TIGTA: IRS Automated Non-Master File Rife with Errors

Chris Gaetano
Published Date:
May 31, 2017

The Treasury Inspector General for Tax Administration (TIGTA) said in a recent report that the IRS's Automated Non-Master File, which provides information regarding individual and business taxpayer accounts that, because of system limitations, cannot be processed through the Master File, contains numerous calculation errors that have resulted in incorrect assessment of penalties for thousands of accounts. 

Because of these errors, the IRS did not assess Failure to File penalties totaling more than $1.7 million on 85 open accounts, overassessed Failure to Pay penalties totaling $88,576 on 153 accounts and underassessed Failure to Pay penalties totaling $354,153 on 227 accounts. 

TIGTA also said that the IRS gave out $122,041 worth of tax credits when the taxpayers, themselves, had unpaid tax liabilities on another Automated Non-Master File account. At the same time, the IRS identified 420 open accounts and 399 closed ones for which the IRS failed to correctly apply $1.4 million in payments, instead posting the payments to the taxpayers' other Master File accounts with a balance due. 

Finally, according to TIGTA, there were 360 accounts where the Collection Statute Expiration Dates did not match information on the Master File, 560 accounts where the address did not match and 116 accounts in which the taxpayers' designated representative information did not match. 

"These discrepancies can result in taxpayers and their representatives not receiving notices as required or the IRS accepting a payment for a balance due that is no longer legally owed," said TIGTA. 

TIGTA recommended that the IRS correct the Automated Non-Master File computation of Failure to File and Failure to Pay penalty and assessment programming errors; establish processes to ensure that payments are correctly applied to Automated Non-Master File accounts; and establish processes to periodically verify the accuracy of taxpayer information on the Automated Non-Master File to the information on the Master File. The IRS agreed with all these recommendations and plans to request programming changes to improve accuracy. It also updated guidance to improve manual processes like penalty computations. 

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