The Treasury Inspector General for Tax Administration (TIGTA) recently issued a report addressing the IRS’s handling of tax offers in compromise (OIC). An OIC is a proposed agreement between a taxpayer and the federal government that settles a tax liability for payment of less than the full amount owed. The TIGTA summarized its findings as follows:
TIGTA found that the IRS did not always contact taxpayers when promised, and inventory backlogs caused processing delays. …
TIGTA reviewed a statistically valid sample of offers and found the IRS did not process all offers timely. In 73 (74 percent) of 99 offers, the IRS failed to contact the taxpayer by the promised date. TIGTA estimates that 9,509 taxpayers who submitted offers between July 1 and December 31, 2010, may not have been contacted when promised.
Additionally, as of October 25, 2011, there were 7,472 unassigned offers in holding queues awaiting assignment to OIC staff. TIGTA found that one processing site had more than four times as many unassigned offers from self-employed taxpayers compared with the other site, and 37 percent of the offers were more than six months old.”
Delays are obviously frustrating to the taxpayers involved. However, delays also provide uncertainty to the taxpayers involved, who are unable to proceed with other transactions until they know whether their tax liabilities will be resolved.
TIGTA’s data covered data through December 31, 2010. The TIGTA concluded that one reason for the large backlog was the poor economy, which made it more difficult for taxpayers to pay what the IRS thought was owing.
The TIGTA made suggestions for improving the large backlog. The IRS agreed with all recommendations.