TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

 

 

Centralized Sites Effectively Evaluated Offers in Compromise From Self-Employed Taxpayers and Assisted in Reducing Overall Staffing

 

 

 

March 26, 2007

 

Reference Number: 2007-30-058

 

 

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.

 

Redaction Legend:

1 = Tax Return/Return Information

 

Phone Number   |  202-927-7037

Email Address   |  Bonnie.Heald@tigta.treas.gov

Web Site           |  http://www.tigta.gov

 

March 26, 2007

 

 

MEMORANDUM FOR COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED DIVISION

 

FROM:                            Michael R. Phillips /s/ Michael R. Phillips

                                         Deputy Inspector General for Audit

 

SUBJECT:                    Final Audit Report – Centralized Sites Effectively Evaluated Offers in Compromise From Self-Employed Taxpayers and Assisted in Reducing Overall Staffing (Audit # 200630020)

 

This report presents the results of our review of the Centralized Offer in Compromise (COIC) sites’[1] evaluation of offers in compromise (offer) filed by certain self-employed taxpayers.  The overall objective of this review was to determine whether the centralized sites properly resolve offers from taxpayers who file a U.S. Individual Income Tax Return (Form 1040) Profit or Loss From Business (Schedule C) and evaluate the related impact on the field offer groups.[2]  This audit was initiated at the request of the Commissioner, Small Business/Self-Employed Division, for us to evaluate the ability of the sites to accurately and timely work offers from these taxpayers.

Impact on the Taxpayer

The COIC sites in Brookhaven, New York, and Memphis, Tennessee, evaluate offers for “simpler” cases (e.g., wage earners), while more complex offers (e.g., business and self-employed taxpayers) are forwarded to field offer groups where they are evaluated by experienced revenue officers, known as offer specialists.  Recently, the Internal Revenue Service (IRS) successfully integrated offers submitted by certain self-employed taxpayers into the mix of cases evaluated by the centralized sites.  This change provides taxpayers with quicker responses to their proposed offers and assisted the IRS in reducing the number of revenue officers dedicated to the offer program.

Synopsis

Self-employed Schedule C cases were worked effectively and efficiently in the COIC sites.

The IRS provided effective oversight to ensure the successful implementation of the self-employed Schedule C units at the centralized sites.  We determined the sites accurately and timely processed a sample of closed self-employed Schedule C offers and took an average of 126 days to work this type of case.  In comparison, field offer groups took an average of 187 days to process similar types of offers.

This process change and other changes over the past several years have resulted in taxpayers receiving quicker responses to their proposed offers.  The number of cases in the field offer groups taking more than 12 months to close decreased from approximately 36 percent in Fiscal Year 2002 to about 14 percent in Fiscal Year 2006.  In addition, the centralized offer concept has assisted in reducing the number of employees dedicated to the offer program.  A 54 percent decrease in offers received between Fiscal Years 2003 and 2006 and improved efficiencies allowed the IRS to reduce the number of revenue officers from 1,078 in April 2001 to 143 in October 2006 and the number of technical employees in the COIC sites from 616 in August 2002[3] to 360 in January 2007.  The 935 revenue officers formerly dedicated to the offer program retired or returned to the Collection Field function.  In addition, revenue officers in the Collection Field function also retired or resigned during this period, resulting in an increase of 275 revenue officers assigned to the field.  This growth was significant because the Collection Field function increased collections by 34 percent, from approximately $2.7 billion in Fiscal Year 2001 to $3.6 billion in Fiscal Year 2006.  While other factors certainly influenced the increase in collections, such an increase would not have occurred if the staff resources had been retained in the offer program.

Recommendation

We made no recommendations in this report.  However, key IRS management officials reviewed it prior to issuance and agreed with the facts and conclusions presented. 

Copies of this report are also being sent to the IRS managers affected by this report.  Please contact me at (202) 622-6510 if you have questions or Daniel R. Devlin, Assistant Inspector General for Audit (Small Business and Corporate Programs), at 202-622-5894.

 

 

Table of Contents

 

Background

Results of Review

Evaluations of Offers in Compromise Submitted by Self-Employed Schedule C Taxpayers Were Successfully Integrated Into the Centralized Sites

Centralized Sites Accurately and Timely Processed Offers

Timeliness of Offer Processing Has Improved, and Use of Staff Resources Has Declined

Appendices

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Related Treasury Inspector General for Tax Administration Audit Reports  

 

 

Abbreviations

 

AOIC

Automated Offer in Compromise

COIC

Centralized Offer in Compromise

IRS

Internal Revenue Service

 

 

Background

 

The offer in compromise is an agreement between a taxpayer and the Federal Government that settles a tax liability for payment of less than the full amount owed.

The Internal Revenue Service (IRS) is responsible for collecting taxes when taxpayers do not fully pay their tax liabilities.  It has the authority to settle or compromise a Federal tax liability by accepting less than full payment under certain circumstances.  This is accomplished through a taxpayer’s submission of an offer in compromise (offer) on an Offer in Compromise (Form 656).  Currently, the IRS is authorized to compromise a liability for any one of three reasons:

  • Doubt As to Collectibility, when the taxpayer’s assets and income are less than the full amount of the liability.
  • Effective Tax Administration, when, although collection in full could be achieved, collection of the full liability would cause the taxpayer economic hardship.

·         Doubt As to Liability, when there is a genuine dispute as to the existence or amount of the correct tax liability under the law.

The Centralized Offer in Compromise (COIC) sites[4] in Brookhaven, New York, and MemphisTennessee process application fees, screen cases for processability,[5] and gather required documents and information.  These centralized sites evaluate offers for “simpler” cases (e.g., wage earners), while more complex cases (e.g., business and self-employed taxpayers) are forwarded to field offer groups[6] where they are evaluated by experienced revenue officers, known as offer specialists.

The centralized sites were implemented in August 2001.  At that time, the IRS intended for the sites to work offers submitted by self-employed taxpayers, but, because of a large inventory, it determined these types of offers should be worked by the field offer groups.  However, since Fiscal Year 2003, offer receipts have been declining, and the IRS has identified simpler field offer cases that could be worked at the centralized sites.  It expected this would allow additional reduction of field personnel in the offer program and more efficiently use resources at the centralized sites.  Based on analysis of cases closed by field offer groups, the IRS defined the population of self-employed cases for full processing at the sites as offers submitted by taxpayers who:

·         File a U.S. Individual Income Tax Return (Form 1040) with Profit or Loss From Business (Schedule C).

·         Have gross receipts of fewer than $100,000 per year.

·         Do not have employees.

This review was performed at the Brookhaven and Memphis COIC sites in the Small Business/Self-Employed Division during the period July 2006 through February 2007.  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.

 

 

Results of Review

 

Evaluations of Offers in Compromise Submitted by Self-Employed Schedule C Taxpayers Were Successfully Integrated Into the Centralized Sites

The IRS has successfully integrated offers submitted by certain self-employed taxpayers who file Form 1040 Schedule C[7] into the types of cases evaluated by the COIC sites.  The integration included steps to ensure the criteria used to identify cases for the sites’ self-employed Schedule C units were appropriate and to ensure the new types of offers were timely and accurately worked.  Our review showed these cases were worked effectively and efficiently in the sites.

The IRS tested the feasibility of working these cases at the centralized sites by conducting a pilot between April 15, 2005, and March 27, 2006.[8]  To provide test cases and maintain a reasonable workload, management limited cases to approximately 90 per site per month.  Cases over the limit were sent to the field offer groups for evaluation.  The IRS began using the offer category code on the Automated Offer in Compromise (AOIC) database.[9]  This code identifies offers based on the taxpayer’s filing requirements or other identifying characteristic.  It provided a methodology to systemically identify and track cases meeting the self-employed Schedule C criteria and whether the cases were worked in the sites or in the field offer groups.

Analysts from the campus[10] Collection Compliance and Compliance Policy functions evaluated the quality of cases worked and conducted weekly conference calls to stay apprised of the pilot’s progress and developing issues.  Also, employees of the pilot and employees selected for the full-time offer examiner positions were provided sufficient training to introduce them to issues relevant to self-employed Schedule C taxpayers.

Centralized Sites Accurately and Timely Processed Offers

An offer determination involves indepth evaluation of the taxpayer’s assets and ability to pay.  In the analysis of an offer based on doubt as to collectibility, the offer examiner compares the amount the taxpayer offered with the amount the IRS determines could be legally collected from the taxpayer (i.e., the reasonable collection potential).  Our review of a judgmental sample of 60 closed self-employed Schedule C offers (20 accepted, 20 rejected, and 20 returned to the taxpayers) showed determinations were completed appropriately and timely.

Offers were appropriately routed to the self-employed Schedule C units

Process examiners at the COIC sites evaluate the processability of offers, build cases (e.g., conduct tax account research), and route the cases to site offer examiners or field offer groups.  Offers meeting the self-employed Schedule C criteria are sent to a self-employed Schedule C unit.  Offers were appropriately routed to these units for evaluation.  In 29 of 30 cases pending assignment to self-employed Schedule C offer examiners, our analysis indicated the assignment of the case to the self-employed Schedule C unit was appropriate.  ****1****

Offers were returned to taxpayers according to procedures

After an offer is determined to be processable, it may still be returned to the taxpayer for various reasons, including:

  • The taxpayer fails to remain in compliance with the filing of required tax returns while the offer is under evaluation.
  • The taxpayer fails to make required estimated tax payments or Federal tax deposits while the offer is under evaluation.
  • The taxpayer fails to fulfill a request for information[11] necessary to complete a full evaluation.
  • The IRS determines the offer was filed solely to delay collection actions.[12]

We reviewed a judgmental sample of 20 processable offers returned to taxpayers and determined  the return of each was appropriate.  Where applicable, the requested information was necessary for the offer evaluation to continue, and determinations of noncompliance with payment of tax were appropriate.  In addition, the centralized sites attempted an additional telephone contact with either the taxpayer or the taxpayer’s representative to obtain missing information and/or estimated tax payments prior to returning offers.  

Offer examiners properly analyzed financial information when deciding to accept or reject offers

Our review of a judgmental sample of 40 closed offers (20 accepted and 20 rejected) determined the sites generally follow procedures when evaluating offers that involve self-employed Schedule C taxpayers.  We identified errors in some of the financial analyses, but the decisions to accept or reject the offers were appropriate.

We identified errors in the financial analysis for 3 (7.5 percent) of the 40 cases reviewed.  ****1**** The errors occurred because the offer evaluation process is complex, requiring employees to pay close attention to details and to make numerous calculations.  While managers had reviewed and approved the final decisions, the errors were not identified and corrected, possibly because the errors did not have a material impact on the final decisions.

Self-employed Schedule C offers were worked timely

The self-employed Schedule C offers worked by the COIC sites were completed timely, both during the pilot phase and subsequent to full implementation of the self-employed Schedule C units.  We also determined the sites provided taxpayers with quicker responses to their proposed offers, compared to similar types of offers worked by the field offer groups. 

Our analysis of AOIC data for processable offer dispositions made between May 1, 2005, and November 30, 2006,[14] showed:

  • The sites took 126 days on average to process self-employed Schedule C offers. 
  • Field offer groups took 187 days on average to process similar types of offers. 
  • The sites took 122 days on average to process other offer types (e.g., offers filed by taxpayers with wage and investment income only).

We further evaluated the timeliness of offer processing using the judgmental sample of 60 offers closed (20 accepted, 20 rejected, and 20 returned).  These offers were in process for approximately 131 days, ranging from 21 days to 220 days.[15]  While 12 (20 percent) of the 60 offers reviewed exceeded the 180-day goal, they exceeded the 180-day goal by only 14 days on average.

Our analysis of the days in process showed the largest component of the processing days (34 percent) was for taxpayer response to information requests or results of preliminary evaluations.  The offer examiners’ evaluations of offers and related work accounted for fewer than 20 percent of the days that these offers were in process.  Figure 1 shows our analysis of the processing activities for the 60 offers we reviewed.

Figure 1:  Processing Activities for Closed Offers

Figure 1 was removed due to its size.  To see Figure 1, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

 

Timeliness of Offer Processing Has Improved, and Use of Staff Resources Has Declined

The IRS’ target for completing offer evaluations is within 6 months of receipt for centralized sites and within 9 months of receipt for field offer groups.[16]  In addition, management indicated that a goal of centralizing the evaluation of self-employed Schedule C offers was to reduce the field staffing dedicated to the offer program and to maximize the efficiency of the site staffing.  Our review showed a reduction in the overall number of offers received, improvements in the timeliness of offer processing, and implementation of the self-employed Schedule C units all contributed to a reduction in field staffing requirements during Fiscal Year 2006. 

The numbers of over-age cases have steadily declined in both the field offer groups and centralized sites

Since Fiscal Year 1999, we have conducted a series of reviews to evaluate the offer program (see Appendix IV for a list of the prior audit reports).  Some of these reviews identified significant timeliness issues; however, they also showed the overall timeliness of offer processing has generally improved over the years.  This has resulted in taxpayers receiving quicker responses to their proposed offers.  For example, the number of cases in process more than 1 year was a concern for the field offer groups.[17]  In Fiscal Year 2002, approximately 36 percent of the field offer groups’ dispositions took more than 12 months to process.  This condition improved to approximately 14 percent during Fiscal Year 2006.  Figure 2 shows the age of offer dispositions at the sites and field offer groups for Fiscal Years 2002 through 2006.

Figure 2:  Age of Processable Dispositions at the COIC Sites and
Field Offer Groups for Fiscal Years 2002 Through 2006
[18]

Figure 2 was removed due to its size.  To see Figure 2, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

Also, the number of offers received has been declining during the recent fiscal years.  As shown in Figure 3, the total number of offers received decreased by approximately 69,000 (54 percent) between Fiscal Years 2003 and 2006.  During this same period, offer receipts in the field offer groups decreased by approximately 24,000 (56 percent).[19]

Figure 3:  Offer Receipts in Fiscal Years 2002 Through 2006

Figure 3 was removed due to its size.  To see Figure 3, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

 

Our analysis of the AOIC database showed that, between May 1, 2005, and November 30, 2006, approximately 28,000 offers were worked or were in process at the field offer groups.  During this same period, the sites worked or had in process approximately 5,000 self-employed Schedule C offers.  This represents a reduction of approximately 15 percent in the number of offers sent to the field offer groups.

Required staffing levels continue to decline

The number of technical employees (i.e., process examiners and offer examiners) working in the COIC sites decreased from 616 in August 2002 to 360 in January 2007 (42 percent).  This reduction would appear to be in line with the reduction in the number of offers received, considering centralized site employees now work more complicated cases that require more processing steps.

In April 2001, 1,078 revenue officers were dedicated to the offer program.  Implementation of the COIC sites in August 2001, the lower number of offers received during Fiscal Years 2004 and 2005, and the expansion of self-employed Schedule C taxpayers to the sites in Fiscal Year 2006 allowed the IRS to reduce the number of revenue officers dedicated to the offer program.  Management indicated that, by the end of Fiscal Year 2006, this number had been reduced to 143 revenue officers working out of 3 Area Offices.  The 935 revenue officers formerly dedicated to the offer program retired or returned to the Collection Field function.  In addition, revenue officers in the Collection Field function also retired or resigned during this period, resulting in an increase of 275 revenue officers assigned to the field.  This growth was significant because the Collection Field function increased collections by 34 percent, from approximately $2.7 billion in Fiscal Year 2001 to $3.6 billion in Fiscal Year 2006.  While other factors certainly influenced the increase in collections, such an increase would not have occurred if the staff resources had been retained in the offer program.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to determine whether the COIC sites[20] properly resolve offers in compromise (offer) from taxpayers who file a U.S. Individual Income Tax Return (Form 1040) Profit or Loss From Business (Schedule C)[21] and evaluate the related impact on the field offer groups.[22]  This audit was initiated at the request of the Commissioner, Small Business/Self-Employed Division, for us to evaluate the ability of the sites to accurately and timely work offers from these taxpayers.

During the review, we relied on data from the AOIC database[23] to identify closed offers.  We evaluated the reasonableness of the data through comparison with selected information from the IRS Collection Reports 5000-108 (Monthly Report of Offer in Compromise Activity).  We determined the data were sufficiently reliable for the purposes of sample selection and various analyses.  Additionally, unless otherwise noted, we used judgmental sampling techniques to minimize time and because this method was sufficient to meet our overall objective.  To accomplish our objective, we:

I.                   Determined whether the appropriate offers were identified for full evaluation by the COIC sites’ self-employed Schedule C units.

A.    Identified the processes and procedures used to identify cases to be worked at the sites and identified any differences in these procedures between the pilot and full program implementation.

B.     Evaluated management’s assessment of the self-employed Schedule C pilot to ensure the criteria used to identify cases were appropriate.

C.     Reviewed a judgmental sample of 30 offers in the unassigned inventory awaiting assignment to offer examiners.  We reviewed 15 offers from each site to determine whether the offers met processing guidelines for the self-employed Schedule C units.  Our samples were judgmentally selected from offers in the unassigned inventory for the self-employed Schedule C unit examiners during our onsite visits on August 30, 2006, and September 12, 2006.  There were 263 offers in this inventory status.

II.                Determined whether the offer evaluations for self-employed Schedule C taxpayers closed by the COIC sites were based on accurate and consistent financial analyses.

A.    Identified and evaluated procedures used by the sites for conducting offer evaluations.

B.     Identified and evaluated training for the self-employed Schedule C unit examiners.

C.     Obtained from the AOIC database a computer extract of all offers closed or in process between April 1, 2005, and July 3, 2006 (101,807 offers).  We chose this period because it represented current case closures at the time of our sample selection and covered the period of the self-employed Schedule C pilot.

1.      Reviewed a judgmental sample of 60 self-employed Schedule C offers (30 offers from each site) closed between April 1, 2006, and June 30, 2006.  This included 20 of 165 offers accepted, 20 of 82 offers rejected, and 20 of 132 offers returned to the taxpayers.  We obtained and evaluated the IRS case files to determine whether correct conclusions were reached and evaluated the accuracy of the financial analyses used to determine equity in assets and future income.  This sample was identified from the data extract discussed in Step II.C. using the offer category code, which identifies offers based on the taxpayer’s filing requirements or other identifying characteristic (e.g., code 2 represents self-employed Schedule C cases).

III.             Determined the impact of the self-employed Schedule C units on the timeliness of offer evaluations at COIC sites.

A.    Evaluated the timeliness of offer processing from Collection Reports 5000-108.

B.     Obtained from the AOIC database an amended computer extract of all offers closed or in process between April 1, 2005, and December 4, 2006 (140,876 offers).  We obtained an updated data extract to evaluate current case closures and to cover the period of the self-employed Schedule C pilot.  We compared the average number of days offers are in process for the self-employed Schedule C units with the average number of days for other offer types.  We limited these data to the period May 1, 2005 through November 30, 2006.[24]

IV.             Determined the impact on the number of offers forwarded to the field offer groups for determination.

A.    Identified the number of offers forwarded to field offer groups for processing from the data extract discussed in Step III.B.  

B.     Identified the change in the number of revenue officers assigned to the offer program through discussion with IRS management.

 

Appendix II

 

Major Contributors to This Report

 

Daniel R. Devlin, Assistant Inspector General for Audit (Small Business and Corporate Programs)

Parker F. Pearson, Director

Amy L. Coleman, Audit Manager

Darryl J. Roth, Lead Auditor

Phyllis E. Heald, Senior 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, Wage and Investment Division  SE:W

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

Deputy Commissioner, Wage and Investment Division  SE:W

Director, Campus Compliance Services, Small Business/Self-Employed Division  SE:S:CCS

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

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

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 Internal Control  OS:CFO:CPIC:IC

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

 

Appendix IV

 

Related Treasury Inspector General for Tax Administration Audit Reports

 

1.      More Taxpayers Can Benefit From the New Offer in Compromise Provisions (Reference Number 2000-40-093, dated June 2000).

2.      The Internal Revenue Service Needs to Consistently Use Special Circumstances in the Offer in Compromise Program (Reference Number 2001-30-096, dated May 2001).

3.      The Internal Revenue Service Needs to Take Timely and Appropriate Closing Actions on Offers in Compromise (Reference Number 2002-30-181, dated September 2002).

4.      Continued Progress Is Needed to Improve the Centralized Offer in Compromise Program (Reference Number 2003-30-182, dated September 2003).

5.      Monitoring of Accepted Offers in Compromise Is Generally Effective, but Some Improvement Is Needed (Reference Number 2004-30-043, dated January 2004).

6.      Improvements Are Needed in the Timeliness and Accuracy of Offers in Compromise Processed by Field Offer Groups (Reference Number 2005-30-013, dated December 2004).

7.      The Implementation of the Offer in Compromise Application Fee Reduced the Volume of Offers Filed by Taxpayers at All Income Levels (Reference Number 2005-30-096, dated June 2005).

8.      The Offer in Compromise Program Is Beneficial but Needs to Be Used More Efficiently in the Collection of Taxes (Reference Number 2006-30-100, dated July 17, 2006).

 



[1] The COIC sites are also referred to as the centralized sites or sites in this report.

[2] The Collection Field function is the unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns.  Specialized staff from the Collection Field function are designated responsibility for evaluation of offers.  An Area Office is a geographical organizational level used by Internal Revenue Service business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.

 

[3] The COIC sites were implemented in August 2001.

[4] The COIC sites are also referred to as the centralized sites or sites in this report.

[5] Processability requirements include the taxpayer cannot be in bankruptcy, has filed all required tax returns, and has submitted the $150 application fee or Income Certification for Offer in Compromise Application Fee and Payment (Form 656-A).  Processability requirements for offers filed after July 16, 2006, were changed due to enactment of the Tax Increase Prevention and Reconciliation Act of 2005 (Pub. L. No. 109-222, 120 Stat. 345), which requires a down payment that is 20 percent of the offer amount for lump-sum offers or the first installment of a periodic payment offer (one payable in 6 or more installments).  The processability requirements now include the taxpayer (1) cannot be in bankruptcy and (2) has submitted the $150 application fee, the offer down payment, or a Form 656-A.

[6] The Collection Field function is the unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns.  Specialized staff from the Collection Field function are designated responsibility for evaluation of offers.  An Area Office is a geographical organizational level used by IRS business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.

[7] Taxpayers who file Form 1040 Schedule C are referred to as self-employed Schedule C taxpayers.

[8] The sites continued to work self-employed Schedule C offers during the rollout of the self-employed Schedule C units.  We considered the self-employed Schedule C units to be fully implemented with the selection and training of offer examiners beginning June 1, 2006.

[9] The IRS database used to monitor offer case processing; it was designed to control, track, and monitor offers.

[10] The data processing function of the IRS.  The campuses process paper and electronic submissions, correct errors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.

[11] Additional information requested may include bank statements, income verification, home mortgage information, a completed collection information statement, etc.

[12]Solely to delay collection” may include the resubmission of an offer after a prior offer has been returned or rejected and the new offer is essentially the same as the prior one.

[13] ****1****

[14] This 19-month period includes the pilot phase and full implementation of the self-employed Schedule C units.  While the beginning of the self-employed Schedule C pilot was April 15, 2005, we used May 1, 2005, to allow time for the centralized sites to evaluate cases.  We used November 30, 2006, because these were the most current data available at the time of our analysis.

[15] From August 29, 2005, through approximately February 28, 2006, offers from taxpayers affected by hurricanes were held from further actions.  In 4 of 30 offers reviewed from the Memphis site, the offer evaluation process was affected by the IRS tax relief efforts.

[16] The goal for field offer groups was originally within 6 months of receipt; however, the IRS modified this goal to 9 months during Fiscal Year 2005.

[17] See Appendix IV, report 6.

[18] Beginning in Fiscal Year 2005, the IRS data include not-processable offers in the age of dispositions.  For comparability with prior fiscal years, we excluded not-processable offers from the number of offers disposed of in 6 or fewer months (to arrive at the percentages shown in the Fiscal Years 2005 and 2006 columns of Figure 2).

[19] IRS offer management believes receipts may continue to decline with enactment of the Tax Increase Prevention and Reconciliation Act of 2005.  Our comparison of offer receipts for both the 5 months before and 5 months after implementation of this Act showed receipts declined by about 18 percent.

[20] The COIC sites are also referred to as the centralized sites or sites.

[21] Taxpayers who file Form 1040 Schedule C are referred to as self-employed Schedule C taxpayers.

[22] The Collection Field function is the unit in the Area Offices consisting of revenue officers who handle personal contacts with taxpayers to collect delinquent accounts or secure unfiled returns.  Specialized staff from the Collection Field function are designated responsibility for evaluation of offers.  An Area Office is a geographical organizational level used by IRS business units and offices to help their specific types of taxpayers understand and comply with tax laws and issues.

[23] The IRS database used to monitor offer case processing; it was designed to control, track, and monitor offers.

[24] This 19-month period includes the pilot phase and full implementation of the self-employed Schedule C units.  While the beginning of the self-employed Schedule C pilot was April 15, 2005, we used May 1, 2005, to allow time for the centralized sites to evaluate cases.  We used November 30, 2006, because these were the most current data available at the time of our analysis.