Tax Administration: Increasing EFT Usage for Installment Agreements Could BenefitIRS

摘要

For years, the Internal Revenue Service (IRS) has allowed taxpayers to paydelinquent taxes in installments, primarily through a paper-based system in which IRS mails monthly statements to taxpayers, who, in turn, are to mail monthly payments back to IRS. In fiscal year 1997, taxpayer defaulted on $6.5 billion in installment agreements--almost as much as the $6.7 billion IRS collected through installments. Because of your interest in improving IRS' ability to collect delinquent taxes, you asked us to identify the best practices currently used by delinquent debt collectors and analyze them to determine if they offer IRS any prospects for improving its collection efforts. This report discusses one such practice, specifically, the use of electronic funds transfer (EFT) for making installment tax payments. EFT is a means of conducting financial transactions by using computers and electronic technology to transfer money instead of using checks and other paper documents. IRS currently accepts EFT payments from taxpayers with installment agreements, but only a small percentage of taxpayers use this method. In this report, we (1) describe some of the uses and benefits of EFT, (2) discuss the experiences of two states that use EFT in their tax installment agreement programs and the benefits they have obtained, and (3) discuss the potential benefits IRS might realize by increasing EFT usage in its installment agreement program.