Thursday, July 06, 2000
IRS owes millions, audit says
Overpayments not credited to accounts
By Curt Anderson
The Associated Press
WASHINGTON — Thousands of taxpayers overpaid $25 million in income taxes that should have been credited to their accounts or refunded by the Internal Revenue Service, according to an independent audit.
The audit cites computer problems as the main culprit.
Thousands more individuals, families and businesses forfeited their rights to a total of $335 million in refunds or credits, or were at risk of doing so. These taxpayers failed to file late tax returns in time to qualify for the money.
The IRS says it has returned or credited the money owed and is fixing the problem. Still, some taxpayers mistakenly got IRS notices demanding taxes already paid or were forced to deal with IRS liens.
The audit by the independent Treasury Inspector General for Tax Administration, David C. Williams, examined 426,000 tax payments, totaling $360 million, from 240,000 taxpayers that had been transferred as of March 1999 to the IRS Excess Collections Account. Payments are deposited into this account when the IRS is unable to match them with a tax return, usually because it is late.
Of the $360 million, the audit found that:
About $25 million, or 29,820 payments, immediately should have been refunded or credited to taxpayers who filed returns late but within the legal requirement, generally three years after the initial due date.
• Taxpayers forfeited $162 million, or 191,700 payments, because they did not get a return to the IRS within the three-year window necessary to claim a refund or credit.
• No tax return had been filed for $173 million, or 204,480 payments. But these taxpayers still could get their credit or refund if they took action quickly.
The chief culprit is the main IRS computer, which is not linked directly to computers in the agency's 10 service centers, where records of payment transfers to the excess account are kept.
IRS Commissioner Charles Rossotti responded in a letter that computers are being modified to prevent transfers into the excess payment account until the three-year refund limit has expired.
Mr. Rossotti also said the IRS will send “periodic letters to taxpayers with credits to remind them to file a return to receive a credit or refund.”
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