NEW: IRS efforts to improve relief for hostages and wrongfully detained taxpayers

Tax Relief Improvements Underway for Taxpayers Wrongfully Detained or Taken Hostage Why did we do this audit? The media reported that individuals who had been held captive abroad were assessed penalties and interest after returning to the United States. These penalties and interest resulted from the failure to pay federal tax liabilities.  The IRS provides tax relief to taxpayers who are, or were, held captive. The tax relief includes deferring collection actions and abating any penalties assessed during the time the taxpayer is held captive. Penalties continue to be abated for an additional six months after the taxpayer is released.  What did we find? In January 2025, the IRS implemented new procedures to improve the process to provide tax relief to taxpayers wrongfully detained or taken hostage. In January and April 2025, the U.S. Department of State and the Federal Bureau of Investigation notified the IRS that 11 individuals were wrongfully detained or held hostage abroad. These individuals should have a hostage indicator placed on their tax account so that the IRS will know to provide appropriate tax relief. In March 2025, the IRS also developed guidance to assist hostages and wrongfully detained taxpayers. Additionally, the IRS developed a dedicated phone resource where a live assistor can provide hostage assistance to affected taxpayers. However, prior to the new process, we found that 75 individuals were either incorrectly labeled as a hostage or did not have the indicator removed after being released from captivity. We also found that recently released hostages did not receive tax relief. For instance, the IRS did not abate penalties on some taxpayer accounts after being notified that the individuals were released from captivity. Additionally, we found instances where the hostage indicator was not preventing account activity on tax accounts. This activity included postings of original tax returns and additional tax assessments.   Read the full report Having trouble viewing this email? View it as a Web page.

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