IRS to develop system to track missing payments, TIGTA says

The IRS will develop an electronic system to track missing taxpayer payments, the agency said in response to a watchdog report that found the IRS relies on manual processes to assign and monitor such payments.

The IRS agreed with the recommendations in a May 21 report from the Treasury Inspector General for Tax Administration (TIGTA). The report said the IRS has already implemented an interim process to track “hardcore payment tracers” while working toward a broader case management system.

From fiscal years 2022 through 2024, the IRS received about $3.2 billion in unidentified payments — funds that could not be immediately matched to a taxpayer account due to missing or incomplete information. The agency applied about $2.3 billion, or 70%, to taxpayer accounts, TIGTA said. Another $741 million was removed from inventory or transferred to excess collections after remaining unresolved for a year, and about $218 million remained unresolved, the report said.

Employees track these payments using spreadsheets and paper files, with cases assigned and monitored manually and sometimes containing missing or inaccurate information, TIGTA said. Although Executive Order 14247, Modernizing Payments To and From America’s Bank Account, directs agencies to move away from paper-based payments, 41.4 million paper payments were still among the 302.6 million payments the IRS received in calendar year 2025, the report said.

Missing information — such as a taxpayer identification number or tax period not included on a check or money order — can prevent payments from being applied correctly.

TIGTA found that “program management controls are not sufficient” to assess the effectiveness of the IRS’s efforts. The agency does not centrally manage unidentified payment inventory and instead tracks cases separately across three tax processing centers using independent systems.

Without a centralized system, the IRS cannot efficiently evaluate performance, including the timeliness of case resolution, and TIGTA said the agency does not have timeliness criteria.

Workloads also are uneven across tax processing centers. For example, the Ogden, Utah, center handled about 40% of unidentified payment inventory but had the same staffing as the center in Kansas City, Mo., which handled about 11%.

The report noted inefficiencies in handling “hardcore payment tracers,” which are used to locate missing or misapplied payments. These cases are tracked manually and inconsistently and may be rerouted between processing centers, delaying resolution.

An electronic case management system would help the IRS oversee payment inventories, improve documentation consistency, and allow employees to work electronic case files, TIGTA said.

The IRS also agreed with TIGTA’s recommendation to create metrics to measure program effectiveness.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.