TIGTA audits effectiveness of the Federal Payment Levy Program [Audit Report No. 2009-40-031]:
Mike Habib, EA Tax Relief & Tax Problem Resolution
An IRS program to collect delinquent taxes through the use of levies needs some changes in order to reduce taxpayer burden, the Treasury Inspector General for Tax Administration (TIGTA) said in a recent audit.
IRS is permitted to continually levy against certain types of federal government payments issued to taxpayers and contractors with outstanding tax debts. For tax debts, a levy is the legal process by which IRS orders a third party to turn over property in its possession that belongs to the tax debtor. This is done through the Federal Payment Levy Program (FPLP).
The program is an automated system that matches IRS records against those of the Federal Management Service–the Treasury Department bureau charged with implementing the government’s delinquent debt collection program–to locate federal payment recipients who have delinquent income tax debts. In fiscal year 2004, IRS collections on delinquent taxes through the FPLP totaled $114 million. In FY 2007, the amount collected rose to $345 million.
“However, even with this growth, IRS management still could do more to reduce the cost of collection and maximize tax collections through the FPLP while preventing hardships on low-income taxpayers,” TIGTA said. The audit identified areas in which the FPLP needed improvement and highlighted that “some low-income Social Security beneficiaries are experiencing hardship due to the FPLP.” This was attributable, in large measure, to the complete removal of an income threshold that previously had been in place, TIGTA said.
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