IRS Billings

I am awful about billing for my services. Too often I forget to charge for a form or realize that I missed tracking some time charges. But I don’t feel so bad now that I’ve learned that the IRS has the same problem.

The Economy Act, (Title 31, sections 1535-1536) gives US government agencies permission to provide goods and services to each other and be reimbursed for those goods and services. The Act requires that both direct and indirect costs be reimbursed from the receiving agency.

For fiscal year 2011, the IRS had 89 agreements. 74 were with other government agencies and 15 agreements were with non-Federal entities (state and foreign governments.) They collected about $90 million for their services. Unfortunately, they shorted themselves.

The Treasury Inspector General for Tax Administration (TIGTA) recently randomly reviewed 6 of the IRS’s agreements and found that in half of the transactions the IRS billed less than the cost involved. For those three agreements, the billings were short $28 million dollars. $26 million of the shortage were from an agreement with Financial Management Service for refund offsets. The FMS handles processing of refunds to pay for delinquent student loans, VA loans, and child support.

TIGTA also cited two other areas of concern. They found that the IRS didn’t follow their own procedures to calculate overhead costs in 4 cases. In two of those cases, overhead wasn’t taken into consideration. Finally, the IRS couldn’t provide supporting documentation for the labor costs they billed. In fact, there was no solid way to track labor costs and supervisors were estimating the costs in 2 cases.

The IRS has agreed with TIGTA’s findings and promises to do better. They will review all agreements and develop procedures and guidelines to better track their expenses. They will also work to better train employees in the systems to bill other agencies.

TIGTA Report 2012-10-176

McIntire Tax Center - on Facebook - on Google+ - or Twitter @ mactax.