The Treasury Inspector General for Tax Administration (TIGTA) has issued a report which concludes that trust fund recovery penalty (TFRP) actions were not always timely or adequate. Employers who do not withhold amounts from their employees’ salaries to cover individual income, Social Security and Medicare taxes (trust fund taxes) are subject to the TFRP, which is assessed by the IRS in order to recover the unpaid taxes. TIGTA conducted an audit to determine whether the Collection Field function was taking adequate and timely TFRP actions on trust fund cases.
TIGTA found untimely TFRP actions, expired assessment statutes, unsupported collectibility determinations, and incomplete TFRP investigations associated with an installment agreement and currently not collectible cases. Untimely or inadequate TFRP actions were found in 99 of the 265 cases reviewed in a statistically valid sample. For 59 of those 99 cases, the untimely actions averaged more than 500 days to review and process the TFRP assessment.
TIGTA recommended that the IRS emphasize to group managers their responsibilities to monitor TFRP cases and ensure that revenue officers take timely TFRP actions; enhance TFRP communication and training; ensure completion and adequacy of scheduled system improvements and take appropriate actions to implement the changes; and revise TFRP guidance regarding the accuracy of the collectibility determination support and controlling the completion of TFRP investigations when installment agreements or currently not collectible closures are approved. The IRS agreed with all recommendations and plans to take corrective actions (TIGTA Report: Trust Fund Recovery Penalty Actions Were Not Always Timely or Adequate, Ref. No. 2014-30-034, May 30, 2014.)
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