FMS receives payment records from and makes payments on behalf of most federal agencies. However, a number of federal agencies have their own disbursing authority. For example, USPS paid about $42 billion in salary and benefits to almost 800,000 career employees in calendar year 1999, and entered into more than 47,000 contracts with vendors in calendar year 1998, totaling almost $8 billion. DOD disbursed over $295 billion in fiscal year 2000, including about $150 billion in contractor and vendor payments and about $100 billion in salary and retirement payments. In addition, Medicare contractors processed over 900 million fee-for-service claims during fiscal year 2000, totaling nearly $175 billion. In addition to disbursing payments for various federal agencies, FMS provides centralized debt collection services for most federal agencies. To aid in federal debt collection, FMS has in place the Treasury Offset Program, which uses a centralized database of delinquent debts that have been referred for offset against federal payments. This database includes federal nontax debts and federal tax debts, as well as state tax debts and child support debts. FMS currently matches federal tax refunds, federal retirement and vendor payments, and certain federal salary and social security benefit payments against its database of delinquent debts, and when a match of both TIN and name control occurs, FMS offsets the payment, thereby reducing or eliminating the debt. FMS plans to include some non-FMS disbursed federal salary payments in the Treasury Offset Program in the latter half of 2001. A provision included in the Taxpayer Relief Act of 1997 enhanced IRS’ ability to collect delinquent federal tax debt by authorizing IRS to continuously levy up to 15 percent of certain federal payments made to delinquent taxpayers. FMS modified the Treasury Offset Program to enable IRS to electronically serve a tax levy to FMS once IRS has notified the delinquent taxpayer of the pending levy. In July 2000, IRS began adding tax debts to FMS’ database of delinquent federal debts, thus initiating the continuous levy program. For this program, FMS compares federal payee information from agency payment records with IRS’ accounts receivable records. When a match of both the TIN and name control occur, FMS informs IRS of the match and IRS then notifies the taxpayer of the pending tax levy. If the taxpayer fails to make an effort to satisfy the tax debt within 30 days, such as by payment in full or entering into an installment agreement, IRS will then instruct FMS to begin levying 15 percent of subsequent payments made to the taxpayer or the exact amount of tax owed if it is less than 15 percent of the next payment. For payments disbursed on behalf of other agencies, FMS deducts the amount to be levied before making the payment, and the levied amount is then credited to IRS. In an April 2000 report, we estimated that IRS could potentially collect as much as $478 million annually through this program. Based on matching federal payments made by the agencies to IRS’ accounts receivable data, we estimate that including payments disbursed by USPS, DOD, and CMS in the continuous levy program could result in recovering at least $270 million annually from about 70,000 delinquent taxpayers. An additional $16 million in delinquent taxes could be recovered annually from about 656 vendors if IRS were to provide FMS with the different names these vendors have used for tax purposes when FMS matches vendor payment data against IRS’ accounts receivable data. Our analysis of IRS’ accounts receivable data as of June 30, 2000, showed that about 70,400 taxpayers received about $1.9 billion in payments--about $8.2 billion on a annualized basis--from either USPS, DOD, or CMS, and the TIN and name on their payment records exactly matched the TIN and name on IRS’ accounts receivable records. These taxpayers owed over $1 billion in delinquent taxes at the time they received these payments and met IRS’ criteria to be included in the continuous levy program. As shown in table 1, we estimate that IRS could recover as much as $277.5 million annually if these payments were included in the continuous levy program. Almost half of the $277.5 million in delinquent taxes that could be recovered would come from vendor payments. The rest would come from wage and salary payments to employees and retirement payments. The amount of delinquent taxes recovered annually could be somewhat lower because some taxpayers might make other arrangements with IRS to resolve their tax debts once they receive a notice of levy. For example, in an effort to avoid a pending tax levy, some taxpayers might contact IRS to arrange to pay their delinquent tax in full or through entering into an installment agreement or submitting an offer-in-compromise. However, such actions on the part of the taxpayer in response to the levy notice would be an added benefit of the program. Although the amount of delinquent taxes recovered could be somewhat lower, as noted earlier, our estimates of the amount of delinquent taxes that might be recovered are understated because we did not receive data for over 50 percent of the Medicare vendor payments made for the time period we reviewed. In addition, we were unable to match about $3.4 billion in DOD vendor payments against IRS’ accounts receivable data because DOD’s payment records did not contain a TIN. According to DOD officials, DOD has recently increased its emphasis on requiring vendors to provide a TIN when registering to do business with DOD. Under procedures for vendor payments that are paid by FMS and currently subject to continuous levy, IRS’ file of accounts receivable data provided to FMS includes only the most recent name a vendor has used for tax purposes. As a result, FMS’ ability to exactly match the vendor name on payment records against IRS’ tax debts is limited. IRS already makes additional names for individual taxpayers included in its databases available to FMS for use in the existing continuous levy program. For example, if taxpayers change their name when they marry, the name used as a single person would be sent to FMS along with their married name. This is not the case for businesses. For vendor payments currently paid by FMS and thus included in the continuous levy program, if a business were to change its name on its federal tax return, IRS would provide FMS with the most current name in its records, but not the prior name. When making our overall estimates of delinquent taxes that could be recovered if USPS, DOD, and CMS Medicare vendor payments were included in the continuous levy program, we determined the amount of additional revenue that could be raised if IRS changed its policy and provided FMS with all of the names it has for vendors. In addition to the 70,400 taxpayers whose TIN and name on the payment records exactly matched the TIN and name on IRS’ accounts receivable records, we found 1,228 instances in which the TIN on the vendor payment records exactly matched the TIN on IRS’ accounts receivable records, but the name on the payment records did not exactly match the name on IRS’ records. For 656 of the 1,228 vendors, we found different names used by these vendors in an IRS database that showed they were in fact the delinquent taxpayers. There were no additional names in the IRS database for the remaining 572 vendors. The 656 taxpayers for which there were additional names owed about $26 million in delinquent taxes. We estimate that IRS could recover about $16 million annually if the different names it has for vendors were provided to FMS for the continuous levy program. If IRS were to provide FMS with the different names it has for business taxpayers, this would benefit the current continuous levy program by increasing the instances in which FMS could match the name in both records, as required before a levy can be made. IRS officials agreed and indicated that providing such a file of additional business names to FMS could be done and would be well worth the effort. FMS officials indicated they were in favor of receiving additional business names for use in the continuous levy program. Whether federal payments made by USPS, DOD, and CMS could be included in the continuous levy program and, if so, when varied by agency and type of payment. FMS plans to receive and include USPS and DOD salary and wage payments, as well as military retirement payments, in the Treasury Offset Program within the next 3 years, thus making them available for continuous levy and enabling IRS to begin collecting about half of the $277.5 million in potential annual tax recoveries mentioned earlier. Vendor payments could also be included in the continuous levy program, with the full range of USPS payments possibly included in less than a year, DOD payments possibly included within 3 years, and CMS payments possibly included within about 5 years. However, with the exception of some DOD vendor payments, officials from FMS, IRS, and the three agencies have not discussed when and how all of these agencies’ vendor payments could be included in the continuous levy program and whether practical options exist to include some portion of the vendor payments in the program before all such payments are available. FMS officials stated that their discussions with USPS have focused on including salary payments in the Treasury Offset Program rather than vendor payments. USPS plans to provide employee salary payments to FMS for inclusion in the Treasury Offset Program, and FMS is working with USPS to develop a specific implementation date. According to FMS officials, once USPS salary payments are available for the Treasury Offset program, they could be included in the continuous levy program about a month later. USPS officials stated that, although they have not had any recent discussions with FMS about including vendor payments in the Treasury Offset Program, they do not believe any obstacles would prevent making vendor payments available to FMS, since all USPS vendor payments are disbursed from one payment center.