Taxpayer Burden Can Be Reduced By Ensuring That Taxpayers
Have
Accurate Information for Submitting
Power of Attorney Forms
March 2002
Reference:
2002-10-077
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.
March
29, 2002
MEMORANDUM FOR COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED DIVISION
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Taxpayer Burden Can
Be Reduced By Ensuring That Taxpayers Have Accurate Information for Submitting
Power of Attorney Forms (Audit #
200110037)
This
report presents the results of our review of the Internal Revenue Service
transition plan for processing power of attorney (POA) forms at three service
centers and the contact information available to the public for submitting the
forms. The overall objectives of this
review were to determine the accuracy of information provided to the public for
submitting POA forms and to determine if the Internal Revenue Service (IRS) had
a plan to transition the processing of POA forms from 10 to 3 service
centers. It is important that telephone
numbers, facsimile (fax) numbers, and mailing addresses for POA forms be
accurate to help ensure that tax professionals are provided with timely access
to taxpayers’ accounts. Delays in
providing tax professionals the authority to represent a taxpayer can result in
delays in responding to notices, as well as, additional tax, interest, and
penalty assessments.
In summary, the IRS began centralizing the processing of POA forms
from 10 to 3 service centers in mid-December 2001. IRS management developed plans to prevent an interruption of
service during this transition period and took the
following actions:
·
IRS management issued guidance to advise taxpayers of the
changes for submitting and processing POA forms.
·
Service centers began redirecting POA forms received through
the mail or by fax to the Memphis or Ogden Service Center.
However,
prior to the centralization (during August and September 2001), we determined
that telephone and fax numbers for taxpayers to call or to submit POA forms
were not always correct or operable.
·
Six of 17 telephone numbers in service centers did not work
properly.
·
Five of 21 fax numbers in service centers did not work
properly. We could not determine if an
additional 8 of 21 fax numbers were operable because we did not receive
acknowledgements.
In
addition, 13 of 22 documents mailed to service centers were not acknowledged as
received by the offices that process POA forms, so we could not determine if
the documents were received in those offices.
On
October 12, 2001, we issued a memorandum to IRS management presenting the
results of our tests regarding the accuracy of telephone numbers, fax numbers,
and mailing addresses. We included
recommendations to provide the IRS with the opportunity to take immediate
action to correct information in publications, internal guidelines, and the
IRS’ public internet site and to ensure that telephone and fax numbers were
operating correctly in the 10 service centers prior to centralizing the
processing of POA forms.
Management’s
Response: Small Business/Self-Employed (SB/SE)
Division management attempted to repair every telephone or fax line but several
could not be repaired. Recorded
messages or employees who answer telephones now in use in other departments
will direct the caller to the correct number.
IRS management revised all incorrect addresses, telephone numbers and
fax numbers in the Form 2848 instructions, the Internal Revenue Manual, and on
the IRS Intranet Website. They also
plan to make the revised Publication 947 available to the public by April
2002.
Management’s
complete response to the draft report is included as Appendix VI.
Copies of this
report are also being sent to the IRS managers who are affected by the report
recommendations. Please contact me at
(202) 622-6510 if you have questions or Daniel R. Devlin, Assistant Inspector
General for Audit (Headquarters Operations and Exempt Organizations Programs),
at (202) 622-8500.
Telephone and Fax Numbers for Submitting Power of Attorney Forms Were Not Always Correct or Operable
Appendix I – Detailed Objectives, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix V – Management’s Response to Memorandum #1
Appendix VI – Management’s Response to the Draft Report
The Internal Revenue
Code Section (§) 6103(c) (2001) prohibits
the release of taxpayer information to third parties without authorization by
the taxpayer. Tax professionals can
submit a Power of Attorney (POA) and Declaration of Representative (Form 2848)
to an Internal Revenue Service (IRS) Centralized Authorization File
(CAF) unit at an IRS service center to notify
the IRS of authorization to represent a specific taxpayer. After the completed Form 2848 with the
required signatures is processed, the representative can directly contact the
IRS to discuss that taxpayer’s account.
Previously, tax professionals could mail or facsimile (fax) Forms 2848 to any of the 10 IRS service centers for processing. In mid-December 2001, the IRS began centralizing the processing of POA forms for domestic taxpayers at the Ogden and Memphis Service Centers. POA forms for international taxpayers will continue to be processed at the Philadelphia Service Center.
IRS management information reports show that during Calendar Year 2000, the IRS processed approximately 2.3 million POA forms. This includes 1.6 million forms received via paper and 0.7 million via fax. Because such a large number of taxpayers use professional representation, it is important that telephone numbers, fax numbers, and mailing addresses for POA forms be accurate to help ensure that tax professionals are provided timely access to taxpayers’ accounts.
We performed our work from July through December 2001 in the
Small Business/Self-Employed (SB/SE) and the Wage and Investment (W&I)
Divisions, and in the 10 IRS service centers in accordance with Government Auditing Standards. Detailed information on our audit
objectives, scope, and methodology is presented in Appendix I. Major contributors to the report are listed
in Appendix II.
The IRS developed plans to prevent an interruption of service when centralizing the processing of POA forms from 10 to 3 service centers.
Management developed and
implemented transition plans to provide
for continued operation
The Andover, Atlanta, Austin, Brookhaven (located in Holtsville, New York), Cincinnati, Fresno, Kansas City, and Philadelphia Service Centers stopped processing POA forms for domestic taxpayers in December 2001. The POA forms were redirected to the Ogden or Memphis Service Center.
· POA forms received in the mail and placed in inventory prior to December 15, 2001, were processed in the service center where received.
Beginning December 15, 2001, the Receipt and Control functions in the eight service centers started identifying the Forms 2848 when received in the mail and forwarding them to either the Ogden or Memphis Service Center for processing.
·
POA forms received via fax and placed in inventory
prior to December 22, 2001, were processed in the
service center where received.
Beginning December 22, 2001, fax
numbers in the eight service centers were
disabled. POA forms faxed to one of the
eight-disabled fax numbers were automatically redirected to a fax number
in either the Ogden or Memphis Service Center. This redirection was invisible to taxpayers
and tax professionals.
Beginning January 3, 2002, a message was placed on the eight-disabled fax numbers advising taxpayers and tax professionals of the new fax numbers in the Ogden and Memphis Service Centers. This message will be in service until February 15, 2002.
Management took action to advise taxpayers and tax professionals of the changes
The IRS Communications Division developed a communications campaign, News For You 2002, to notify the public about the many improvements in tax administration and tax policy. It includes a “fact sheet” that outlines the change for processing POA forms. The fact sheet advises taxpayers and tax professionals to send POA forms to either the Memphis or Ogden Service Center and for international taxpayers, to the Philadelphia Service Center. The correct telephone numbers, fax numbers, and mailing addresses were provided.
The IRS’ centralization plans also included revising the sources of information already available to taxpayers and tax professionals.
· Form 2848 instructions were revised in January 2002. Practice Before The IRS and Power of Attorney (Publication 947) will be revised by April 2002. Both show that POA forms should be mailed or faxed to the Memphis or Ogden Service Center, whichever is closest to the taxpayer. The publications also provide the IRS’ toll-free telephone number if taxpayers or tax professionals have additional questions.
· Internal Revenue Manual (IRM) 21.3.7 was revised in October 2001. It includes the current telephone and fax numbers and mailing addresses for the 10 service centers, and it includes a note that beginning in January 2002, processing of POA forms would be performed at the Memphis and Ogden Service Centers.
· The “Tax Professional’s Corner” on the IRS’ Internet website was revised in mid-December 2001. It provides the fax numbers and mailing addresses for the Memphis and Ogden Service Centers and alerts taxpayers and tax professionals of the upcoming centralization of work.
· The Service-wide Electronic Research Program on the IRS’ intranet website was revised in mid-December 2001. This is an internal resource for IRS employees to use. It provides the fax numbers and mailing addresses for the Memphis and Ogden Service Centers.
When we contacted the CAF units during August and September 2001, the IRS was still processing POA forms at all 10 service centers. Using the instructions that were available to the public in August 2001, we tested the accuracy of the IRS’ instructions for submitting POA forms. We determined that we could not always contact the service center CAF units using the telephone numbers, fax numbers, and mailing addresses provided by the IRS to taxpayers and tax professionals. The incorrect contact information was only a problem until January 2002, when the centralization was implemented and new instructions and publications were issued to the public with the correct information. However, anyone attempting to submit POA forms before January 2002 could have faced increased taxpayer burden if they used the incorrect or inoperable numbers.
As of mid-August 2001, the IRS included instructions for taxpayers to follow when submitting Forms 2848 in these sources:
· Publication 947 – Revised January 1999
· Form 2848 instructions – Revised January 2000
· Processing Third Party Authorizations (IRM 21.3.7 – Revised October 2000)
· Internet Tax Professional’s Corner (the IRS’ Digital Daily)
·
Servicewide Electronic Research Program (SERP) (the
IRS’ Intranet website)
·
The IRS’ Toll-Free Telephone Number
Telephones were not always operable for the CAF units
We called the CAF units in the 10 service centers using the 17 telephone numbers identified from the sources listed above. Eleven of the 17 telephone numbers for the CAF units worked properly when tested. However, six telephone numbers did not work properly:
· Two rang in other units within the service centers which provided us with the correct telephone number for the CAF units.
· Two had recordings that the extension was not valid or the extension did not answer.
· Two had immediate busy signals, indicating that they were possibly out of service.
Fax numbers were not always
operable for the CAF units
We attempted to fax test documents to the 21-fax numbers identified from the sources listed above. Eight of 21 test documents were acknowledged as received by the CAF units.
Five test documents could not be faxed:
· One fax number was answered by an employee’s voice message.
· Three fax numbers repeatedly had an immediate busy signal, indicating the fax line may have been out of service.
· One fax number was not answered after numerous attempts to fax the document.
We could not determine if the remaining eight documents were received in the CAF units because we did not receive acknowledgements.
Test documents mailed to the
10 service centers were not always acknowledged
We mailed test documents to the 22 addresses as identified from the sources listed above. Nine of the 22 test documents were acknowledged as received by the CAF units. Thirteen documents were not acknowledged as received by offices that process POA forms:
· Two documents were acknowledged as received in service centers, but not by the CAF units. Although we did receive an acknowledgement, we could not determine if these employees would have forwarded a POA form to the CAF unit. The test documents were sent to the general service center mailing addresses that did not include CAF unit identifier numbers (because none were provided in the instructions we were using). However, employees in the Receipt and Control function may not have known to send the test documents to the CAF units because we did not send a Form 2848 with our test documents.
· No acknowledgement was received for the remaining 11 test documents, so we could not determine if the documents were received in the CAF units.
IRS management advised us that the incorrect numbers occurred because changes were periodically made to telephone and fax numbers in the CAF units at various service centers but the corrections were not always made in the applicable documents. For example, Publication 947 and Form 2848 are considered continuous use documents and are only updated on an as needed basis. In addition, IRS management informed us that telephone or fax number changes may not have been significant enough to warrant updating these documents. The IRMs are normally updated annually, so the changes to the CAF unit telephone and fax numbers in IRM 21.3.7 would be updated accordingly. Also, management explained that the telephone and fax numbers on the Internet and Intranet web sites are more current because they can be updated when changes occur. For our tests, 9 of the 11 inoperable telephone and fax numbers were identified from Publication 947 and the remaining 2 were from IRM 21.3.7.
Due to these inaccuracies, additional burden may have been
created for taxpayers and tax professionals if they had to conduct further
research and resend Forms 2848. During
these delays, tax professionals cannot discuss issues with the IRS on behalf of
taxpayers, which may delay the resolution of a taxpayer’s issues. Delays can result in additional tax, penalties, and interest assessments, as well as increased
taxpayer frustration. It can also
result in additional expense to the taxpayer for the tax professional’s
repeated attempts to submit the POA form.
On October 12, 2001, we issued a memorandum (see Appendix IV) to IRS management presenting the results of our tests regarding the accuracy of telephone numbers, fax numbers, and mailing addresses. We included recommendations to provide the IRS with the opportunity to take immediate action to correct information in publications, internal guidelines, and the IRS’ public internet site and to ensure the CAF unit telephone and fax numbers were operating correctly in the 10 service centers prior to centralizing the processing of POA forms.
IRS management agreed to correct information in publications, internal guidelines, and the IRS public Internet website. In addition, management advised that after the transition of processing POA forms at the Memphis and Ogden Service Centers, IRS instructions will provide a specific Post Office Box or Stop Number for mailing POA forms (rather than just providing the general service center mailing address). However, IRS management did not ensure that the inoperable telephone and fax numbers were corrected prior to the centralization. Management’s complete response to the memorandum is included as Appendix V.
1. SB/SE management should ensure that telephone numbers and fax numbers documented in current publications are operable. If this is not feasible, a recorded message should be used to direct the caller to the correct telephone or fax number, or the number should be programmed to roll over to the correct telephone or fax number.
Management’s Response: SB/SE management attempted to repair all telephone and fax lines. Several lines could not be repaired by the telephone carrier. Recorded messages and in some instances employees who answer the telephones now in use in other departments will direct callers to the correct number.
2. SB/SE and W&I management should correct all incorrect telephone numbers, fax numbers, and mailing addresses in the publications and forms that are scheduled for revision in November 2001. Updates should be sent as soon as possible to correct the information in the IRM and on the IRS Intranet. IRS management should also include information in the revised documents explaining that beginning in January 2002, POAs will only be processed at the Memphis and Ogden Service Centers. Any changes that may occur to the contact information for those two service centers should be included in revised printed material. In addition, a statement should be added to the publications directing taxpayers and representatives to 1-800-829-1040 for assistance if they have a problem contacting a CAF unit.
Management’s Response: IRS management revised incorrect mailing addresses, telephone numbers and fax numbers in the Form 2848 instructions, the Internal Revenue Manual, and the IRS Intranet Website. They also plan to make the revised Publication 947 available to the public by April 2002.
Appendix I
The overall objectives of this review were to determine the accuracy of information provided to the public for submitting power of attorney (POA) forms and to determine if the Internal Revenue Service (IRS) had a plan to transition the processing of POA forms from 10 to 3 service centers. We performed the following work:
I. Identified five IRS sources that contained the telephone and fax numbers and the mailing addresses for the Centralized Authorization File (CAF) units.
A. Interviewed IRS’ Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) employees and identified two sources that contained contact information for the CAF units.
B. Researched Internal Revenue Manual (IRM) and IRS internet/intranet websites and identified three sources that contained telephone numbers, facsimile (fax) numbers, and mailing addresses for the CAF units.
II. Contacted the CAF units using the information found in sub-objective I.
A. Telephoned the CAF units at the 10 service centers and determined whether each of the 5 IRS sources contained accurate telephone numbers, fax numbers, and mailing address information.
B. Faxed and mailed test documents to the CAF units using the contact information available in each of the IRS’ sources and determined whether they were received. The test documents requested that the recipient contact us to acknowledge receipt.
III. Identified IRS management’s plans for centralizing the processing of POA forms from the 10 service centers to the Memphis or Ogden Service Center.
A. Determined if the SB/SE and the W&I Division management included information about the planned centralization for processing POA forms at the Memphis and Ogden Service Centers in the revised Power of Attorney and Declaration of Representative (Form 2848) instructions and Processing Third Party Authorizations (IRM 21.3.7).
B. Identified the IRS’ schedule for changing the telephone and address information to reflect its new processing procedures.
C. Reviewed the SB/SE management plan to handle the increased workload at the Memphis and Ogden Service Centers.
1. Identified the established receipt cutoff dates for the eight service centers that would no longer process POA forms for domestic taxpayers.
2. Identified the procedures that would be followed by the eight service centers if they received forms after the established cutoff dates in III.C.1.
Appendix II
Major Contributors to This Report
Daniel R. Devlin, Assistant
Inspector General for Audit (Headquarters Operations and Exempt Organizations
Programs)
Nancy A. Nakamura, Director
Gerald
T. Hawkins, Audit Manager
Jeffery
A. Smith, Senior Auditor
Yolanda
D. Brown, Auditor
Gwendolyn M. Green, Auditor
Appendix III
Commissioner N:C
Commissioner,
Wage and Investment Division W
Director,
Customer Account Services, Small Business/Self-Employed Division S:CAS
Director, Customer
Assistance, Relationships and Education, Wage And Investment
Division W:CAR
Chief Counsel CC
National Taxpayer Advocate TA
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
Liaisons:
Commissioner, Small Business/Self-Employed Division S
Commissioner, Wage and Investment Division W
Appendix IV
Memorandum
#1: Internal Revenue Service Source
Documents Contain Inaccurate Telephone and Facsimile Numbers and Mailing
Addresses for Submitting Power of Attorney Forms
Memorandum #1 was removed due to its size. To see Memorandum #1, please go to the Adobe
PDF version of the report on the TIGTA Public Web Page.
Appendix V
Management’s Response to
Memorandum #1
Management’s Response to Memorandum #1 was removed due to
its size. To see the response, please
go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Appendix VI
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.