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Treasury Inspector General Finds Good News, Bad News in Audit of IRS Tax Lien Procedures

The Treasury Inspector General for Tax Administration (TIGTA) says the IRS gets a mixed report card when it comes to notifying taxpayers an IRS lien has been filed against them.

The audit looked at Form 668(Y)(c), Notice of Federal Tax Lien or NTFL. When the form has been filed against taxpayers, the IRS must notify them in writing within five business days, using the taxpayer’s last known address. A taxpayer’s right to appeal the notice in a timely fashion may be jeopardized if the notification procedure isn’t carried out.

Using a sample of NTFLs from July 1, 2014 to June 30, 2015, the audit examined notices that were sent out successfully – and those that had problems due to address issues.

TIGTA found the sample of successful NTFLs had been mailed out in a timely manner and had been sent to the correct addresses. The mailings included the taxpayers’ appeal rights as well as the lien notice.

However, in looking over 162 undelivered lien notices, TIGTA identified nine cases where the taxpayers didn’t get the notice because the NTFL had been sent to the individual’s old address – even though the IRS computer system listed the newer, last-known address. In seven of those cases, employees had not obtained a secondary address for the spouses.

The IRS did reissue lien notices in three cases when the original mailing came back undelivered, and the remaining six NTFLs were also reissued. However, TIGTA noted that all nine cases “involve potential legal violations because the IRS did not meet its statutory requirement to timely send lien noticed to the taxpayer’s last known address.”

IRS regulations require that a taxpayer’s representative be supplied with copies of all correspondence with the taxpayer. However, the audit found that in six of the 37 cases sampled that involved a taxpayer’s representative, the IRS failed to notify the representative of the NTFL filings. TIGTA estimates more than 22,000 taxpayers may have been affected by this action alone.

Recommendations

TIGTA recommended that the applicable division director:

  • Determine if a secondary address for a spouse can be uploaded into the IRS computer system for NTFLs with joint tax liabilities;
  • Require employees to research and obtain a last known address for the secondary spouse in cases of joint liability;
  • Make procedures pertaining to courtesy copies of lien notices applicable to Automated Collection System employees; and
  • Remind workers to update the mail status of the lien notice with the appropriate transaction code and action code combination.

The IRS agreed with the findings and all the recommendations of the report.

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.

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