DOCUMENT RESUME 03103 - rA2173307] r rocedures Used by the Internal Revenue Service to Provide Taxpayers with efunds Not Initially Delivered by the Postal Servicel. FGMSD-77-9; B-137762. Agust 4, 1977. 6 pp. Report to Jerome urtz, Commissioner, Internal Revenue Service; by D. L. Scantlebury, Director, Financial Studies Div. and General Management Issue Area: Accounting and Financial Reporting (2800). Contact: Financial and General anagement Budget Function: Miscellaneous: Financial Studies Div. Management and Information Systems (1002). Organization Concerned: Department of congressional Relevance: Rouse Committeethe Treasury. on Oversight Subcommittee; Senate Committee ays and Means: Taxation and Debt Management Generally on Finance: Subcommitcee. Internal Revenue Service (IRS) procedures adequate for providing undelivered are generally refunds to taxpayers who fis income tax returns in the year following refunds were undelivered. owever, IRS the one in which the needs to take ction o deliver unclaimed tax refunds +o some taxpayers who may not file tax returns in succeeding years. Findings/conclusions: December 31, 1975, IRS was holding about As of belonging to nearly 200,000 individual $25 million in refunds checks were returned as undeliverable taxpayers whose refund by the Postal Service. Followup letters have been partially taxpayers ent.tled to tax refunds. Of successful in locating the 352,000 refund checks returned in 1975, IRS was able to redeliver the checks to the taxpayers. However, 248,000, or 71%, of in cases where tax refunds are paid when taxpayers file their succeeding year returns, as much as a year could pass before the Procedures should be designed to locaterefunds are set-. RS taxpayers entitled to undelivered refinds a greater number of and to do it more promptly. Recommendations: The Commissioner Revenue Service should: (1) furnish the of the Internal individuals entitled to undelivered tax news media with lists of determine if information in the Social refunds; and (2) Security Administration's benefit file would be useful in locating undelivered tar refunds, and, 4 f so, individuals entitled to using such information. (SC) develop a procedure for UNITED STATES GENhRAL ACCOUNTING OFFICE WASHINGTQN, D.C. 2054 W PINANCIL AND DIVISION GEEZRL MANAGZ3SNT TUDI ,f)(j ia77 O B-137762 Mr. Jercme Kurtz Commissioner, Internal Revenue Service Department of the Treasury Dear Mr. Kurtz: This report presents the results of our evaluation Internal Revenue Service (IRS) procedures for providing of taxpayers with refunds not initially delivered by the Postal Service. We evaluated the procedures at several Department of Treasury activities, including Treasury' s regional disbursing center in Birmingham, Alabama; IRS headquarters in D.C.; IRS service center in Chamblee, Georgia; and Washington, IRS district office in Atlanta, Georgia. IRS procedures are generally adequate for providing undelivered refunds to taxpayers who file income tax returns in the year following the one in which the refunds were undelivered. However, IRS needs to take action to deliver unclaimed tax refunds to some taxpayers who may not file tax returns in succeeding years, such as retired, unemployed, or disabled individuals, or heirs of deceased individuals. We believe two relatively inexpensive procedures might help IRS to more promptly locate taxpayers entitled to refunds. One would involve use of the news media, a practice the State of Georgia has successfully used for several years. The other would involve the use of informa- tion in the benefit files maintained by the Social Security Administration. We are, therefore, recommending use these two procedures to the extent practical. that IRS Details of our findings and recommendations are presented in the following sections. FGMSD-77-9 B-137762 EXTENT OF UNCLAIMED-TAX REFUNDS-IN IRS'POSSESSION As of December 31, 1975, IRS was holding about $25 million in refunds that belonged to nearly 200,000 individual taxpayers whose refund checks were returned as undeliverable by the Postal Service. About 25,000 of these checks, valued at approximately $4.2 million, were being held Iy the Birmingham Regional Disbursing Center. The checks had been issued to taxpayers who filed their Federal income tax returns with either the Chamblee or Memphis IRS service center. The remaining tax refund checks were being held by the other Treasury regional disbursing centers. IRS PROCEDURES TO PAY FUNDELIVERABLE-REFUNDS Treasury' s regional disbursing centers issue checks for income tax refunds at the request of IRS service centers. Because the disbursing centers are custodians of the checks thay issue, the Postal Service returns to them any checks for tax refunds that candnt be delivered to taxpayers at addresses shown on the checks. When checks are returned as undeliverable, the regional disbursing enters redeposit the returned checks to the Treasurer's account on a weekly basis. IRS procedures then call for: -- Recording on the taxpayers' accounts the amounts of undeliverable checks, thereby insuring that the taxpayers receive the refunds in the event they file tax returns in succeeding years. -- Sending followup letters to taxpayers' last known mailing addresses advising them that the Postal Service had been unable to deliver checks for tax refunds and requesting confirmation of the correct mailing addresseen -2- B-137762 The regional disbursing centers are instructed to mail new refund checks to those taxpayers entitled to undelivered refunds, if such taxpayers are located through the followup letters or if they file subsequent returns. The amounts for undelivered refunds are then removed from accounts of the taxpayers issued the new refund checks, a procedure necessary to insure that the individuals do not receive duplicate payments. According to IRS officials, the followup letters have been partially successful in locating taxpayers entitled to tax refunds and numerous unclaimed checks have been remailed through this means. The followup letters are more successful in locating taxpayers who reside in areas with a high rate o theft, particularly from mailboxes. In explaining the reason for this, a Postal Service official said mail carriers were instructed not to leave letters obviously containing checks, especially the distinctive ones like tax refund envelopes, in unlock d mailboxes for patrons residing in such areas. He said, however, that the followup letters would be left in the unlocked boxes. The followup letters, along ith IRS procedures for annotating the taxpayers' accounts to show undeliverable checks, have permitted the redelivery of a substantial umber of the refund checks returned each year. For emple, the Postal Service returned over 32,00U refund checks in 1975, and IRS officials said that about 248,000, or 71 percent, of the checks were redelivered to taxpayers. IRS procedurei would be adequate to insure that tax- payers entitled to undelivered refunds eventually receive them, providing the taxpayers file returns in succeeding years. Based on information IRS provided us, however, it appears that about one-third, or about $8 million, of the remaining undelivered refunds could belong to individuals who may be retired, unemployed, disabled, or deceased. Tax returns are not always filed in succeeding years by many such individuals and, therefore, the annotation procedures do not always result in delivery of refunds to many tax- payers or their beneficiaries. -3- B-137762 Even if tax etunds are paid when taxpayers file their succeeding year returns, as much as a year could pass before they are sent. This long delay could impose undue hardships on low- and moderate-income taxpayers. ADDITIONAL-PROCEDURES-THAT COULD BL IMPLEMENTED As discussed below, IRS could implement two additional procedures to promptly locate taxpayers entitled to undelivered tax refunds. Use-of-news-media IRS regulations require that IRS service centers furnish each district office with an annual list containing the name and the last known address of any taxpayers whose income tax refund checks were returned as undeliverable. While the regulations allow the lists to be made available to the news media, they specify that this will be done upon request. At the RS national office, we were told IRS procedures provided for annual news releases informing the public that any taxpayers not receiving their refunds should contact IRS. However, since the news releases are prepared before the lists are available, they do not contain the names of individuals entitled to undelivered tax refunds. Officials at the Atlanta IRS District Office said that their office had never made the lists available to the news media because it was the district director's policy not tk solici. requests for the lists. Since IRS regulations are not generally known to the public, it is doubtful that the news media is aware of the existence and availability of the lists. Several years ago the State of Georgia began to all State newspapers annual lists containing thesending names and last known addresses of taxpayers entitled to undelivered State income tax refunds. A State official said most news- papers in the State were eager to publish the lists as a public service, especially lists containing names of tax- payers who reside in the papers' principal circulation areas. The official also said Georgia's experience in locating taxpayers by this means had varied somewhat over the years, but that for a representative tax year--1974-- it had resulted in delivery of approximately 30 percent, or about 500, of the returned checks. -4- B-137762 As IRS has readily available lists, by geographical regions, of individuals entitled to tax refunds, such lists should be made available to the news media especially to newspapers with State-wide circulation. Use of-Social Security Administration records The Social Security Administration provides benefits to employees who are retired and disabled, and to spouses and minor dependents of deceased taxpayers. It maintains automated benefit files containing the names, social security numbers, and addresses of individuals receiving the benefits. Treasury regional disbursing centers also maintain a copy of these benefit files for recipients residing in their service areas. IRS also receives an automated file from Treasury regional disbursing centers containing similar information on employees entitled to unclaimed Federal checks for tax refunds. As some of these individuals may also be recipients of social security benefits, it may be worthwhile for IRS to develop procedures to screen the social security benefit files for mailing addresses on any individuals on its unclaimed check lists. It appears that this could be done at very little cost, since the procedures would basically involve a matching process which could be done by automated data processing equipment. CONCL'YSIONS-AND-RECOMMENDATIONS Durin, 1975 a substantial number of individual tax refunds were undelivered and returned by the Postal Service. Under IRS procedures many of these individuals will eventually receive their money. However, some individuals will not receive their refunds at all. We believe improvements are needed and should be designed in IRS procedures to locate a greater number of taxpayers entitled to undelivered refunds and to do it more promptly. To accomplish this, we recommend that you: -- Furnish the news media with lists of individuals entitled to undelivered tax refunds. -- Determine f information in the Social Security Administraticn's benefit files would be useful in locating individuals entitled to undelivered tax refunds and, if so, develop a procedure for using such information. -5- B-137762 A draft of this report was reviewed by, and discussed with, IRS officials and their comments have been incorporated in the report. We are sending copies of this report to the House Committee on Appropriations; the House Committee on Government Operations and the Senate Committee on Governmental Affairs; the Joint Committee on Taxation; the Director, Office of Management and Budget; the Secretary of the Treasury; and Treasury s Directors of the Division of Disbursement and the Office of Audit. Thank you for the courtesies and cooperation extended our representatives. We would appreciate your comments and advice on any action taken or planned on the matters discussed in this report. Sincerely yours, D. L. Scantlebury Director -6-
Procedures Used by the Internal Revenue Service To Provide Taxpayers With Refunds Not Initially Delivered by the Postal Service
Published by the Government Accountability Office on 1977-08-04.
Below is a raw (and likely hideous) rendition of the original report. (PDF)