TAP 04-037

Low Dollar Balance Due Abatement

Statement of Issue:

In July 2001, the Internal Revenue Service computer program was updated to permanently abate the portion of the tax, penalty , and interest that remains unpaid when the amount is less than $5.00. Since that time, costs of processing notices to taxpayers on balance due accounts has increased

Proposal:

Increase the tolerance level to $25.00 and update the notices informing taxpayers of changes to their account using a statement similar to the current notice for balance dues of less than $5.00.

Compliance functions in both W&I and SB/SE reviewed the proposal but do not plan to implement the recommendation. A cost analysis of IRS Balance Due Notices showed the cost of a single notice ranging from 45 cents to $4.79 depending on the type of notice. The cost of administering the account increases if more than one balance due notice is sent from $5.68 to $12.33 depending on the amount of review of notices required. IRS also incurs additional cost in administering the account. In addition, IRS analyzed the number of accounts with balance dues less than $25.00. Based on the volume of accounts and the costs of processing, IRS would loose revenue by raising the abatement amount to $25.00. Further research will be conducted to determine if the abatement amount should be raised higher than $5.00 but less than $25.00.