There Were No Administrative or Civil Actions With Respect to Violations of Fair Tax Collection Practices in Calendar Year 2004

 

 

March 2005

Reference Number:  2005-10-051

 

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.

 

March 15, 2005

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT

 

FROM:     Pamela J. Gardiner /s/ Pamela J. Gardiner

                 Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report - There Were No Administrative or Civil Actions With Respect to Violations of Fair Tax Collection Practices in Calendar Year 2004  (Audit # 200410040)

 

This report presents the results of our review of violations of fair tax collection practices.  The overall objective of this review was to obtain information on any Internal Revenue Service (IRS) administrative or civil actions resulting from Fair Tax Collection Practices violations by IRS employees.  Section (§) 1102 (d)(1)(G) of the IRS Restructuring and Reform Act of 1998 requires the Treasury Inspector General for Tax Administration to include in one of its semiannual reports to the Congress information regarding any administrative or civil actions related to the violations of the fair debt collection provisions of 26 U.S.C. § 6304.

In summary, our review of the 32 cases closed during the period January 1 through December 31, 2004, that were coded as potential Fair Debt Collection Practices Act violations did not identify any administrative or civil actions with respect to violations of Fair Tax Collection Practices.  Further, there were no civil actions that resulted in the IRS paying monetary settlements to taxpayers because of a Fair Tax Collection Practices violation.

Management’s Response:  IRS management agreed with the findings in our draft audit report.  Management’s complete response to the draft report is included as Appendix V.

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

There Were No Administrative Actions With Respect to Violations of Fair Tax Collection Practices

There Were No Monetary Settlements to Taxpayers With Respect to Fair Tax Collection Practices Civil Actions

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Fair Tax Collection Practices Provisions

Appendix V – Management’s Response to the Draft Report

 

Background

Section (§) 1102 (d)(1)(G) of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) requires the Treasury Inspector General for Tax Administration (TIGTA) to include in one of its semiannual reports to the Congress information regarding any administrative or civil actions related to violations of the fair debt collection provisions of 26 U.S.C. § 6304, Fair Tax Collection Practices.  The IRS has traditionally referred to the 26 U.S.C. § 6304 violations as “Fair Debt Collection Practices Act” (FDCPA) violations.  The TIGTA semiannual report must provide a summary of such actions and include any judgments or awards granted.

The law itself does not provide an explanation of what is meant by “administrative actions.”  We used the IRS’ definition when determining the number of FDCPA violations to be reported under RRA 98 § 1102 (d)(1)(G).  The IRS’ definition of administrative actions includes disciplinary actions ranging from admonishment through removal.  Lesser actions, such as oral or written counseling, are not considered administrative actions.

As originally enacted, the FDCPA included provisions that restricted various collection abuses and harassment in the private sector.  These restrictions did not apply to Federal Government practices.  However, the Congress believed it was appropriate to require the IRS to comply with applicable portions of the FDCPA and to be at least as considerate to taxpayers as private creditors are required to be with their customers (see Appendix IV for a detailed description of the FDCPA provisions).  As such, RRA 98 § 3466(a) required the IRS to follow Fair Tax Collection Practices in line with the FDCPA.

Taxpayer complaints about IRS employees’ conduct can be reported to several IRS functions for tracking on IRS management information systems.  If a taxpayer files a civil action or if IRS management determines that the taxpayer’s rights related to Fair Tax Collection Practices were potentially violated, the complaint could be referred and then tracked on one or both of the following IRS systems:

·         Office of Workforce Relations’ Automated Labor and Employee Relations Tracking System (ALERTS), which generally tracks employee behavior that may warrant IRS management administrative actions.

·         Office of Chief Counsel’s Counsel Automated System Environment (CASE), which is an inventory control system that tracks items such as taxpayer civil actions or bankruptcies.

The IRS began tracking FDCPA codes on the ALERTS in March 1999 and on the CASE in June 1999.

For the Calendar Year 2004 review, we analyzed closed cases from the ALERTS and the CASE to identify violations of Fair Tax Collection Practices.  However, we could not ensure the cases recorded on the ALERTS and the CASE constitute all Fair Tax Collection Practices violations.  Furthermore, the scope of our audit was not intended to determine the accuracy or consistency of disciplinary actions taken against employees for Fair Tax Collection Practices violations that were not reported to the Office of Workforce Relations.

This review was performed at the Chief Human Capital and Chief Counsel Offices in the IRS National Headquarters in Washington, D.C., during the period October through December 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.

There Were No Administrative Actions With Respect to Violations of Fair Tax Collection Practices

There were 32 cases coded as FDCPA complaints closed on the ALERTS during the period January 1 through December 31,  2004.  However, only 18 of the cases were related to collection practices—the other cases were either miscoded (13 cases) or duplicate (1 case).  None of the 18 cases involved administrative actions with respect to violations of Fair Tax Collection Practices.  The disposition of the 18 cases included admonishment for failure to follow established guidelines, written counseling, retirement or other separation from the IRS, withdrawal of the allegation, clearance of any wrongdoing, and closure without further action.

Oral or written counseling is not considered an administrative action under the IRS’ definition.  Since the IRS does not routinely track all informal oral counseling or minor actions against its employees, it is not possible to determine how often, and for what reasons, informal oral counseling or other minor disciplinary actions occurred.

There Were No Monetary Settlements to Taxpayers With Respect to Fair Tax Collection Practices Civil Actions

Section 7433 of the Internal Revenue Code (I.R.C.) provides that a taxpayer may bring a civil action for damages against the Federal Government if an officer or employee of the IRS recklessly or intentionally, or by reason of negligence, disregards any provision of the I.R.C., or related regulation, in connection with the collection of Federal tax.

There were no cases closed on the CASE for which the IRS paid damages to taxpayers resulting from a civil action filed due to a Fair Tax Collection Practices violation.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The objective of this review was to obtain information on any Internal Revenue Service (IRS) administrative or civil actions resulting from Fair Tax Collection Practices violations by IRS employees.  Specifically, we:

I.                   Determined the number of Fair Tax Collection Practices violations resulting in administrative actions.

A.. Obtained a computer extract from the Automated Labor and Employee Relations Tracking System (ALERTS) of the 32 cases that were opened after July 22, 1998, and closed during the period January 1 through December 31, 2004, as Fair Debt Collection Practices Act (FDCPA) violations. 

B.. Determined whether any of the FDCPA-coded cases resulted in administrative actions.

II.                Determined whether there were Fair Tax Collection Practices violations which resulted in civil actions (judgments and awards granted) by requesting a computer extract from the Counsel Automated System Environment (CASE) of the Subcategory 6304 (established to track FDCPA violations) cases opened after July 22, 1998, and closed during the period January 1 through December 31, 2004.  The Office of Chief Counsel identified no cases.

 

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

Kevin P. Riley, Audit Manager

Charles O. Ekunwe, Lead Auditor

Frank I. Maletta, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Chief Counsel  CC

Chief Human Capital Officer  OS:HC

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 Counsel  CC

   Chief Human Capital Officer  OS:HC

 

Appendix IV

 

Fair Tax Collection Practices Provisions

 

To ensure the Internal Revenue Service (IRS) and private debt collectors follow similar rules, the IRS Restructuring and Reform Act of 1998 requires the IRS to comply with certain provisions of the Fair Debt Collection Practices Act.  These provisions are referred to as Fair Tax Collection Practices procedures.  Specifically, the IRS may not communicate with taxpayers in connection with the collection of any unpaid tax:

·         At unusual or inconvenient times.

·         If the IRS knows that the taxpayer has obtained representation from a person authorized to practice before the IRS, and the IRS knows or can easily obtain the representative’s name and address.

·         At the taxpayer’s place of employment, if the IRS knows or has reason to know that such communication is prohibited.

Further, the IRS may not harass, oppress, or abuse any person in connection with any tax collection activity or engage in any activity that would naturally lead to harassment, oppression, or abuse.  Such conduct specifically includes, but is not limited to, the:

·         Use or threat of violence or harm.

·         Use of obscene or profane language.

·         Causing a telephone to ring continuously with harassing intent.

·         Placement of telephone calls without meaningful disclosure of the caller’s identity.

 

Appendix V

 

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.