Fiscal Year 2005

Statutory Review of Restrictions on Directly Contacting Taxpayers

 

February 2005

 

Reference Number:  2005-40-040

 

 

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 22, 2005

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT

 

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

                 Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report - Fiscal Year 2005 Statutory Review of Restrictions on Directly Contacting Taxpayers (Audit # 200540027)

 

This report presents the results of our review of the Internal Revenue Service’s (IRS) compliance with restrictions on direct contact with taxpayers.  The overall objective of this review was to determine whether the 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 whether the IRS fully complied with I.R.C. §§ 7521(b)(2) and (c) requirements when directly contacting taxpayers and their representatives.  This is the seventh 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:  The IRS concurred with our decision to not recommend the creation of a separate tracking system and indicated its appreciation of our support of legislation that would alleviate the requirement to perform this review.  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 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

Appendix IV – Management’s Response to the Draft Report

 

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, Wage and Investment Division, and Office of the National Taxpayer Advocate during the period October 2004 through January 2005.  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 November 2003 and October 2004.  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 seventh 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:  The IRS concurred with our decision to not recommend the creation of a separate tracking system and indicated its appreciation of our support of legislation that would alleviate the requirement to perform this review. 

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to determine whether 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.                   Obtained confirmation from the Small Business/Self-Employed and Wage and Investment Divisions that the IRS neither has, nor plans to implement, a system or process to identify or 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 (four complaints and two investigations) closed by the TIGTA Office of Investigations (OI) during the period November 25, 2003, through October 13, 2004.

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

Sharon Summers, Lead Auditor

Cindy Harris, Auditor

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

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

Commissioner, Wage and Investment Division  SE:W

National Taxpayer Advocate  TA

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

Director, Communications, Government Liaison, and Disclosure Small Business/Self-Employed Division SE:S:CGL&D

Director, Customer Assistance, Relationships, and Education, Wage and Investment Division  SE:W:CAR

Director, Examination, Small Business/Self-Employed Division  SE:S:E

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

Chief, Performance Improvement, Wage and Investment Division  SE:W:S:PI

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

Senior Operations Advisor, Wage and Investment Division  SE:W:S

 

Appendix IV

 

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.