Treasury Pushes IRS to Automate Unidentified Payments Tracing

The IRS is working to establish an electronic case management system for tracking cases in which a taxpayer contacts the agency about a missing payment, and the IRS employee who receives the inquiry cannot locate the payment.

The agency is doing so in response to recommendations the Treasury Inspector General for Tax Administration (TIGTA) made after finding that there is a need to modernize programs that resolve unidentified taxpayer payments, TIGTA said in a Thursday (May 21) report.

TIGTA found that for fiscal years 2022 through 2024, the IRS had $3.2 billion in unidentified payments. These were often caused by missing or incomplete payment information that prevented the agency from applying payments to the correct taxpayer account. Examples include checks or money orders that do not include the taxpayer’s name, identification number, form type or tax period, according to the report.

Among those unidentified payments, the IRS successfully applied $2.3 billion to taxpayer accounts. However, the agency has insufficient program management controls for the “hardcore payment tracer” cases in which the IRS employee cannot locate the payment, the report said.

Following an audit of this situation, TIGTA recommended that the IRS develop an electronic case management system and associated internal controls to manage inventory streams across the IRS accounting operations. The IRS is now working to establish such a system, per the report.

TIGTA also recommended that the IRS develop an interim process to track hardcore payment tracers until the new system is established. The IRS has done so, the report said.

The IRS also agreed with a TIGTA recommendation that the agency develop evaluation metrics to help assess the efficiency and effectiveness of its process to identify and address issues around unidentified payments, per the report.

TIGTA said in its report that while a March 2025 executive order mandated all payments to and from the federal government to be electronic, the IRS received 41.4 million paper payments among the 302.6 million total payments it received in calendar year 2025.

It added that while an increased use of electronic payments will reduce many factors that contribute to paper-based unidentified payments, “taxpayer errors, such as transposed bank account numbers, can still occur with electronic payments.”

The executive order signed by President Donald Trump in March 2025 mandated that the federal government stop issuing paper checks for disbursements by Sept. 30, 2025, and stop accepting them for payments “as soon as practicable.”