The
National Taxpayer Advocate Could Enhance the Management of Systemic Advocacy
Resources
September 2003
Reference
Number: 2003-10-187
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
30, 2003
MEMORANDUM FOR NATIONAL TAXPAYER ADVOCATE
FROM:
Gordon C. Milbourn III /s/ Gordon C. Milbourn
Assistant Inspector General For Audit (Small Business
and
Corporate Programs)
SUBJECT: Final Audit Report - The National
Taxpayer Advocate Could Enhance the Management of Systemic Advocacy Resources
(Audit # 200210044)
This report presents the
results of our review of the Office of the Taxpayer Advocate’s (OTA) management
of systemic advocacy resources. Our
overall objective was to evaluate the
OTA’s resource management of systemic advocacy projects. Systemic advocacy projects resolve and
prevent recurring taxpayer problems dealing with the Internal Revenue Service
(IRS).
In summary, we found
systemic advocacy projects were frequently not timely completed, and there were
long periods of time without any project activity. As of November 2002, there were 130 open systemic advocacy projects
that had been in process for an average of 482 calendar days. For the 164 systemic advocacy projects
closed between March 2000 and November 2002, the OTA took an average of 234
calendar days to complete them. We
examined a judgmental sample of 37 open systemic advocacy projects and found
inactivity delays after the projects were assigned. Specifically, in 23 (62 percent) of the 37 open projects, periods
of inactivity ranged between 91 and 365 calendar days, and in 2 (5 percent) of
the 37 open projects, there was no activity from 1 to 3 years. We found no major periods of inactivity for 12
(33 percent) of the 37 open projects reviewed.
Systemic
advocacy project delays could adversely affect substantial numbers of
taxpayers. All of the systemic advocacy
projects in our sample supported the OTA’s mission of resolving recurring
taxpayer problems. Using IRS
statistical information, we determined that potentially 16.7 million taxpayers
are continuing to be affected by the problems outlined in projects we sampled.
Delays
in processing systemic advocacy projects were due to competing priorities and
not having either timeliness standards or complete management information. Advocacy analysts devote the majority of
their time to systemic advocacy projects for a 4-month period from January to
April. Beginning in May, however, these
same advocacy analysts are reassigned to work on the National Taxpayer
Advocate’s (NTA) Annual Report to Congress and discontinue work on their
ongoing systemic advocacy projects, often not returning to their initial
projects until the following January.
The practice of interrupting ongoing systemic advocacy projects to free
up staff to work on the NTA’s Annual Report to Congress reveals a serious
vulnerability.
The
OTA had not established timeliness or staff resource standards for conducting
systemic advocacy projects. This did
not allow systemic advocacy analysts and managers to plan and monitor the
delivery of systemic advocacy projects.
We believe that the OTA can develop reasonable standards based on its
experience to date in conducting projects.
In addition, systemic advocacy managers do not have the data necessary
to adequately monitor systemic advocacy project activity. The new management information system does
not require entry of the estimated number of staff days necessary to complete a
systemic advocacy project, the staff days expended to date, or the amount of
time elapsed since the project’s inception.
These limitations do not allow systemic advocacy managers to accurately
forecast a project’s completion date or the resources being dedicated to the
project. We were unable to determine
whether the staffing level for the systemic advocacy program was appropriate
because no information was available on the staff days expended in working
systemic advocacy projects or developing issues for the NTA’s Annual Report to
Congress.
During discussions, the NTA
stated the OTA had taken corrective actions. Quality
standards for conducting systemic advocacy projects and a time sheet to track
the amount of time that the OTA expends on systemic advocacy projects were
proposed. Also, the NTA has begun a
project grading system to match the skill levels of the staff with their job
expectations, and implemented organizational changes to improve the regional
management and oversight of the systemic advocacy analysts. However, the OTA could not demonstrate that
actions were implemented or the actual benefit the actions have had on
resolving the problems.
We believe additional enhancements are needed to further improve the
program over and above those enhancements already underway or planned by the
NTA.
We recommended that the NTA
formalize the policy of concurrently working systemic advocacy projects
and assignments in support of the NTA’s Annual Report to Congress, and
implement a process to manage both operations simultaneously. The NTA should
establish timeliness and staff resource standards for conducting systemic
advocacy projects based on the experience to date. In addition, the NTA should upgrade the management information
system to provide data on systemic advocacy project activities and staff
resources to assist managers in monitoring and budgeting systemic advocacy
resources.
Management’s Response: The NTA
concurred with the premise of the recommendations to improve management
systems; however, the NTA believes that, since her appointment to the position
in March 2001, substantial improvements have already been implemented,
including some recommended in this report.
Improvements include creating several new managerial positions,
enhancing the skills and training of systemic advocacy analysts, developing a
new management information system, developing business and diagnostic
indicators, establishing quality standards, and developing timeliness indicators. In addition, the NTA took exception to our
finding that project analysts suspend work on systemic advocacy projects to
attend to the Annual Report to Congress.
She noted that, in principle, all work in the OTA may be considered
systemic advocacy in nature and forms the basis for the Annual Report to
Congress. The NTA further noted that
she has implemented a process whereby the development of advocacy projects
forms the basis for recommendations in the Annual Report to Congress. The process will be formalized and shared at
future systemic advocacy training sessions.
Lastly, the NTA disagreed that our recommendations
would provide a measurable benefit on tax administration by potentially
reducing the burden on approximately 16.7 million taxpayers. She stated that their analysis of the 3
specific issues under review showed an impact on approximately 1.9 million
taxpayers, 1.7 million of which could be addressed only through a legislative
change. Management’s complete response
to the draft report is included as Appendix VII.
Office of Audit Comment: We
attempted to evaluate the actions taken to date by the NTA to improve systemic
advocacy projects; however, no measurable benefits could be determined because several actions had
not been developed or implemented at the time of our review. Some of these actions were not implemented
due to the status of negotiations with the National Treasury Employees Union,
as mentioned in the NTA’s response to our draft report.
It is unclear how the new
process whereby systemic advocacy projects support the recommendations in the
Annual Report to Congress overcomes the problem of interrupting ongoing
systemic advocacy projects to prepare the Annual Report. Because the process has not yet been
formalized, we could not assess its contribution to resolving this matter. As such, we reaffirm our initial
recommendation to accomplish both tasks concurrently. Although advocacy work is evident in many aspects of the OTA, the
NTA’s labeling of all work as systemic advocacy defines away a true management
problem; i.e., ensuring specific systemic advocacy projects are completed on
time and without interruption. Project
delays prevent efficient resolution of problems that burden taxpayers and cause
ineffective management of staff resources.
Although we disagree with the NTA, we do not plan to elevate the
disagreement to the Department of the Treasury for resolution.
The NTA questioned the number of taxpayers
potentially burdened by delays in systemic advocacy projects. Although the objective of the audit was not
to quantify the numbers of taxpayers who stood to be affected by systemic
advocacy, we presented an estimate to illustrate the broad impact of the NTA’s
work. The NTA indicated that only 1.9
million taxpayers are potentially affected and that solutions to the issues
affecting approximately 1.7 million of those 1.9 million taxpayers would
require legislative action. However,
this analysis did not include all types of taxpayer burden. By assessing the various ways in which
taxpayers may be burdened in the areas under study, we concluded that many more
taxpayers could be affected by the delays in the NTA’s work. For example, the NTA considered only those
taxpayers that obtained extensions to file tax returns and did not consider
taxpayers that filed late tax returns without extensions, filed amended tax
returns, or could have received a refund earlier in the year if partnership
information was provided sooner. We
believe that delays in completing systemic advocacy projects adversely affected
the NTA’s ability to propose legislation to alleviate taxpayer problems with
the IRS. For example, the NTA knew
about the potential partnership issue in Calendar Year 2001, but at the time of
our review of the project in January 2003, the OTA had not conducted any
project research to formulate a potential legislative proposal. Therefore, we are not adjusting our outcome
measure of a potential 16.7 million taxpayers.
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.
Appendix I – Detailed Objective,
Scope, and Methodology
Appendix II – Major Contributors to
This Report
Appendix III – Report Distribution
List
Appendix IV – Outcome Measures
Appendix V – List of Open Systemic Advocacy
Projects Reviewed
Appendix VI –
List of Closed Systemic Advocacy Projects Reviewed
Appendix VII – Management’s Response
to the Draft Report
In
1996, the Congress created within the Internal
Revenue Service (IRS) the Office of the Taxpayer Advocate (OTA) to
assist taxpayers in resolving problems with the IRS,
identify areas in which taxpayers have problems in dealing with the IRS, and
propose changes in the administrative practices of the IRS and potential
legislative changes that may reduce those problems. In 1998, the Congress added more structural and reporting
requirements to the OTA to help preserve taxpayer rights and resolve and
prevent taxpayer problems with the IRS.
The resolution and prevention of problems is referred to as systemic
advocacy and is discussed by the OTA in its mission, reports to the Congress, and information to the
general public.
IRS
employees, taxpayers, tax practitioners, and other government entities that
identify recurring problems with IRS processes or systems are encouraged to
submit these issues to the OTA. These
issues can cover individual and business tax topics. The OTA organizes the issues to consolidate similar concerns and
eliminate duplication of others. The
highest priority issues, called systemic advocacy projects, are then selected
for review and assigned to advocacy analysts for resolution. Advocacy analysts are required to determine
the cause of systemic problems and either recommend solutions to the IRS operating
divisions for implementation or propose legislative remedies to the Congress.
Since
the OTA began operating in March 2000 as an independent IRS function, it has
implemented some major changes to improve the systemic advocacy program. To address systemic business issues, the OTA
created the Director of Business Advocacy in November 2001 and hired advocacy
analysts with backgrounds in small business and self-employed, tax exempt and
government entities,
and large and mid-size business tax administration. In March 2002, the Office of Systemic Advocacy was created with
an Executive Director to oversee systemic advocacy in the OTA. In April 2003, the OTA began an outreach
program advising IRS employees and the
general public on how to submit a systemic advocacy issue through its
web site. The OTA is
revising and updating the systemic advocacy procedures in the Internal Revenue
Manual and plans to issue them by the end of Fiscal Year (FY) 2003.
The OTA put into operation the Systemic Advocacy
Management System (SAMS) in February 2003 to address inadequacies in the
previous systemic advocacy inventory systems.
The SAMS was designed to consolidate all
unassigned and assigned systemic advocacy issues and projects into one system, identify
duplicate and related items, automatically send acknowledgements to originators
of issues, and help identify the “Most Serious Problems” for the National
Taxpayer Advocate’s (NTA) Annual Report to Congress.
From March 2000 through September 2002, the OTA received 789 systemic
advocacy issues. The 789 issues included
some duplicates and related issues. The
OTA initiated 294 systemic advocacy projects based on these issues. As of November 2002, the OTA had completed 164
projects, with 130 still open. Advocacy
analysts also conducted other systemic advocacy assignments in support of the
NTA’s Annual Report to Congress. These
assignments included work on the analysis of the top 20 most serious problems
encountered by taxpayers, the legislative recommendations, and the most
litigated tax issues.
This audit was performed at the Austin, Texas; Dallas, Texas; New Carrollton, Maryland; St. Paul, Minnesota; and Washington, D.C., OTA offices. Our work was performed from November 2002 through March 2003 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.
The OTA did not ensure that systemic advocacy projects were completed in a timely manner, which could adversely affect substantial numbers of taxpayers. These delays were caused by competing priorities and not having timeliness standards or complete management information systems. During discussions, the NTA stated the OTA had taken corrective actions. However, the OTA could not demonstrate that actions were implemented or the benefit these actions have had on resolving the problems.
Timeliness
The NTA had no formal time requirement for completing systemic advocacy projects. As a result, we could not assess the timeliness of its work against a true standard. However, considering the significance of the projects’ results to the American taxpayers, we deemed the length of time some of these projects remained open to be excessive.
Information on open and closed systemic advocacy projects provided by local OTA management showed that the projects were not timely completed. As of November 2002, there were 130 open projects that had been in process for an average of 482 calendar days. For the 164 projects closed between March 2000 and November 2002, the OTA took an average of 234 calendar days to complete them. The following charts show the number of systemic advocacy projects and age of the open and closed inventory:
Time in Process for
130 Open Systemic Advocacy Projects
The
chart was removed due to its size. To
see the chart, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.
Time to Complete 164 Closed Systemic Advocacy Projects
The chart was removed due to its size. To see the chart, please go to the Adobe PDF
version of the report on the TIGTA Public Web Page.
Inactivity
In January 2003, we reviewed a judgmental sample of 37 open systemic advocacy projects and identified inactivity delays after these projects were assigned. See Appendix V for a listing of open systemic advocacy projects reviewed. In our sample, there were 23 (62 percent) projects with periods of inactivity between 91 and 365 calendar days and 2 (5 percent) projects with periods of inactivity from 1 to 3 years. In only 12 (32 percent) projects did we find no major periods of inactivity. The following chart outlines periods of inactivity after the open systemic advocacy projects were initiated:
Periods of Inactivity in the Open Systemic Advocacy
Projects
The chart was removed due to its size. To see the chart, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.
We attempted to review a judgmental sample of 51 closed systemic advocacy projects for periods of inactivity, but the OTA did not maintain sufficient documentation in 45 (88 percent) of the closed project folders to allow us to determine when actions were taken by advocacy analysts or when advocacy analysts were temporarily removed for other assignments. See Appendix VI for a listing of closed systemic advocacy projects reviewed.
During our closing conference, the NTA expressed the view that many of the advocacy analysts do not possess the technical skills required to successfully resolve projects as a contributing factor to the delays and related problems in this area. In reaction, the OTA has begun to match the skill level of analysts with the issues raised in specific projects. Presently, this is under discussion between the NTA and the National Treasury Employees Union (NTEU). In addition, the NTA plans to establish Advocacy Liaisons who will work with the IRS and Local Taxpayer Advocates to address and correct specific problems affecting systemic advocacy.
The NTA shares our concerns about the timeliness and inactivity on its projects and indicated that the OTA had initiated additional actions to accelerate the conduct of these projects. The NTA informed us that the OTA had undertaken the development of quality standards for conducting systemic advocacy projects. The quality standards include expectations for the timely execution of systemic advocacy projects. Presently, these standards are under discussion between the NTA and NTEU. The NTA also proposed the use of a time sheet to track the amount of time that the OTA expends on systemic advocacy projects.
We acknowledge the efforts undertaken to address these concerns, and though we did not formally assess their efficacy, it appears that they will contribute to improving the quality and timeliness of the OTA’s work. In our discussion with key executives in the OTA, we requested evidence to gauge the actual improvements in these areas. Despite their expectation that the problems had been resolved, the NTA could not demonstrate improvement in these areas. No information could be provided to show that the length of time expired for open projects, the time expended to complete closed projects, or the frequency and duration of periods of project inactivity had been reduced.
Significance of systemic advocacy projects
Delays in processing systemic advocacy projects could adversely affect substantial numbers of taxpayers. All of the projects in our sample supported the OTA’s mission of resolving recurring taxpayer problems. Although only a few project files contained data on the number of taxpayers affected by the problems outlined in the projects, we used IRS statistical information to quantify the potential number of taxpayers affected by some of the open projects. The majority of the open projects we sampled focused on the Offer in Compromise and the Federal Payment Levy Programs that potentially affect as many as 168,650 taxpayers per year. In addition, 1 project concerning Partnership Income, Credits, and Deductions could affect 16.5 million taxpayers per year. The following table outlines the potential numbers of taxpayers affected by the systemic advocacy projects and the average numbers of calendar days these projects were open:
Potential Taxpayers
Affected
Project Type
|
Taxpayers Affected
Annually
|
Average Calendar Days
Open
|
Federal Payment Levy Program
|
52,050
|
140
|
Offer in Compromise
|
116,600
|
289
|
Partnership Income
|
16.5 million
|
890
|
Source: TIGTA
review of open systemic advocacy projects and IRS statistical information.
The OTA did have additional assignments devoted to resolving other taxpayer issues involving the Offer in Compromise and the Federal Payment Levy Programs. The OTA had identified both of these issues in previous Annual Reports to Congress. However, the majority of taxpayer issues discussed in the open systemic advocacy projects were different from the issues raised in the Annual Reports to Congress.
In addition, although the FY 2001 Annual Report to Congress outlined that the OTA would review a Partnership Income issue to determine if legislative recommendations were warranted, no actions had been initiated on the Partnership Income systemic advocacy project at the time of our review.
In addition to its current workload, the OTA can expect increased demand for its services. In response to its outreach efforts, the OTA is realizing steady increases in the number and type of problems taxpayers are experiencing with the IRS. From March 2000 through September 2002, the OTA received 789 advocacy issues. However, the OTA anticipates receiving 800 issues in FY 2003 alone. This reaffirms the need for effective management of staff resources by the OTA.
Competing priorities
Delays in completing systemic
advocacy projects were due to a number of factors. According to interviews with OTA employees, advocacy analysts
devote the majority of their time to systemic advocacy projects for a 4-month
period from January to April. Beginning
in May, however, these same advocacy analysts are reassigned to work on the
NTA’s Annual Report to Congress and discontinue work on their ongoing systemic
advocacy projects. These same advocacy
analysts do not return to their initial systemic advocacy projects until the
NTA’s Annual Report to Congress is complete, often not until the following
January. A review of the 37 open
systemic advocacy projects we sampled generally confirmed this situation. In 25 of the open projects, advocacy
analysts documented that they were unable to continue work on these projects
due to their reassignment between May and December to work on the NTA’s Annual
Report to Congress.
We believe the practice of interrupting ongoing systemic advocacy projects to free up staff to work on the NTA’s Annual Report to Congress reveals a serious vulnerability. Though the OTA is required to complete both systemic advocacy projects and its Annual Report to Congress, the process of issuing the NTA’s Annual Report to Congress comes at the expense of the obligation to address systemic weaknesses in the IRS. For the past 7 years, the NTA has issued Annual Reports to Congress. Given the length of time that has transpired and the expected lessons learned from producing the Annual Report to Congress each year, we believe that the OTA should have developed an operational approach for preparing its Annual Report to Congress that does not conflict with the timely processing of systemic advocacy projects. In our opinion, the OTA needs to maintain a balance between continuing to process systemic advocacy projects with timely results and producing its Annual Report to Congress.
During discussions of this report, the Executive Director, Systemic Advocacy, informed us that she had instructed systemic advocacy managers early in Calendar Year 2003 to discontinue the practice of interrupting the ongoing systemic advocacy projects to work on the NTA’s Annual Report to Congress. We contacted four advocacy analysts at random to determine if they were aware of a new process being implemented. These analysts were assigned Annual Report duties as well as systemic advocacy projects. These analysts stated that they considered this to be more of a goal than an operating expectation and that they had no written guidance or procedures to accomplish it. All of the analysts stated that their perception was that the NTA’s Annual Report to Congress was still the priority and came first.
We believe these efforts should be expanded to formalize the policy of concurrently working these projects and the Annual Report assignments and by implementing a process to manage both operations simultaneously. This should include establishing and disseminating procedures, balancing current work load to ensure high-priority systemic advocacy projects and Annual Report assignments are timely completed, and analyzing workload and staffing resources annually for future advocacy efforts.
Standards
The OTA had not established timeliness or staff resource standards for conducting systemic advocacy projects. This did not allow systemic advocacy analysts and managers to plan and monitor the delivery of systemic advocacy projects. Though the NTA now uses a milestone date to prompt management attention to the length of open projects, there was a fundamental difference of opinion among senior officials as to whether the milestone date was intended as an expected completion date or more simply as a device to alert project managers. We believe that to manage systemic advocacy projects efficiently, the NTA needs a standard to guide analysts in the conduct of their work and aid managers in their oversight role.
The standards should consider the complexity of many of the OTA’s systemic advocacy projects. Many of the issues the OTA undertook for review involve complicated tax law and IRS manual operations that are labor-intensive and subject to error – issues that understandably prompt taxpayers to seek the services of the OTA. We believe that the OTA could develop reasonable standards based on its experience to date in conducting projects that consider such factors as technical complexity.
Management information
In addition, systemic advocacy managers do not have the data necessary to monitor systemic advocacy project activity. The SAMS, implemented in February 2003, did require the entry of estimated start and completion dates for systemic advocacy projects. However, the SAMS automatically calculates a project completion date based on 90 calendar days rather than on the complexity of the systemic advocacy project or the resources necessary to complete it. As discussed above, the Executive Director, Systemic Advocacy, informed us that the 90 calendar days was a prompt for systemic advocacy managers to follow up on the status of projects. We also found the SAMS was not designed to record the estimated number of staff days necessary to complete a project, the staff days expended to date, or the amount of time elapsed since the project’s inception. These SAMS limitations did not allow systemic advocacy managers to accurately forecast a project’s completion date or the resources being dedicated to the project. Therefore, the SAMS could not be effectively used to identify delays in initiating or completing work on systemic advocacy projects.
Using the SAMS, systemic advocacy managers could not prioritize and budget the available staff resources dedicated to systemic advocacy projects and activities in support of the NTA’s Annual Report to Congress. The SAMS did not track staff days budgeted or expended on the projects or the activities in support of the NTA’s Annual Report to Congress. By capturing and analyzing information on staff days budgeted and expended on systemic advocacy projects and the Annual Report to Congress, the OTA would be able to more readily determine cost and staffing requirements.
We were unable to determine whether the staffing level for the systemic advocacy program was appropriate because no information was available on the staff days expended in working systemic advocacy projects or developing issues for the NTA’s Annual Report to Congress. The systemic advocacy program’s FY 2003 budget allowed for 60 full-time employees. The total budget in FY 2003 for the entire OTA organization allowed for approximately 2,170 full-time employees.
We believe that the OTA did not develop a system to monitor systemic advocacy project activities and resources because the OTA was focusing its efforts on delivering its Annual Report to Congress and on a number of other priority activities, including the initial development of the SAMS. However, timely and accurate systemic advocacy project information would assist the OTA in managing and prioritizing systemic advocacy projects and activities in support of the NTA’s Annual Report to Congress.
1. The NTA should formalize the policy of concurrently working systemic advocacy projects and assignments in support of its Annual Report to Congress and implement a process to manage both operations simultaneously. This should include establishing and disseminating procedures, balancing current workload to ensure high-priority systemic advocacy projects and Annual Report assignments are timely completed, and analyzing workload and staffing resources annually for future advocacy efforts.
Management’s Response: The NTA believes the SAMS provides the data necessary to capture project activity and time periods. The NTA has established business and diagnostic indicators and is in negotiations with the NTEU on ways to capture employee staff hours.
In addition, the NTA took exception with our finding that project analysts suspend work on systemic advocacy projects to attend to the Annual Report to Congress. She noted that, in principle, all work in the OTA may be considered systemic advocacy in nature and forms the basis for the Annual Report to Congress. The NTA further noted that she has implemented a process whereby the development of advocacy projects forms the basis for recommendations in the Annual Report to Congress. The process will be formalized and shared at future systemic advocacy training sessions.
The NTA disagreed that our recommendations would provide a measurable benefit on tax administration by potentially reducing the burden on approximately 16.7 million taxpayers. She stated that their analysis of the 3 specific issues showed an impact on approximately 1.9 million taxpayers, 1.7 million of which could be addressed only through a legislative change.
Office of Audit Comment: We could not evaluate the established indicators, as they had not been implemented. The NTA needs to formalize the operational approach and disseminate policies and procedures to systemic advocacy analysts to avoid the persistent problems of stopping project work to concentrate on the Annual Report to Congress.
It is unclear how the new process whereby systemic advocacy projects support the recommendations in the Annual Report to Congress overcomes the problem of interrupting ongoing systemic advocacy projects to prepare the Annual Report. Because the process has not yet been formalized, we could not assess its contribution to resolving this matter. As such, we reaffirm our initial recommendation to accomplish both tasks concurrently. Although advocacy work is evident in many aspects of the OTA, the NTA’s labeling of all work as systemic advocacy defines away a true management problem; i.e., ensuring specific systemic advocacy projects are completed on time and without interruption. Project delays prevent efficient resolution of problems that burden taxpayers and cause ineffective management of staff resources.
The NTA questioned the number of taxpayers potentially burdened by delays in systemic advocacy projects. Although the objective of the audit was not to quantify the numbers of taxpayers who stood to be affected by systemic advocacy, we presented an estimate to illustrate the broad impact of the NTA’s work. The NTA indicated that only 1.9 million taxpayers are potentially affected and that solutions to the issues affecting approximately 1.7 million of those 1.9 million taxpayers would require legislative action. However, this analysis did not include all types of taxpayer burden. By assessing the various ways in which taxpayers may be burdened in the areas under study, we concluded that many more taxpayers could be affected by the delays in the NTA’s work.
For example, the NTA considered only those taxpayers that obtained extensions to file tax returns and did not consider taxpayers that filed late tax returns without extensions, filed amended tax returns, or could have received a refund earlier in the year if partnership information was provided sooner. We believe delays in completing systemic advocacy projects adversely affected the NTA’s ability to propose legislation to alleviate taxpayer problems with the IRS. For example, the NTA knew about the potential partnership issue in Calendar Year 2001, but at the time of our review of the project in January 2003, the OTA had not conducted any project research to formulate a potential legislative proposal. Therefore, we are not adjusting our outcome measure of a potential 16.7 million taxpayers.
2.
The NTA should establish timeliness and
staff resource standards for conducting systemic advocacy projects based on the
experience to date. This should include
reasonable time periods and standards that take into account the complexity of
the subjects under review.
Management’s Response: The NTA believes that our proposals for
measuring time are not appropriate. However,
she agreed that timeliness is an effective diagnostic tool. The NTA believes they have already taken
corrective actions by developing time reporting, case-grading criteria, and
quality measures, and by hiring additional staff. The NTA stated that these actions have resulted in improved
management of resources and projects.
Office of Audit Comment: The actions listed are still in the development and negotiation stage and had not been implemented at the time of our review. Until these actions are fully implemented, the NTA will not be in a position to measure improvements in the management of resources and projects.
3.
The NTA should upgrade the SAMS to provide
data on systemic advocacy project activities and staff resources to assist
managers in monitoring and budgeting systemic advocacy resources. The upgrade should include data on
assignments conducted in support of the NTA’s Annual Report to Congress. The system should also identify
delays in initiating or completing systemic advocacy projects and capture
budgeted and expended staff days.
Management’s Response: The NTA maintained that the SAMS captures
the Annual Report assignments, systemic advocacy project activities, and staff
resources. Project leads and Managers
track timeliness on the SAMS. Case
grading, time reporting, and quality standards features will be implemented
within a year of completing NTEU negotiations and testing.
Office of Audit Comment: The NTA has taken some actions
to address the recommendation; however, without capturing actual staff resource
time expended on projects, the OTA will not be able to monitor and budget staff
resources. The SAMS does not have the
ability to capture staff hours at this time, and the manual processes listed
will not provide adequate means to implement the recommendation.
Appendix I
Detailed Objective,
Scope, and Methodology
The overall objective was to evaluate the Office of the Taxpayer Advocate’s (OTA) resource management for systemic advocacy projects. In determining this, we reviewed how the OTA records, monitors, and budgets its staffing resources for systemic advocacy projects. Although we gathered information about and acknowledge the many changes the OTA has implemented to the systemic advocacy program, we did not evaluate the effectiveness of these changes. To accomplish the overall objective, we:
I. Determined if OTA management was adequately monitoring and allocating staff resources on systemic advocacy projects by discussing the processes used by managers and employees, reviewing systemic advocacy project inventory, determining the age of systemic advocacy projects by reviewing a judgmental sample of 88 (37 open and 51 closed) systemic advocacy projects, and reviewing the current and historical systemic advocacy budgets.
II. Determined what is generally expected of Internal Revenue Service (IRS) management to monitor and allocate staff resources by reviewing the Internal Revenue Manual and other documents available to managers.
III. Determined if the OTA had an adequate management information system to help monitor and allocate staff resources for systemic advocacy projects by reviewing the current management information system, the Systemic Advocacy Management System (SAMS).
IV. Determined if inadequate monitoring and allocation of systemic advocacy staffing delayed or prevented possible protection of taxpayer rights and/or created taxpayer burden by reviewing the judgmental sample of 88 systemic advocacy projects described in Step I. We used a judgmental sample because the systemic advocacy project files were not centrally located and the inventory system did not allow us to verify the population of projects with certainty. For each open project in the sample, determined if there were periods of inactivity or delays.
A. To find the potential number of taxpayers affected by delays in Offer in Compromise systemic advocacy projects, computer analyzed the IRS’ 1 percent statistical databases for the Individual and Business Master Files.
B. To find the potential number of taxpayers affected by delays in Federal Payment Levy Program systemic advocacy projects, computer analyzed the IRS’ 1 percent statistical database for the Individual Master File.
C. To find the potential number of taxpayers affected by delays in the Partner’s Share of Income, Credits, and Deductions, etc. (Form 1065 Schedule K-1) systemic advocacy project, reviewed information provided by the IRS National Office of Research, which compiles the actual number of Form 1065 Schedule K-1s prepared annually with copies sent to the IRS.
V. Determined if changes to the OTA’s inventory systems could be made that would provide information to management that would aid them in allocating and monitoring staff resources by discussing the systems and possible changes with management officials.
VI.
Determined the major changes being
implemented for the systemic advocacy program and the potential risks the OTA
was attempting to address by discussing and reviewing the capabilities of the
SAMS. We discussed and reviewed
documentation on an outreach program to educate external sources on how to
submit systemic issues to the OTA.
Appendix II
Major
Contributors to This Report
Daniel R. Devlin, Assistant
Inspector General for Audit (Headquarters Operations and Exempt Organizations
Programs)
Mary
V. Baker, Director
Aaron
R. Foote, Audit Manager
Abraham B. Millado, Senior Auditor
Thomas
F. Polsfoot, Senior Auditor
Janice
M. Pryor, Senior Auditor
Yasmin
B. Ryan, Senior Auditor
Appendix III
Commissioner C
Executive Director, Systemic Advocacy TA:EDSA
Chief Counsel CC
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Management Controls OS:CFO:AR:M
Audit Liaison: National Taxpayer Advocate TA
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective actions will have on tax administration. This benefit will be incorporated into our Semiannual Report to the Congress.
Type and Value of Outcome Measure:
· Taxpayer Burden – Potential; 16.7 million taxpayers annually due to systemic advocacy project delays (see page 3).
Methodology Used to Measure the Reported Benefit:
Systemic advocacy project delays could adversely affect many taxpayers. All of the systemic advocacy projects in our judgmental sample of 37 open projects supported the Office of Taxpayer Advocate’s (OTA) mission of resolving significant recurring taxpayer problems. Although only a few case files contained data on the number of taxpayers affected by the problems outlined in the systemic advocacy projects, we used Internal Revenue Service (IRS) statistical information to quantify the number of potential taxpayers affected for some of the open projects. Due to time and resource constraints, our analysis for potentially affected taxpayers concentrated on 26 of the 37 open systemic advocacy projects reviewed. These projects were categorized into 3 focus groups: Offer in Compromise (16 projects), Federal Payment Levy Program (9 projects), and Partnership Income (1 project). See Appendix V for a complete list of the open systemic advocacy projects sampled and those that make up these three focus groups.
To find the potential number of taxpayers affected by delays
in Offer in Compromise systemic advocacy projects, we computer analyzed the
IRS’ 1 percent statistical databases for the Individual and Business Master
Files. From this information, we
determined approximately 126,300 and 106,900 taxpayers had filed Offers in
Compromise during Calendar Years (CY) 2001 and 2002, respectively. The average is approximately 116,600
taxpayers per year. Although not all
the Offer in Compromise systemic advocacy projects will potentially affect this
entire population, some, such as the project for sending acknowledgment letters, will potentially affect the entire
population. However, as an outcome
measure, we counted the annual population only once for all Offer in
Compromise systemic advocacy projects we sampled.
To find the potential number of taxpayers affected by delays
in Federal Payment Levy Program systemic advocacy projects, we computer
analyzed the IRS’ 1 percent statistical database for the Individual Master
File. From this information, we
determined approximately 6,200 and 97,900 taxpayers had Federal Payment Levies
during CYs 2001 and 2002, respectively.
The average is approximately 52,050 taxpayers per year. Although not all the Federal Payment Levy
Program systemic advocacy projects will potentially affect this entire
population, some, such as the project for a change in computer programming, will potentially affect the entire
population. However, as an outcome
measure, we counted the annual population only once for all Federal
Payment Levy Program systemic advocacy projects we sampled.
To find the potential number of taxpayers affected by delays in the Partner’s Share of Income, Credits, and Deductions, etc. (Form 1065 Schedule K-1) systemic advocacy project, we reviewed information provided by the IRS National Office of Research, which compiles the actual number of Form 1065 Schedule K-1s prepared annually with copies sent to the IRS. From this information, we determined approximately 17 million and 16 million Form 1065 Schedule K-1s were prepared during CYs 2001 and 2002, respectively. The average is approximately 16.5 million per year. This systemic advocacy project was to research the possibility of changing the Form 1065 Schedule K-1 due date from April 15 to a date similar to that required for other types of information returns (e.g., Wage and Tax Statement (Form W-2)) to allow taxpayers that receive Form 1065 Schedule K-1s more time to prepare their individual returns that are also due April 15. Potentially, each one of these Form 1065 Schedule K-1s could affect an individual taxpayer.
In total, the Offer in Compromise (116,600 taxpayers); Federal Payment Levy Program (52,050 taxpayers); and Partner’s Share of Income, Credits, and Deductions (16.5 million) systemic advocacy projects could annually minimize burden for approximately 16.7 million taxpayers for whom the OTA has yet to resolve the potential taxpayer problem. This is a minimum number because we did not review all open systemic advocacy projects, and we counted the maximum population only once for similar systemic advocacy projects.
Appendix
V
|
Open Projects Reviewed |
Location |
Issue |
Potential Taxpayers Burdened per the OTA |
Date Assigned to Analyst |
Date of TIGTA Review |
Project Age |
Period Over 90 Calendar Days of Inactivity |
|
1 |
Austin |
Cancellation of Debt |
Not Documented |
12/6/2001 |
1/21/2003 |
411 |
110 |
|
2 |
Austin |
Penalty Umbrella Project |
Not Documented |
3/6/2001 |
1/21/2003 |
686 |
274 |
|
3 |
Austin |
Print Consolidation |
Not Documented |
9/13/2000 |
1/21/2003 |
860 |
275 |
|
4 |
Austin |
Refund Offset |
Not Documented |
7/16/2001 |
1/21/2003 |
554 |
285 |
|
5 |
New Carrollton |
Form 2290 – Heavy Vehicle
Use Tax |
Not Documented |
12/4/2002 |
1/30/2003 |
57 |
n/a |
|
6 |
New Carrollton |
Identification Numbers for
Mexican Nationals |
Not Documented |
11/13/2001 |
1/30/2003 |
443 |
189 |
|
7 |
New Carrollton |
Incorrect Corporate Interest
|
Not Documented |
3/25/2002 |
1/30/2003 |
311 |
167 |
|
8 |
New Carrollton |
Interest on Lost or Stolen
Refunds |
Not Documented |
3/4/2002 |
1/30/2003 |
332 |
332 |
|
9 |
New Carrollton |
Partnership Income –
Legislative Change to Revise Due Date of Form 1065 Schedule K-1 |
Not Documented |
8/23/2000 |
1/30/2003 |
890 |
890 |
|
10 |
New Carrollton |
Revise Head of Household
Criteria |
Not Documented |
12/11/2001 |
1/30/2003 |
415 |
182 |
|
11 |
New Carrollton |
Self-employment Tax on
Deferred Compensation |
Not Documented |
3/28/2001 |
1/30/2003 |
673 |
673 |
|
12 |
St. Paul |
Collection Due Process –
Grant Lien Filing Appeal Rights |
Not Documented |
3/13/2002 |
1/28/2003 |
321 |
244 |
|
13 |
St. Paul |
Federal Payment Levy Program
– Levies Cause Hardship to Taxpayers |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
14 |
St. Paul |
Federal Payment Levy Program
– Amend Income Requirement |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
15 |
St. Paul |
Federal Payment Levy Program
– Change Computer Programming |
Not Documented |
12/21/2001 |
1/28/2003 |
403 |
244 |
|
Open Projects Reviewed |
Location |
Issue |
Potential Taxpayers Burdened per the OTA |
Date Assigned to Analyst |
Date of TIGTA Review |
Project Age |
Period Over 90 Calendar Days of Inactivity |
|
16 |
St. Paul |
Federal Payment Levy Program
– Levies on Social Security Income |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
17 |
St. Paul |
Federal Payment Levy Program
– Revise Notification and Screening Process |
Not Documented |
7/29/2002 |
1/28/2003 |
183 |
155 |
|
18 |
St. Paul |
Federal Payment Levy Program
– Revise Procedures for Income Exclusion |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
19 |
St. Paul |
Federal Payment Levy Program
– Correct Computer Errors |
Not Documented |
12/12/2002 |
1/28/2003 |
47 |
n/a |
|
20 |
St. Paul |
Federal Payment Levy Program
– Elderly Taxpayers Incorrect Address |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
21 |
St. Paul |
Federal Payment Levy Program
– Selection Criteria for the Program |
Not Documented |
10/15/2002 |
1/28/2003 |
105 |
n/a |
|
22 |
St. Paul |
Offer in Compromise –
Computer |
Not Documented |
3/6/2002 |
1/28/2003 |
328 |
244 |
|
23 |
St. Paul |
Offer in Compromise –
Effective Tax Administration |
Not Documented |
5/24/2001 |
1/28/2003 |
614 |
244 |
|
24 |
St. Paul |
Offer in Compromise – Form
Revision |
Not Documented |
6/14/2002 |
1/28/2003 |
228 |
200 |
|
25 |
St. Paul |
Offer in Compromise – Have the
IRS Accept Low Offers if Reasonable |
Not Documented |
6/14/2002 |
1/28/2003 |
228 |
200 |
|
26 |
St. Paul |
Offer in Compromise –
Refunds Not Issued |
|
4/4/2001 |
1/28/2003 |
664 |
244 |
|
27 |
St. Paul |
Offer in Compromise – Status
Codes Causes Refunds to Be Delayed |
Not Documented |
8/23/2001 |
1/28/2003 |
523 |
244 |
|
28 |
St. Paul |
Offer in Compromise –
Treatment of Default |
Not Documented |
11/29/2002 |
1/28/2003 |
60 |
n/a |
|
29 |
St. Paul |
Offer
in Compromise – Trust
Fund Recovery Penalties |
Not Documented |
8/12/2002 |
1/28/2003 |
169 |
141 |
|
30 |
St. Paul |
Offer in Compromise –
Inconsistent Treatment of Defaulted Offers |
Not Documented |
11/29/2002 |
1/28/2003 |
60 |
n/a |
|
31 |
St. Paul |
Offer in Compromise – Levies
While Offer Is in Process |
Not Documented |
5/20/2002 |
1/28/2003 |
253 |
244 |
|
32 |
St. Paul |
Offer in Compromise – Short
Time Frames to Provide Additional Information |
Not Documented |
10/25/2002 |
1/28/2003 |
95 |
n/a |
|
33 |
St. Paul |
Offer in Compromise – Refund
Hold on Accepted Offers |
700 |
1/3/2002 |
1/28/2003 |
390 |
244 |
|
Open Projects Reviewed |
Location |
Issue |
Potential Taxpayers Burdened per the OTA |
Date Assigned to Analyst |
Date of TIGTA Review |
Project Age |
Period Over 90 Calendar Days of Inactivity |
|
34 |
St. Paul |
Offer in Compromise –
Release of Refund Freeze on Defaulted Offers |
Not Documented |
1/8/2002 |
1/28/2003 |
385 |
244 |
|
35 |
St. Paul |
Offer in Compromise – Send
Acknowledgment Letter |
Not Documented |
6/10/2002 |
1/28/2003 |
232 |
204 |
|
36 |
St. Paul |
Offer in Compromise – Timely
Input of Acceptance Code |
Not Documented |
11/5/2002 |
1/28/2003 |
84 |
n/a |
|
37 |
St. Paul |
Offer in Compromise – When
Is an Offer Processible? |
Not Documented |
3/20/2002 |
1/28/2003 |
314 |
244 |
Appendix VI
|
Closed Projects Reviewed |
Location |
Issue |
Date Assigned to Analyst |
Date |
Project Age |
|
1 |
Austin |
Direct Deposit Refunds |
2/7/2000 |
1/10/2003 |
1,068 |
|
2 |
Austin |
Estimated Tax Penalty on
Schedule H |
2/5/2001 |
11/25/2002 |
658 |
|
3 |
Austin |
Liberal Penalty Abatement –
First-Time Filers |
2/27/2001 |
11/25/2002 |
636 |
|
4 |
Austin |
Penalty Guidelines |
3/12/2001 |
11/25/2002 |
623 |
|
5 |
Austin |
Suspension of Interest |
3/29/2002 |
11/25/2002 |
241 |
|
6 |
Dallas |
Abatement of Estimated Tax
Penalty |
2/5/2001 |
8/9/2001 |
185 |
|
7 |
Dallas |
Automated Collection System
& Federal Tax Liens |
3/3/2001 |
9/25/2001 |
206 |
|
8 |
Dallas |
Coordinated Examination
Program |
3/31/2000 |
4/11/2001 |
376 |
|
9 |
Dallas |
Credit Offsets Resulting in
Balance |
9/26/2001 |
10/11/2001 |
15 |
|
10 |
Dallas |
Disaster Claims |
8/8/2001 |
10/3/2001 |
56 |
|
11 |
Dallas |
Disaster Penalty &
Interest – Mississippi |
10/12/2001 |
2/15/2002 |
126 |
|
12 |
Dallas |
Employer Identification
Numbers not Shared With Representative |
11/22/2000 |
4/9/2001 |
138 |
|
13 |
Dallas |
Estimated Tax Penalties on
Farmers & Fisherman |
4/5/2001 |
8/9/2001 |
126 |
|
14 |
Dallas |
Extend Statute of
Limitations for Collection to 20 Years |
3/8/2001 |
4/18/2001 |
41 |
|
15 |
Dallas |
Failure to Pay Tax Penalty –
Computation on Refunds |
2/5/2001 |
8/28/2001 |
204 |
|
16 |
Dallas |
Final Notice Too Harsh |
11/27/2000 |
4/11/2001 |
135 |
|
17 |
Dallas |
Form 1040ES with Secondary
Social Security Numbers |
4/3/2002 |
5/3/2002 |
30 |
|
18 |
Dallas |
Form 1099-G – Incorrect |
10/6/2000 |
3/12/2001 |
157 |
|
19 |
Dallas |
Incorrect Credit Offsets |
1/8/2001 |
8/28/2001 |
232 |
|
20 |
Dallas |
Incorrect Penalty Assessment |
4/9/2001 |
4/26/2001 |
17 |
|
21 |
Dallas |
Incorrect Telephone Number
on Notices |
6/4/2001 |
6/4/2001 |
0 |
|
22 |
Dallas |
Lien Mailing Lists Sold to
the Public |
Unable to Find |
3/19/2001 |
Not Determined |
|
23 |
Dallas |
Manual Refunds on Decedents |
1/4/2001 |
6/7/2001 |
154 |
|
24 |
Dallas |
Match Forms K-1 with Forms
1040 |
1/31/2001 |
4/16/2001 |
75 |
|
25 |
Dallas |
Miscalculation of Child Tax
Credit |
2/27/2001 |
5/4/2001 |
66 |
|
26 |
Dallas |
Offer in Compromise – Uncollectible
Accounts |
12/4/2000 |
3/19/2001 |
105 |
|
Closed Projects Reviewed |
Location |
Issue |
Date Assigned to Analyst |
Date |
Project Age |
|
27 |
Dallas |
Offer
in Compromise – Perfection Correction |
12/4/2000 |
3/14/2001 |
100 |
|
28 |
Dallas |
Offer in Compromise – Joint
Offers |
5/10/2001 |
8/10/2001 |
92 |
|
29 |
Dallas |
Penalties on Form 1120F |
4/16/2001 |
4/9/2002 |
358 |
|
30 |
Dallas |
Penalty Abatements |
5/1/2001 |
7/9/2001 |
69 |
|
31 |
Dallas |
Penalty Disparity |
4/10/2000 |
8/9/2001 |
486 |
|
32 |
Dallas |
Public Disclosure of
Delinquent Taxpayers |
2/10/2000 |
1/30/2001 |
355 |
|
33 |
Dallas |
Rejection of Form 2848 for
Powers of Attorney |
6/2/2000 |
2/22/2001 |
265 |
|
34 |
Dallas |
Revise Form W-4 for
Withholding |
11/28/2000 |
4/16/2001 |
139 |
|
35 |
Dallas |
Offer in Compromise – Revise
Internal Revenue Manual |
9/27/2000 |
12/17/2001 |
446 |
|
36 |
Dallas |
Revision to Form 668 to
Advise Balance Due |
12/4/2000 |
5/4/2001 |
151 |
|
37 |
Dallas |
Revision to Notice of
Federal Tax Lien – Balance Due |
12/4/2000 |
5/4/2001 |
151 |
|
38 |
Dallas |
Script for Automated
Collection System Toll-Free Line |
2/14/2001 |
12/13/2001 |
302 |
|
39 |
Dallas |
Seizure & Sale Process |
Unable to Find |
Unable to Find |
Not Determined |
|
40 |
Dallas |
Social Security Number
Visible Through Envelope |
12/29/2000 |
5/4/2001 |
126 |
|
41 |
Dallas |
Substitute for Returns |
3/21/2000 |
4/12/2001 |
387 |
|
42 |
Dallas |
Unemployment Indian Tribal
Governments |
3/22/2000 |
3/21/2001 |
364 |
|
43 |
Dallas |
Update Form 2210 for
Estimated Tax Penalty |
2/5/2001 |
5/4/2001 |
88 |
|
44 |
Dallas |
Use of Bank Address for IRS
Notices |
6/2/2000 |
4/5/2001 |
307 |
|
45 |
New Carrollton |
Closing Letter on Estate
Cases |
2/13/2001 |
7/10/2002 |
512 |
|
46 |
New Carrollton |
Collection Due Processing
Hearings |
2/25/2002 |
1/25/2003 |
334 |
|
47 |
New Carrollton |
Earned Income Credit
Questionnaire |
10/30/2001 |
5/20/2002 |
202 |
|
48 |
New Carrollton |
Offer in Compromise –
Partnerships |
4/12/2001 |
4/16/2002 |
369 |
|
49 |
New Carrollton |
Offer in Compromise –
Processing |
12/21/2001 |
5/13/2002 |
143 |
|
50 |
New Carrollton |
Tax Liens – Housing and
Urban Development Loans |
5/11/2000 |
10/11/2001 |
518 |
|
51 |
St. Paul |
Offer in Compromise –
Accounts Under Examination |
11/21/2002 |
1/25/2003 |
65 |
Appendix
VII
Management’s Response to the Draft Report
The response 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.