Opportunities Exist to Reduce the Time to Respond to Taxpayers Who Protest Examiners' Findings and Request an Appeals Conference

September 2001

Reference No. 2001-10-129

Executive Summary

Taxpayers who are subject to a tax examination by the Internal Revenue Service (IRS) have the right to appeal the findings by requesting that the examining office send the case to the office of the Chief, Appeals, for a conference. Once the Appeals function receives the case, an Appeals employee will contact the taxpayer.

The Appeals function is the administrative dispute resolution forum for taxpayers who exercise their right to protest findings from an IRS examination. It is independent of the IRS offices that examined and proposed the findings. The Appeals functionís mission is to resolve tax controversies, without litigation, on a basis that is fair and impartial to both the Government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS. One goal is to carry out this mission in a timely manner.

Our overall objective was to identify barriers that hamper the IRSí efforts to provide a prompt response to taxpayers who request that the findings from their income tax examinations be reviewed by the Appeals function. We specifically focused on the barriers to timely forward cases from the Small Business/Self-Employed (SB/SE) Division to the Appeals function and the effectiveness of the IRSí communications from the date of receipt of the request to the date of the first contact by the Appeals function. At the beginning of Fiscal Year 2001, the Appeals function had 11,650 cases from taxpayers who protested their examination findings and requested an Appeals conference.


Since 1998, taxpayers have expressed their dissatisfaction with the Appeals functionís timeliness by consistently giving it very low scores in customer satisfaction surveys. The time to hear from the Appeals function is a combination of two components: the time for the Compliance function to send the case to the Appeals function and the time for the Appeals function to contact the taxpayer.

The time to hear from the Appeals function also offers the greatest opportunity for the IRS to improve overall customer satisfaction. The Compliance and Appeals functions had jointly conducted several studies to improve timeliness and made various recommendations to reduce the processing time and improve monitoring. Actions such as these, together with improved communications with taxpayers, should assist the IRS in its goal of providing top quality service to each taxpayer requesting help. We believe the IRS can significantly reduce the time it takes to transfer cases to the Appeals function and improve overall customer satisfaction.

The Compliance Function Should Streamline Its Process for Forwarding Cases to the Appeals Function

The process for forwarding the cases from the Compliance functional groups to the Appeals function takes extensive time. An analysis of the Appeals functionís inventory data showed that sending cases from the Compliance function took an average of 80 days from the date taxpayers requested an Appeals conference to the date the cases were received in the Appeals function.

Case reviews and routing by the Compliance function before cases are forwarded to the Appeals function can be redundant and time consuming. While some Compliance functional groups input computer updates and sent cases directly to the Appeals function, most groups sent cases through the Examination Support Processing (ESP) function. The ESP function performed case reviews and updated computer statuses before cases were forwarded to the Appeals function.

The IRS has conducted several studies to evaluate the timeliness of processing cases to the Appeals function. Several of these studies have recommended that the Compliance functional groups send cases directly to the Appeals function, bypassing the ESP function. One obstacle to closing cases at the group level has been lack of clerical support. Another reason cited was the impact of the major reorganization within the IRS. Compliance and Appeals function management delayed implementing their study recommendations to focus on the reorganization.

The Compliance and Appeals Functions Should Enhance the Timeliness of Communications

Compliance functional groups did not promptly acknowledge receipt of taxpayer requests for an Appeals conference, and some Compliance functional groups sent letters when they forwarded cases to the ESP function for further case reviews and computer updates. However, these letters were sent over 2 months after the taxpayer requested the conference.

The Appeals function informed taxpayers that their requests had been received by either the Case Processing Section sending taxpayers an acknowledgement letter or by Appeals Officers contacting taxpayers by telephone or letter. The letters appropriately contained the Appeals Officerís name and telephone number. However, none of the Case Processing Section letters and only about 40 percent of the Appeals Officer letters in the 45 cases we reviewed stated the expected time frame for the next action.

As for the timeliness of the contacts, we found in our sample of 45 cases that the Appeals function contacted 78 percent of the taxpayers within an average of 9 days. From that sample, 17 taxpayers were promptly contacted in an average of 4 days through Case Processing Section acknowledgement letters. In the remaining 28 cases where acknowledgements were not sent, taxpayers were not promptly contacted. Appeals Officers contacted 18 taxpayers within an average of 13 days, and in the remaining 10 cases, Appeals Officers did not contact taxpayers until 72 days on average.

Summary of Recommendations

The Commissioner, SB/SE Division, should analyze the results of offices using or testing streamlined case processes to the Appeals function and determine if the benefits of the streamlined process warrant implementing the process nationwide. Both the SB/SE Division and Appeals function need to improve communications so that taxpayers are aware that their Appeals conference requests have been received and that they are informed of the expected dates of the next action on their cases.

Managementís Response: Management plans to further analyze the results of this audit and previous studies to determine appropriate closing procedures with a goal to reduce processing time to 30 days. Management has also planned appropriate corrective action to improve its communications with taxpayers. Managementís complete response is included as an appendix to the report.