Management Advisory Report: Progress Was Made to Provide Taxpayers With Correct Answers to Tax Law Questions

 

 

August 2002

 

Reference Number:  2002-40-161

 

 

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 30, 2002

 

 

MEMORANDUM FOR COMMISSIONER, WAGE AND INVESTMENT DIVISION

 

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

                Acting Inspector General

 

SUBJECT:     Final Management Advisory Report - Progress Was Made to Provide Taxpayers With Correct Answers to Tax Law Questions (Audit # 200240053)

 

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 issues 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 required 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 third in a series of bi-monthly reports that we will issue in response to the amendment to the Treasury spending bill. 

During May and June 2002, our auditors made 76 anonymous visits to 39 TACs.  The auditors asked 156 tax law questions and determined that IRS employees are not providing correct answers to some tax law questions.  For example:

·        Eighty-eight (56 percent) of the 156 questions were answered correctly.

·        Thirty-six (23 percent) of the 156 questions were answered incorrectly.

·        Thirty-two (21 percent) of the 156 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 addition, we observed the following during our visits to the TACs:

·        Office hours were not posted for 17 (44 percent) of the 39 TACs shown on the IRS website.  (Office hours posted at one TAC site were not the same as the hours posted on the website.)

·        Taxpayer privacy was not adequate in 21 (57 percent) of 37 TACs we visited.  (Auditors were unable to assess the adequacy of privacy at two TACs because they were assisted in the receptionist area.) 

·        The TACs were clean in 39 (100 percent) of 39 sites we visited. 

·        The TACs were organized in 33 (85 percent) of 39 sites we visited.

·        IRS employees were professional and courteous to the TIGTA auditors in 71 (93 percent) of the 76 visits.

·        Wait-time for service was 30 minutes or less for 62 (82 percent) of the 76 visits. 

We will 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.  We will also continue to issue bi-monthly reports on our results to the IRS and the Congress.

Management’s Response:  The IRS continues to disagree with our method of reporting referrals to publications when computing the accuracy rate.  However, based on our May and June visits to TACs, the IRS has taken additional steps to address improper referrals to publications.  Beginning in July, IRS managers conducted exit interviews of taxpayers as they left the TACs to determine the level of service received. This also identified improper referrals.  Managers also shopped TACs other than their own to ask questions.  Both actions provided immediate feedback. 

The IRS Quality Review Staff also began TAC visits in July 2002 to baseline quality for account inquiries and tax return preparation.  They are also measuring professionalism and courtesy.  Early results show that, in almost all cases, employees were professional and courteous.  The IRS’ official results will be available in late August.

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.

 

Table of Contents

Background

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 May and June 2002

Appendix V – Management’s Response to the Draft Report

 

Background

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 these results, 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 required 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 percentage 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 choose from on the following topics:

·        Earned Income Tax Credit (EIC).

·        Dependents.

·        Education Credits.

·        Social Security Benefits.

Our auditors performing anonymous visits to the TACs also ask two questions during each visit, one of which was a question provided by the IRS to its contractor.  The remaining question asked was selected from those we developed which relate to 22 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 when he or she visits a TAC.  In May 2002, we changed the scope of the questions or added additional scenarios that were more applicable to the types of questions taxpayers ask after the filing season. 

This report is the third 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 May and June 2002.  Our auditors anonymously visited 39 TACs in 6 states (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.

Taxpayers Are Receiving Incorrect Answers to Tax Law Questions

IRS employees did not always provide correct answers to the tax law questions asked by our auditors. The results for the 156 tax law questions were as follows:

·        Eighty-eight (56 percent) of the 156 questions were answered correctly.  In 25 of the 88 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 15 questions where the IRS employee provided the correct answer but gave the taxpayer the wrong reason.  For example, the IRS employee stated that a daughter could not be claimed as a dependent because she did not meet the residency test of staying in the home for the entire year.  The correct answer for the scenario our auditors were presenting was that the daughter could not be claimed as a dependent because she earned more than the maximum amount allowed in income and was not a full-time student.  The residency test in this scenario was not a factor in determining if the daughter qualified as a dependent.

·        Thirty-six (23 percent) of the 156 questions were answered incorrectly.  For example, an IRS employee stated that the auditor could claim the EIC because he met the income and age tests.  The correct answer was the auditor could not claim the EIC because his filing status was married filing separate.

·        Thirty-two (21 percent) of the 156 questions resulted in the IRS employee referring the auditor to a publication and generally advising the auditor to do his or her own research to find the answer to the question.  For example:

The tables below provide a complete breakdown of the accuracy of questions answered for the universe as well as the individual IRS and TIGTA accuracy rates.

 

IRS Contractor and TIGTA Questions (156 questions asked)

 


Correct

Correct but Incomplete

Incorrect

Ref. to

Pub.

Service

Denied

Responses

63

25

36

32

0

Percentages

40%

16%

23%

21%

---

Source:  Anonymous visits performed by TIGTA auditors.

 

IRS Contractor Questions (77 questions asked)

 


Correct

Correct but Incomplete


Incorrect

Ref. to

Pub.

Service

Denied

Responses

39

13

12

13

0

Percentages

51%

17%

16%

17%

---

Source:  Anonymous visits performed by TIGTA auditors.

 

TIGTA Questions (79 questions asked)

 


Correct

Correct but Incomplete


Incorrect

Ref. to

Pub.

Service

Denied

Responses

24

12

24

19

0

Percentages

30%

15%

30%

24%

---

Source:  Anonymous visits performed by TIGTA auditors.

 

Accommodations at Taxpayer Assistance Centers Could Be Improved

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 21 (57 percent) of 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.  A TIGTA auditor overheard an IRS employee leave a telephone message with another IRS office.  The message included the taxpayer’s SSN, telephone number, and a description of the tax issue. 

·        A taxpayer’s SSN was seen when the IRS employee placed a slip of paper with the SSN down on the desk. The auditor was able to write down the SSN. 

Also, 17 (44 percent) of 39 TACs did not have office hours posted on the IRS website.  In one (3 percent) of the 39 TACs visited, posted office hours were not the same as the office hours shown on the IRS’ website. The table below shows a breakdown of our TAC site accommodation results. 

 

TAC Site Accommodations (39 TACs visited)

 

Occurrences

Percentages

TAC Site Address Correct

38

97%

TAC Site Office Hours Correct

21

95%

TAC Site Clean

39

100%

TAC Site Organized

33

85%

TAC Site Space Adequate

16

43%

TAC Site With Security

23

59%

Source:  Anonymous visits performed by TIGTA auditors.

 

Auditors Had Positive Experiences When They Visited Taxpayer Assistance Centers

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 (93 percent) of the 76 visits. During three visits, auditors observed an IRS employee using an interpreter to assist Spanish-speaking taxpayers.

·        The wait-time for service was 30 minutes or less in 62 (82 percent) of the 76 visits. 

·        Thirty-nine (100 percent) of the TACs visited were clean and 33 (85 percent) were organized.

The tables below show a breakdown of our quality of assistance results.

Quality of Assistance – Wait-Time (39 TACs visited, 2 auditors per site)

 

Occurrences

Percentages

0 to 15 Minutes

48

63%

16 to 30 Minutes

14

18%

31 to 45 Minutes

7

9%

46 Minutes to 1 Hour

5

7%

Greater Than 1 Hour

2

3%

Source:  Anonymous visits performed by TIGTA auditors.

 

Quality of Assistance – Miscellaneous (39 TACs visited, 2 auditors per site)

 

Occurrences

Percentages

Employee Name Given/Visible

56

74%

Employee ID Number Given/Visible

54

71%

Employee Name Not Provided When Requested

0

---

Employee Professional/Courteous

71

93%

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 issues 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 39 TACs visited.  We asked 156 tax law questions that an individual taxpayer might ask.  The 156 questions included 77 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 Fiscal Year 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

Kathy Hughes, Senior Auditor

Frank Jones, Senior Auditor

Edith Lemire, Senior Auditor

John Piecuch, Senior Auditor

Lena Dietles, Auditor

Roberta Fuller, Auditor

Andrea Hayes, Auditor

Kathy Henderson, Auditor

Mary Keyes, Auditor

Grace Terranova, Auditor

 

Appendix III

 

Report Distribution List

 

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

Audit Liaisons:

            Wage and Investment Division

 

Appendix IV

 

States Visited During May and June 2002

 

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.

 

The six states visited include: Arkansas, California, Hawaii, Nevada, New York, and North Carolina. 

 

Appendix V

 

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.