Fiscal Year 2004

Statutory Review of Restrictions on Directly Contacting Taxpayers

 

February 2004

 

Reference Number:  2004-40-059

 

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.

 

February 24, 2004

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT

 

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

                 Acting Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report - Fiscal Year 2004 Statutory Review of Restrictions on Directly Contacting Taxpayers  (Audit # 200440002)

 

This report presents the results of our review to determine if the Internal Revenue Service (IRS) complied with legal guidelines dealing with directly contacting taxpayers and their representatives as set forth in Internal Revenue Code Sections (I.R.C. §§) 7521(b)(2) and (c) (2000).

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 sixth 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) (2000) 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.  Furthermore, we do not recommend the creation of a separate tracking system.  Accordingly, we made no recommendations in this report.

Management’s Response:  IRS management has reviewed the draft report and provided their concurrence with its contents via email.  However, since there were no recommendations requiring a formal response, the IRS has agreed that the report will be issued with no formal written response.

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

 

Table of Contents

Background

Compliance With Statutory Requirements for Restrictions on Directly Contacting Taxpayers Cannot Be Determined

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

 

Background

The Omnibus 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) (2000) to annually evaluate the IRS’ compliance with the direct contact provisions of I.R.C. §§ 7521(b)(2) and (c) (2000).

This review was performed at the IRS National Headquarters in Washington, D.C., in the Small Business/Self-Employed Division and the Office of the National Taxpayer Advocate, during the period October 2003 through January 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.

Compliance With Statutory Requirements for Restrictions on Directly Contacting Taxpayers Cannot Be Determined

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 we could readily identify cases in which 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 in which taxpayers had requested to consult with a representative or in which 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.

Taxpayer complaints that allege IRS employees bypassed their representatives and contacted them directly are tracked by the TIGTA Office of Investigations (OI).  The TIGTA OI closed six direct contact complaint and investigation cases between January and November 2003.  Our review of these cases showed that, in all six cases, the IRS employees did not violate the direct contact provisions of the I.R.C. 

As a result, we do not recommend the creation of a separate tracking system and are making no recommendations in this report.  This is the sixth 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:  A Small Business/Self-Employed Division official concurred with the conclusions detailed in our draft report, but declined the opportunity to provide a formal written response.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to determine if the Internal Revenue Service (IRS) complied with legal guidelines dealing with directly contacting taxpayers and their representatives as set forth in Internal Revenue Code Sections 7521(b)(2) and (c) (2000).  To accomplish this objective, we:

I.                    Interviewed an executive in the Small Business/Self-Employed Division to determine if the IRS has implemented or plans to implement a system to track cases in which taxpayers have requested to consult with a representative or in which an IRS employee bypassed a representative.

II.                 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 a plan for a system to track taxpayer complaints relating to violations of the direct contact provisions of the law.

A.     Identified six direct contact cases (two complaints and four investigations) closed by the TIGTA Office of Investigations (OI) during the period January 28, 2003, through November 24, 2003.

B.     Obtained and reviewed the closed TIGTA OI complaint and investigation files to determine their validity and what actions were taken by the IRS as a result of the complaints and investigations.

 

Appendix II

 

Major Contributors to This Report

 

Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs)

Mary V. Baker, Director

Bryce Kisler, Audit Manager

Kristi Larson, Senior Auditor

Sylvia Sloan-Copeland, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

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

Director, Communications and Liaison, National Taxpayer Advocate  TA:CCL

Director, Communications and Liaison, Small Business/Self-Employed Division  SE:S:MS:CL

Director, Compliance, Small Business/Self-Employed Division  SE:S:C

Director, Compliance, Wage and Investment Division  SE:W:CP

Director, Strategy and Finance, Wage and Investment Division  SE:W:S

Chief Counsel  CC

National Taxpayer Advocate  TA

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:

      Chief, Customer Liaison, Small Business/Self-Employed Division  SE:S:COM

Director, Communications and Liaison, National Taxpayer Advocate  TA:CCL

GAO/TIGTA Liaison, Wage and Investment Division  SE:W:S:PA