Rising requests for agreements between taxpayers and the IRS to settle tax liabilities have increased backlogs and delayed responses in the face of a down economy and decreasing resources.
So-called offers in compromise – OICs — are agreements that settle tax liabilities for payments of less than the full amounts owed.
TIGTA found that the IRS did not always contact taxpayers when promised, and inventory backlogs caused processing delays, leading to taxpayer uncertainty.
The combined impact of a weak economy and IRS efforts to promote the OIC increased the number of OIC requests by 28 percent from fiscal 2007 through 2011, but available resources have decreased, TIGTA said.
It said that in 73 out of 99 offers it reviewed that the IRS failed to contact the taxpayer by the promised date, and it estimates that 9,509 taxpayers who submitted offers from July through December 2010 may not have been contacted when promised.
Further, as of October 25, 2011, there were 7,472 unassigned offers in holding queues awaiting assignment to OIC staff, and 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, the IG said.
In response to the report the IRS said it plans to keep taxpayers better informed by increasing the amount of time they tell taxpayers it will take until they are contacted as well as issuing an interim letter if contact is not made within the specified time. It also said it plans to initiate reassignment of offers between the sites as needed.
