Taxation & Estate Planning

Welcome to Tax Collection Tyranny in the Computer Age

By Darrin Mish

A huge percentage of all individual tax returns processed by the Internal Revenue Service's modernized account information computer system. Known as the Customer Account Data Engine, or CADE. This system is the centerpiece of modernization efforts at the IRS. CADE is handling significantly more tax returns each year. CADE, which is at the core of the effort to replace many of the agency's aging systems, dramatically speeds up internal IRS processing, permitting taxpayer accounts to update on a daily basis. This helps the IRS better administer the nation's tax system. The IRS is rolling out CADE in a series of "releases," each improving on and adding to the system capabilities. CADE was envisioned to replace the legacy Master File system, parts of which date back to the Kennedy Administration and will eventually house the account information of more than 200 million individual and business taxpayers.

The IRS will process nearly 140 million individual tax returns in 2008 and collect approximately $2 trillion in federal government revenue with the help of this system. Once processed by CADE returns are then analyzed by the computer system and compared against IRS data. As the computer processes each return error notices, balance due statements and audit alerts are all automatically generated. Each return requiring further collection is placed into a "notice queue" to receive a series of timely notices, each designed to increase compliance. If the computer notice is not successful in collecting past due tax or encouraging the taxpayer to file past due returns, the account is then assigned to the automated collection system (ACS), or in more extreme cases assigned to an IRS agent for collection.

Wage and bank account levies as well as federal tax liens can all be issued through the computer system. This highly impersonal way of enforcing the collection of taxes is often problematic and compounded by the "not so friendlier" IRS agents that man the phones at call centers. It's not an uncommon experience for a taxpayer to get lost in this complex "maze" and the pure frustration can become maddening. Often the frustration factor alone results in increased collection by the IRS because it's simply easier and more time efficient for some taxpayers to pay the computer generated bill, rather than fight it, even when the IRS is wrong. While the automation of an agency that employees nearly one million people makes sense from an efficiency standpoint, it likely spells continued frustration from a "customer service" standpoint. Taxpayer disagreements with computer notices and errors inevitably mean the involvement of a real live IRS agent after weeks or even months of frustrating phone calls.

Furthering taxpayer frustration as time passes, interest and penalties are accumulating. A simple tax problem can become a complex tax problem at blinding speed. Unfortunately the procedural steps to exercising these rights are often confusing and further must be implemented in a short period of time (usually 30 days or less). A competent professional can save you time, stress and money. Why? A tax professional deals with the IRS and taxpayer problems all day, every day. Most taxpayers only have limited contact with the IRS regarding their own personal circumstances. A competent tax professional on the other hand has seen a wide variety of tax problems regularly. In the long run you'll spend less time and SAVE money by hiring a competent professional to handle your tax problem, even the "minor" ones. Plus you'll have peace of mind and sleep a lot better each night. Why not give us a call tollfree at (888) 438-6474? We represent taxpayers in all 50 states and around the world.

Full post as published by IRS Problem Solver Blog on September 25, 2008 (boomark / email).