The Associated Press reports that “The federal government forgos the collection of millions of dollars owed every year because the IRS computers don’t record the interest due on penalties for unpaid taxes, a Treasury Department auditor said. IRS computers keep track of the building failure-to-pay penalty, but the charges aren’t applied to the taxpayer’s account. However, those accounts which are managed by hand, not by computers, do pay interest. The IRS said it doesn’t have the capacity to send monthly notices to taxpayers as those penalties and interest charges accrue. The IRS agreed to start applying the penalties annually beginning in 2006”.
“The taxpayer must pay the fine which accrues monthly until the penalty equals 25% of the unpaid tax. The taxpayer also owes interest on the mounting penalties”.
By sometime in 2006, probably half the people owing this money will have cashed out and declared bankruptcy.
Amazing what high technology can’t do for this entrenched bureaucracy who says it can still do it by hand (meaning hand held calculators). Gives you that warm, fuzzy feeling doesn’t it, knowing that whoever set up this convoluted system probably just got promoted away from the problem while probably blaming the taxpayers for not giving the IRS a larger budget.