The Taxpayer Advocate Service Should Reevaluate the Roles of Its Staff and Improve the Administration of the Taxpayer Advocacy Panel
September 29, 2009
Reference Number: 2009-10-121
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 |
202-622-6500
Email Address | inquiries@tigta.treas.gov
Web Site |
http://www.tigta.gov
September 29, 2009
MEMORANDUM FOR NATIONAL TAXPAYER ADVOCATE
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – The Taxpayer Advocate Service Should Reevaluate the Roles of Its Staff and Improve the Administration of the Taxpayer Advocacy Panel (Audit # 200910001)
This report presents our review of the Taxpayer Advocate Service’s (TAS) administration of the Taxpayer Advocacy Panel (hereafter referred to as the Panel). The overall objective of this review was to determine whether the Panel is operating in accordance with its charter and whether the Panel and the TAS are utilizing resources efficiently to promote improvements in Internal Revenue Service (IRS) customer service. This audit is part of our Fiscal Year 2009 Annual Audit Plan under the major management challenge of Providing Quality Taxpayer Service Operations.
Impact on the Taxpayer
The Panel was established in Calendar Year 2002 to listen
to taxpayers, identify “grass roots” issues, and make recommendations for
improving the customer service provided by the IRS.[1] The Panel provides
a valuable service to the IRS and to taxpayers in this role. However, the
TAS needs to ensure a better use of its resources by providing a better balance
between the costs of administration and staff ($2.7 million and 25 TAS employees)
used to support the Panel, the large size of the Panel, and the Panel’s ability
to help improve service to taxpayers. In
this current economic environment where there is greater emphasis on accountability
for Federal programs, it is important for the National
Taxpayer Advocate (NTA) to ensure that TAS resources are being effectively and
efficiently spent and that the Panel is at an optimal size.
Synopsis
Advisory
committees play an important role in shaping the programs and policies of the
Federal Government by providing input and advice to key decision makers. However, the costs associated with supporting
and maintaining these committees should be balanced with the benefits received
to ensure the best use of Government resources.
The number of members serving on the Panel (approximately 100)[2] could be significantly reduced, thereby requiring fewer TAS resources for oversight. In addition, recruiting for Panel members is an extensive process and involves a high cost. Panel members serve staggered 3-year terms, which means approximately one-third are completing their terms each year. Consequently, the TAS can spend up to 7 months each year recruiting and selecting new Panel members to replace those whose terms have expired.
The TAS also needs to clarify its role in assisting the Panel to ensure its independence. While some of the duties performed by TAS staff are vital for the Panel to operate effectively (e.g., arranging meetings, scheduling travel), many appear to go beyond administrative-type activities and could unintentionally influence the work that the Panel performs or give the impression that the Panel did not develop the issues and recommendations independently.
Further, the Panel’s charter does not account for a significant amount of the work completed by its membership. A large portion of the recommendations, 245 (58 percent) of 426,[3] made by the Panel since its inception are IRS-driven issues (e.g., the IRS requesting the Panel to provide the taxpayer’s perspective on issues the IRS is working on). However, the charter, which is a public document, contains language that mainly focuses on “grass roots”[4] issues and does not include this important, additional role that Panel members perform.
In addition, a significant number of inaccurate entries in the Panel database led to overstatements in the performance measures reported to the General Services Administration by the TAS. For example, 46 recommendations were incorrectly identified as agreed to by the IRS when, in fact, the IRS disagreed with all or a part of the Panel’s recommendations. Since Congress and the General Services Administration rely on this information to evaluate the performance and the need for the continued existence of advisory committees, it is important that the information reported to them is accurate. The TAS can also strengthen its processes for performing tax compliance checks on Panel members to ensure that noncompliance is addressed timely.
Recommendations
The NTA
should take the following actions: 1) revise its time tracking system and require TAS staff to track
hours by activity to assist in determining if TAS resources are being used
efficiently; 2) reevaluate the Panel’s structure and size to ensure an
appropriate balance between TAS staff and budgetary resources used to support
the Panel; 3) reevaluate the roles of the staff assigned to assist the Panel and
establish guidance to ensure that the Panel functions independently; 4) revise
the charter to accurately reflect the liaison role that TAS employees provide
Panel members and accurately reflect the dual roles of Panel members;
5) establish and implement a process to validate data in the Panel database and
correct the 46 erroneous database entries we identified during our review;
6) establish a process to follow up with the IRS on the recommendations under
consideration for future implementation and request that the IRS provide the anticipated
date of implementation; 7) establish formal guidance for conducting tax
compliance checks of Panel members; and 8) develop procedures to verify that
licensed tax practitioners serving on the Panel are in good standing with the
IRS.
Response
The NTA agreed with seven recommendations and partially
agreed with one recommendation. Management
agreed to revise its time tracking system to require TAS staff to track hours
by activity. The TAS also agreed to
study whether centralization of support services will provide improved service
to the Panel, as well as review the recruitment and selection process of Panel
members for potential costs savings. In
addition, the TAS agreed to provide further guidance on the liaison role of the
TAS staff assigned to the Panel. The TAS
also agreed to revise the Panel’s charter to more accurately reflect the roles
of the TAS staff and Panel members.
Further, the TAS agreed to implement procedures to ensure the validity
of the Panel database, review the 46 potentially invalid entries we identified,
and correct any erroneous entries in the Panel database. TAS management also agreed to establish a
process to follow up on and track the implementation of recommendations accepted
by the IRS. Also, the TAS agreed to
establish formal guidance
for conducting tax compliance checks and agreed to conduct limited annual
compliance checks on continuing members. Finally, the TAS agreed to establish
procedures to verify
the good standing of the licensed practitioners serving on the Panel.
The NTA did not fully agree with the recommendation to reevaluate the Panel’s size to determine the optimal structure of the Panel’s membership, indicating there was no compelling data that the current structure is flawed, and that it would not be cost effective to make such changes. In addition, the NTA noted that any changes to the Panel require approval by the Secretary of the Treasury and the IRS Commissioner. Management’s complete response to the draft report is included as Appendix VIII.
Office of Audit
Comment
We acknowledge the Panel can provide a fresh perspective on grass roots issues based on the input of the volunteer members serving on the Panel. However, since the Panel was established in 2002 and no studies have been performed of it, we believe that our recommendation to reevaluate the structure and size of the Panel and the TAS staff supporting the Panel is valid. This type of evaluation will determine whether the level of resources for both the Panel and TAS support is still appropriate in the current environment or whether the level could be reduced while still meeting the intended goals of the Panel. In the current environment of increased accountability in Government, we believe this evaluation is important to identify any potential changes that could reduce costs and improve efficiency. We also believe the NTA can initiate any recommended improvements to the Panel, if warranted, for approval by the Secretary of the Treasury and the IRS Commissioner.
Copies of this report are also being sent to the IRS managers affected by the report recommendations. Please contact me at (202) 622-6510 if you have questions or Nancy A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations), at (202) 622-8500.
Misclassified
and Unverified Recommendations Led to an Overstatement of Accomplishments
Tax Compliance Reviews for
Current and Prospective Members Occur Infrequently and Are Incomplete
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
V – Taxpayer Advocacy Panel Issue Committees - Fiscal Year 2009
Appendix
VI – Taxpayer Advocate Service Staff
Appendix
VII – Definition of Recommendations
Appendix
VII – Management’s Response to the Draft Report
Abbreviations
|
FACA |
Federal Advisory Committee Act |
|
GSA |
General Services Administration |
|
IRS |
Internal Revenue Service |
|
NTA |
National Taxpayer Advocate |
|
OPR |
Office of Professional Responsibility |
|
TAS |
Taxpayer Advocate Service |
|
TIGTA |
Treasury Inspector General for Tax
Administration |
The Taxpayer Advocacy Panel (hereafter referred to as the Panel) was established in Calendar Year 2002 to listen to taxpayers, identify “grass roots” issues,[5] and make recommendations for improving the customer service provided by the Internal Revenue Service (IRS).[6] The Taxpayer Advocate Service (TAS) oversees the Panel by providing technical, administrative, and clerical support. The TAS also assists the Panel by tracking the Panel’s recommendations and recording the IRS’ responses to the recommendations in a database.
The Panel consists of volunteer members from around the Country
who are appointed by the Secretary of the Treasury to represent each State, the
Area Committees are geographically
based and members solicit grass
roots issues from taxpayers in their communities. The Panel identifies issues through member
outreach events and public meetings, develops some of these issues into
recommendations, and submits them to the IRS for consideration. In addition, the Panel has a toll-free telephone line and a web site where taxpayers
can communicate concerns about the IRS.
The TAS established
eight Issue Committees[7] that work closely with the IRS to provide
“pre-decisional” feedback[8] to IRS management representatives (called
program owners) on specific issues and initiatives affecting taxpayers. The IRS program owners have responsibility for
various functions within the Small Business/Self-Employed and the Wage and
Investment Divisions. The IRS utilizes
the Panel Issue Committees to obtain public input on a variety of issues impacting
tax administration.
The Panel is one of more than 900 Federal advisory committees currently in existence throughout the Federal Government that fall under the purview of the Federal Advisory Committee Act (FACA) of 1972.[9] The FACA was enacted to control the growth and operation of advisory committees and to ensure accountability to the public. In doing so, the FACA ensures that the advice rendered by advisory committees is both objective and accessible to the public. In addition, the General Services Administration (GSA) monitors and reports on each advisory committee’s compliance with the FACA. In this role, the GSA collects and compiles data from the individual committees and conducts an annual comprehensive review of the activities and responsibilities of each advisory committee.
The Panel’s charter requires the yearly submission of a
report to the Secretary of the Treasury, the IRS
Commissioner, and the National Taxpayer Advocate (NTA). This annual report provides a self-assessment
of the work completed by the Panel, including outreach activities and
recommendations made to improve service to taxpayers. Since its inception in Calendar Year 2002
through December 31, 2008, the Panel has issued 5 annual reports and has
made 426[10] recommendations to improve the IRS’ service to taxpayers.
This review was performed at the IRS National Headquarters
in
The Panel provides a valuable service to the IRS and taxpayers by recommending ways to improve customer service and overall tax administration. Some of the Panel’s recommendations which have benefitted taxpayers include:
While the Panel can provide a fresh perspective on grass roots issues, we identified several ways the TAS can improve its oversight and administration of the Panel to ensure a better use of resources.
The TAS should reevaluate the size of the Panel. The number of members serving on the Panel (approximately 100)[12] could be significantly reduced, thereby requiring fewer TAS resources for oversight. In addition, recruiting for Panel members is an extensive process and involves a high cost. Panel members serve staggered 3-year terms, which means that approximately one-third are completing their terms each year. Consequently, the TAS can spend up to 7 months each year recruiting and selecting[13] new Panel members to replace those whose terms have expired. If the size of the Panel were reduced, the TAS’ recruiting efforts could be significantly lessened.
The TAS also needs to clarify its role in assisting the
Panel to ensure the Panel’s independence.
While some of the duties performed by the TAS staff are vital for the Panel
to operate effectively (e.g., arranging meetings, scheduling travel), many
appear to go beyond administrative-type activities and could unintentionally
influence the work that the Panel performs or give the impression that the
Panel did not develop the issues and recommendations independently. In contrast to the other IRS advisory committees we contacted, the TAS
staff was much more involved in the Panel’s daily operations and took on more
technical roles such as identifying issues to work, educating the Panel on tax
law and procedural issues, and interacting with the IRS operating divisions on
behalf of the Panel. The NTA advised us
that one reason for the increased involvement by the TAS staff is the nature of
the Panel members, many of whom are not tax experts and do not understand how
the IRS operates.
Further, the Panel’s charter does not account for a significant amount of work completed by the Panel membership. A large portion of the recommendations, 245 (58 percent) of 426,[14] made since the Panel’s inception pertain to IRS-driven issues (e.g., the IRS requesting the Panel to provide the taxpayer’s perspective on issues the IRS is working on). However, the charter, which is a public document, contains language that mainly focuses on “grass roots” issues and does not include this important, additional role that Panel members perform. It is important for the NTA to revise the language in the charter to provide transparency to the public by clearly defining the roles and responsibilities of the Panel.
The TAS also needs to ensure a better balance between the
costs of administration and staff ($2.7 million and 25 TAS employees) used
to support the Panel, the size of the Panel, and the Panel’s ability to help
improve service to taxpayers. The TAS
established a separate function within its organization to support the Panel
with field offices in the following locations:
In addition, we identified a significant number of
inaccurate entries in the Panel database that led to overstatements in the performance
measures reported to the GSA by the TAS.
For example, 46 recommendations were incorrectly identified as agreed to
by the IRS when, in fact, the IRS disagreed with all or a part of the Panel’s
recommendations. Since Congress and the
GSA rely on this information to evaluate the performance and the need for the
continued existence of advisory committees, it is important that the
information reported to them is accurate.
The TAS can also strengthen its processes for performing tax compliance
checks on Panel members to ensure that noncompliance is addressed timely.
The Taxpayer Advocate Service Staffing and Size of the Panel May Not Be Optimal or an Efficient Use of Resources
The TAS provides a significant amount of support to the Panel in terms
of Full-Time Equivalent[15] staffing and both technical and administrative assistance. As of June 2009, the TAS employed 25 Full-Time Equivalents with an anticipated annual expense of
approximately $3 million to oversee Panel members’ activities. Notably, the labor expense for
Fiscal Year 2008 was approximately $1.8 million and is expected to
increase to more than $2 million in Fiscal Year 2009. See Figure 1 for the TAS labor costs for
overseeing the Panel since Fiscal Year 2003.[16]
Figure 1: TAS Labor Costs
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.[17]
The size of the Panel, with approximately 100
primary members, directly affects the TAS’ expenses and staffing
requirements. Because of the large size
of the Panel membership, the TAS devotes up to 7 months each year for
recruiting and selecting new members.
During the 2008 open recruitment period, the TAS processed 620
applications and selected 43 new members to serve on the Panel.
We also attribute the overall increase in labor
costs to the TAS’ decentralized structure.
The TAS staff is located in six IRS offices[18] throughout the country, with managers and support staff in each
office. This structure results in a higher ratio of managers to employees than
other program areas under the NTA. For
example, the span of control[19] for the Panel is 4:1, whereas, the authorized span
of control for the TAS business unit as a whole is 10:1. This means that the TAS dedicates more
management staff (on a percentage basis) to the Panel than to other mission
critical areas within the TAS.
In recent years, various IRS programs have consolidated
operations and centralized functions to reduce costs and improve efficiency. Since the TAS’ decentralized structure affects
staff and budget resources, consideration should be given to whether this is
the most effective structure for supporting the Panel. In our opinion, the size of the Panel should
be structured to allow for diverse viewpoints in terms of members’ backgrounds and
yet manageable in terms of the budget and TAS staffing resources.
Another significant factor
in the size of the TAS staff is the role the TAS performs in supporting the
Panel. We analyzed the roles of the TAS
and found that not only does the TAS provide administrative support (e.g.,
scheduling meetings and making travel arrangements), but the TAS staff also
performs technical-related duties (e.g., gathering data, preparing documents to
outline issues). To help guide TAS
employees regarding the administration of the Panel, the TAS drafted a separate
Internal Revenue Manual section.[20] The TAS
also established a support function within its organization for the sole
purpose of supporting the Panel. These
actions illustrate the TAS’ level of involvement with and resource commitment
to the Panel.
However, the TAS is not able
to determine how its resources are specifically being used to support the
Panel. Although the TAS staff does not
have other collateral duties and charges all its time to Panel activities, there
is no other method for tracking time spent on the various duties undertaken by
the TAS to support the Panel. Therefore,
neither the TAS nor the NTA can quantify how many hours TAS employees spend on
recruiting activities versus hours spent conducting research for an Area or
Issue Committee. We believe having this kind of detailed information
would be helpful in identifying if TAS resources are being used effectively and
efficiently. In addition, if the TAS
tracked its time by activity, it could better assess the resources needed to
support the Panel.
When the Panel was first assigned to the TAS, the IRS hired an independent consulting agency to establish a baseline staffing model for supporting the Panel. The study was completed in Calendar Year 2002 and, at that time, the TAS had 18 Full-Time Equivalents dedicated to the Panel. The firm presented the IRS with three staffing models to consider; however, the current staffing configuration does not fit any of these models. Further, the TAS has not reevaluated its staffing model in the 6 years since the Panel’s inception. In this current environment of increased accountability and transparency in Government, it is important that the TAS staff track its time and the activities performed to support the Panel, and TAS management reevaluate the structure and size of the program to ensure that TAS and Panel resources are used efficiently.
Recommendations
The NTA
should:
Recommendation 1: Revise its time tracking system and require
the TAS staff to track hours by activity (e.g., recruiting, researching,
handling administrative matters). Doing
so will provide the NTA with information to help in completing Recommendation
2.
Management’s Response: Management agreed with the recommendation and will begin
to track hours by activity.
Recommendation 2: Reevaluate the Panel’s structure and size to
ensure an appropriate balance between TAS staff and budgetary resources used to
support the Panel. This would include:
·
Identifying ways to
reduce costs by centralizing operations.
·
Reducing the costs of
the applicant recruitment and selection process.
·
Reducing the Panel
membership.
Management’s Response: Management agreed
in part with our recommendation.
Management indicated they plan to: 1) review and rewrite the position
descriptions for the TAS staff; 2) establish a task group to review whether
centralization would provide improved service to the Panel; and 3) establish a
task group to review whether staggered 3-year terms are appropriate for Panel
membership. Management did not fully agree
to reevaluate the Panel’s size to determine the optimal structure of the
Panel’s membership, indicating there was no compelling data that the current
structure is flawed and that it would not be cost effective to make such
changes. In addition, the NTA noted that
any changes to the Panel require approval by the Secretary of the Treasury and
the IRS Commissioner.
Office of Audit Comment: We acknowledge the Panel can provide a fresh perspective on grass roots issues based on the input of the volunteer members serving on the Panel. However, because the Panel was established in 2002 and no studies have been performed of it, we believe that our recommendation to reevaluate the structure and size of the Panel and the TAS staff supporting the Panel is valid. This type of evaluation will determine whether the level of resources for both the Panel and TAS support is still appropriate in the current environment or whether the level could be reduced while still meeting the intended goals of the Panel. In the current environment of increased accountability in Government, we believe this evaluation is important to identify any potential changes that could reduce costs and improve efficiency. We also believe the NTA can initiate any recommended improvements to the Panel, if warranted, for approval by the Secretary of the Treasury and the IRS Commissioner.
Panel Activities May Be Unintentionally Influenced
by Taxpayer Advocate Service Management and Are Not Adequately Identified in
the Charter
The TAS’ extensive level of involvement with
the Panel also raises concerns about the ability of the Panel to provide
independent advice to the IRS. According
to its annual report, the Panel stated that, “to maintain independence and
credibility, the work of the Panel must be directed and largely accomplished by
its citizen volunteer members.”
We analyzed the roles actually performed by the TAS and compared that to the roles outlined in the Panel’s charter, the guiding document for an advisory committee. According to the charter, the TAS provides support services to the Panel. However, the charter does not define the nature and extent of the services the TAS will perform. In general, support includes providing office space, supplies and equipment, administrative staff assistance, and access to key decision makers.[21]
As stated earlier, the TAS provides administrative and technical support to the Panel and collaborates with Panel members in developing issues and making recommendations. Since the TAS staff is responsible for obtaining taxpayer input from the Panel’s toll-free telephone number and web site, the TAS will generally conduct research on an issue before it is presented to the Panel for consideration. The TAS advised us that this research assists the Panel members in better understanding the issue. In addition, the TAS staff helps Panel members identify issues of current concern by performing outreach events. Many of the Panel members do not have a background in tax administration, so the TAS staff educates them on the applicable tax law and the various processes pertaining to IRS programs. Once the Panel chooses to work on a given issue, the TAS staff continues to be involved in the process. This includes:
Further, the TAS staff may assist the Panel in drafting recommendations, preparing written responses to the IRS, and acting as an intermediary between the IRS and the Panel members. Sometimes this latter role involves the TAS contacting the business units requesting more work for Panel members.
The degree of collaboration between the Panel and the TAS staff is unique in comparison to the other IRS advisory committee staff we interviewed. Typically, the IRS support staff for these committees performed administrative-type duties and were called upon on an as-needed basis. For example, the support staff for all committees makes travel arrangements, processes travel vouchers, and arranges committee meetings. However, the other IRS committee staffs were not typically as involved in the daily workings of their respective committees as the TAS. This is partly because the other IRS committee members were much more likely to be tax professionals or have management or administrative expertise. As such, they likely required much less technical advice from their support staff. We believe this contributes to their ability to act autonomously.
While some of the technical-related duties performed by the TAS may be considered “support” or liaison work, some of it may be seen as unintentionally influencing the Panel to select issues to work and/or determine potential recommendations. The FACA stipulates that advisory committees must be free from inappropriate influence by the appointing authority or special interests. However, the FACA does not outline specific steps that must be taken to ensure that this occurs. Consequently, each agency is responsible for developing specific operating procedures to ensure that its advisory committees can operate independently from the agencies they serve. Therefore, the NTA should revise the charter to clarify the TAS’ support role and establish additional guidance to ensure that the integrity of the Panel’s independence is maintained.
Finally, the Panel’s charter does not account for a
significant amount of work completed by the Panel membership. The Panel serves a dual role, providing a
venue for raising citizen concerns to the IRS and serving as a focus group that
provides input to IRS management on IRS strategic initiatives. A large portion of the recommendations, 245
(58 percent) of 426,[22]
made by the Panel since its inception pertain to IRS-driven issues (e.g., the
IRS requesting that the Panel provide the taxpayer’s perspective on issues the
IRS is working on). However, the
charter, which is a public document, contains language that mainly focuses on
“grass roots” issues and does not include this important, additional role that
Panel members perform. According to FACA guidance, a committee’s charter should
include the committee’s specific duties.
This includes the committee’s objectives and the scope of its activities. In addition, the GSA Committee Management
Secretariat advised us that the charter should specifically reflect the scope
of committee activities. Therefore, it
is important for the NTA to revise the language in the charter to provide
transparency to the public by clearly defining the roles and responsibilities
of the Panel and TAS staff assigned to support the Panel.
Recommendations
The NTA should:
Recommendation 3: Reevaluate the roles of the staff assigned to assist the Panel and establish guidance to ensure that the Panel functions independently.
Management’s
Response: Management agreed with our recommendation. Management indicated they would establish by-laws
and include guidance on the liaison role of the TAS staff in the Internal
Revenue Manual.
Recommendation
4:
Revise the charter to clarify the liaison role that TAS
employees provide Panel members and accurately reflect the dual roles of
members. Specifically, the charter
should be updated in Section B, Objectives and Scope, as well as Section F,
Duties and Responsibilities. These
changes can be made when the current charter expires in March 2010.
Management’s Response: Management
agreed with this recommendation and will revise the charter when it expires in
March 2010.
Misclassified and Unverified Recommendations Led to an Overstatement of Accomplishments
After the Panel works on an issue, it may make a recommendation to the
IRS to improve its service to taxpayers.
The TAS records the IRS’ responses to the recommendations in the Panel’s
database for tracking purposes. However,
we identified inaccuracies with the way the TAS records the IRS’ responses to
the Panel’s recommendations and, consequently, the performance measures
reported to the GSA may be overstated.
According to data maintained in the Panel’s
database, the Panel made 426 recommendations since its inception in Calendar Year
2002.[23] Of these recommendations, 181
reflected grass roots as their source, and 161 of the 181 were categorized as
closed.[24] According to the database,
almost one-half of the closed recommendations showed a favorable result (e.g.,
closed as accepted, implemented, or partially accepted). Figure 2 shows the status of the closed
recommendations.
Figure 2: Status of Closed
Recommendations on the Panel’s Database
|
IRS Responses to Panel Recommendations |
Number |
Percentage |
|
Recommendation Accepted |
37 |
23% |
|
Recommendation Partially Accepted |
37 |
23% |
|
Recommendation Implemented |
8 |
5% |
|
Subtotal |
82 |
51% |
|
Recommendation Rejected |
40 |
25% |
|
All Other Categories[25] |
39 |
24% |
|
Total |
161[26] |
100% |
Source: Treasury Inspector General for Tax
Administration (TIGTA) analysis of the Panel database –
February 2009.
However, when we analyzed the IRS’ responses to the 82 favorably closed recommendations, we determined that the IRS did not always agree with these recommendations as the TAS records indicated. For example, we identified 46 instances (of the 82) in which the TAS entered an incorrect or unsupported closing designation. In many of the responses, the IRS declined the Panel’s recommendations, yet the TAS recorded these recommendations as accepted. In addition, for other closings, the IRS agreed to only consider some recommendations when planning for future enhancements (e.g., software and tax form updates), not to actually implement the recommendations. Further, some of the IRS responses indicated that they agreed to only part of the recommendation, but the TAS recorded those recommendations as fully accepted.
As a result, the data captured in the database are not reliable, which is a concern because the database is used to report the Panel’s performance measures to the GSA. As shown in Figure 3, we identified 46 recommendations in which the IRS appeared to disagree with all or a part of the Panel’s recommendations.
Figure 3: TIGTA
Analysis of IRS Responses to Panel Recommendations
Recorded by the TAS as Accepted or Implemented
|
TIGTA Assessment of
Panel Recommendations |
Number of Recommendations |
|
Proposal Rejected |
18 |
|
IRS Indicated They Would Consider the
Recommendation (Impact and Action Unknown) |
15 |
|
Response Unclear on
Whether the IRS Accepted the Recommendation |
7 |
|
Proposal Partially Accepted |
6 |
|
Total |
46 |
Source: TIGTA review of cumulative data in the Panel database. Data were compiled in February 2009.
The Panel’s performance measures reported to the GSA include the total number of recommendations made (over the life of the committee) and an estimate of the cumulative percentage of fully or partially implemented recommendations made by the committee. The GSA, which provides oversight to all advisory committees, incorporates the Panel’s data into the FACA database. This information is then used by the GSA for conducting annual comprehensive reviews of accomplishments, costs, benefits, and other factors to gauge the performance of an advisory committee and whether it should continue in existence.
We raised concerns about the accuracy of the data with TAS management and were advised that since the results have already been published in the Panel’s annual reports, it would not be a “judicious use of staff time, or volunteer time” to correct this information. However, TAS management indicated they would take additional steps in the future to validate the data entries by conducting quarterly managerial reviews of the closing entries.
We agree that TAS management should establish a process to regularly validate data in the Panel’s database. However, because the GSA report is based on cumulative data, the TAS should correct the inaccurate closed recommendations identified in our report in the Panel’s database and advise the GSA of the revised performance results. Doing so will also allow the GSA to update the FACA database with the revised results. This is especially important since the FACA database is utilized by members of Congress, the Government Accountability Office, and other oversight functions to review information pertaining to Federal advisory committees.
Recommendation
Recommendation
5:
The NTA should establish
and implement a process to validate data in the Panel database on an annual
basis, prior to the issuance of the Panel’s annual report. In addition, the NTA should correct the 46 erroneous
database entries we identified during our review. The corrected cumulative results should be
provided to the GSA by the due date of the next report.
Management’s
Response: Management agreed with our recommendation and
stated they will implement procedures to ensure the validity of data in the
Panel database. Management indicated
they will review with the Panel the 46 issues we identified as having incorrect
closing statuses and modify any entries that have been determined to be
incorrect. In addition, management
agreed to develop additional guidance and training regarding the classification
of issues.
The TAS does not
have a process to ensure that recommendations accepted by the IRS are
implemented
In general, the TAS does not require the IRS to provide time periods for implementing Panel recommendations that it agrees to. Since the TAS does not have a system to follow up on accepted recommendations, it cannot ensure that the IRS takes the action as promised. Further, because Panel members devote a considerable amount of time developing recommendations that could benefit taxpayers, the TAS should verify that the accepted recommendations are implemented as agreed to.
We reviewed several recommendations to improve service
within the Small Business/Self-Employed and Wage and Investment Divisions that
the IRS accepted more than a year ago[27]
and determined that they still have not been implemented. For example, in January 2006, the Panel
recommended changes to the Application for IRS Individual Taxpayer Identification Number (Form W-7). The IRS agreed to revise the Form, and the
TAS closed the issue in May 2006.
However, the IRS has not yet revised the Form W-7 as previously agreed
(the most current revision of the Form W-7, dated March 2009, does not
reflect the change).
TAS management advised us that they cannot follow up to ensure that the IRS takes action since some recommendations may take years to implement. They also indicated that they do not have the authority to require the IRS to implement any recommendations. While we agree that TAS management does not have this level of authority, we believe that if the IRS agrees to a recommendation, then the TAS should follow up to ensure that it gets implemented. If the IRS later determines that it cannot implement the recommendation as previously agreed, the Panel database should be updated to reflect this. Consequently, we believe that the IRS should take a more proactive role to ensure that the Panel’s recommendations are implemented and that the information in the Panel database is accurate.
Recommendation
Recommendation 6: The NTA should establish a process to follow up with the IRS on the Panel’s recommendations under consideration for future implementation. For all recommendations accepted by the IRS, the IRS should be asked to provide the anticipated date of implementation. The TAS should work with the IRS business units to clarify the expectations when responding to recommendations made by the Panel such as providing a date of implementation. Further, the TAS should record and track the implementation dates in its database.
Management’s
Response: Management agreed with the recommendation and plans to
track the implementation of recommendations which are accepted by the IRS.
Tax Compliance Reviews for Current and Prospective Members Occur Infrequently and Are Incomplete
Prospective Panel members are required to certify that they are in compliance with their tax responsibilities before serving their 3-year term. The TAS staff should research the prospective Panel member’s tax history to confirm compliance before that person is seated on the Panel. However, our review disclosed that the TAS tax compliance checks are incomplete, not done frequently enough, and do not address whether licensed practitioners are in good standing with the IRS.
The
TAS does not conduct regular reviews for tax account compliance and the reviews
are incomplete
The
TAS was unable to provide documentation for 34 of the 101 Panel members seated
in Calendar Year 2009 to confirm that they were compliant with their tax
obligations. In addition, the TAS had
not completed the tax account compliance checks to verify that five individuals
filed their 2007 tax returns before they were seated on the 2009 Panel. The verification was completed after we asked
for the documentation and 2 months after the members had begun serving their
terms.
Some Panel members are self-employed; however, the TAS does not collect the related Employer Identification Numbers[28] nor does it conduct a tax account compliance check of the applicant’s business. Our review also found that the TAS does not complete annual tax compliance checks for members currently serving their 3-year term. As a consequence, we found three instances in which the Panel members were noncompliant either during the course of their terms or in the calendar year immediately preceding their term.
The TAS policy is to perform a
one-time review of the applicant’s tax accounts[29] for the three tax periods preceding his or her
selection. In addition, because the
review is done only once, Panel members could become noncompliant while serving
their 3-year term. TAS management
advised us that they follow the guidance in Treasury Directive 21-03;[30] however, this document provides no specific guidelines
regarding the frequency of the tax compliance checks. It only establishes the requirement to
conduct the tax compliance checks when the Panel member is appointed.
The Treasury Directive does specify that the tax compliance checks should be conducted by the agency’s Human Resources Division or Office of Security. However, we noted that the TAS does not follow this portion of the policy. Rather, the TAS performs its own compliance checks to ensure timely completion prior to appointment to the Panel. In our opinion, if the TAS continues to conduct these reviews internally, management should establish formal guidance to assist employees in identifying potentially noncompliant situations and procedures for addressing these situations. Formal guidance will help ensure consistent and equal treatment for potential and current Panel members. Formal procedures should also ensure that the tax compliance checks are comprehensive enough to identify the three types of noncompliance – failure to file, failure to pay, and failure to fully report all income.
Recommendation
Recommendation
7: The NTA should establish and follow formal guidance for conducting tax
compliance checks, to include using the Integrated Data Retrieval System[31] as a tool for accomplishing this. The reviews should be comprehensive enough to
ensure that selected applicants have filed all required tax returns, paid all
applicable tax due, and fully reported all taxable income for the previous 3
years. The guidance should also address:
· The type of tax forms and periods that must be reviewed to verify that applicants meet the criteria for tax compliance.
· Annual compliance checks for all continuing members. The checks should include researching the members’ Social Security Number as well as the Employer Identification Number when applicable.
· Identification of the office that should perform the compliance checks.
· The specific location of the office where all related documentation shall be maintained.
The TAS should also amend the application form to include
the business name and Employer Identification Number for self-employed
applicants.
Management’s Response: TAS management agreed
to establish formal guidance for conducting tax compliance checks.
They also agreed to amend the tax check waiver form to include the
business name and Employer Identification Number for self-employed applicants and agreed to conduct limited annual
compliance checks for continuing members.
TAS management also agreed
to establish guidance to identify the office that will perform the compliance
check and where all related documentation will be maintained.
The
TAS does not have procedures to verify that Panel members who are licensed tax
practitioners are in good standing with the IRS
Protecting the public from disreputable tax practitioners has long been a concern for the IRS. Practitioner misconduct can erode the public’s confidence in our tax system and create unfortunate consequences for taxpayers relying on unscrupulous tax practitioners. We determined that approximately one-third of the Panel membership is comprised of tax practitioners based on our discussions with TAS personnel and our review of documentation maintained by the TAS. However, no procedures are in place to require the TAS to verify whether these individuals are allowed to practice before the IRS or whether they are in good standing. Therefore, we believe the TAS should coordinate with the Office of Professional Responsibility (OPR) as part of the compliance check for licensed tax practitioners.
The OPR is
responsible for regulating licensed tax practitioners who represent taxpayers
before the IRS by setting and enforcing standards of competency, integrity, and
conduct. The IRS publishes the names of
practitioners that have been reprimanded on its web site, as well as providing
a searchable database that the TAS can use to research practitioners. The IRS also
regularly publishes the names of practitioners that have been sanctioned in the
Internal Revenue Bulletin, which is issued periodically.
If a licensed tax practitioner engages in disreputable conduct, the OPR may impose disciplinary actions. Sanctions for disreputable conduct result
from such things as the practitioner’s failure to file several Federal tax
returns, making false declarations in bankruptcy proceedings, or failure to
exercise due diligence. In our opinion,
this information is readily available and accessible to the TAS for researching
whether a potential Panel member, who is also a practitioner, is
reputable. Although we recognize that
the OPR data may not always be complete, they provide some assurance that
potential Panel members are acceptable to serve on the Panel.
Recommendation
Recommendation
8: The NTA should
develop procedures for verifying the good standing of licensed practitioners
serving on the Panel. These procedures
should address:
· Revising the Panel application form to ask if the applicant is a tax practitioner.
· Confirming, during the interview process, if applicants are tax practitioners.
· Accessing the IRS OPR web site and/or contacting the OPR to determine if applicants that are licensed tax practitioners have been subject to disciplinary actions.
Management’s Response: Management agreed
with the recommendation and will develop procedures for verifying the good
standing of licensed practitioners serving on the Panel.
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the Panel is operating in accordance with its charter and whether the Panel and the TAS are utilizing resources efficiently to promote improvements in IRS customer service. To accomplish this objective, we:
I. Determined whether the Panel is operating under the terms identified in the Panel’s charter and within the guidelines established under the FACA.
A. Identified whether members participated on at least one subcommittee and that those subcommittee meetings were publicized and held at least quarterly.
B. Reviewed the Panel’s 2007 annual report and exhibits (with cumulative results) and evaluated whether the results accurately represented work completed by the Panel.
C. Determined whether the Fiscal Year 2008 data provided to the GSA are accurate, complete, and timely.
II. Evaluated the process used to recruit, select, and manage Panel members.
A. Interviewed TAS management to determine the process used to recruit and select Panel members.
B. Determined whether applicants selected for the Panel are in compliance with their Federal tax obligations.
III. Evaluated the Panel’s process for identifying issues and making recommendations to improve customer service.
A. Interviewed TAS personnel to determine how issues are identified for the Panel’s review.
B. Obtained any available guidance for processing citizen input and responding to IRS requests for assistance.
C. Determined what systems are in place for tracking issues and recommendations and evaluated selected fields in the databases used to record issues received and recommendations made. We validated the information in the databases through sorting the applicable fields and conducting a review for reasonableness. The results established that the data were valid for our purposes.
D.
Determined how many grass roots recommendations had been submitted
to the IRS during Calendar Years 2003 through 2008 and assessed the accuracy of
the closing category used on the 82 recommendations that were classified as
being accepted, partially accepted, or implemented.
IV. Determined the amount of TAS and Panel resources and how these resources were used.
A. Determined the TAS staffing levels, budget, and Panel membership levels for each year since the inception of the Panel.
B. Identified the roles and responsibilities of each TAS employee assigned to the Panel.
C. Determined whether the current ratio of management to employees is consistent with Department of the Treasury/IRS standards.
D. Determined whether TAS employees are dedicated solely to the Panel or if they have other duties and assignments.
Appendix II
Major Contributors to This Report
Nancy A. Nakamura, Assistant Inspector General for Audit (Management Services and Exempt Organizations)
Jeffrey
M. Jones, Director
Diana
M. Tengesdal, Acting Director
Janice
M. Pryor, Audit Manager
Mary
F. Herberger, Lead Auditor
Mark
A. Judson, Senior Auditor
James
S. Mills Jr., Senior Auditor
Yasmin
B. Ryan, Senior Auditor
Ahmed
M. Tobaa, Senior Auditor
Michele
N. Strong, Auditor
Appendix III
Commissioner
C
Office of the
Commissioner – Attn: Chief of Staff C
Deputy Commissioner for Services and
Enforcement SE
Chief Counsel
CC
Deputy
National Taxpayer Advocate TA
Director,
Taxpayer Advocacy Panel 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:
National Taxpayer Advocate TA
Appendix IV
This appendix presents detailed information on the measurable impact that our recommended corrective action will have on tax administration. This benefit will be incorporated into our Semiannual Report to Congress.
Type and Value of Outcome Measure:
· Reliability of Information – Actual; status of 46 closed recommendations on the Panel database that were incorrectly recorded by the TAS (see page 10).
Methodology Used to Measure the Reported Benefit:
We identified a population of 82 Panel recommendations that were submitted to the IRS during Calendar Years 2003 through 2008 that the TAS recorded as being accepted or implemented by the IRS. Forty-six of the 82 recommendations were inaccurately recorded by the TAS as having been accepted or implemented by the IRS when, in fact, they were either only partially accepted, not accepted, or unclear whether they were accepted. This results in stakeholders, such as the Department of the Treasury, the GSA, and the public potentially relying on incorrect and inaccurate information, and basing decisions on the accomplishments and benefits of the Panel on this erroneous data.
Appendix V
Taxpayer Advocacy Panel Issue
Committees - Fiscal Year 2009
|
Earned
Income Tax Credit Issue Committee - recommends ways to
enhance Earned Income Tax Credit marketing and educational products to ensure
that Earned Income Tax Credit information is available to all low-income
workers. |
|
Notice
Improvement Issue Committee - works with the Wage and
Investment and Small Business/Self-Employed Divisions to advise the IRS about
clarity and tone of letters sent to taxpayers. Panel members review the proposed language,
tone, and usability of new or modified documents. |
|
Small
Business/Self-Employed Division Issue Committee - explores ways to increase the number of
employment tax returns that are filed electronically and improve the quality
and accessibility of guidance on mortgage foreclosures. |
|
Taxpayer
Assistance Centers[32] Issue
Committee - supports the IRS Wage and Investment Division
which manages all IRS Taxpayer Assistance Centers. The Committee will analyze the payment
receipt and processing systems and look for ways to improve the process. |
|
Volunteer
Income Tax Assistance Issue Committee - assists the IRS in assessing the accuracy
of returns prepared at Volunteer Income Tax Assistance and Tax Counseling for
the Elderly locations. |
|
Multi-Lingual
Initiatives Issue Committee - aims to expand
products and services for |
|
Tax Forms and
Publications/Language Services Issue Committee - provides timely feedback on 2009 Filing Season products, such as the
First Time Home Buyers Credit, provides specific comments on how to improve
Tax Forms and Publications, and provides a centralized focus on all Panel
recommendations for IRS tax products. |
|
Communications
Committee - develops communications strategies and
products to be used by Taxpayer Advocacy Panel for internal Taxpayer Advocacy
Panel business and for interacting with the taxpaying public. |
Source: Taxpayer Advocacy Panel web site,
ImproveIRS.org, accessed on March 19, 2009, and TAS management.
Appendix VI
Taxpayer Advocate Service Staff
Figure 1: TAS
Staffing Dedicated to the Panel
|
Position Title |
Number of Positions |
|
Director |
1 |
|
Field
Manager |
4 |
|
Analyst |
15 |
|
Secretary |
5 |
|
Total[33] |
25 |
Source: TIGTA review of the TAS staff assigned to the
Panel as of April 2009.
Figure 2: Comparison of the Panel to Other IRS Advisory Committees Reviewed[34]
|
IRS Advisory Committees |
Fiscal Year 2008 Staff Costs |
Percentage of Total Staff Costs |
Fiscal Year 2008 |
Number of Panel Members |
|
Taxpayer
Advocacy Panel |
$1,882,842 |
70% |
18.9 |
111[36] |
|
IRS
Advisory Council |
$360,000 |
13% |
5 |
26 |
|
Information
Reporting Program Advisory Committee |
$355,500 |
13% |
3 |
33 |
|
Electronic
Tax Administration Advisory Committee |
$70,000 |
3% |
.7 |
14 |
|
Tax
Exempt and Governmental Entities Division Advisory Committee |
$25,000 |
1% |
.5 |
21 |
|
Total Fiscal Year 2008 Staff Costs |
$2,693,342 |
100% |
---- |
---- |
Source: FACA database.
Appendix VII
Figure 1: Closed
Categories for Panel Recommendations
|
Closed,
Proposal Accepted |
|
The
IRS indicates the proposal is fully accepted. The proposal may or may not be implemented,
but the IRS has agreed to the recommendation. |
|
Closed,
Proposal Partially Accepted |
|
The
IRS indicates the proposal is partially accepted. The proposal may or may not be implemented,
but the IRS has agreed to the recommendation in part. The partial acceptance should be explained
in the Response Notes. |
|
Closed,
Proposal Rejected |
|
The
IRS has indicated that the proposal is rejected. The reasons for the rejection should be
explained in the Response Notes. |
|
Closed,
Proposal Implemented |
|
The
IRS has fully or partially implemented the proposal. A partial implementation should be explained
in the Response Notes. |
Source:
Draft Internal Revenue Manual Section 13.7.1, dated January 27, 2009.
Figure 2: Other Categories Used for Panel
Recommendations
|
Closed, Project/Assignment Completed |
|
Used for Issue Committee tasks or projects
that are completed. |
|
Elevated Directly by Committee |
|
Term previously used by Issue Committees to
indicate tasks or projects were completed.
|
|
Closed |
|
Used primarily with legislative or
regulatory issues or line-by-line issues on forms, publications, and notices
when only general acknowledgement is received and no specific feedback is
provided. |
Source:
TIGTA analysis of the Panel database, dated April 2009.
Appendix VIII
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.
[1] TAS management advised us the Panel structural alignment was the result of a cross-functional team that included representatives from various IRS operating divisions.
[2] There are also 100 alternates; however, the alternates do not serve on the Panel or participate in meetings.
[3] Subsequent to our review, TAS management informed us that the correct number of recommendations was 429 and that 264 (62 percent) were IRS-driven issues.
[4] Grass roots issues are identified by the general public or Panel committee members, not the IRS.
[5] Grass roots issues are identified by the general public or Panel committee members, not the Internal Revenue Service.
[6] Taxpayer Advocate Service management advised us the Panel structural alignment was the result of a cross-functional team that included representatives from various IRS operating divisions.
[7] See Appendix V for a description of the Issue Committees.
[8] This includes survey results, focus group input, or other advice that IRS management may seek as part of a decision-making process.
[9] Public Law 92-463.
[10] Subsequent to our review, TAS management informed us that the correct number of recommendations was 429.
[11] An IRS organization with employees who answer questions, provide assistance, and resolve account-related issues for taxpayers face to face.
[12] There are also 100 alternates; however, the alternates do not actively serve on the Panel.
[13] The recruitment process generally begins in March. Candidates are ranked and interviewed and after tentative selections are made, Federal Bureau of Investigation background and tax compliance checks are generally completed by September. Final confirmation is generally made by October or November.
[14] Subsequent to our review, TAS management informed us that the correct number of recommendations was 429 and that 264 (62 percent) were IRS-driven issues.
[15] A measure of labor hours in which 1 Full-Time Equivalent is equal to 8 hours multiplied by the number of compensable days in a particular fiscal year. For Fiscal Year 2009, 1 Full-Time Equivalent is equal to 2,088 staff hours.
[16] See Appendix VI for more information on TAS staffing.
[17] The TAS reported higher labor costs to the GSA by approximately 3 percent for FYs 2005 through 2008 since additional TAS personnel provide support to the Panel on an as needed basis.
[18] The six
IRS offices are located in
[19] Span of control is defined as the number of employees supervised by one manager.
[20] Draft Internal Revenue Manual Section 13.7.1, dated January 2009. In general, the Internal Revenue Manual provides an organization with specific policies and procedures and provides transparency to the public about how the IRS carries out its tax administration duties.
[21] “Support” is described in 41 CFR Section 102-3.95, Federal Advisory Committee Management; Final Rule, July 1, 2008.
[22] Subsequent to our review, TAS management informed us that the correct number of recommendations was 429 and that 264 (62 percent) were IRS-driven issues.
[23] The term “recommendation” is broadly defined since it includes pre-decisional feedback and other tasks assigned by IRS program managers during Calendar Years 2003 through 2008.
[24] Subsequent to our review, TAS management informed us that the correct number of recommendations was 429 and that 165 (38 percent) were grass-roots issues.
[25] These were closed for various other reasons and the IRS response, if any, was generally considered to be neutral (neither accepted nor rejected). See Appendix VII for a listing of closed categories used.
[26] The 161 closed recommendations are from the issues the TAS identified as being “grass roots.”
[27] We identified nine recommendations that were accepted by the IRS but were not implemented as of May 2009. These nine recommendations were submitted to the IRS at various times during Calendar Years 2003 through 2008.
[28] A unique nine-digit number used to identify a taxpayer’s business account.
[29] Tax accounts are individual modules with a record of all transactions for a given tax period.
[30] Establishment and Management of Treasury Advisory Committees, dated July 30, 2007.
[31] IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records.
[32] IRS “walk-in” offices with employees who answer questions, provide assistance, and resolve account-related issues for taxpayers in a face-to-face setting.
[33] Other IRS employees also support the Panel on an as-needed basis.
[34] Data were obtained from the FACA database for Fiscal Year 2008.
[35] A measure of labor hours in which 1 Full-Time Equivalent is equal to 8 hours multiplied by the number of compensable days in a particular fiscal year. For Fiscal Year 2008, 1 Full-Time Equivalent was equal to 2,096 staff hours.
[36] This includes members who resigned before their term was completed and does not include the alternates selected.