Management Advisory Report:
Taxpayers Continue to Receive Incorrect Answers to Some Tax Law
Questions
June 2002
Reference Number:
2002-40-113
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.
June
26, 2002
MEMORANDUM FOR
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Deputy Inspector General for
Audit
SUBJECT: Final Management Advisory Report -
Taxpayers Continue to Receive Incorrect Answers to Some Tax Law Questions
(Audit # 200240036)
This
report presents the results of our review to determine if the Internal Revenue
Service (IRS) provides accurate and timely responses to taxpayers’ tax law
questions. In addition, we assessed
whether IRS employees were professional and courteous to Treasury Inspector
General for Tax Administration (TIGTA) auditors who made anonymous visits to
the Taxpayer Assistance Centers (TACs).
We also evaluated the adequacy of accommodations for items such as
space, privacy, and cleanliness, and determined if the correct office hours
were posted in the TACs.
This
review was conducted as a result of an amendment to the Treasury spending bill
for Fiscal Year (FY) 2002 proposed by Senator Byron Dorgan, (Democrat-North
Dakota), Chairman of the Subcommittee on Treasury and General Government. The amendment requires the TIGTA to conduct
visits to all TACs and report to the Congress on whether taxpayers are provided
correct and prompt answers to their questions.
We will conduct anonymous visits to all TACs over a 2-year period. This is the second in a series of bi-monthly
reports that we will issue in response to the amendment to the Treasury
spending bill.
During March and April 2002, our auditors made 73 anonymous
visits to 37 TACs. The auditors asked
146 tax law questions and determined that IRS employees did not provide correct
answers to some tax law questions. For
example:
·
Eighty (55 percent) of the 146 questions were answered
correctly.
·
Forty-two (29 percent) of the 146 questions were answered
incorrectly.
·
Twenty-three (16 percent) of the 146 questions resulted in
the IRS employee referring the auditor to IRS publications and generally
advising the auditor to do his or her own research to find the answer to the
question. In two instances, the auditor
was referred to the wrong publication.
·
One question (1
percent) asked by an auditor was not answered.
The employee did not refer the auditor to another employee (in the
office or on the telephone).
In addition, we observed the
following during our visits to the TACs.
·
Office hours posted at
16
(43 percent) of the 37 TACs visited were not the same as the hours shown on the
IRS website.
·
Taxpayer privacy was not adequate in 28 (76 percent) of 37
TACs we visited.
·
The TACs were clean in 37 (100 percent) of 37 sites we
visited.
·
The TACs were organized in 35 (95 percent) of 37 sites we
visited.
·
IRS employees were professional and courteous to the TIGTA
auditors in 71 (97 percent) of the 73 visits.
·
Wait time for service was 30 minutes or less for 66 (90
percent) of the 73 visits.
We
do not make formal recommendations to the IRS in the bi-monthly reports. However, we plan to issue semi-annual trend
reports that may include appropriate recommendations to help ensure taxpayers
are provided accurate responses to their tax law questions. Our auditors will continue making visits to
the TACs throughout Calendar Years 2002 and 2003 and issuing bi-monthly reports
on our results.
Management’s
complete response to the draft report is included as Appendix V.
Office
of Audit Comment:
As with their response to
our first in this series of bi-monthly reports, IRS management continues to
believe that the statistics cited in our report do not reflect the accuracy of
the IRS’ answers. Specifically, they do
not believe that referrals to publications should be included in computing the
accuracy rate. We disagree. As we previously stated, we do not believe
that simply referring taxpayers to a publication to do the research themselves
ensures a correct answer nor do we believe it qualifies as successful customer
service.
Copies of this
report are also being sent to the IRS managers who are affected by the
report. Please contact me at (202)
622-6510 if you have questions or Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs), at (202) 927-0597.
Taxpayers are Receiving Incorrect Answers to Tax Law
Questions
Accommodations at Taxpayer Assistance Centers Could Be Improved
Auditors Had Positive Experiences When They Visited Taxpayer Assistance Centers
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – States Visited During March and April 2002
Appendix V – Management’s Response to the Draft Report
The Senate Committee on Appropriations was deeply concerned about the findings in a Treasury Inspector General for Tax Administration (TIGTA) audit report on the Internal Revenue Service’s (IRS) Taxpayer Assistance Centers (TAC). This report showed that our auditors did not receive accurate or sufficient answers to 73 percent of their tax law questions posed during anonymous visits to the TACs during January and February 2001. Based on the results of this review, Senator Byron Dorgan (Democrat-North Dakota), Chairman of the Subcommittee on Treasury and General Government, proposed an amendment to the Treasury spending bill for Fiscal Year (FY) 2002. The amendment requires the TIGTA to conduct visits to all TACs and report to the Congress as to whether taxpayers are provided correct and prompt answers to their questions. We will conduct anonymous visits to all TACs over a 2-year period.
The IRS’ Field Assistance (FA) office in the Wage and Investment (W&I) Division has overall responsibility for the TACs. The TACs exist primarily to serve taxpayers who choose to seek help from the IRS in person. The IRS employees who work in the TACs provide assistance in interpreting tax laws and regulations, preparing some tax returns, resolving inquiries on taxpayer accounts, and providing various other services designed to minimize the burden on taxpayers in satisfying their tax obligations. There are currently no statistics on the percent of time spent by employees in the TACs on the various services detailed above. The FA office is using FY 2002 as a baseline to establish standards and other management information in this area.
There are 414 TACs located throughout the United States including Washington, D.C. During FY 2001, the TACs served approximately 9.3 million taxpayers.
In addition to the anonymous visits being performed by our auditors, the IRS has hired an outside contractor to anonymously visit its TACs and ask two tax law questions per visit. The contractor visits began in October 2001. The IRS provided the contractor with four questions to ask on the following topics:
|
· Dependents |
· Earned Income Tax Credit |
|
· Education Credits |
· Social Security Benefits |
Our auditors performing anonymous visits to the TACs also asked two questions during each visit, one of which was a question provided by the IRS to its contractor. The other question asked was selected from those we developed which relate to 18 tax law topics that are within the scope of topics that TAC employees should have been trained to answer. The TIGTA questions were designed to cover a wide range of tax law topics in order to provide an overall assessment on whether taxpayers are receiving correct answers to questions that an individual taxpayer might ask.
This report is the second in a series of bi-monthly reports that we will issue on the results of our visits to the TACs. The review was conducted in the IRS’ Customer Assistance, Relationships, and Education office in the W&I Division in March and April 2002. Our auditors anonymously visited 37 TACs in 10 states and in Washington, D.C. (See Appendix IV for specific states visited).
This review was conducted in accordance with the President’s Council on Integrity and Efficiency’s Quality Standards for Inspections. Detailed information on our objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
IRS employees did not always provide correct answers to the tax law questions asked by our auditors. The results for the 146 tax law questions were as follows:
· Eighty (55 percent) of the 146 questions were answered correctly. In 24 of the 80 questions, the IRS employee provided a correct answer without asking all of the required questions outlined in the tax law instructions and publications. This also included 7 questions where the IRS employee provided the correct answer but gave the taxpayer the wrong reason. For example, the IRS employee stated that a nephew could not be claimed as a qualifying child for the earned income credit because a nephew does not meet the relationship test. The correct answer for the scenario our auditors were presenting was that the nephew was not a qualifying child because he did not live with the taxpayer for the entire year. A nephew does meet the relationship test.
· Forty-two (29 percent) of the 146 questions were answered incorrectly. For example, an IRS employee provided an incorrect answer to a question on whether the auditor, as a single taxpayer with a gross income of $68,530, was eligible to claim a credit for tuition costs while pursuing a Master’s degree in 2001. The maximum adjusted income level allowed for this single taxpayer to claim a credit is $50,000. The IRS employee stated that the auditor qualified for the credit, but the maximum amount was $1,000.
· Twenty-three (16 percent) of the 146 questions resulted in the IRS employee referring the auditor to IRS publications and generally advising the auditor to do his or her own research to find the answer to the question. In two instances, the auditor was referred to the wrong publication.
· One question (1 percent) was not answered by the IRS employee. We recorded this response as service denied. The IRS employee told the TIGTA auditor that he or she did not know the answer to the question. The employee did not refer the auditor to another employee (in the office or on the telephone) to obtain an answer.
The tables below provide a complete breakdown of the accuracy of questions answered for the universe as well as for IRS and TIGTA accuracy rates.
|
IRS Contractor and TIGTA Questions |
|||||
|
|
|
Correct but
Incomplete |
|
Ref. to Pub. |
Service Denied |
|
Responses |
56 |
24 |
42 |
23 |
1 |
|
Percentages |
38% |
16% |
29% |
16% |
1% |
Source:
Anonymous visits performed by TIGTA auditors.
|
IRS Contractor Questions |
|||||
|
|
|
Correct but Incomplete |
|
Ref. to Pub. |
Service Denied |
|
Responses |
36 |
9 |
16 |
12 |
0 |
|
Percentages |
49% |
12% |
22% |
16% |
--- |
Source:
Anonymous visits performed by TIGTA auditors.
|
TIGTA Questions |
|||||
|
|
|
Correct but
Incomplete |
|
Ref. to Pub. |
Service Denied |
|
Responses |
20 |
15 |
26 |
11 |
1 |
|
Percentages |
27% |
21% |
36% |
15% |
1% |
Source:
Anonymous visits performed by TIGTA auditors.
During our visits, we assessed the adequacy of accommodations in the TACs, including items such as space and privacy. We also determined if the correct office hours were posted in the TACs.
We determined that taxpayer privacy was not always protected. In 28 (76 percent) of the 37 TACs visited, the floor plan did not allow for taxpayer privacy. If several taxpayers were in line waiting for service, the next person in line could easily overhear the conversation between the IRS employee and the taxpayer being served. For example:
· A taxpayer’s Social Security Number (SSN) was overheard. The IRS employee asked the taxpayer to give his SSN and the TIGTA auditor waiting for service was able to hear the SSN.
· A taxpayer’s SSN was seen when the IRS employee placed a check made out to the IRS down on the desk.
We were unable to compare office hours posted on the IRS website with those posted at the TACs for 12 (32 percent) of the 37 TACs visited. For 16 (43 percent) of the 37 TACs visited, posted office hours were not the same as the office hours shown on the IRS website. For example:
· One (3 percent) of the 37 TACs had office hours posted that showed the site was open on Saturdays. However, Saturday office hours for this TAC site were not posted on the IRS website.
· One (3 percent) of the 37 TACs had Saturday office hours posted on the IRS website, but the office hours posted at the TAC site did not show that the site was open on Saturdays.
Also, we determined that thirty-seven (100 percent) of the TACs visited were clean and 35 (95 percent) were organized. The table below shows a breakdown of our TAC site accommodation results.
|
TAC SITE ACCOMMODATIONS |
||
|
|
Occurrences |
Percent |
|
TAC Site
Office Address Correct |
37 |
100 |
|
TAC Site
Office |
9 |
24 |
|
TAC Site
Clean |
37 |
100 |
|
TAC Site
Organized |
35 |
95 |
|
TAC Site |
9 |
24 |
|
TAC Site |
10 |
27 |
Source:
Anonymous visits performed by TIGTA auditors.
During our visits to the TACs, we assessed whether IRS employees were professional and courteous. We also assessed the wait time for service and the cleanliness of the TAC. We had some positive experiences. For example:
· The IRS employees assisting us were professional and courteous in 71 (97 percent) of the 73 visits.
The table below shows a breakdown of our quality of assistance results.
|
QUALITY OF ASSISTANCE—WAIT TIME |
||
|
|
Occurrences |
Percent |
|
0 to 15 Minutes |
60 |
82 |
|
16 to 30 Minutes |
6 |
8 |
|
31 to 45 Minutes |
1 |
1 |
|
46 Minutes to One Hour |
0 |
--- |
|
Greater Than One Hour |
6 |
8 |
Source:
Anonymous visits performed by TIGTA auditors.
|
QUALITY OF ASSISTANCE—MISCELLANEOUS |
||
|
|
Occurrences |
Percent |
|
Employee Name Given/Visible |
62 |
85 |
|
Employee ID Number Given/Visible |
61 |
84 |
|
Employee Name Not Provided When
Requested |
0 |
--- |
|
Employee Professional/Courteous |
71 |
97 |
Source:
Anonymous visits performed by TIGTA auditors.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of the review was to determine if the Internal Revenue Service (IRS) provides accurate and timely responses to taxpayers’ tax law questions. In addition, we assessed whether IRS employees in the Taxpayer Assistance Centers (TACs) were professional and courteous to our auditors who made anonymous visits to the TACs. We also evaluated the adequacy of the accommodations for items such as space, privacy, and cleanliness, and determined if the correct office hours were posted in the TACs.
To achieve this objective, we performed the following tests.
I.
Determined if the IRS
provided quality service and accurate responses to tax law inquiries at the
TACs. We asked 146 tax law questions
that an individual taxpayer might ask.
The 146 questions included 73 questions that are being used by the IRS’
contractor. We developed the remaining
questions based on the training provided to Tax Resolution Representatives
(TRR) during the fall of 2001 and the scope of services for tax law assistance
prescribed in the FY 2002 Field Assistance Operating Procedures.
II.
Determined the quality of
service provided by the TRR.
III.
Determined if accommodations
in the TACs visited were suitable to provide quality customer service.
Appendix II
Major
Contributors to This Report
Michael R. Phillips, Assistant Inspector
General for Audit (Wage and Investment Income Programs)
Kerry Kilpatrick, Director
Deborah Glover, Audit Manager
Russell Martin, Audit Manager
Pamela DeSimone, Senior Auditor
Deborah Drain, Senior Auditor
John Hawkins, Senior Auditor
Robert Howes, Senior Auditor
Kathy Hughes, Senior Auditor
Frank Jones, Senior Auditor
Edith Lemire, Senior Auditor
John Piecuch, Senior Auditor
Robert Baker, Auditor
Lena Dietles, Auditor
Roberta Fuller, Auditor
Kathy Henderson, Auditor
Mary Keyes, Auditor
Grace Terranova, Auditor
Appendix
III
Commissioner N:C
Deputy Commissioner N:DC
Director, Customer Assistance, Relationships, and Education W:CAR
Director, Field Assistance W:CAR:FA
Director, Strategy and Finance W:S
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
Appendix IV
States Visited During March and April
2002
We visited Washington, D.C., and ten states, including: Alabama, Florida, Illinois, Iowa, Maryland, Minnesota, Montana, Nebraska, North Dakota, and South Dakota.
The map was removed due to its size. To see the map, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
Appendix V
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.