Unpaid Payroll Taxes
Businesses withhold payroll taxes from employees' salaries but do not always send the money to the Internal Revenue Service (IRS). At September 30, 2007, over 1.6 million businesses owed over $58 billion in payroll taxes. IRS has powerful tools at its disposal to prevent the further accumulation of unpaid payroll taxes and to collect the taxes that are owed, but does not always use these tools fully and effectively. To make better use of its existing enforcement tools and to augment these tools, GAO recommended that the Commissioner of Internal Revenue
- develop a process to monitor collection actions taken by revenue officers against egregious payroll tax offenders to ensure collection actions appropriately utilize all available collection tools contained in the service's policies;
- review current case prioritization and assignment practices to determine if IRS's enforcement and collection procedures could be enhanced by requiring, to the maximum extent feasible, businesses with egregious payroll tax debt and responsible owners and/or officers with a trust fund penalty assessment be treated as a single unified and coordinated collection effort assigned to a single revenue officer;
- develop and implement procedures to expeditiously file a Notice of Federal Tax Lien against property as soon as possible after payroll tax debt is identified and ensure liens are filed on both businesses with unpaid payroll taxes and owners and/or officers assessed a trust fund recovery penalty;
- develop and implement procedures to monitor and report on revenue officers' compliance with the new trust fund penalty assessment time frames to ensure revenue officers are making trust fund penalty determinations and assessments in a timely manner;
- develop performance goals and measures that specifically evaluate the accumulation of unpaid payroll taxes by business, the extent and timeliness of trust fund recovery penalty assessments, and the effectiveness of actions taken to collect unpaid payroll taxes and trust fund recovery penalty assessments; and
- work with states that have developed procedures for matching financial accounts to tax debts to evaluate the potential for IRS to either develop and implement similar measures or partner with states that currently have that tool to leverage their efforts to assist revenue officers in identifying a business's leviable assets.
These actions would provide for the more effective use of IRS's full range of available enforcement tools against egregious payroll tax offenders and would enhance its existing enforcement tools to strengthen payroll tax compliance.
^ Back to topKey Reports
- Tax Compliance: Businesses Owe Billions in Federal Payroll Taxes
- GAO-08-617, July 25, 2008
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 75 pages) Accessible Text Recommendations (HTML)
