Management report: improvements needed in IRS's internal controls

Original publisher: Washington, DC: U.S. Govt. Accountability Office, [2007] OCLC Number: (OCoLC)155852555 Excerpt: ... or to generate a refund to the taxpayer. In each of these six cases, IRS relied on its automated systems to automatically transfer the credits. However, the automatic transfers did not occur within 30 days because the taxpayers ' accounts contained 24 freeze codes that prevented the automatic transfers. The presence of these freeze codes required IRS personnel to manually review and, as needed, resolve issues with the taxpayer's account before the credits could be applied to other outstanding tax period balances owed by the taxpayer. IRS eventually resolved the issues on the accounts of each of these six taxpayers and did not assess additional taxes against any of them. However, because IRS did not have procedures in place to promptly research and properly apply the credits, it did not release the liens against these taxpayers within the statutorily required 30 days. Timely Recording of Discharge by Bankruptcy Court Taxpayers may have their tax liability fully discharged through bankruptcy filings. When a taxpayer is discharged of his or her tax liability by the bankruptcy court and the court notifies IRS, employees in IRS's Centralized Insolvency Office ( CIO ) are responsible for recording the discharge on the taxpayer's master file account or to manually record the lien release in ALS. As mentioned earlier, IRS's lien release process relies heavily upon its automated computer systems. Consequently, the Centralized Insolvency Office must record this information timely in order for IRS to complete the lien release process within 30 days. In reviewing IRS's lien release test results, we identified five cases in which IRS did not timely release the lien because it did not timely record that the taxpayer had been 25 fully discharged of his or her tax liability by the bankruptcy courts. According to IRS, the lien release was delayed because Cent...