The Taxpayer Advocate Service Needs to Improve Case Management to Ensure Taxpayer Problems Are Resolved Timely

 

September 2004

 

Reference Number:  2004-10-166

 

 

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 29, 2004

 

 

MEMORANDUM FOR NATIONAL TAXPAYER ADVOCATE

 

FROM:     Gordon C. Milbourn III /s/ Gordon C. Milbourn III

                 Acting Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report - The Taxpayer Advocate Service Needs to Improve Case Management to Ensure Taxpayer Problems Are Resolved Timely  (Audit # 200310039)

 

This report presents the results of our review of the Taxpayer Advocate Service’s (TAS) case processing function.  The overall objective of this review was to evaluate the efficiency and timeliness of the TAS in resolving taxpayers’ problems. This audit was conducted as part of our Fiscal Year (FY) 2004 Annual Audit Plan.

In summary, the time it takes the TAS to resolve taxpayers’ problems has increased significantly over the past 5 years, from an average of 37 days in FY 1998 to 76 days in FY 2003.  This increase is not due to a decrease in staff or a heavier workload.  Staffing for the TAS has remained fairly constant since FY 2000.  Moreover, new case receipts and closures have decreased approximately 41 percent since FY 1998.  The National Taxpayer Advocate (NTA) stated that part of the increase in case resolution time resulted from changes in the TAS organizational structure and its authorities in FY 2000.  The NTA also believes the TAS now works a higher percentage of cases involving complex issues.  However, the NTA was not able to provide enough data or other evidence for us to verify these as causes for increased case resolution time.

Based on our review, we believe a significant portion of the increase in time needed to resolve taxpayers’ problems was due to inefficient case management on the part of TAS employees (called case advocates) and inadequate management oversight by the TAS.  We reviewed a statistical sample of 500 of the 203,634 TAS cases closed in FY 2003.  There were 273 cases in our sample in which case advocates did not take timely action to resolve the taxpayers’ problems. Based on the results of our review, we estimate that 76,183 taxpayers experienced unnecessary delays in FY 2003 because the TAS did not take timely actions.  These delays increased the TAS’ average time needed to resolve cases by 16 days.

Case advocates generally did not document a plan of action on taxpayer cases and did not effectively establish follow-up dates for actions needed to resolve cases.  Even when follow-up dates were recorded, case advocates did not follow up by the dates set and did not document why follow-up dates were missed. Delays also occurred because it appeared case advocates did not have the technical knowledge needed to resolve certain cases and did not seek assistance from management or technical experts.  In addition, case reviews conducted by TAS managers did not appear to address the absence of action plans or untimely case processing.

Last year, we reviewed the TAS Systemic Advocacy function, which is devoted to resolving problems that affect large numbers of taxpayers.  In our opinion, systemic problems were not addressed timely because many of the staff were shifted away from Systemic Advocacy function work to produce the NTA’s Annual Report to Congress.  Based on our prior and current reviews of the TAS, we are concerned the TAS may not be using its resources effectively to accomplish its primary mission of helping individual taxpayers and resolving systemic problems.

There were also some delays in closing cases that did not affect taxpayers but did inflate the TAS inventory of open cases and the average reported case resolution time.  In 56 of the 500 TAS cases reviewed, the cases were not closed after the TAS had completed all case actions.  We estimate these types of delays affected 18,817 cases, which inflated the average reported case resolution time in FY 2003 by over 3 days.

For the cases in which the TAS used an Operations Assistance Request to ask for assistance from one of the Internal Revenue Service (IRS) operating divisions to resolve taxpayers’ problems, there was generally not enough information in the cases to evaluate whether actions by the operating divisions were timely.  The TAS has since developed an electronic method to maintain and track these Requests.  However, in the cases we reviewed, the case advocates generally did not coordinate with the operating divisions to establish reasonable time periods for completion.  Better communication will be needed to ensure the dates set for completion are achievable; otherwise, the reports and statistical information the TAS provides to the operating divisions may be of limited benefit in providing a useful measure of timeliness.

We recommended the NTA alert TAS managers that case advocates are not developing and documenting case action plans as required, provide training to case advocates on developing case action plans and establishing estimated case completion dates, and eliminate the 5-day grace period allowed on follow-up actions.  The NTA should provide specific direction for managers as to when and how often to review cases.  The NTA should also revise procedures and alert managers that cases should be closed once a determination has been made on a taxpayer’s problem.  Further, the NTA should provide additional guidance to case advocates on communicating with IRS operating divisions to coordinate case resolution and to set agreed on time periods in which to complete the actions specified on Operations Assistance Requests.

Management’s Response:  The NTA agreed with five of the seven recommendations in our report and with the premise that timeliness in casework is vital.  The TAS has redesigned the Taxpayer Advocate Management Information System (TAMIS) to give employees the tools to maintain date fields, action plan items, and inventory management controls.  Managers use the “Next Action Date” report generated by the new TAMIS to ensure timeliness of case actions.  TAS management is required to use a new case review form that addresses the necessity of documenting a case action plan.  Recent changes to the TAS procedures will provide clarity on the use of action plans and follow-up dates, and these new procedures will be part of TAS training scheduled for the first quarter of FY 2005.  The TAS will also examine the managerial review process and has implemented a new requirement for local taxpayer advocates to review cases that have reached 100 days.  Area and Headquarters Offices will review the local manager reviews.  In addition, the TAS is developing a strategy to conduct case reviews 7-10 days after new cases are received to ensure case advocates have developed action plans and are on the right track.  The TAS plans to make a formal determination on the types and frequency of reviews based on the trends identified through its quality and evaluative reviews.

In addition, the TAS will issue a reminder to ensure all actions occur on or within limits described in TAS procedures.  The TAS will review the existing procedural requirements to determine if additional clarification is needed.  The redesigned TAMIS will allow managers to more effectively track dates set by case advocates and to conduct follow-up reviews to ensure deadlines are met.  The TAS will continue to emphasize setting achievable completion dates and work with the operating divisions to ensure adherence to the Service Level Agreements.  The TAS has initiated projects to promote campus consistency and to improve procedures for processing innocent spouse claims, Criminal Investigation function freeze cases, and Earned Income Tax Credit cases.  In addition, TAS procedures recommend time periods for some common issues arising through Operations Assistance Requests to assist the TAS in establishing estimated completion dates.

The NTA did not agree to eliminate the 5-day grace period allowed on follow-up dates because the NTA believes case advocates must have the flexibility to set their own work priorities.  In addition, the NTA did not agree to close cases on the TAMIS that the TAS is only monitoring while the cases are in the Appeals function because the NTA believes it would not be consistent with the TAS’ mission of assisting taxpayers regarding their appeal rights and processes.

The NTA also expressed some concerns about the presentation of data and conclusions in this report.  The NTA believes a statistical sample of cases for fiscal years before FY 2003 would be necessary to make a determination of the cause of the increase in cycle time from earlier years. The NTA also disagreed with our determination on more than 30 percent of the cases we reviewed.  The NTA believes many of the audit team’s findings of delay reflect subjective judgments about how cases should be handled rather than instances of inefficiency or neglect.  The NTA asserted that the median case cycle time is a better indicator of timeliness than the mean or average cycle time.  Further, the NTA stated that the case cycle time statistics before FY 2001 are not comparable to those for FY 2003 because the TAS operated as the Problem Resolution Program until March 2000. The NTA noted that recent trends show TAS casework is timelier by the TAS quality standards and believes a higher percentage of cases have complex issues than in FY 2001.  The NTA believes an indicator of complexity is the increase in cases classified as “compliance” compared to “service” cases.  The TAS is still working to develop a better measure to quantify complexity but, based on anecdotal evidence, the NTA believes this is a reasonable indicator.

The NTA again noted disagreement with our prior report on the TAS Systemic Advocacy function.  The NTA stated that certain systemic issues can be resolved only through legislation; therefore, using Systemic Advocacy function resources for the Annual Report to Congress is proper.  Management’s complete response to the draft report is included as Appendix VI.

Office of Audit Comment:  We believe the conclusions and recommendations in this report are valid.  The NTA should eliminate the 5-day grace period allowed on follow-up dates because allowing this grace period undermines the importance of meeting follow-up dates and the sense of urgency inherent to the TAS.  We understand that case advocates may not always meet the follow-up dates they set. We believe in those instances they should document the cases with an explanation.  In our review, we found that case histories were poorly documented, and case advocates generally did not explain why follow-up dates were missed. In addition, the NTA should close cases on the TAMIS once the IRS has made a determination on the case.  Keeping the cases open on the TAMIS when the cases are in monitoring status reduces the accuracy of case cycle time statistics, which reduces their benefit as a diagnostic tool.

Also, we believe that the TAS’ actions do not fully address Recommendations 1 and 7.  The TAS’ actions appear to be beneficial but do not fully address the recommendation to alert managers that case advocates are not developing action plans as already required by TAS procedures, and that follow-up dates are not being recorded or met. The purpose of an alert is to quickly notify management that a significant problem exists and should be addressed immediately.  In addition, the TAS’ actions appear beneficial to the overall processing of Operations Assistance Requests, but the proposed corrective actions do not fully address our recommendation to provide case advocates additional guidance on communicating with the IRS operating divisions.  Both the TAS and the operating divisions need to reach agreement about when Operations Assistance Requests will be completed. While we still believe our recommendations are worthwhile, we do not intend to elevate our disagreement concerning them to the Department of the Treasury for resolution.

Our results and estimates are based on a sample of FY 2003 cases to provide the most current and relevant information to TAS management.  The trend information from FYs 1998 to 2003 shows the basis for our concern about the timeliness of the TAS advocacy program.  TAS management agreed or partially agreed with our findings in about 70 percent of our cases, which represented approximately 80 percent of the total time that the cases were delayed.  We considered the TAS’ responses in each of the 88 cases to which it did not agree.  Notwithstanding, we continue to disagree and still believe a delay occurred in these cases.

·         In 42 cases, the TAS’ responses were too vague to determine the reason for disagreement.

·         In 14 cases, the TAS responded the taxpayer had not been harmed even though a delay occurred.

·         In 19 cases, the TAS responded the delay was justified based on the case advocate’s judgment; however, management did not present a valid reason for the delay.

·         In 13 cases, the TAS disagreed because employees were operating within the TAS policies and procedures related to the 5-day grace period for follow-up dates or those that allow case advocates to keep cases open for monitoring while the cases are in the Appeals function.

The NTA believes median cycle time is a more accurate indicator of what the typical TAS customer experiences.  We do not agree.  The median is the mid-point.  As such, 50 percent of the taxpayers experience a case resolution time that is longer than the median case resolution time.  A timeliness standard that relies on a mid-point minimizes the collective impact of extreme delays, many of which we encountered in our review.  Such extreme delays caused serious burden to some taxpayers and should prompt more aggressive resolution by the TAS than is currently taken.

It should be noted that we never took exception to the length of time a case was open; we took exception only if actions were not timely.  The average case cycle time was used to show the effect of delays.  The mean case cycle time is the same information the TAS reported to the IRS Commissioner in past Business Performance Reviews.

The NTA stated that the case cycle time statistics before FY 2001 are not comparable to those for FY 2003 because the casework was handled by the Problem Resolution Program until March 2000.  We would like to clarify this point.  The Office of the Taxpayer Advocate replaced the position of the Taxpayer Ombudsman in 1996.  The IRS Restructuring and Reform Act of 1998 did not create the Office of the Taxpayer Advocate but reorganized employees from the Problem Resolution Program into a system of local taxpayer advocates who report directly to the NTA.  This organizational structure was implemented in March 2000. Notwithstanding, we believe comparing trends over time provides useful information to management and helps identify problems.  We recognized in this report that the TAS organizational structure has undergone significant changes as a result of the tax laws; however, the TAS and the Problem Resolution Program both share the same core mission of assisting taxpayers when the IRS has not addressed their problems.

The NTA believes TAS casework is timelier based on certain quality standards the TAS uses in its quality reviews.  We did not review the accuracy of TAS quality reviews during this audit.  However, we did find significant delays by the TAS in resolving cases, and TAS management acknowledged most of these delays.  The NTA also asserted that TAS casework has become more complex.  We do not believe the TAS’ anecdotal evidence provides an adequate basis for this assertion.

Last year, we reported the TAS did not address potential systemic problems that affected large groups of taxpayers. Instead, TAS management redirected a significant number of its staff to work on the NTA’s Annual Report to Congress. Systemic projects were allowed to age up to 3 years without action because analysts were devoting the majority of their time to the Annual Report to Congress.  For example, we identified a partnership project that potentially affected 16.5 million taxpayers which had been open for 2.5 years without any action. The NTA’s assertion that no delay occurred because these taxpayers could only have been assisted by means of a legislative proposal put forth in the Annual Report to Congress is misleading.  At the time of our review, the TAS was taking no such action on their behalf.  We recommended changes to help the TAS use and monitor its resources to improve the Systemic Advocacy function while still providing the NTA’s Annual Report to Congress.

Copies of this report are also being sent to the IRS managers 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.

 

Table of Contents

Background

Inefficient Case Management Often Led to Lengthy Delays in Resolving Taxpayers’ Problems

Recommendation 1:

Recommendations 2 and 3:

Recommendation 4:

Some Delays Did Not Affect Taxpayers but Did Distort Open Inventory Levels and Case Resolution Time Statistics

Recommendations 5 and 6:

Better Communication Is Needed Between the Case Advocates and the Internal Revenue Service Operating Divisions

Recommendation 7:

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 – Charts Showing Case Processing Time, Receipts, Closures, and Staffing

Appendix VI – Management’s Response to the Draft Report

 

Background

The Office of the Taxpayer Advocate, also known as the Taxpayer Advocate Service (TAS), is an independent function within the Internal Revenue Service (IRS) which helps taxpayers resolve problems with the IRS that have not been resolved through normal IRS processes.  The TAS also works to correct systemic problems that affect large numbers of taxpayers.  In Fiscal Year (FY) 2003, the TAS received 188,209 new cases from taxpayers, tax practitioners, and referrals by the IRS operating divisions and Congressional offices.  Table 1 provides a summary of the reasons taxpayers contacted the TAS in FY 2003.

Table 1:  Types of TAS Cases Received in FY 2003

Reason for Contacting the TAS

Percentage
of TAS
Cases

IRS systems or procedures either did not operate as intended or did not resolve the taxpayer’s problem.

31%

Taxpayer experienced a delay of more than 30 days to resolve a tax account problem with the IRS.

27%

Taxpayer did not receive a response from the IRS by the date promised.

19%

Taxpayer is suffering or about to suffer a significant hardship.

12%

Taxpayer is facing threat of adverse action.

3%

Taxpayer will incur significant costs if relief is not granted.

2%

Taxpayer will suffer an irreparable injury or long term adverse impact.

2%

Any case not meeting specific TAS criteria but warranting TAS intervention.

4%

Source:  National Taxpayer Advocate – FY 2003 Annual Report to the Congress.

If a taxpayer’s problem falls within the TAS’ authorities, a TAS employee, known as a case advocate, will work the case to resolution.  However, if any action is outside the TAS’ authorities, case advocates must obtain the assistance of an IRS operating division(s) using an Operations Assistance Request (Form 12412) to resolve the taxpayer’s problem.

In September 2002, the IRS Oversight Board issued a report that focused on the TAS’ operation.  One of the major concerns of the IRS Oversight Board was that the TAS and the IRS operating divisions are not resolving taxpayers’ problems quickly. The American Institute of Certified Public Accountants (AICPA) also expressed concerns about slow responses from the TAS and its unwillingness to use its authority to cut through red tape.

We performed this review to evaluate the efficiency and timeliness of the processes used by the TAS to resolve taxpayers’ problems.  This review was performed using a statistical sample of TAS cases nationwide which were closed in FY 2003 and information obtained from the TAS Washington, D.C., office during the period November 2003 through June 2004. 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.

Inefficient Case Management Often Led to Lengthy Delays in Resolving Taxpayers’ Problems

Because cases the TAS receives often involve financial hardships to the taxpayers as well as delays in resolving taxpayer problems though normal IRS channels, the TAS is concerned about the timeliness of its case processing.  The TAS uses case cycle time as one of its diagnostic measures in its Business Performance Review.

TAS statistics indicate the average time to resolve cases has increased significantly since 1998—it more than doubled over the last 5 years, from an average of 37 days to 76 days.  The increase in case cycle time is not due to fewer staff or heavier workload. There was a significant increase in the TAS staff during FY 2000, and since then the number of employees assigned to case advocacy has remained relatively consistent.  Moreover, the TAS case workload has decreased over time—the number of cases received and closed by the TAS was 41 percent lower in FY 2003 than in FY 1998.  Table 2 shows the trends in the TAS workload, staffing, and cycle time to resolve cases.

Table 2:  Trends in the TAS Workload, Staffing, and Cycle Time to Resolve Cases, FYs 1998 – 2003

Fiscal Year

Cases
Received
by the TAS

Cases
Closed
by the TAS

Case Advocacy Employees

Cycle Time to Resolve Cases (calendar days)

1998

333,636

314,554

n/a

37

1999

286,773

294,899

n/a

46

2000

257,196

238,063

1,499

54

2001

254,026

248,011

1,922

72

2002

216,899

234,327

1,829

81

2003

188,209

196,619

1,904

76

Source:  National Taxpayer Advocate – Business Performance Reviews.

During FYs 1998, 1999, and part of 2000, the TAS operated under a different organizational structure, known as the Problem Resolution Program.  The National Taxpayer Advocate (NTA) stated that part of the increase in case resolution time resulted from changes in the TAS organizational structure and its authorities in FY 2000.  The NTA also believes the TAS now works a higher percentage of cases involving complex issues.  However, the NTA was not able to provide enough data or other evidence for us to verify these as causes for increased case resolution time.  Based on our review, we believe a significant portion of the increase in time needed to resolve taxpayers’ problems was due to inefficient case management on the part of TAS employees and inadequate management oversight by the TAS.

Last year, we reviewed the TAS Systemic Advocacy function, which is devoted to resolving problems that affect large numbers of taxpayers.  In our opinion, systemic problems were not addressed timely because TAS management shifted staff away from Systemic Advocacy function work to produce the NTA’s Annual Report to Congress.  Based on our prior and current reviews of the TAS, we are concerned the TAS may not be using its resources effectively to accomplish its primary mission of helping individual taxpayers and resolving systemic problems.

To manage its inventory of taxpayer cases, the TAS uses an automated system called the Taxpayer Advocate Management Information System (TAMIS).  To evaluate the timeliness of actions taken to resolve taxpayers’ problems, we reviewed a statistical sample of 500 of the 203,634 TAS cases closed in FY 2003.

Of the 500 cases we reviewed, there were 273 cases in which the TAS did not take timely actions to resolve the taxpayers’ problems, which often caused prolonged delays.  In many of the cases, the case advocates did not document a plan of action to resolve the taxpayer’s problem and were not effectively establishing follow-up dates on the TAMIS, which prevented them from using the System’s automated tools to prioritize their work.  Even when follow-up dates were recorded on the TAMIS, case advocates often did not follow up by the dates set and did not document why the follow-up dates were missed. In addition, case advocates often set follow-up dates which were too far in the future when information needed to take the next action on the case was available at a much earlier date.

Case resolution was also delayed because it appeared the case advocates did not have the technical knowledge to resolve certain cases and did not seek assistance from management or the technical experts.  We also found that TAS procedures allow case advocates to miss a follow-up date they established by up to 5 workdays, which minimizes the sense of urgency inherent in the TAS.  Since a case can have numerous follow-up dates, delays could be compounded if the case advocate consistently misses the follow-up dates.  Table 3 summarizes the results from our sample of 500 TAS cases and the estimated total number of taxpayers affected by each type of TAS delay in FY 2003.

Table 3:  TAS Cases With Unnecessary Delays in Resolving Taxpayers’ Problems (FY 2003)

Type of Delay
Affecting Taxpayers

Number
of Cases

Estimated Taxpayers Affected

Average Days Delayed For Taxpayers Affected

Estimated Effect
on Overall TAS Case Resolution Time (in days)

No follow-up date was set for the next action to resolve the case.

159

32,797

35

5.71

Follow-up date was documented but missed by more than 5 workdays.

102

23,447

36

4.18

Delays in obtaining technical assistance.

65

11,224

56

3.08

Follow-up date provided more time than needed to complete the case action.

47

15,127

15

1.14

Follow-up date was documented but missed by 5 or fewer workdays.

43

15,779

7

.54

Excessive and/or multiple deadlines were set to obtain internal/external documents.

31

9,426

43

.97

No actions were taken while the employee was on leave or in training.

14

1,673

34

.28

Dispute between TAS offices as to which office was responsible for the case.

9

1,240

24

.15

Source:  The Treasury Inspector General for Tax Administration (TIGTA) sample review of 500 TAS FY 2003 closed cases and statistical projections.

We estimate that 76,183 taxpayers experienced at least 1 unnecessary delay in FY 2003 because the TAS did not take timely actions to resolve taxpayers’ problems.  In addition, we estimate the TAS’ average time of 76 days to resolve cases in FY 2003 would have been 16 days fewer if case actions had been timely. 

These delays can cause additional frustration and burden to taxpayers who have already been unable to resolve their problems through normal IRS processes. The following are examples of cases in our sample with lengthy delays encountered by taxpayers in resolving their problem through the TAS:

·         In a case that involved a problem with employment taxes, it took 910 days (approximately 2½ years) for the TAS to resolve the matter. Delays accounted for 71 percent of the time the case was open.  There were 11 separate periods of inactivity that totaled 649 days.  One period of inactivity was 230 consecutive days.  The case advocate did not use follow-up dates, and there were no explanations for the delays in the case history.

·         A business contacted the TAS because it had received a refund to which it was not entitled.  It took 538 days (almost 1½ years) for the TAS to resolve this problem. Unnecessary delays accounted for 391 consecutive days.  The case advocate did not take the necessary action to try to solve the taxpayer’s problem during the period of inactivity.  It appeared the case advocate did not know how to correct the account and did not contact the group manager or other technical specialists to help resolve the issue sooner.

·         In a case involving penalties and interest that should have been removed from a taxpayer’s account, it took 281 days for the TAS to resolve the matter.  The case advocate missed 3 separate follow-up dates originally set in the case history by 125, 16, and 106 consecutive days.  We estimate the TAS should have resolved the taxpayer’s issue within 34 days.

·         A nonprofit organization’s bank account was levied while the TAS was supposed to be working on its case.  The TAS took no action on the case for 201 consecutive days and did not timely contact the IRS Collection function.  Due to the bank levy, the nonprofit organization had difficulty paying its employees and the TAS took almost a year to correct the situation and refund the monies that were levied.

TAS procedures require case advocates to develop an action plan when they initially receive a taxpayer’s case.  An action plan is important because it facilitates proper case management and provides a map for anyone who may need to take action on the case.  The procedures also require case documentation to be clear, specific, and complete so anyone reviewing a case can follow the progress of the action plan, know what actions have been taken, and know what the next action will be.  Despite these requirements, case advocates generally did not develop and document action plans needed to resolve taxpayers’ problems.  Case documentation was generally poor and delays were not explained.

Manager case reviews were limited and did not appear to be effective

TAS management’s review of cases did not appear to address the absence of case action plans or untimely case processing.  TAS management reviewed only 172 (34 percent) of the 500 cases in our sample.  Most of the cases reviewed by management indicated the case was reviewed, but no guidance was provided in the case history. Consequently, the case files could not be used to determine how management attempted to address delays. Moreover, in some instances, delays continued to occur even after management reviewed the cases.

According to TAS officials, concerns by employees and the National Treasury Employees Union (NTEU) that management reviews could be used against employees have caused many TAS managers to not document their reviews in case files.  The TAS is in the process of developing a new method for management case reviews that is being negotiated with the NTEU.  TAS management stated this new method was developed to provide a more comprehensive format and consistency across the nation.  However, there is no indication the new TAS method for management review will address the inadequate case planning and the untimely casework.  In addition, the new method does not specify when or how often manager reviews are to be performed.

Better monitoring by TAS managers would help detect poor workload management and delays in resolving cases.  It would act as an important control and a means to provide immediate feedback and direction to employees.

Recommendations

The NTA should:

1.      Alert TAS managers that case advocates are not developing and documenting case action plans as required.  Further, managers should be alerted that follow-up dates are often not being recorded on the TAMIS as required and that established follow-up dates are often not met.

Management’s Response:  The NTA agreed with our recommendation and has redesigned the TAMIS to give employees the tools to maintain date fields, action plan items, and inventory management controls.  Managers use the “Next Action Date” report generated by the new TAMIS to ensure timeliness of case actions.  TAS management is required to use a new case review form that addresses the necessity of documenting a case action plan.  Recent changes to the TAS procedures will provide clarity on the use of action plans and follow-up dates.  The proper use of action plans and follow-up dates will be part of TAS training on the new procedures scheduled for the first quarter of FY 2005.

Office of Audit Comment:  The TAS’ actions appear to be beneficial but do not fully address the recommendation to alert managers that case advocates are not developing action plans as already required by TAS procedures and that follow-up dates are not being recorded or met. The purpose of an alert is to quickly notify management that a significant problem exists and should be addressed immediately.

2.      Provide training to case advocates on the requirement to develop and document case action plans at the beginning of each case.  The training should guide employees on determining the overall time period needed to complete a case as well as intermediate follow-up dates to ensure the case is progressing as intended.  The training should also address the need to improve case documentation so the progress of the case action plan can be properly monitored.

Management’s Response:  The NTA agreed with this recommendation and has redesigned the TAMIS to give employees the tools to maintain date fields, action plan items, and inventory management controls.  Also, recent changes to the TAS procedures will provide clarity on the use of action plans and follow-up dates that will be part of TAS training scheduled for the first quarter of FY 2005.

3.      Revise the procedures to eliminate the 5-day grace period allowed on follow-up dates.

Management’s Response:  The NTA did not agree with this recommendation.  The NTA indicated that all cases must be worked as they arrive and case advocates often face multiple deadlines that fall on the same day.  This 5-day grace period provides case advocates with the flexibility they require to set priorities.  For example, a case advocate facing a follow-up date on one case may receive another case in which the IRS is about to seize a taxpayer’s property. The NTA believes case advocates must have the flexibility to work the case involving the property seizure before working other cases.

Office of Audit Comment:  We believe case advocates should take action by the date they specified in the case history to avoid delays and move the case to resolution.  Allowing a grace period undermines the importance of meeting follow-up dates and the sense of urgency inherent to the TAS.  We understand that case advocates may not always meet the follow-up date they set.  In those instances, they should document the case with an explanation.  However, we found that case histories were poorly documented and case advocates generally did not explain why follow-up dates were missed.

4.      Include in the new management case review procedures specific direction for when and how often managerial reviews are to be performed.  An expected completion date should be established at the beginning of each case to assist managers in identifying cases which have been delayed, so the managers will review such cases and take corrective action.

Management’s Response:  The NTA agreed with this recommendation and will examine the managerial review process. The TAS has already implemented a new case review form and a new requirement for local taxpayer advocates to review cases that have reached 100 days.  In FY 2005, Area and Headquarters Offices will review the local manager reviews. In addition, the TAS is developing a strategy to conduct case reviews 7-10 days after new cases are received to ensure case advocates have developed action plans and are on the right track.  The TAS plans to make a formal determination on the types and frequency of reviews based on the trends identified through its quality and evaluative reviews.

Some Delays Did Not Affect Taxpayers but Did Distort Open Inventory Levels and Case Resolution Time Statistics

There were also delays in closing cases that did not affect the taxpayers involved but did inflate the TAS open inventory and average reported case resolution time.  In 56 of the 500 TAS cases reviewed, the cases were not closed on the TAMIS when the TAS had completed all case actions.  In 29 cases, the delayed case closing appeared to be an oversight on the part of the TAS since the taxpayers’ issues were already resolved.  In the other 27 cases, the TAS left the cases open for monitoring.  Table 4 summarizes the results from our sample of 500 TAS cases and the estimated total number of cases in FY 2003 in which the case closure was delayed.

Table 4:  TAS Cases With Incorrectly Reported Case Resolution Time (FY 2003)

Type of Delay
Affecting Cases

Number of Cases

Estimated Cases Affected

Average Days Delayed for Cases Affected

Estimated Effect
on Overall TAS Case Resolution Time (in days)

Untimely case closing after all actions were completed.

29

17,039

14

1.19

The TAS left cases open for monitoring.

27

1,778

229

2.00

Source:  The TIGTA sample review of 500 TAS FY 2003 closed cases and statistical projections.

For TAS cases in general, if the IRS determines a taxpayer is not entitled to relief and the taxpayer appeals the decision, the TAS will close the case. However, the NTA directed that cases involving innocent spouse issues be kept open throughout the entire appeals process to monitor processing that may occur by the IRS campuses after the Appeals function has completed its review.  TAS procedures for innocent spouse cases state, “Cases going to Appeals Division will not be closed until Appeals makes a determination on the appeal and the taxpayer/representative is informed.”

The TAS’ policy of monitoring these types of cases throughout the Appeals function process may be beneficial; however, because of the length of the Appeals function process and because further case actions on the part of the TAS are usually not necessary, the practice of leaving these cases open on the TAMIS reduces the accuracy of the case resolution time statistics provided by this System.  Although these cases account for a small percentage of the total number of cases with delays, the total number of days these cases are left open affects the overall case cycle time, which affects the reliability and comparability of the TAMIS data.  For example, 1 such TAS case took 1,330 days (more than  3½ years) to close.  In our opinion, the case advocate should have closed this case 959 days (more than 2½ years) earlier once the Appeals function received the request for relief.

Overall, based on the cases we reviewed, we estimate these delays in recording case closure affected 18,817 cases in FY 2003, which inflated the TAS’ average case resolution time by over 3 days.

Recommendations

The NTA should:

5.      Alert TAS managers that case advocates are not closing cases after all actions are completed.

Management’s Response:  The NTA agreed with this recommendation and will issue a reminder to ensure all actions occur on or within limits described in TAS procedures.  The TAS will also review the existing procedural requirements to determine if additional clarification is needed.  In addition, the redesigned TAMIS allows managers to more effectively track dates set by case advocates and to conduct follow-up reviews to ensure deadlines are met.

6.      Revise TAS procedures to close cases once the IRS has made a determination, even if the taxpayer appeals that determination.  If the TAS monitors such cases, it should ensure the TAMIS reflects that the cases are in monitoring status.

Management’s Response:  The NTA did not agree with this recommendation.  The NTA indicated the TAS must assist each taxpayer until the IRS completes action on the case.  If a taxpayer appeals an adverse IRS determination, a TAS case advocate assists the taxpayer regarding his or her appeal rights and processes.  The TAS also retains the authority to intervene on the taxpayer’s behalf and, if necessary, to issue a Taxpayer Assistance Order to the Appeals function.  Each determination to hold a case open during the appeal process is made on the basis of a facts-and-circumstances analysis.  The NTA believes closing cases simply to shorten cycle time would elevate process above fulfillment of the TAS’ core mission.

Office of Audit Comment:  Keeping cases open on the TAMIS when the cases are in monitoring status reduces the accuracy of case resolution time statistics, which reduces their benefit as a diagnostic tool.

Better Communication Is Needed Between Case Advocates and the Internal Revenue Service Operating Divisions

Before the IRS Restructuring and Reform Act of 1998 (RRA 98) was implemented, TAS employees performing case-related activities were part of the IRS’ core business functions, such as Collection or Examination. Prior to FY 2000, the TAS operated as the Problem Resolution Program.  After the passage of the RRA 98, the TAS became an independent function and its employees no longer reported to the core business functions.  When the TAS became an independent function, the actions TAS employees could take to resolve taxpayer issues were very limited. In January 2001, the IRS Commissioner delegated additional authorities to the TAS to take certain case-related actions.  This increased the number of cases the TAS employees could resolve without assistance from IRS operating divisions. Nonetheless, there are still many case actions needed to resolve taxpayer problems which are outside the TAS’ authorities.  For these actions, case advocates must obtain the assistance of an IRS operating division(s) using an Operations Assistance Request.

The NTA has stated that the process of referring cases to the IRS operating divisions may have had a significant impact on the TAS’ case cycle time.  However, we could not validate this assumption since the TAS did not keep statistics regarding the age or timeliness of Operations Assistance Requests.

In September 2002, the TAS established Service Level Agreements with the operating divisions to provide a uniform method and basic requirements for the IRS operating divisions when assisting the TAS.  The Service Level Agreements require that the TAS and the operating divisions negotiate and agree to a completion date for each Operations Assistance Request.  In general, the Service Level Agreements state that, if the taxpayer’s case cannot be completed by the agreed upon date, the TAS manager or liaison should contact the operating division liaison to discuss the reasons for the delay.

In our sample of 500 TAS cases closed in FY 2003, there were 323 cases that required 1 or more Operations Assistance Requests.  For these 323 cases, there were 612 Operations Assistance Requests.  We compared the Requested Completion Date (the date requested by the case advocate) with the date the operating division employee completed the requested action to determine whether the operating divisions were resolving issues timely.  However, there was not enough information in the TAS case files to determine if the operating divisions were causing delays because the Operations Assistance Requests were incomplete.  Case advocates did not include the Requested Completion Date for 123 Operations Assistance Requests, and the operating division employees did not record the date they completed 99 Operations Assistance Requests.

Further, although case advocates are required to contact the IRS operating division employee assigned to an Operations Assistance Request to discuss case issues and the proposed completion date, case advocates did not do this consistently. For the cases in which the case advocate did record a Requested Completion Date, there was no indication that the case or the proposed completion date was discussed with the appropriate IRS operating division.

Beginning in FY 2004, the TAS developed an electronic method to maintain and track Operations Assistance Requests on its inventory system.  In addition, the TAS is developing an online Intranet portal that will be available to the operating divisions.  After the portal is implemented, the TAS plans to provide reports to each operating division with the location, age, and status of each Operations Assistance Request.  This portal will help the TAS and the operating divisions manage their inventory of Operations Assistance Requests and will provide statistical data on the timeliness of completion of these Requests.  The Deputy Commissioner for Services and Enforcement has required the operating divisions to report on the status of the TAS case inventory in their Business Performance Reviews starting in FY 2004.  The operating divisions were directed to include any conclusions drawn from the reports provided by the TAS and resolve any systemic delays or problems.

This electronic method to maintain and track Operations Assistance Requests is a step in the right direction.  Nonetheless, since Requested Completion Dates are often established by the TAS without the agreement of the operating divisions, the reports and statistical information the TAS provides to the operating divisions for Operations Assistance Requests may be of limited benefit in providing a useful measure of timeliness.  Better communication will be needed to ensure the dates set for completion are achievable.

Recommendation

7.      The NTA should provide additional guidance to case advocates on communicating with IRS operating divisions to coordinate case resolution and to set achievable deadlines for completing Operations Assistance Requests.

Management’s Response: The NTA agreed with this recommendation. The TAS will continue to emphasize setting achievable completion dates and work with the operating divisions to ensure adherence to the Service Level Agreements.  The TAS has initiated projects to promote campus consistency and to improve procedures for processing innocent spouse claims, Criminal Investigation function freeze cases, and Earned Income Tax Credit cases.  In addition, TAS procedures recommend time periods for some common issues arising through Operations Assistance Requests to assist the TAS in establishing estimated completion dates.

Office of Audit Comment:  The TAS’ actions appear beneficial to the overall processing of Operations Assistance Requests, but the proposed corrective actions do not fully address our recommendation to provide case advocates additional guidance on communicating with the IRS operating divisions.  Both the TAS and the operating divisions need to reach agreement about when Operations Assistance Requests will be completed.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to evaluate the efficiency and timeliness of the Taxpayer Advocate Service (TAS) in resolving taxpayers’ problems.  To complete this objective, we:

I.                   Determined what guidance had been provided to the TAS and Internal Revenue Service (IRS) operating division employees for the processing of TAS cases by reviewing the Internal Revenue Manual, authorities delegated to the TAS by the IRS Commissioner, and Service Level Agreements between the TAS and the operating divisions.

II.                Used the Taxpayer Advocate Management Information System (TAMIS) to select a stratified statistical sample of 500 cases from the 196,617 regular cases and 7,017 reopened cases closed by the TAS in Fiscal Year 2003. With the assistance of a statistician, we selected a sample to project the number of taxpayers affected and the amount of time delayed.  The sample used a 95 percent confidence interval and a +/‑ 4 percent desired precision rate.  The strata were determined as follows:

 

Stratum

Number of Days the Case Was Open

Population of Stratum

Sample Size per Stratum

1

0-29

61,508

50

2

30-69

71,671

75

3

70-119

38,226

125

4

120-365

28,877

125

5

366-1,307

3,327

100

6

1,308 or longer

25

25

III.             Determined if the TAS caused delays in processing the 500 cases in our sample by reviewing the case histories on the TAMIS and the physical case files.  For the cases we identified with delays, we projected the number of exceptions and days delayed over the population with the assistance of a statistician.

IV.             Determined the number of cases that involved an Operations Assistance Request and reviewed them for timely actions by the operating divisions. This included reviewing completion dates on Operations Assistance Requests required to be input by the operating divisions and the TAS.

Appendix II

 

Major Contributors to This Report

 

Daniel R. Devlin, Assistant Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs)

Michael E. McKenney, Director

Aaron R. Foote, Audit Manager

Janice M. Pryor, Lead Auditor

Joseph P. Smith, Senior Auditor

Michael J. Della Ripa, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Deputy Commissioner for Services and Enforcement SE

Commissioner, Large and Mid-Size Business Division SE:LM

Commissioner, Small Business/Self-Employed Division SE:S

Commissioner, Tax Exempt and Government Entities Division SE:T

Commissioner, Wage and Investment Division  SE:W

Chief, Appeals  AP

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 Liaisons:

            National Taxpayer Advocate  TA

            Deputy Commissioner for Services and Enforcement  SE

            Commissioner, Large and Mid-Size Business Division  SE:LM

            Commissioner, Small Business/Self-Employed Division  SE:S

            Commissioner, Tax Exempt and Government Entities Division  SE:T

            Commissioner, Wage and Investment Division  SE:W

            Chief, Appeals  AP

 

Appendix IV

 

Outcome Measures

 

This appendix presents detailed information on the measurable effect that our recommended corrective actions will have on tax administration.  These benefits will be incorporated into our Semiannual Report to the Congress.

Type and Value of Outcome Measure:

·         Taxpayer Burden – Potential; delays in resolving 76,183 taxpayer problems during Fiscal Year (FY) 2003 (see page 2).

·         Reliability of Data – Potential; 18,817 Taxpayer Advocate Service (TAS) cases due to untimely actions in closing cases and TAS procedures (see page 10).

Methodology Used to Measure the Reported Benefit:

The TAS provided the number of closed cases in FY 2003.  The population consisted of 196,617 “regular” cases and 7,017 cases that had been reopened. We selected a statistically valid stratified sample of 500 cases closed in FY 2003.  Of these, 273 cases had unnecessary delays in resolving taxpayers’ problems.  Based on the sample, we estimated that a total of 76,183 taxpayer cases were delayed (our estimate is based on a 95 percent confidence level and a precision of +/- 4.6 percent).  We also identified eight specific types of delays that affected taxpayers and the TAS’ overall average time to resolve cases (see Table 3 on page 5).  Our statistician computed weighted averages for each type of delay to determine the number of cases that were affected and the average number of days delayed for each category.

Using the same statistically valid stratified sample of 500 cases closed in FY 2003, we also identified 56 cases that increased the TAS’ case cycle time, which affected the reliability of data but did not cause taxpayer burden.  We estimated there were a total of 18,817 cases with unreliable case resolution time (our estimate is based on a 95 percent confidence level and a precision of  +/- 3.5 percent).  We also identified two specific types of delays that affected reliability of case resolution time (see Table 4 on page 11).  Our statistician computed weighted averages for each type of delay to determine the number of cases that were affected and the average number of days delayed for each category.

 

Appendix V

 

Charts Showing Case Processing Time, Receipts, Closures, and Staffing

 

 

The charts were removed due to their size. To see the charts, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

 

Appendix VI

 

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.