Fiscal Year 2003 Statutory Review of Restrictions on Directly
Contacting Taxpayers
June 2003
Reference Number:
2003-40-131
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
16, 2003
MEMORANDUM FOR
COMMISSIONER EVERSON
FROM: Gordon C. Milbourn III /s/ Gordon C.
Milbourn III
Acting Deputy Inspector
General for Audit
SUBJECT: Final Audit Report – Fiscal Year 2003
Statutory Review of Restrictions on Directly Contacting Taxpayers (Audit #
200340002)
This
report presents the results of our review to determine if the Internal Revenue
Service (IRS) is in compliance with legal guidelines dealing with directly
contacting taxpayers and their representatives set forth in Internal Revenue
Code Section (I.R.C. §) 7521(b)(2) and (c) (1986).
In
summary, we could not determine if the IRS fully complied with I.R.C. §
7521(b)(2) and (c) requirements when directly contacting taxpayers and their
representatives. This is the fifth year
in which we have reported our inability to give an opinion on the IRS’
compliance with the restrictions of I.R.C § 7521(b)(2) and (c).
The
Treasury Inspector General for Tax Administration 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.
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. Even though the IRS does
not monitor its employees’ compliance with the direct contact provisions, the
IRS has existing Internal Revenue Manual citations that adequately address the
requirements. Furthermore, we do not
recommend the creation of a separate tracking system. Accordingly, we are making no recommendations in this report.
Management’s
Response:
IRS management stated again that they have no plans to create a
separate tracking system to monitor compliance with the direct contact
provisions. IRS management noted they
took correct administrative actions when two employees were identified as
having violated the direct contact provisions.
The IRS’ response stated that because of their compliance with the
statute and the resources expended to address this issue, they were asking us
to work with them to have this mandatory audit requirement reconsidered. Management’s complete response to the draft
report is included as Appendix IV.
Copies of this
report are also being sent to the IRS managers who are affected by the report
results. 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.
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 an examination 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 an examination or collection action.
The provisions were created to protect the rights of taxpayers who are interviewed by an IRS employee as part of an examination 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 Section (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).
This review was conducted in the IRS National Headquarters, the Small Business/Self-Employed Division, and the Office of the National Taxpayer Advocate, during the period February through April 2003. 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.
We 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 TIGTA could readily identify cases where the taxpayer requested a representative or the IRS contacted the taxpayer directly and bypassed the representative.
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. In addition, there is no legal requirement for the IRS to develop a separate system that records or monitors cases involving these two procedures. Even though the IRS does not monitor its employees’ compliance with the direct contact provisions, the IRS has existing Internal Revenue Manual citations that adequately address both procedures.
Taxpayer complaints that allege IRS employees bypassed their representatives and contacted them directly are tracked by the TIGTA Office of Investigations (OI). TIGTA OI received and closed five direct contact complaints between March 2002 and March 2003. Our review of the complaint results showed three of five IRS employees did not violate the direct contact provisions of the I.R.C. TIGTA OI referred two of five complaints to the IRS. TIGTA OI and IRS determined two IRS employees violated the direct contact provisions, and IRS has taken administrative action.
We do not recommend the creation of a separate tracking system and are making no recommendations in this report. This is the fifth year in which we have reported our inability to give an opinion on the IRS’ compliance with the I.R.C. restrictions on direct contact.
Management’s Response: IRS management has no plans to create a separate tracking system to monitor compliance with the direct contact provisions. IRS management noted they took correct administrative actions when two employees were identified as having violated the direct contact provisions. The IRS’ response stated that because of their compliance with the statute and the resources expended to address this issue, they were asking us to work with them to have this mandatory audit requirement reconsidered. Management’s complete response to the draft report is included as Appendix IV.
Appendix I
Detailed Objective, Scope,
and Methodology
The overall objective of this review was to determine if the Internal Revenue Service (IRS) is in compliance with legal guidelines dealing with directly contacting taxpayers and their representatives set forth in Internal Revenue Code Section (I.R.C. §) 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. Interviewed an SB/SE Division analyst and researched the Internal Revenue Manual to determine whether instructions have been established to ensure IRS employees comply with the direct contact provisions of the law.
III. Interviewed various IRS and Treasury Inspector General for Tax Administration (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 five direct contact complaints received and closed by the TIGTA Office of Investigations during the period March 2002 to March 2003.
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
Paula W. Johnson, Audit Manager
Lynn Faulkner, Senior Auditor
John Hawkins, Senior Auditor
Jean Bell, Auditor
Sandra Hinton, Auditor
Appendix III
Deputy Commissioner for Service and Enforcement 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
National Taxpayer Advocate TA
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:AR:M
Audit Liaisons:
Executive Assistant, Director, Communications and Liaison CL
Director, Compliance, Small Business/Self-Employed Division S:C
Director, Compliance, Wage and Investment Division W:CP
Appendix IV
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.