TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
Fiscal Year 2007 Statutory Review of Restrictions on Directly Contacting Taxpayers
July 13, 2007
Reference Number: 2007-40-118
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.
Phone Number |
202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site |
http://www.tigta.gov
July 13, 2007
MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Fiscal Year 2007 Statutory Review of Restrictions on Directly Contacting Taxpayers (Audit # 200740003)
This report presents the results of our review to determine
whether the Internal Revenue Service (IRS) complied with legal guidelines
addressing the direct contact of taxpayers and their representatives, as set
forth in Internal Revenue Code Sections (I.R.C. §§) 7521(b)(2) and (c). The Treasury Inspector General for Tax
Administration was statutorily required to conduct this audit.
Impact on the Taxpayer
The Omnibus Taxpayer Bill of Rights[1]
created a number of safeguards to protect taxpayers being interviewed by an IRS
employee as part of an examination or collection action. IRS employees are required to stop an
interview if the taxpayer requests to consult with a representative and may not
bypass a representative without supervisory approval. Neither the IRS nor we could readily identify
cases in which the taxpayer requested a representative or the IRS improperly
bypassed the representative. Of the
limited number of complaints received related to this issue, there were none in
which the facts of the case indicated the IRS employee did not comply with the
taxpayer’s request to consult with a representative or improperly bypassed the representative.
Synopsis
IRS employees are required by the direct contact provisions of I.R.C. §§ 7521(b)(2) and (c) to:
The IRS Internal Revenue Manual provides employees with guidance to help ensure compliance with the direct contact provisions. In addition, the IRS has informed taxpayers of their rights through various IRS publications. However, we could not determine whether the IRS complied with I.R.C. §§ 7521(b)(2) and (c) requirements when directly contacting taxpayers and their representatives. IRS management information systems do not separately record or monitor direct contact requirements, and Congress has not explicitly required the IRS to do so. Furthermore, we do not recommend the creation of a separate IRS system to track those cases involved with direct contact issues. Accordingly, we made no recommendations in this report.
Response
Because this was a positive report and we made no specific recommendations, comments from the IRS were not required.
Please contact me at (202) 622-6510 if you have questions or Michael E. McKenney, Assistant Inspector General for Audit (Wage and Investment Income Programs), at (202) 622-5916.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Abbreviations
|
I.R.C. § |
Internal Revenue Code Section |
|
IRS |
Internal Revenue Service |
|
RRA 98 |
Restructuring and Reform Act of 1998 |
|
TIGTA |
Treasury Inspector General for Tax
Administration |
The Omnibus Taxpayer Bill of Rights[2] 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 by the direct contact provisions of Internal Revenue Code Sections (I.R.C. §§) 7521(b)(2) and (c) to:
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 TIGTA is required to annually evaluate the IRS’ compliance with the direct contact provisions of I.R.C. §§ 7521(b)(2) and (c).
On July 22, 1998, the President signed into law the IRS Restructuring and Reform Act of 1998 (RRA 98),[3] which required the IRS to revise Your Rights as a Taxpayer (Publication 1) to inform taxpayers of their rights (1) to be represented at interviews and (2) to suspend an interview pursuant to I.R.C. § 7521(b)(2). In addition, Congress added I.R.C. § 7803(d)(1)(A)(ii) to the RRA 98, which requires the Treasury Inspector General for Tax Administration (TIGTA) to annually evaluate the IRS’ compliance with the direct contact provisions. Senate Committee on Finance Report 105-174 (dated April 22, 1998) related to the RRA 98 § 3502 provision stated that Congress believes taxpayers should be more fully informed of their rights to representation in dealing with the IRS and those rights should be respected.
This review was performed in the IRS Headquarters and the National
Taxpayer Advocate function in
The Internal Revenue Manual Provides Employees Guidance to Help Ensure Compliance With the Direct Contact Provisions
Following the enactment of the Omnibus Taxpayer Bill of Rights in 1988, the IRS began to establish written procedures regarding taxpayer interviews for employees to follow and planned to further enhance those procedures as needed. These initial procedures required employees not only to meet the legal guidelines imposed by the direct contact provisions but also to document the related actions in the taxpayer’s case file.
The enactment of RRA 98 contributed to the further enhancement of the procedures and guidelines related to the direct contact issues. In response to prior TIGTA reports, the IRS took several corrective actions to further improve the existing procedures and guidelines for directly contacting taxpayers and their representatives.
In our Fiscal Year 1999 report, we recommended the IRS (1) complete its efforts to develop national guidance to ensure consistent treatment of taxpayers and (2) develop a process to determine whether employees are complying with the direct contact provisions. In response to our first recommendation, the IRS updated its Internal Revenue Manual in 1999 and 2000 to reflect:
In response to our second recommendation, the IRS assigned group managers responsibility for monitoring employee compliance with the direct contact provisions. The group managers were required to address this issue during group meetings, case reviews, on-the-job visits, and taxpayer/representative inquires to ensure employees fully comply with the law.
The Internal Revenue Service Has Informed Taxpayers of Their Rights Through Various Internal Revenue Service Publications
The IRS uses Publication 1 as the main document to keep taxpayers
informed of their rights and to explain the examination, collection, appeals,
and refund processes. Taxpayers are
provided a copy of Publication 1 prior to the scheduled interview with the
IRS. Prior to December 1998, taxpayer
rights during IRS interviews were not specifically mentioned in Publication
1. The RRA 98 required the IRS to revise
Publication 1 to include information concerning taxpayers’ rights to be
represented at interviews with the IRS and to suspend an interview pursuant to
I.R.C. § 7521(b)(2). The IRS has also
included information on these rights in other publications. As a result, taxpayers may be better informed
of their rights during interviews through the expanded avenues made available
by the IRS. These other publications
include:
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 improperly 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. There is no legal requirement for the IRS to record or monitor cases involving these two procedures.
One way to identify possible violations of these taxpayer rights is to determine if taxpayers have complained that an IRS employee intentionally denied them their right to representation or bypassed representatives without proper approval. Taxpayer complaints that allege IRS employees bypassed their representatives and contacted them directly are tracked by the TIGTA Office of Investigations. The TIGTA Office of Investigations closed seven direct contact complaint cases, involving six IRS employees, between October 2005 and September 2006. In all seven cases, the Office of Investigations determined the facts did not support the opening of a criminal investigation for any violation of the law.
This is the ninth 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. Although the IRS does not systemically monitor its employees’ compliance with the direct contact provisions, we believe the procedures and guidelines it has established and enhanced over the years adequately address the requirements of the law. We do not recommend the creation of a separate tracking system and are making no recommendations in this report.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the IRS complied with legal guidelines addressing the direct contact of taxpayers and their representatives as set forth in I.R.C. §§ 7521(b)(2) and (c). 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 TIGTA personnel responsible for the Taxpayer Advocate Management Information System,[4] the Information Tracking System,[5] and the Performance and Results Information System [6] to determine if there is a system to track taxpayer complaints relating to violations of the direct contact provisions of the law.
A. Identified seven direct contact cases (seven complaints) on the Performance and Results Information System closed by the TIGTA Office of Investigations during the period October 19, 2005, through September 30, 2006.
B. Obtained and reviewed the closed TIGTA Office of Investigations case files to determine their validity and what actions were taken by the IRS as a result of the complaints and investigations.
III. Obtained information on the actions taken by the IRS in response to I.R.C. §§ 7521(b)(2) and (c) to determine the impact on IRS programs.
A. Reviewed all prior TIGTA audit reports for the Mandatory Direct Contact reviews and summarized the audit results, recommendations, and corrective actions taken by the IRS.
B. Reviewed historic and current Internal Revenue Manual sections to identify any updates made in response to I.R.C. §§ 7521(b)(2) and (c).
C. Reviewed IRS.gov (the public IRS Internet site) and related IRS publications to identify how the IRS informs taxpayers of its prohibition against directly contacting taxpayers in certain situations.
Appendix II
Major Contributors to This Report
Michael E. McKenney, Assistant Inspector General for Audit (Wage and Investment Income Programs)
Mary V. Baker, Director
Bryce Kisler, Acting Director
Alan Lund, Acting Audit Manager
David Hartman, Lead Auditor
Andrea McDuffie, Auditor
Appendix III
Acting 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, Liaison, and Disclosure, Small Business/Self-Employed Division SE:S:CLD
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 Internal Control OS:CFO:CPIC:IC
Audit Liaisons:
Director, Communications and Liaison, National Taxpayer Advocate TA:CCL
Senior Operations Advisor, Wage and Investment Division SE:W:S
[1] Pub. L. No. 100-647, 102 Stat. 3730 (1988) (codified as amended in scattered sections of 5 U.S.C. and 26 U.S.C.).
[2] Pub. L. No. 100-647, 102 Stat. 3730 (1988) (codified as amended in scattered sections of 5 U.S.C. and 26 U.S.C.).
[3] Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).
[4] The Taxpayer Advocate Management Information System is an electronic database and case inventory control system used by Taxpayer Advocate Service employees.
[5] The Information Tracking System is an application used by the IRS to assign, control, and track information and correspondence. It replaced the Executive Control Management System.
[6] The Performance and Results Information System is a management information system that provides the TIGTA with the ability to manage and account for the thousands of complaints received and investigations initiated annually.