The Internal Revenue Service Cannot Monitor Its Compliance
With the Direct Contact Provisions
September 2002
Reference Number: 2002-40-177
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.
September
11, 2002
MEMORANDUM FOR
COMMISSIONER ROSSOTTI
FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner
Acting Inspector General
SUBJECT: Final Audit Report - The Internal Revenue
Service Cannot Monitor Its Compliance With the Direct Contact Provisions (Audit
# 200240016)
This
report presents the results of our review to determine if the Internal Revenue
Service (IRS) complied with legal guidelines dealing with directly contacting
taxpayers and their representatives set forth in Internal Revenue Code (I.R.C.)
§§ 7521(b)(2) and (c) (1986).
In
summary, we could not determine if the IRS fully complied with the requirements
of I.R.C. §§ 7521(b)(2) and (c). The Treasury
Inspector General for Tax Administration (TIGTA) is
required under I.R.C. § 7803(d)(1)(A)(ii) (Supp. IV 1998) to annually evaluate
the IRS’ compliance with the direct contact provisions of the law. This is the fourth year in which the TIGTA
has reported its inability to give an opinion on the IRS’ compliance with these
legal guidelines. IRS management
information systems do not separately record or monitor direct contact
requirements, and the Congress has not explicitly required the IRS to do
so. Furthermore, the TIGTA does not
recommend the creation of a separate tracking system. Accordingly, we are not making any formal recommendations in this
report.
In
response to the TIGTA’s Fiscal Year 2001 report, the IRS proposed revising the
Internal Revenue Manual (IRM) to have first-line managers address this issue
through group meetings, case reviews, on-the-job visits, and taxpayer or
representative inquiries. We determined
that the IRM has not been revised, but a memorandum was issued to the Small Business/Self-Employed
first-line managers in March 2002 that contained the same language as in the
proposed IRM revisions.
Management’s
Response: IRS management was pleased that our review
of direct contact complaints showed no IRS employee violations of the direct
contact provisions of the I.R.C. and agreed that their management information
systems do not monitor compliance with direct contact provisions. The IRS has no plans to create a separate
tracking system to monitor compliance with the direct contact provisions.
The
IRS provided instructions to its field group managers to take any steps
necessary to ensure employees are complying with direct contact provisions and
plans to include these instructions in the IRM.
Management’s
complete response to the draft report is included as Appendix IV.
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.
The Internal Revenue Service Cannot Monitor Its Compliance With
the Direct Contact Provisions
Appendix I – Detailed Objective, Scope, and Methodology
Appendix II – Major Contributors to This Report
Appendix III – Report Distribution List
Appendix IV – Management’s Response to the Draft Report
The Taxpayer Bill of Rights created a number of safeguards to protect taxpayers being interviewed by an Internal Revenue Service (IRS) employee as part of a tax audit or collection action. Specifically, IRS employees are required to:
·
Stop a taxpayer interview
(unless the interview is required by court order) whenever a taxpayer requests
to consult with a representative (someone who is permitted to represent taxpayers
before the IRS).
·
Obtain their immediate
supervisor’s approval to contact the taxpayer instead of the representative if
the representative is responsible for unreasonably delaying the completion of a
tax audit or collection action.
The provisions were created to
protect the rights of taxpayers who are interviewed by an IRS employee as part
of a tax audit or collection action. A
taxpayer can file a civil suit against the IRS if an IRS employee intentionally
disregards these provisions by denying a taxpayer the right to appropriate
representation.
The Treasury Inspector General for
Tax Administration (TIGTA) is required under Internal Revenue Code (I.R.C.) §
7803(d)(1)(A)(ii) (Supp. IV 1998) to annually evaluate the IRS’ compliance with
the direct contact provisions of I.R.C. §§
7521(b)(2) and (c)(1986). In Fiscal
Years (FY) 1999, 2000, and 2001, the TIGTA reported that it could not determine
whether IRS employees complied with the required procedures because the IRS was
unable to readily identify any cases for the TIGTA’s reviews. Current IRS management information systems
do not separately record or monitor cases where taxpayers had requested to
consult with a representative or where IRS employees bypassed taxpayer
representatives and contacted the taxpayers directly. Moreover, there is no legal requirement for the IRS to develop a
separate system that records or monitors cases involving these two procedures.
This review was conducted at the IRS National Headquarters and the Small Business/Self-Employed (SB/SE) Division Headquarters during May and June 2002. The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
As in the prior reviews, the TIGTA could not determine whether IRS employees followed proper procedures to stop an interview if the taxpayer requested to consult with a representative. Neither the IRS nor the TIGTA could readily identify cases where the taxpayer requested a representative or the IRS contacted the taxpayer directly and bypassed the representative.
The TIGTA recommended in its FY 1999 report that a process be developed to monitor IRS employee compliance with the law when a taxpayer requests to consult with a representative or when an IRS employee disregards the taxpayer’s request and bypasses a representative. In its response, the IRS stated it planned to implement a survey process to capture information from taxpayers interviewed by IRS employees. It also planned to include the direct contact issues in its quality review process.
However, in their response to the TIGTA’s FY 2001 report, IRS management stated that they no longer agreed that a survey was the correct approach. They believe an additional survey would impose undue taxpayer burden. In addition, they stated that including the direct contact issues in the IRS’ quality review process was not feasible because there are no expectations for an IRS employee to document what did not occur in the course of the taxpayer contact. Therefore, these types of comments are generally not included in the case files.
As an alternative, IRS management planned to have field group managers take steps to help ensure employee compliance with the laws concerning direct contacts with taxpayers. These instructions were to be included in a revision of the Internal Revenue Manual (IRM). As of May 2002, the IRM had not been revised to include this guidance.
However, in March 2002 the SB/SE Division issued a memorandum to its first-line managers explaining that they are to take whatever steps are necessary (including case reviews, on-the-job visits, and taxpayer or representative inquiries) to help ensure their employees complied with the direct contact provisions of the law.
Even though the IRS does not monitor its employees’ compliance with the direct contact provisions, the TIGTA Office of Investigations tracks taxpayer complaints that allege IRS employees bypassed their representatives and contacted them directly. A review of the 11 direct contact complaints received and closed by the TIGTA between November 1999 and April 2002 showed that none of the IRS employees violated the direct contact provisions of the I.R.C.
This is the fourth year in which the TIGTA has reported its inability to give an opinion on the IRS’ compliance with the direct contact provisions of the I.R.C. The TIGTA does not recommend the creation of a separate tracking system. Accordingly, we are not making any formal recommendations in this report.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine if the Internal Revenue Service (IRS) complied with legal guidelines dealing with directly contacting taxpayers and their representatives set forth in Internal Revenue Code §§ 7521(b)(2) and (c) (1986). To accomplish this objective, we:
I.
Interviewed an executive in
the Small Business/Self-Employed (SB/SE) Division to determine if the IRS has
implemented or plans to implement a system to track cases where taxpayers have
requested to consult with a representative or where an IRS employee bypassed a
representative.
II. Determined the status of the alternative corrective actions
proposed by the IRS in its response to the Treasury Inspector General for Tax
Administration’s (TIGTA) Fiscal Year 2001 report.
A.
Reviewed the Internal Revenue
Manual to determine if it had been revised to incorporate the proposed changes.
B.
Obtained and reviewed a
memorandum issued by the SB/SE Division in March 2002 instructing first-line
managers to take whatever steps necessary to ensure direct contact prohibitions
are understood and followed by employees.
III. Interviewed various IRS and TIGTA personnel responsible for
the Taxpayer Advocate Management Information System (TAMIS), the Executive
Control Management System (ECMS), and the Performance and Results Information System
(PARIS) to determine if there is a system or plans for a system to track
taxpayer complaints relating to violations of the direct contact provisions of
the law.
A.
Identified 11 direct contact
complaints received and closed by the TIGTA Office of Investigations from
November 1999 to April 2002.
B.
Obtained and reviewed the
complaint files to determine their validity and what actions were taken by the
IRS as a result of the complaints.
Appendix II
Major Contributors to This Report
Michael R. Phillips, Assistant
Inspector General for Audit (Wage and Investment Income Programs)
Augusta R. Cook, Director
Bryce Kisler, Audit Manager
Mary Lynn Faulkner, Senior Auditor
Kristi Larson, Senior Auditor
David Hartman, Auditor
Patricia Jackson, Auditor
Appendix III
Deputy Commissioner N:DC
Commissioner, Large and Mid-Size Division LM
Commissioner, Small Business/Self Employed Division S
Commissioner, Tax Exempt and Government Entities Division T
Commissioner, Wage and Investment Division W
Director,
Compliance, Small Business/Self-Employed Division S:C
Director,
Compliance, Wage and Investment Division
W:CP
Director, Strategy and Finance W:S
Chief, Customer Liaison S:COM
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:
Director, Compliance, Small Business/Self-Employed Division S:C
Director, Compliance, Wage and Investment Division W:CP
Executive Assistant, Director, Communications and Liaison CL
Appendix IV
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.