According to a recent report from the Treasury Inspector General for Tax Administration, the Internal Revenue Service has failed to take action to resolve millions of dollars in so-called “frozen credit accounts.” As result, some taxpayers have been adversely affected by not receiving their tax funds.
What is a Frozen Credit Account?
The IRS’s computer system has a special coding system that identifies certain accounts that require action by the IRS, or if the IRS is awaiting the outcome of a future event. This is known as a “freeze condition.” If frozen credit accounts are not timely addressed by the IRS then taxpayers can be adversely affected, including:
● Barred assessments, collections, and refunds due to the expiration of the applicable statute of limitations.
● Unnecessary payment of additional interest to taxpayers for not timely issuing applicable refunds.
● Taxpayer burden if delayed refunds or payments not applied to the proper tax module affect the taxpayer’s ability to meet financial obligations.
Most credits are frozen for just a few months; however, the IRS does not timely resolve all frozen credit conditions for several reasons. For example, the taxpayer may be in bankruptcy or the taxpayer may have made a payment before an additional assessment was applied.