TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION
FISCAL YEAR 2008 STATUTORY AUDIT OF
COMPLIANCE WITH NOTIFYING TAXPAYERS OF THEIR RIGHTS WHEN REQUESTED TO EXTEND
THE ASSESSMENT STATUTE
Issued on June 5, 2008
Highlights
Highlights of
Report Number: 2008-40-127 to the
Internal Revenue Service Deputy Commissioner for Services and Enforcement.
IMPACT ON TAXPAYERS
The Internal
Revenue Service (IRS) is required by law to notify taxpayers of their rights
when requesting an extension of the statute of limitations for assessing
additional taxes and penalties. In
passing this law, Congress expressed concern that taxpayers were not being
advised adequately of their rights to refuse to extend the statute of
limitations or to request that a statute extension be limited to specific
issues or a specific period of time.
Based on the results of our review, the IRS is complying with the intent
of the law. However, there were still
some instances in which IRS employees did not document whether taxpayers or
their representatives were advised of these rights.
WHY TIGTA DID THE AUDIT
This
audit was initiated because it is required by the IRS Restructuring and Reform
Act of 1998. The overall objective of
this review was to determine whether the IRS was complying with Internal
Revenue Code Section 6501(c)(4)(B), which requires that the IRS provide notice
to taxpayers of their rights to decline to extend the assessment statute of
limitations or to request that any extension be limited to specific issues or a
specific period of time. TIGTA is
required to provide information annually regarding the IRS’ compliance with
this provision.
WHAT
TIGTA FOUND
The IRS has
shown improvement over prior years when documenting that taxpayers were
informed of their rights. The percentage
of case files without documentation has steadily decreased over the last 5
years. However, there were still
instances in which there was no documentation in the related case files to show
that taxpayers were advised of their rights regarding assessment statute
extensions.
In a
statistical sample of 139 tax returns, 6 percent of the related case files
reviewed did not contain adequately document that the taxpayers
had been advised of their rights regarding assessment statute extensions. This sample included 109 case files with
authorizations for third-party representation.
TIGTA found that 8 percent of the 109 case files did not contain
documentation that the taxpayers’ representatives were provided with the required
notification.
WHAT TIGTA RECOMMENDED
TIGTA made
no recommendations in this report because prior recommendations were still
effective and because of the IRS' continued improvement. However, key IRS management officials reviewed the report
prior to issuance and agreed with the facts and the presentation of the
difference in the interpretation of the law as to whether informing a
taxpayer’s representative meets the requirement that the taxpayer be
informed. Because of the difference in
the interpretation of the law, the IRS disagrees with our outcome measure
involving the protection of taxpayer rights and entitlements for taxpayers
whose related case files did not contain adequate documentation to show that
the taxpayers were advised of their rights when assessment statutes were
extended.
However, TIGTA believes that taxpayer
rights could be negatively affected if the IRS does not comply with statutory
and regulatory provisions and its own procedures and publications requiring
that taxpayers be directly notified of their rights related to extensions of
the assessment statute of limitations.
To view the report,
including the scope, methodology, and full IRS response, go to:
http://www.treas.gov/tigta/auditreports/2008reports/200840127fr.html.
Email Address: inquiries@tigta.treas.gov
Phone Number: 202-622-6500
Web Site:
http://www.tigta.gov