GAO Reports  
GGD-95-137 May 02, 1995

Tax Administration: Administrative Improvements Possible in IRS' Installement Agreement Program

Pursuant to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) Installment Agreement Program, focusing on the: (1) increase in installment agreements since IRS streamlined the processing and approval of taxpayers' requests for installment agreements; (2) effects these changes had on IRS collection activities; (3) internal auditors' concerns regarding these changes; (4) information that IRS provides taxpayers on their liabilities under installment agreements; and (5) administrative practices that could improve the installment agreement program.

GAO found that: (1) the 2.6-million new installment agreements approved in fiscal year (FY) 1994 represented a 136-percent increase over the number of FY 1991 installment agreements; (2) the amount of taxes paid through new installment agreements increased 135 percent between FY 1991 and 1994 and accounted for 33 percent of the delinquent taxes paid in FY 1994; (3) installment agreement program changes have affected IRS collection activities by reducing Automated Collection System collections and the routine collection process' workload; (4) internal IRS auditors have raised concerns about the ease of entering into installment agreements and IRS failure to instruct taxpayers to amend their withholding or estimated taxes to prevent future delinquencies; (5) IRS may be permitting financially capable taxpayers to avoid paying their tax debts in one on-time payment and to accumulate tax debts by adding new tax balances to existing agreements; (6) IRS is taking steps to reduce the problems the auditors identified; and (7) administrative changes to improve the installment agreement program and reduce costs include informing taxpayers of the applicable penalties and interest that will be added to their installment agreements, allowing taxpayers to make electronic direct debit payments, and sending some default notices by regular mail instead of certified mail.

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