Legislative Change Needed to Enable IRS to Assess Taxes Voluntarily Reported by Taxpayers in Bankruptcy

摘要

The Bankruptcy Reform Act provides qualified debtors with certain protections from creditors--including IRS. The act restricts IRS' authority in many cases to assess, collect, or recover a claim against an individual or a business during bankruptcy proceedings. Because of this restriction, IRS must process returns from bankrupt taxpayers manually rather than through its automated processing system. GAO believes that the Bankruptcy Act should be amended to allow assessment of the taxes that bankrupt taxpayers report on their returns. Allowing IRS to assess--but not collect--these taxes would enable bankrupt taxpayers to be protected at less cost than is presently being incurred.