The mission of IRS’s collection program, as set forth in the fiscal year 2015 collection program letter, is “to collect delinquent taxes and secure delinquent tax returns through the fair and equitable application of the tax laws, including the use of enforcement tools when appropriate, provide education to customers to enable future compliance, and thereby protect and promote public confidence in the American tax system.” IRS collects unpaid tax debts through a complex, three-phase process: (1) a notice phase, (2) a telephone phase (ACS), and (3) an in-person phase (Field collection). While these phases are not necessarily sequential (for example, a case could go directly from the notice phase to Field collection), with few exceptions every collection case is required to go through the notice phase. Of cases initiated in fiscal year 2014, more than two-thirds were resolved in the notice phase. If a case is not resolved during the notice phase, it is sent to the automated Inventory Delivery System (IDS), where the next step is determined. IDS will (1) identify and filter out uncollectible cases (i.e., removed from active collection status through a process known as shelving), (2) categorize some cases as high risk, and (3) determine whether cases should be routed to either ACS or Field collection to potentially be worked. See figure 1. To make these determinations, IDS considers hundreds of factors about a case while carrying out two activities that facilitate closures, prioritization, and routing: Modeling is a statistical process that analyzes the results of previously closed cases to predict likely case outcomes. In IDS, this process helps determine if a case should be shelved if a model predicts it would not be collectible. Risking determines whether a case is high risk and influences case routing and shelving decisions. For example, cases where a taxpayer owes a large amount of money would be considered high risk and would be a priority for selection. The outputs from the modeling and risking activities are used in conjunction with hundreds of business rules to determine where to route cases for further collection actions. For cases routed to ACS and Field collection, the predictive modeling results from IDS are transmitted and used again to further prioritize cases. Cases are sent to ACS for several reasons, the two most common of which, based upon IRS data, are: Taxpayer case already established in ACS: Taxpayer already has one or more delinquency issues that are being pursued in ACS. Default routing rules: No other IDS rule for routing cases to Field collection or for shelving cases proves applicable, and therefore by default the module is sent to ACS. Once a collection case is sent to ACS, it is either established as a new case or added to an existing case on a taxpayer. IRS pursues ACS collection cases by taking one or more actions, including reminding taxpayers of their tax delinquency through automated outgoing calls and letters, as well as placing liens on property or levying wages or assets. These actions may prompt taxpayers to call ACS to attempt to resolve their cases. If collection cases in ACS do not contain up-to-date contact information for the taxpayer, or information about sources that IRS could levy, IRS collection representatives will search for such information. If they find it, the case enters the pool of cases on which a potential action could be taken. ACS attempts to resolve two types of collection delinquencies: (1) balance due cases, in which a taxpayer has a tax liability to IRS, and (2) nonfiler cases, in which a taxpayer has an unfiled return. One case may include both types of delinquencies. Balance due cases can be resolved by the taxpayer paying the outstanding tax debt in full, or arranging with IRS to pay the full or partial outstanding tax debt over time (known as an installment agreement). However, these cases could also be closed as currently not collectible if ACS collection representatives are unable to locate or contact the taxpayer, or if the taxpayer is facing economic hardship or unable to pay, among other reasons. Some cases closed as currently not collectible may reenter the collection inventory if IRS determines that in the future, the taxpayer will be able to pay some of the tax debt. Unfiled return cases may be resolved if the taxpayer files the delinquent return, or if the taxpayer is no longer liable for the unpaid taxes during the period in question, among other reasons. If the collection case is unresolved by ACS, it may move to Field collection to be pursued further, or it could be shelved. In November 2014, IRS began realigning collection operations across its Wage & Investment (W&I) and Small Business/Self-Employed (SB/SE) business operating divisions. According to IRS, the realignment will increase efficiency, reduce redundancies, and position IRS to improve identification of emerging compliance issues. Previously, ACS operations were split with W&I handling collections against individual taxpayers, and SB/SE handling individuals with business income and losses as well as all business entity taxpayers. As part of the realignment, IRS is consolidating all ACS call and support sites within SB/SE. At least through fiscal year 2015, ACS will operate separate phone numbers for W&I and SB/SE, and all sites will continue to handle the same type of taxpayers as they did prior to the realignment. IRS officials said that they plan to consolidate the management of its telephones by fiscal year 2016 to align with the new organizational structure. The ACS prioritization and selection process consists of three steps, as shown in figure 2. These steps are automated—that is, they do not involve manual intervention—and occur within seconds of each other. IRS managers responsible for ACS case prioritization and selection cannot change these steps without guidance from IRS collection program executives and input from IRS’s information technology staff. Overall, the ACS prioritization and selection process is set up so that high-priority cases are worked first. These include IRS program collection priorities and cases that have a greater potential to result in full payment or an installment agreement based on IRS’s predictive models discussed above. Documentation of the process is limited (an issue we discuss later in this report); therefore we based our description below largely on our reviews of the documentation that does exist, on multiple interviews with IRS officials, and on our observations during two visits to the ACS call site in Philadelphia. The first step in the ACS prioritization and selection process is to assign a case to one of three inventory groups: (1) special inventories, (2) model priority inventories, and (3) the general population inventory. During this step, ACS first assesses cases to determine whether they fall within one of ACS’s five special inventories, four of which align with IRS’s collection program priorities. ACS will look at the case characteristics, such as from which IRS division the case originated, to assign it to a special inventory. ACS works all but one of the special inventories at specific call sites where staff possess the expertise to work the cases. See table 1. Next, ACS assesses the remaining cases to determine whether they qualify for assignment to one of the business model priority inventories. These inventories contain cases that IRS predicts as having a probability of resulting in full payment or installment agreements, among other outcomes. To make this determination, ACS uses the predictive model scores generated by IDS. If the model score on the case is above a specified threshold, ACS will assign the case to the corresponding model priority inventory. ACS assigns any remaining cases not placed into one of the special inventories or model priority inventories to the general population inventory. Simultaneously with these actions, ACS assigns each case a risk category of high, medium, or low. ACS bases this assignment on the case’s characteristics, such as its age, the dollar value of the outstanding balance, and the type of return the taxpayer filed or failed to file, among others. According to IRS officials, the risk categories have remained largely unchanged since their inception in 2000. Many of the risk categories contain dollar thresholds, which have also remained unchanged; for example, if a taxpayer has a delinquent balance due that is within or above a specified amount, ACS will assign it to the corresponding risk category. In addition, ACS uses risk categories to determine how long to retain cases in ACS before sending them to the queue or shelving them. ACS sends high- and medium-risk cases to the queue after 26 weeks. Low-risk cases are not sent to the queue but are shelved after 104 weeks. IRS officials said that ACS retains low-risk cases for longer because ACS staff have to work through high- and medium-risk cases before they can get to low-risk cases. These officials added that if low-risk cases are not resolved in ACS and subsequently sent to the queue, it is unlikely that they would get worked by revenue officers in Field collection. After ACS assigns a case to an inventory and a risk category, the case receives a priority level, which determines the order in which ACS works the case within each inventory. ACS uses the assigned inventory, risk category, and the predictive model scores unique to each case to assign it a priority level. Figure 3 illustrates how ACS sets the priority level for business taxpayers. The ACS process for setting the priority level for individual taxpayers is similar except that it prioritizes high-income nonfiler and FERDI cases, among others, first. Following the IRS realignment, which is consolidating all ACS call sites within SB/SE, IRS officials said that their goal is to integrate the case prioritization and selection processes used for SB/SE and W&I into one approach during fiscal year 2016. IRS collection program officials said that they would like to continue to expand IRS’s use of the IDS model scores to prioritize cases within ACS. For example, ACS prioritizes cases into priority levels of 0 to 5, but does not prioritize the cases within each level.