In the Taxpayer Relief Act of 1997, Congress authorized IRS to collect delinquent tax debt by continuously levying up to 15 percent of certain federal payments made to delinquent taxpayers. In July 2000, IRS first implemented the continuous levy program, now referred to as FPLP. We estimated in prior reviews that once fully operational, the program could potentially recover hundreds of millions of dollars in delinquent tax debt annually. In fiscal year 2002 IRS collected more than $60 million in delinquent taxes through continuous levy under FPLP. IRS operates the program with FMS, the agency that receives payment records from and makes payments on behalf of most federal agencies, including federal retirement payments and Social Security benefit and vendor payments. With respect to FPLP, FMS compares each taxpayer’s identification number (TIN) and name on agency payment records with the TIN and name control on accounts receivable records provided by IRS. When FMS identifies a delinquent taxpayer scheduled to receive a federal payment, it informs IRS, which then issues a notice of intent to levy to the taxpayer, unless the notice was previously sent. Once taxpayers receive the notice of impending levy, they have several options for action. Taxpayers who receive a notice from FPLP have a minimum of 30 days to respond to the notice, during which time they may consider several alternatives available to them. Taxpayers may either disagree with IRS’s assessment and collection of tax liability, in which case they can appeal the action by requesting a hearing with IRS’s Office of Appeals; elect to pay off the debt in full; negotiate with IRS to set up an alternative payment arrangement such as an installment agreement or an offer in compromise; or apply to IRS for a hardship determination, whereby taxpayers demonstrate to IRS that making any payments at all would result in a significant financial hardship. In such cases, IRS may agree to temporarily delay collection action until the taxpayer’s financial condition improves. If taxpayers do not respond to IRS and avail themselves of options within the notification period, IRS will instruct FMS to proceed with the continuous levy by reducing each scheduled payment to the taxpayer by 15 percent—or the exact amount of tax owed if it is less than 15 percent of the payment—until the tax debt is satisfied. The FPLP began with levies of federal employees’ retirement payments and vendor payments issued by FMS. IRS later added additional types of federal payments to the program, including selected Social Security benefits and selected federal salaries. IRS plans to continue expanding the program by adding additional federal employee salaries and other types of federal payments. Not all delinquent taxpayer accounts are eligible for FPLP. IRS has excluded certain accounts from levy; for example, cases where the taxpayer has entered bankruptcy, made alternative arrangements to pay, or demonstrated to IRS that making payments on the outstanding tax debt would result in a financial hardship. With some exceptions, delinquent taxpayer accounts are eligible for FPLP if they are either assigned to IRS’s Automated Collection System (ACS) or to field collections or have been waiting for assignment to one of these areas for at least 1 year. Cases in which collection activity has been deferred for at least a year because of low tax liability, as well as cases in which IRS has been unable to either locate or contact the taxpayer are also eligible for FPLP. IRS tracks FPLP program results by measuring only tax revenue collected through continuous levy, although most of the collections attributable to FPLP result from taxpayers subsequently contacting IRS and either submitting a payment voluntarily, or arranging to pay their delinquent taxes through other means such as by entering into an installment agreement. Our analysis of about 98,000 delinquent taxpayers who received a notice of intent to levy during the October through December 2001 period showed that as of August 2002, IRS had collected an estimated $107.1 million from these taxpayers. As shown in figure 1, levies represented an estimated $28.5 million of this amount, or 27 percent of the total collections, while other payment methods represented an estimated $78.6 million, or 73 percent of the total FPLP-related collections. By not measuring the nonlevy payments attributable to FPLP, IRS significantly underestimates the program’s success. (See app. II for more detailed information on the amount of delinquent taxes collected as a result of FPLP by the type of federal payment taxpayers received (i.e., Social Security benefits, federal retirement payments, and vendor payments) and by the method of collection.) IRS realizes other benefits attributable to FPLP that it does not currently measure. IRS does not measure the extent that FPLP helps IRS function more efficiently by decreasing its accounts receivable inventory. Our analysis of the 98,000 FPLP cases indicated that after receiving a notice of intent to levy, about 29 percent of the taxpayers took action that enabled IRS to remove them from the active accounts receivable inventory or to move them to an inactive status. Specifically, we estimate that subsequent to receiving a levy notice, about 19 percent of the taxpayers resolved their liability while about 10 percent obtained a determination of financial hardship. (For more information on the characterization of account status, see app. II.) By reclassifying some active delinquent accounts to an inactive status and removing others, FPLP helps IRS to more efficiently prioritize its accounts receivable inventory and enables IRS to focus more of its resources on delinquent accounts that have more collection potential. Knowing the full impact of FPLP’s effectiveness would be consistent with IRS’s strategic planning and budgeting process, which emphasizes the importance of assessing the impact of current program operations to efficiently allocate resources. IRS acknowledges that FPLP generates indirect results in addition to revenues collected through the continuous levy process, and has initiated its own study on how to measure the outcomes attributable to the program, which it expects to complete in calendar year 2003. After completing this study, IRS will decide how to revise its measurement approach. When IRS implemented FPLP in July 2000, it made a decision to temporarily block most delinquent taxpayer accounts placed in ACS and field collections from being matched against federal payment records. ACS accounts were blocked primarily because IRS believed it lacked the resources to issue levy notices and respond to the potential increase in telephone calls from taxpayers responding to the notices and still adequately perform other ACS activities. Specifically, agency officials were concerned that if the 1.4 million delinquent taxpayers with accounts in ACS were added to the program for matching too rapidly, it could disrupt ACS workload processes and likely could not be handled with existing resources. IRS also decided not to match over 55,000 delinquent accounts in field collection because revenue officers believed that this action could interfere with their successfully contacting taxpayers and negotiating a settlement to resolve the delinquent account they had been assigned. We found some of IRS officials’ concerns with respect to matching the nearly 1.5 million ACS and field collection accounts may be unfounded. We matched the nearly 1.5 million accounts to FMS payment records and found that only about 112,000 taxpayers were receiving federal payments, as shown in table 1. Submitting delinquent taxpayer accounts to FMS for matching against federal payment records does not necessarily mean IRS must levy these accounts. Rather, the matching process performed by FMS would provide IRS with useful additional information to assist in determining what the best collection method may be. For example, of the 108,469 delinquent taxpayers in ACS receiving federal payments at the time of our analysis, IRS had not yet contacted or located more than half—about 55,900—of these delinquent taxpayers, and could therefore have chosen to levy some of these accounts without disrupting ongoing collections. These 55,900 taxpayers owed about $460 million in delinquent taxes and received $4.1 billion in federal payments during 2002. If IRS had information on matching federal payments for these delinquent accounts, it would have had additional options available to determine how best to pursue collection of the delinquent tax revenue—such as using FPLP. While the ACS and field collection actions may result in the eventual recovery of most of the delinquent taxes associated with these accounts, using the automated FPLP matching process could help IRS collect this revenue in a more timely and efficient manner. Even when ACS or field revenue officers have already contacted the taxpayer, matching—but not necessarily issuing a notice of intent to levy—the account could provide useful information for IRS to consider in collections. For example, revenue officers may not be aware that taxpayers in their case inventory are currently receiving federal payments, and they could use this information to develop a more complete assessment of the taxpayer’s financial situation. In January 2003, IRS unblocked and made available for matching and levy those delinquent accounts identified as receiving federal salary or annuity payments—representing about 20,000 of the 112,000 blocked taxpayers we identified in our analysis. However, other delinquent accounts remain blocked from being matched to FMS payment records. Agency officials said that they plan to unblock a portion of the remaining delinquent accounts sometime in 2005, although they have not yet established a firm time frame for doing so. IRS established an income threshold to exclude Social Security beneficiaries who cannot afford to pay their taxes from FPLP. However, our analysis of Social Security beneficiaries above and below this income threshold shows that IRS’s income criterion is an inaccurate indicator of a taxpayer’s ability to pay. We found little difference between the two groups in terms of the frequency with which taxpayers either made voluntary payments in response to a levy notice or relied on Social Security as a sole source of income. We also found that the income criterion relies on information that is often outdated and incomplete.