The amount of delinquent taxes on the Internal Revenue Service’s (IRS) records is growing and so is the amount classified as currently not collectible (CNC). At the end of fiscal year 1992, IRS' inventory of individual and business delinquent accounts totaled $130.6 billion. Because of overstatements in the inventory, the total does not reflect the true amount of delinquent taxes owed. IRS had classified as CNC and thereby suspended collection action on accounts totaling $52.4 billion, or 40 percent of the inventory. During fiscal year 1992, IRS classified over 1.2 million accounts totaling $9.5 billion as CNC. Unless the taxpayers make voluntary payments or claim refunds that IRS can offset, most of the CNC amounts will never be collected.

Because of the large amount of recorded CNC tax debt and the potential revenue losses, the Chairman of the Subcommittee on Oversight, House Committee on Ways and Means, requested that GAO determine whether IRS' CNC determinations were appropriate and whether IRS' efforts to monitor CNC accounts for future collection potential were adequate. This report focuses on individual taxpayer accounts that IRS classified as CNC because of the individuals’ financial hardship or because IRS was unable to locate or contact the taxpayers. These accounts make up about 90 percent of the total dollar amount of individual CNC accounts.

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