IRS May Expand Holds on Tax Refunds for Delinquent Taxpayers

The Internal Revenue Service is considering expanding a program under which it delays tax refunds for up to six months for delinquent taxpayers.
A new report released Tuesday by the Treasury Inspector General for Tax Administration noted that the IRS has the authority to delay issuing income tax refunds for up to six months while it investigates tax return delinquencies from other tax years. Holding the tax refund encourages taxpayers to resolve their delinquent filing obligations earlier, the report noted.
In 2012, the Delinquent Return Refund Hold Program collected nearly $242 million, which was applied to balances due on delinquent returns. From 2008 to 2012, the program held an average of 156,422 tax refunds per year. During that same period, the program secured an average of 64,222 returns from taxpayers per year and coordinated with the IRS’s Automated Substitute for Return program to prepare and post an additional 117,895 substitute returns per year.
IRS management had earlier considered expanding the program by lowering the dollar threshold required to put a tax refund on hold. The exact amount of that threshold and where it would be expanded were redacted from the public version of the report. However, the IRS has not expanded the threshold because of limited resources.
Under one change proposed by the IRS in 2009 for reducing the tax gap and bringing more taxpayers into compliance, approximately 50,000 additional refund returns would have been included in the program that year, adding potential revenue of $21 million, or $105 million over a five-year period.
Call Jeffrey R. Siegel, your Kansas City Tax Attorney, at (913) 735-4829 to assist your clients with getting their tax liabilities under control.