when taxpayers file returns but do not pay the full amounts due or they are making payments against amounts due.

Figure 3 shows IRS' reported inventory of uncollected assessments for June 30, 1991, and

Source: IRS analysis of its inventory of uncollected assessments for fiscal years ending September 30, 1992 through September 30, 1995. For June 30, 1991, amounts are based on GAO's analysis of IRS inventory of uncollected assessments.

In fiscal year 1992, IRS did not identify the amount of financial receivables.

According to IRS records, $96 billion, or 48 percent, of its inventory of uncollected

assessments as of September 30, 1995, is uncollectible. Figure 4 shows this and the

amounts IRS reports as related to the collection actions being taken on other uncollected

assessments.

Figure 4: Status of IRS' Inventory of Uncollected Assessments

as of September 30, 1995 (Dollar amount in billions)

Also, IRS records show that about $116.4 billion, or more than 59 percent, of its inventory of uncollected assessments as of September 30, 1995, is more than 6 tax years old. Figure

5 shows the age of IRS' inventory of uncollected assessments.

Figure 5: IRS' Inventory of Uncollected Assessments by Tax
Year as of September 30, 1995

Source: IRS inventory of uncollected assessments as of September 30, 1995.

Note: The total of this chart is $196 billion. The difference between this amount and the total uncollected assessments of $200 billion represents estate tax accounts and other tax accounts which are not tracked by tax periods.

In addition, IRS cites several reasons, or categories, such as the inability of taxpayers to pay amounts owed, for uncollected assessments being in an inactive status, which means that IRS is not currently working to collect them. Figure 6 shows the amounts IRS reports in each of these categories as of September 30, 1995.

Figure 6: IRS' Inventory of Inactive Uncollected Assessments as of September 30, 1995 (Dollar amount in billions)

Note: Of IRS' $200 billion inventory of uncollected assessments, a total of $110 billion was inactive at
September 30, 1995.

Accounts Receivable Accounting

Problems and Solutions

IRS' accounting and reporting for accounts receivable is hampered by the limitations of

its financial management system. IRS' system is not designed to specifically identify and separately track from detailed taxpayer records those owing taxes reportable as accounts receivable.

This year, to mitigate this system's limitation, IRS reported accounts receivable by using the uncollected assessment information from its computer system's master files, which were automatically sorted into either compliance assessments or financial receivables. In this way, IRS planned to identify the amount specifically related to financial receivables and report it as valid accounts receivable as of September 30, 1995.

However, when we tested a sample of the automated sorting results, we found cases in which the financial management system's data were incorrect, and thus, did not properly segregate compliance assessments from financial receivables. We identified instances in which compliance assessments were classified as financial receivables, and thus, incorrectly included as accounts receivable; and other cases in which financial receivables were classified as compliance assessments, and thus, improperly excluded from accounts receivable. Based on the testing results, we concluded that the process IRS used in 1995 was unreliable for projecting the total inventory of outstanding assessments.