The Treasury Inspector General for Tax Administration (TIGTA) in its recent report found that the IRS may have improperly issued levies on hundreds of taxpayers,
What TIGTA investigated
The IRS must notify taxpayers and their authorized representatives of the right to a CDP hearing prior to issuing levies and to suspend levy action during the time frames required pursuant to Internal Revenue Code Section 6330.
TIGTA reviewed various levies issued to taxpayers during the period October 1, 2017, through September 30, 2018.
When taxpayers do not pay delinquent taxes, the Internal Revenue Service (IRS) has the authority to work directly with financial institutions and other third parties to seize taxpayers’ assets. This action is commonly referred to as a “levy”.
The first step in the collection process involves mailing taxpayers a series of notices asking for payment of the delinquent taxes. The final notice is the CDP notice. If taxpayers do not comply, the IRS may take collection actions to collect delinquent taxes. The IRS may collect monetary assets from the taxpayer by issuing levies through the Automated Collection System (ACS), Field Collection, or one of the IRS’s Automated Levy Programs (ALP).
Taxpayer rights prior to IRS levy action
The Internal Revenue Code (I.R.C.) generally requires the IRS to provide taxpayers notice of its intention to levy at least 30 calendar days before initiating the levy action.
The IRS Restructuring and Reform Act of 1998 expanded upon this notice requirement by creating I.R.C. Section (§) 6330, which requires the IRS, in addition to giving the taxpayer 30 calendar days’ notice of the IRS’s intent to levy, to also notify taxpayers of their right to request a Collection Due Process (CDP) hearing at which taxpayers can raise various issues with respect to the proposed levy (CDP rights).
The provisions require that all levy actions be suspended during the 30 calendar days prior to the levy for those periods that are the subject of the requested hearing, as well as throughout the entire period that a hearing (including any appeals from the hearing) is pending. CDP rights include the right to a fair and impartial hearing before the Office of Appeals.
Levies improperly issued by automated levy programs (ALP)
TIGTA determined that the IRS’s controls in place for ensuring that CDP notices were issued timely did not always work.
The review also identified that ALP levies were improperly issued when taxpayers had a pending CDP hearing.
Levies improperly issued by automated collection system (ACS)
TIGTA’s review found some cases in which ACS levies were issued without notifying taxpayers of their CDP rights and in other cases levies were issued while a CDP hearing was pending.
Levies improperly issued by field collections
TIGTA’s review of levies issued by revenue officers in Field Collection during FY 2018 showed that taxpayers’ rights were not always protected for both systemically and manually issued levies.
Hundreds of taxpayers were not notified of their CDP rights prior to levy issuance, or were not timely notified of their CDP rights.
IRS’ response
The IRS agreed with TIGTA’s recommendations but noted that levies were issued without errors in the vast majority of incidents.
The approximately 500 incidents of improperly issued levies are out of a population of almost 3.5 million taxpayers.