Letter Report: Full Compliance With Statutory Requirements for the Disclosure of Collection Information to Joint Filers Cannot Be Determined (Fiscal Year 2001)

August 2001

Reference Number: 2001-10-126

 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

August 2, 2001

MEMORANDUM FOR CHIEF, COMMUNICATIONS AND LIAISON

FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner

Deputy Inspector General for Audit

SUBJECT: Final Letter Report: Full Compliance With Statutory Requirements for the Disclosure of Collection Information to Joint Filers Cannot Be Determined (Fiscal Year 2001)

This report presents the results of our review of the Internal Revenue Service’s (IRS) compliance with 26 U.S.C. § 6103(e)(8) (Supp. IV 1998).

In summary, the Treasury Inspector General for Tax Administration (TIGTA) could not determine if the IRS fully complied with 26 U.S.C. § 6103(e)(8) requirements for responding to written requests from joint filers. This is the third year in which we have reported our inability to opine on the IRS’ compliance with the provisions of 26 U.S.C. § 6103(e)(8).

In response to our Fiscal Year (FY) 1999 report, the IRS committed to studying the possibility of implementing a process for tracking joint filer requests. The IRS’ former Collection function completed a 6-month study of the volume of joint filer requests during FY 2000. Based on the results of that study, IRS management decided against implementing a tracking system. As a result, unless some means of identifying and tracking these requests is implemented by the IRS, we will have to continually state in TIGTA’s Semiannual Reports to the Congress that we are unable to certify the IRS’ compliance with this provision.

In responding to a draft of this report, the Chief Communications and Liaison recognized that this is the third year the TIGTA has been unable to determine compliance with 26 U.S.C. § 6103(e)(8). Because of this condition, he has asked the Director, Legislative Affairs, to solicit a legislative proposal for a formal request to the Congress to consider the repeal of 26 U.S.C.§ 6103(e)(8). The full text of management’s comments is included as an appendix.

Please contact me at (202) 622-6510 or Maurice S. Moody, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs), at (202) 622-8500, if you have any questions.

Objectives and Scope

The objectives of this review were to determine if the Internal Revenue Service (IRS) complied with the provisions of the Taxpayer Bill of Rights 2 (TBOR2) related to the disclosure of collection activities to joint filers and to determine the results of the IRS’ corrective actions in response to a recommendation from our Fiscal Year (FY) 1999 statutory joint filer audit. To accomplish these objectives, we interviewed management in the Small Business/Self-Employed and Wage and Investment Divisions in the National Headquarters and reviewed applicable documentation.

We performed our review during the period March through May 2001 in accordance with Government Auditing Standards. Major contributors to this report are listed in Appendix I. Appendix II contains the Report Distribution List.

Background

The IRS Restructuring and Reform Act of 1998 (RRA 98) added 26 U.S.C. § 7803(d)(1)(B) (Supp. IV 1998), which requires the Treasury Inspector General for Tax Administration (TIGTA) to review and certify annually whether the IRS is complying with the requirements of 26 U.S.C. § 6103(e)(8).

The TBOR2 added 26 U.S.C. § 6103(e)(8), which gave joint filer taxpayers who are no longer married or no longer reside in the same household the right to receive information regarding the IRS’ efforts to collect delinquent taxes on their joint return liabilities. The procedures in 26 U.S.C. § 6103(e)(8) require that the IRS provide, in writing, collection activity information to joint filers if they send in a written request. After passage of the TBOR2, the IRS Disclosure Office issued procedures which stated that if 26 U.S.C. § 6103(e)(8) is not specifically cited in the request, the IRS can provide either an oral or written response, based upon 26 U.S.C. § 6103(e)(7).

The RRA 98 required both the Treasury Department and the Joint Committee on Taxation (JCT) to complete separate studies of the scope and use of provisions regarding taxpayer confidentiality. The JCT issued its study report in January 2000 and recommended 26 U.S.C. § 6103(e)(8) be amended to allow for both oral and written information requests from joint filers. The Treasury Department issued its study report in October 2000 with a similar recommendation to eliminate the requirement that joint filer information requests be in writing. The Treasury Department’s report also suggested that the TIGTA’s reporting requirement regarding joint filer requests be phased out.

In response to a recommendation in our FY 1999 audit report, the IRS agreed to perform separate analyses by January 2001 in the former National Headquarters Collection and Customer Service functions to determine the volume of written joint filer requests received. IRS management stated that they would use the outcome of these analyses to determine if a centralized management control process was warranted to track joint filer requests.

Results

We could not determine if the IRS fully complied with 26 U.S.C. § 6103(e)(8) requirements when responding to all written requests from joint filers because of our inability to identify joint filer requests received nationwide. This condition occurred because the IRS’ management information systems do not separately record or monitor joint filer requests. In addition, there is no statutory or regulatory requirement for the IRS to develop a separate system that records or monitors these requests. This is the third year in which we have reported our inability to opine on the IRS’ compliance with the provisions of 26 U.S.C. § 6103(e)(8).

Due to a recommendation contained in our FY 1999 report, the former Collection function completed its study in the six participating former district offices to determine the volume of written joint filer requests it received. During this 6-month study, 5 written joint filer requests were received.

In our FY 2000 audit, we reviewed the four written requests received during the first 5 months of the Collection study (January through May 2000). The IRS provided the taxpayers the information requested for two of the cases. The TIGTA could not make a determination for the remaining two cases because the information about the request or the responses were either vague or not available for review.

For this FY 2001 audit, we reviewed the 1 written request received during the last month of the 6-month study. In this case, the IRS provided a written response to the taxpayer even though the request did not specifically cite 26 U.S.C. § 6103(e)(8). However, we could not determine if the IRS provided the information requested because the IRS’ response did not specify the type of information given to the taxpayer.

Due to the low volume of requests identified in the Collection study, the former National Headquarters Customer Service function did not conduct its study. In May 2001, management in the Small Business/Self-Employed and Wage and Investment Divisions (former Collection, Examination, and Customer Service management) decided not to develop a new management control process to track joint filer information requests in the future. This decision was made because of the low volume of requests received during the Collection study.

Management’s Response: The Chief Communications and Liaison recognized that this is the third year the TIGTA has been unable to determine compliance with 26 U.S.C. § 6103(e)(8). However, IRS management does not believe it has a business case for identifying and tracking these requests. Accordingly, the Chief Communications and Liaison has asked the Director, Legislative Affairs, to solicit a legislative proposal for a formal request to the Congress to consider the repeal of 26 U.S.C. § 6103(e)(8).

Conclusion

We could not determine if the IRS fully complied with 26 U.S.C. § 6103(e)(8) requirements when responding to all written requests from joint filers because of our inability to identify requests received nationwide on the IRS’ management information systems. IRS management in the Small Business/Self-Employed and Wage and Investment Divisions decided not to develop a new management control process to track joint filer requests because of the low volume of requests received during the former Collection function’s 6-month study. As a result, unless some means of identifying and tracking these requests is implemented by the IRS, we will have to continually include in TIGTA’s Semiannual Reports to the Congress our inability to certify the IRS’ compliance with this provision.

Appendix I

Major Contributors to This Report

Maurice S. Moody, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs)

Nancy A. Nakamura, Director

Jeffrey M. Jones, Audit Manager

Cheryl Cerqua, Senior Auditor

Thomas Polsfoot, Senior Auditor

Appendix II

Report Distribution List

Commissioner N:C

Commissioner, Small Business/Self-Employed Division S

Commissioner, Wage and Investment Division W

Chief Counsel CC

National Taxpayer Advocate TA

Director, Compliance, Small Business/Self-Employed Division S:C

Director, Compliance, Wage and Investment Division W:CP

Director, Customer Account Services, Small Business/Self-Employed Division S:CAS

Director, Customer Account Services, Wage and Investment Division W:CAS

Director, Governmental Liaison and Disclosure CL:GLD

Director, Legislative Affairs CL:LA

Director, Office of Program Evaluation and Risk Analysis N:ADC:R:O

Office of Management Controls N:CFO:F:M

Audit Liaisons:

Director, Compliance, Small Business/Self-Employed Division S:C

Director, Compliance, Wage and Investment Division W:CP

Director, Customer Account Services, Small Business/Self-Employed Division S:CAS

Director, Customer Account Services, Wage and Investment Division W:CAS

Appendix III

Management’s Response to the Draft Report

The response was removed due to its size. To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.