval.  What this means for the IRS is there are enormous tax collection opportunities being missed.

But this report also has implications on the taxpayer.  Managers often check the numbers and check for documentation to support claimed expenses.  When a case is slipped into CNC status without managerial approval, these details can easily be missed.  And if the oversight is caught at a later date, the IRS has a bad habit of pulling cases out of CNC status without explanation or warning.  Furthermore, if the case is not coded correctly (also a manager function), it will not be protected from enforced collection activity such as wage garnishment, bank levy, and asset seizure.

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