Report: IRS Must Enhance its International Collection Efforts
The Treasury Department, through the Treasury Inspector General for Tax Administration (“TIGTA”) has highlighted what the U.S. government should be doing in the 21st century to collect U.S. taxes owed under U.S. law, against overseas taxpayers and their worldwide assets. The highlight of the report is set out below and the complete report of 12 Sept. 2014 can be read here TIGTA Report:
WASHINGTON – As international tax noncompliance remains a significant area of concern for the Internal Revenue Service (IRS), its collection efforts need to be enhanced to ensure that delinquent international taxpayers become compliant with their U.S. tax obligations, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).
The overall objective of TIGTA’s review was to evaluate the IRS’s collection efforts on delinquent taxpayers residing in foreign countries. Income received from international transactions of these taxpayers is subject to U.S. tax rules and reporting requirements.
“The IRS faces many unique challenges in collecting taxes from international taxpayers,” said J. Russell George, Treasury Inspector General for Tax Administration. “In today’s global economy, businesses and individuals are becoming more and more involved in international transactions. Accordingly, the role of an international revenue officer is very important in helping taxpayers comply with the tax laws and improving international tax compliance.”
TIGTA’s review found that ineffective management oversight has contributed to several control weaknesses in the International Collection program. Moreover, the IRS does not have reliable statistics on the rate of noncompliance of these taxpayers with their U.S. tax obligations.
For example, International Collection does not have:
• Adequate policies, procedures, position descriptions, or the training needed to ensure that international revenue officers can properly work International Collection cases.
• A specific inventory selection process that ensures that the International Collection cases with the highest risk are worked.
• Performance measures and enforcement results reported separately from Domestic Collection.
• A process to measure the value of the “Customs Hold” as an enforcement tool.
TIGTA recommended that the IRS: 1) develop a formal International Collection Strategic plan; 2) update International Collection guidance to provide specific policies and procedures to international revenue officers; 3) evaluate and update the current international revenue officer position descriptions; 4) develop a formal International Collection training plan using Subject Matter Experts to develop and teach international specific courses; 5) evaluate the International
Collection inventory selection criteria; 6) develop separate performance measures and track specific enforcement results for International Collection; and 7) continue to pursue direct access to the Customs Hold information.
IRS officials agreed with all of TIGTA’s recommendations and have taken or plan to take corrective actions. However, while the IRS has implemented some corrective actions to improve the selection of International Collection inventory, develop separate performance measures, and track enforcement results, TIGTA does not believe that the IRS’s completed corrective actions fully addressed the recommendations.
It seems that every time TIGTA issues a report, and demands the IRS modify their methods and procedures, the IRS takes action. If the information and premises in the TIGTA report are valid, then the IRS changes in policy can be for the good.
The IRS has already dedicated tremendous resources to the area of international taxation. It will be interesting to see if the IRS will dedicate even more resources to this area in response to the TIGTA report?
I have posted a number of posts related to the enforcement and collection of taxes against taxpayers residing overseas, including:
How will the IRS collect tax and penalty assessments against former USCs and LPRs who live exclusively outside the U.S.?, posted 8 October 2014.
U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Legal Limitations, posted 5 July 2014
