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GAO-03-318R 1 (2003-01-03)

handle is hein.gao/gaobaamde0001 and id is 1 raw text is: I Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 January 3, 2003 The Honorable Bob Wenzel Acting Commissioner of Internal Revenue Internal Revenue Service Subject: Minimizing Inappropriate Levies in IRS's Federal Payment Levy Program Dear Mr. Wenzel: Each year, thousands of taxpayers who owe delinquent federal taxes receive billions of dollars in federal payments. To help the Internal Revenue Service (IRS) collect these delinquent taxes more effectively, the Congress passed the Taxpayer Relief Act of 1997, the provisions of which authorized the establishment of the Federal Payment Levy Program (FPLP), which allows IRS to continuously levy up to 15 percent of the payments made to delinquent taxpayers. The Department of the Treasury's Financial Management Service (FMS), which receives payment records from and makes payments on behalf of most federal agencies, collects the continuous levy from the federal payment after IRS has authorized the levy. Subsequent payments are continuously levied until such time that the tax debt is paid or IRS releases the levy. In a prior report, we noted that inappropriate levies-which subsequently must be refunded--could undermine support for the continuous levy authority, by generating negative public reaction to the program and frustrating taxpayers whose payments are inappropriately levied.' Since October of 2001, the inclusion of Social Security recipients and others in the levy program has extended levy use substantially. This expansion heightens the importance of minimizing inappropriate levies. IRS built controls into FPLP to prevent levying taxpayers who are not subject to levy and to protect against levying payments for more than taxpayers owe. Under FPLP, FMS continuously levies a taxpayer's account based on the taxpayer's account balance in FMS's records. IRS updates FMS's records on the taxpayer's account from its master file once every week,2 except during system maintenance and sends FMS 'See U.S. General Accounting Office, Tax Administration: IRS' Levy of Federal Payments Could Generate Millions of Dollars, GAO/GGD-00-65 (Washington, D.C.: Apr. 7, 2000). 2The master file maintains an account for every taxpayer who files a return. The account maintained on the master file includes records related to that taxpayer over the years (returns filed, payments made, additional taxes assessed as a result of audit, etc.). GAO-03-318R IRS's Federal Payment Levy Program

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