TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

 

 

 

Fiscal Year 2009 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations

 

 

 

 May 28, 2009

 

Reference Number:  2009-40-078

 

 

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   |  202-622-6500

Email Address   |  inquiries@tigta.treas.gov

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

 

May 28, 2009

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT

                                         DEPUTY COMMISSIONER FOR OPERATIONS SUPPORT

 

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

                                         Deputy Inspector General for Audit

 

SUBJECT:                    Final Audit Report – Fiscal Year 2009 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations (Audit # 200840036)

 

This report presents the results of our review to determine whether the Internal Revenue Service (IRS) complied with the IRS Restructuring and Reform Act of 1998 (RRA 98)[1] Section (§) 3707 and its own internal guidelines that prohibit IRS officers and employees from referring to taxpayers as Illegal Tax Protesters or any similar designations.  The Treasury Inspector General for Tax Administration is required under Internal Revenue Code § 7803(d)(1)(A)(v) to annually evaluate the IRS’ compliance with the provisions of RRA 98 § 3707.

Impact on the Taxpayer

Congress enacted RRA 98 § 3707 to prohibit the IRS from labeling taxpayers as Illegal Tax Protesters or any similar designations.  Overall, the IRS has eliminated most uses of this and similar designations.  However, in some instances, IRS employees did refer to taxpayers by these designations in case narratives, which could stigmatize taxpayers and cause employee bias in future contacts with these taxpayers.

Synopsis

Prior to enactment of the RRA 98, taxpayers could be designated as Illegal Tax Protesters if their tax returns or correspondence contained specific indicators of noncompliance with the tax law, such as the use of arguments that had been repeatedly rejected by the courts.  Once taxpayers’ accounts were coded with Illegal Tax Protester indicators, certain tax enforcement actions were accelerated.  The designation was also intended to alert employees to be cautious so they would not be drawn into confrontations with taxpayers.  The RRA 98 prohibits the IRS from using Illegal Tax Protester or any similar designations. 

In some instances, IRS employees referred to taxpayers as Illegal Tax Protesters or used similar designations in case narratives.

The IRS has not reintroduced past Illegal Tax Protester codes on the Master File,[2] and formerly coded taxpayer accounts have not been assigned similar Master File designations.  In addition, the Internal Revenue Manual[3] and current publications do not have any Illegal Tax Protester references.  However, there were some designations identified in the case narratives.  In 324 instances out of approximately 65.3 million records and cases, IRS employees improperly referred to taxpayers as Illegal Tax Protesters or other similar designations.

IRS management disagrees that employee use of Illegal Tax Protester or similar designations in a case narrative is a potential violation of the law.  We continue to believe that the use of these designations in case narratives may stigmatize taxpayers and cause employee bias in future contacts with these taxpayers.  Electronic case narratives are available to other IRS employees for future reference and may affect the opinions and actions of employees working the taxpayers’ cases.

Notwithstanding their disagreement with our interpretation of the law, IRS management advised us they have taken a conservative approach by implementing a policy that prohibits employees from using Illegal Tax Protester or any similar designation.  In August 2007, IRS management issued a memorandum to all employees reminding them of this policy.  In Fiscal Year 2008, guidance in the form of Alerts and memorandums were issued to employees and portions of the Internal Revenue Manual were updated to reflect the prohibition on using Illegal Tax Protester or any similar designation.  Through IRS management’s continued efforts, the total number of improper designations by IRS employees has decreased.

Response

We made no recommendations in this report.  In their response to a draft of this report, IRS management stated there are no indications that the use of Illegal Tax Protester or similar designation has affected the way in which the IRS deals with taxpayers who disapprove of the tax system.  Because these taxpayers are treated in the same manner and given the same rights as any other taxpayer, the IRS does not believe that the rights of the taxpayers related to the 324 instances we identified were affected.  Management’s complete response to the draft report is included as Appendix V.

Office of Audit Comment

We continue to believe our outcome measure is valid because the use of Illegal Tax Protester or similar designations may stigmatize taxpayers and cause employee bias in future contacts with these taxpayers.

Copies of this report are also being sent to the IRS managers affected by the report.  Please contact me at (202) 622-6510 if you have questions or Margaret E. Begg, Assistant Inspector General for Audit (Compliance and Enforcement Operations), at (202) 622‑8510.

 

 

Table of Contents

 

Background

Results of Review

Illegal Tax Protester Codes Were Not Used on the Master File

Internal Revenue Service Publications Do Not Contain Illegal Tax Protester References

Illegal Tax Protester References Have Been Removed From the Internal Revenue Manual

In Some Instances, Employees Used Illegal Tax Protester or Similar Designations in Case Narratives

Alternative Methods That Avoid the Need for Illegal Tax Protester Designations Have Been Established to Address Tax Compliance Issues

Appendices

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Outcome Measure

Appendix V – Management’s Response to the Draft Report

 

 

Abbreviations

 

IRS

Internal Revenue Service

RRA 98

Restructuring and Reform Act of 1998

 

 

Background

 

Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98)[4]  Section (§) 3707 prohibits the IRS from using Illegal Tax Protester or any similar designations.  In addition, the law requires the removal of all existing Illegal Tax Protester codes from the Master File[5] and instructs IRS employees to disregard any such designation not located on the Individual Master File.[6]

Prior to enactment of the RRA 98, the IRS used the Illegal Tax Protester Program to identify individuals and businesses that were using methods that were not legally valid to protest the tax laws.  Employees identified taxpayers for referral to the Program when their tax returns or correspondence contained specific indicators of noncompliance with the tax law, such as the use of arguments that had been repeatedly rejected by the courts.  There were tax protester coordinators who were responsible for determining whether a taxpayer should be included in the Illegal Tax Protester Program.  If a taxpayer was classified as an Illegal Tax Protester, the taxpayer’s record was coded as such on the Master File.  Once a taxpayer’s account was coded, certain tax enforcement actions were accelerated.  The designation was also intended to alert employees to be cautious so they would not be drawn into confrontations with taxpayers.

Congress was concerned that some taxpayers were being permanently labeled and stigmatized by the Illegal Tax Protester designation.  The concern was that this label could bias IRS employees and result in unfair treatment of the taxpayer.

The Treasury Inspector General for Tax Administration is required to annually evaluate IRS compliance with the prohibition against using Illegal Tax Protester or any similar designations.

Internal Revenue Code § 7803(d)(1)(A)(v) requires the Treasury Inspector General for Tax Administration to annually evaluate IRS compliance with the prohibition against using the Illegal Tax Protester or any similar designations.  This is our eleventh review since Fiscal Year 1999.  These reviews have identified areas for improvement to help the IRS comply with the Illegal Tax Protester designation prohibition.

This review was performed in the Criminal Investigation Division, the Office of the National Taxpayer Advocate, and the Office of Appeals in Washington, D.C.; the Small Business/Self-Employed Division in New Carrollton, Maryland; and the Wage and Investment Division in Atlanta, Georgia, during the period July 2008 through February 2009.  We conducted this performance audit in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective.  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.  However, due to concerns with providing us access to sensitive grand jury information, the IRS provided us with an extract of manually edited Criminal Investigation Division cases from the Criminal Investigation Management Information System.  While our audit results seem reasonable based on prior experience with this database, we were not able to validate any of the information due to IRS editing of the data.  We are required by generally accepted government auditing standards to disclose this limitation in the scope of our work.  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

 

Illegal Tax Protester Codes Were Not Used on the Master File

Prior to enactment of the RRA 98, the IRS used Illegal Tax Protester indicators on the Master File to accelerate collection activity for taxpayers who were delinquent in filing tax returns or paying their taxes.  These indicators were also intended to alert employees that there might be problems encountered when dealing with nonfilers and delinquent taxpayers.

Congress was concerned about the use of the Illegal Tax Protester designation because:

  • Taxpayers were labeled as Illegal Tax Protesters without regard to their filing obligations or compliance.
  • Illegal Tax Protester indicators were not always reversed when taxpayers became compliant with their tax obligations.

RRA 98 § 3707 required the IRS to remove the existing Illegal Tax Protester designations from taxpayers’ accounts on the Master File beginning January 1, 1999.

In prior reviews, we reported the IRS had removed these designation codes from the Master File as required by the law.  Based on our analysis of approximately 1.2 million taxpayer records that had been coded for accelerated collection activity, the IRS has not reintroduced Illegal Tax Protester codes on the Master File.  The law also prohibits using any designation similar to Illegal Tax Protester.  We matched approximately 57,000 taxpayer accounts formerly coded as Illegal Tax Protesters to the Master File and confirmed that the IRS had not input any other type of similar designation on these accounts.

Internal Revenue Service Publications Do Not Contain Illegal Tax Protester References

The picture was removed due to its size.  To seethe picture, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

To help promote compliance with RRA 98 § 3707, IRS management issued directives for employees to update various publications to eliminate references to Illegal Tax Protester terminology and programs.  Our reviews prior to Fiscal Year 2002 identified several publications that contained Illegal Tax Protester references.  When notified of the problem, the IRS had either revised the publications or labeled them as being obsolete.   Our review of available publications on the Servicewide Electronic Research Program,[7] IRS public Internet web site (IRS.gov), Electronic Publishing web site, and 2008 Federal Tax Products DVD did not identify any current Illegal Tax Protester references.  By eliminating these references from its forms, documents, letters, and training materials, the IRS avoids the implication that the use of this terminology is permissible.

Illegal Tax Protester References Have Been Removed From the Internal Revenue Manual

The picture was removed due to its size.  To seethe picture, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.

In 9 of our 10 prior reviews, we identified Illegal Tax Protester references in various formats of the Internal Revenue Manual.[8]  The Official Internal Revenue Manual is maintained on the Electronic Publishing web site.  However, it is also found electronically on the Internal Revenue Manual online, the Servicewide Electronic Research Program, IRS.gov, and the Internal Revenue Manual CD-ROM, as well as in paper format.  The graphic to the right shows the relationship between the Official Internal Revenue Manual and the various formats available to IRS employees.

During our Fiscal Year 2009 review, we again verified that no Illegal Tax Protester references existed in the Internal Revenue Manual.  By removing all Illegal Tax Protester references from the Internal Revenue Manual, the IRS avoids any inappropriate implication to taxpayers for whom these designations are being used.

In Some Instances, Employees Used Illegal Tax Protester or Similar Designations in Case Narratives

We found that, out of approximately 65.3 million records and cases, there were 324 instances in which employees had labeled taxpayers as “Tax Protester,” “Illegal Tax Protester,” “Constitutionally Challenged,” or other similar designations in case narratives on the following computer systems during the period of October 2007 through September 2008.

  • Appeals Centralized Database System:[9]  A review of approximately 2.6 million opened/closed Appeals function narrative comment records identified 48 cases in which 41 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the case narratives.
  • Automated Collection System:[10]  A review of approximately 3 million open cases identified 3 cases in which 3 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the case narratives.
  • Criminal Investigation Management Information System:[11]  A review of approximately 6,600 opened/closed cases identified 4 cases in which 4 employees used a similar designation when referring to specific taxpayers in the case narratives.
  • Desktop Integration:[12]  A review of approximately 59 million records identified 94 cases in which 77 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the case narratives.
  • Integrated Collection System:[13]  A review of approximately 519,000 open cases identified 168 cases in which 131 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the case narratives.
  • Taxpayer Advocate Management Information System:[14]  A review of approximately 68,000 open cases identified 3 cases in which 3 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the case narratives.
  • Taxpayer Information File:[15]  A review of approximately 98,000 open records identified 4 cases in which 4 employees used Illegal Tax Protester or a similar designation when referring to specific taxpayers in the Activity Code field.

We believe these designations are prohibited by law.  Figure 1 contains the number of Illegal Tax Protester or similar designations identified in IRS computer system case narratives during our Fiscal Years 2008 and 2009 reviews.

Figure 1:  Illegal Tax Protester and Similar Designations in Case Narratives

Computer System

Fiscal Year 2008 Review

Fiscal Year 2009 Review

Employees Involved

Protester Designation Used

Similar Designation Used

Employees Involved

Protester Designation Used

Similar Designation Used

Appeals Centralized Database System

56

27

41

41

15

33

Automated Collection System

****(1)****

****(1)****

****(1)****

3

3

0

Criminal Investigation Management Information System

3

0

3

4

0

4

Desktop Integration

134

150

33

77

75

19

Integrated Collection System

147

70

97

131

49

119

Taxpayer Advocate Management Information System

7

4

3

3

0

3

Taxpayer Information File[16]

N/A

N/A

N/A

****(1)****

****(1)****

****(1)****

Source:  Case narratives found on various IRS computer systems and the Treasury Inspector General for Tax Administration report entitled Fiscal Year 2008 Statutory Audit of Compliance With Legal Guidelines Prohibiting the Use of Illegal Tax Protester and Similar Designations (Reference Number 2008-40-124, dated May 23, 2008).  N/A = not applicable.

We also identified 90 case narratives in which employees made references about the taxpayers’ actions (e.g., taxpayer sent letters containing “typical protester language,” the taxpayer responded with “protester jargon”).  We agree with the IRS that merely making references to a taxpayer’s actions does not constitute a designation prohibited by statute.  However, we are concerned these references could become, or be considered, permanent labels that could subsequently stigmatize taxpayers in future contacts with the IRS.  We did not include any instances in which employees were only documenting statements made by a taxpayer and/or his or her representative because quoting a taxpayer’s self-designation as an Illegal Tax Protester is not prohibited by the law.

The statute states that officers and employees of the IRS shall not designate taxpayers as Illegal Tax Protesters or any similar designations.  It further specifies that existing designations in the Master File must be removed and any other designations made before the effective date of the statute, such as those on paper records that have been archived, must be disregarded.  Senate Committee on Finance Report 105-174 (dated April 22, 1998), related to the RRA 98 § 3707 provision, stated the Committee was concerned that taxpayers might be stigmatized by a designation as an “Illegal Tax Protester.”   Based upon the language of the statute and the Senate Committee Report, we believe IRS officers and employees should not label taxpayers as Illegal Tax Protesters or similar designations in any records, which include paper and electronic case files.  Officers and employees should not designate taxpayers as such because a designation alone contains a negative connotation and appears to label the taxpayer.

IRS management disagrees that employee use of Illegal Tax Protester or similar designations in a case narrative is a potential violation of the law.  We continue to believe that the use of these designations in case narratives may stigmatize taxpayers and cause employee bias in future contacts with these taxpayers.  Electronic case narratives are available to other IRS employees for future reference and may affect the opinions and actions of employees working the taxpayers’ cases.

Even though IRS management continues to disagree with our interpretation of the law, they have taken a conservative approach by implementing a policy that prohibits employees from using Illegal Tax Protester or any similar designation.  In August 2007, IRS management issued a memorandum to all employees reminding them of this policy.  In Fiscal Year 2008, guidance in the form of Alerts and memorandums were issued to employees and portions of the Internal Revenue Manual were updated to reflect the prohibition on using Illegal Tax Protester or any similar designation.  Through IRS management’s continued efforts, the total number of improper designations by IRS employees has decreased.

Alternative Methods That Avoid the Need for Illegal Tax Protester Designations Have Been Established to Address Tax Compliance Issues

IRS tax compliance operations have not been significantly affected by the prohibition against using Illegal Tax Protester or similar designations because alternative programs exist to address issues previously handled by the Illegal Tax Protester Program.  These include:

  • The Frivolous Return Program that handles taxpayers who file tax returns based on some type of frivolous argument that justifies payment of little or no income tax.  This includes filing a tax return claiming no income because paying taxes is voluntary or claiming to be a citizen of a State but not a citizen of the United States.
  • The Nonfiler Program that handles taxpayers who fail to file their required tax returns.
  • The Potentially Dangerous Taxpayer/Caution Upon Contact Program that handles taxpayers who have assaulted and/or threatened IRS employees.

Each of these programs is set up to address various issues IRS employees may encounter when dealing with taxpayers protesting the legality of paying their income taxes.  Unlike the former Illegal Tax Protester Program, each program addresses a specific taxpayer behavior.  In addition, taxpayers are not assigned to these individual programs on a permanent basis, as was the case in the Illegal Tax Protester Program.

None of our prior reviews have identified instances in which the Illegal Tax Protester indicator was needed on a taxpayer’s account to either accelerate tax enforcement actions and/or alert IRS employees to be cautious when dealing with the taxpayer.  As a result, we believe that prohibiting the use of the Illegal Tax Protester designation has had no negative impact on collection or examination activities.

Management’s Response:  We made no recommendations in this report.  However, IRS management stated there are no indications that the use of Illegal Tax Protester or similar designation has affected the way in which the IRS deals with taxpayers who disapprove of the tax system.  Because these taxpayers are treated in the same manner and given the same rights as any other taxpayer, the IRS does not concur with our outcome measure described in Appendix IV.

Office of Audit Comment:   We continue to believe our outcome measure is valid because the use of Illegal Tax Protester or similar designations may stigmatize taxpayers and cause employee bias in future contacts with these taxpayers.  Electronic case narratives are available to other IRS employees for future reference and may affect the opinions and actions of employees working the taxpayers’ cases.

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The objective of this review was to determine whether the IRS complied with RRA 98[17] § 3707 and its own internal guidelines that prohibit IRS officers and employees from referring to taxpayers as Illegal Tax Protesters or any similar designations.  The Treasury Inspector General for Tax Administration is required to annually evaluate compliance with the prohibition against using Illegal Tax Protester or any similar designations.[18]  Unless otherwise noted, our limited tests of the reliability of data obtained from various IRS systems did not identify any errors.  We tested the reliability of the data by scanning the data received for blank, incomplete, illogical, or improper data.  In addition, we traced a judgmental sample for each data set to the source IRS files to ensure accuracy.  We did not perform any testing of internal controls over the systems that were the sources of our data.  To accomplish the objective, we:

I.                    Determined if the Illegal Tax Protester coding on the Master File[19] was removed by reviewing all tax accounts coded for accelerated collection activity as of September 2008 on the Business Master File[20] and Individual Master File.[21]  We analyzed 1,217,048 Master File records that had been coded for accelerated collection activity.

We also matched our historic computer extract of approximately 57,000 taxpayers designated as Illegal Tax Protesters before the RRA 98 was enacted to our records that had been coded for accelerated collection activity to determine if any new common codes were being used to classify the taxpayers as Illegal Tax Protesters.

II.                 Determined if the Internal Revenue Manual[22] contained Illegal Tax Protester or any similar designations by performing key word searches of the IRS Electronic Publishing web site, the Internal Revenue Manual online, the Servicewide Electronic Research Program,[23] IRS.gov, and the Internal Revenue Manual CD-ROM.

III.               Determined if IRS publications contained Illegal Tax Protester or any similar designations by performing key word searches of the Servicewide Electronic Research Program, IRS.gov, and the IRS Electronic Publishing web site in August 2008, and the IRS 2008 Federal Tax Products DVD in February 2009.

IV.              Determined if employees were using Illegal Tax Protester or any similar designations within taxpayer case narratives on the Integrated Collection System[24] by securing a copy of the database and analyzing 519,327 cases open as of September 2008 with history action dates between October 2007 and September 2008.

V.                 Determined if employees were using Illegal Tax Protester or any similar designations within taxpayer case narratives on the Automated Collection System[25] by securing a copy of the database[26] and analyzing 2,981,246 cases open as of September 2008 with history action dates between October 2007 and September 2008.

VI.              Determined if employees were using Illegal Tax Protester or any similar designations within taxpayer case narratives on the Taxpayer Advocate Management Information System[27] by securing a copy of the database as of September 2008 and analyzing 67,593 open cases with activity between October 2007 and September 2008.

VII.            Determined if employees were using Illegal Tax Protester or any similar designations within the taxpayer case narratives on Desktop Integration[28] by securing a copy of the database as of September 2008 and analyzing 59,049,776 records with activity between October 2007 and September 2008.

VIII.         Determined if employees were using the Illegal Tax Protester or any similar designations within taxpayer case narratives on the Appeals Centralized Database System[29] by securing a copy of the database as of September 2008 and analyzing 2,593,038 open/closed Appeals function narrative comment records with activity between October 2007 and September 2008.

IX.              Determined if employees were using Illegal Tax Protester or any similar designations within the taxpayer case narratives on the Criminal Investigation Management Information System[30] by analyzing 6,641 Criminal Investigation Division cases opened and/or closed between October 2007 and September 2008.

Due to concerns with providing us access to sensitive grand jury information, the IRS provided us with an extract of manually edited Criminal Investigation Division cases from the Criminal Investigation Management Information System.  While our audit results seem reasonable based on prior experience with this database, we were not able to validate any of the information due to IRS editing of the data.  We are required by generally accepted government auditing standards to disclose this limitation in the scope of our work.

X.                 Determined if the IRS is using any Frivolous Return Program[31] codes as replacements for Illegal Tax Protester designations by reviewing guidance provided for the Frivolous Return Program and interviewing its Program Coordinator.

XI.              Determined if the IRS Nonfiler Program[32] is in compliance with the provisions established by RRA 98 § 3707(b) by reviewing guidance provided for the Nonfiler Program and interviewing its Program Coordinator.

XII.            Determined if there is any relationship between Illegal Tax Protester designations and Potentially Dangerous Taxpayer/Caution Upon Contact indicator use on the Master File by reviewing guidance provided for the Potentially Dangerous Taxpayer/Caution Upon Contact Program[33] and interviewing its Program Coordinator.

XIII.         Determined if employees were using Illegal Tax Protester or any similar designations within the Activity Code field on the Taxpayer Information File[34] by securing a copy of the database and analyzing 97,692 open records with activity between October 2007 and September 2008.

 

Appendix II

 

Major Contributors to This Report

 

Margaret E. Begg, Assistant Inspector General for Audit (Compliance and Enforcement Operations)

Frank Dunleavy, Audit Director

Bryce Kisler, Audit Manager

Alan Lund, Acting Audit Manager

David Hartman, Lead Auditor

Cynthia Dozier, Senior Auditor

Craig Pelletier, Senior Auditor

Sharon Summers, Senior Auditor

Rebecca Kaplan, Auditor

James Allen, Information Technology Specialist

 

Appendix III

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

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

Commissioner, Wage and Investment Division  SE:W

Chief, Appeals  AP

Chief, Criminal Investigation  SE:CI

Chief Counsel  CC

National Taxpayer Advocate  TA

Chief Technology Officer  OS:CTO

Director, Office of Research, Analysis, and Statistics  RAS

Director, Communications and Liaison, National Taxpayer Advocate  TA:CL

Director, Office of Servicewide Policy, Directives, and Electronic Research  RAS:SPDER

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

Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division  SE:S:CLD

Director, Compliance, Wage and Investment Division  SE:W:CP

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

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

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:

GAO/TIGTA Liaison, Deputy Commissioner for Operations Support  OS

GAO/TIGTA Liaison, Deputy Commissioner for Services and Enforcement  SE

GAO/TIGTA Liaison, National Taxpayer Advocate  TA

GAO/TIGTA Liaison, Chief Technology Officer  OS:CIO:SM:PO

Chief, GAO/TIGTA/Legislative Implementation Branch  SE:S:CLD:PSP:GTL

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

 

Appendix IV

 

Outcome Measure

 

This appendix presents detailed information on the measurable impact that our recommended corrective action will have on tax administration.  While no recommendations were made in this report, the Treasury Inspector General for Tax Administration has made prior recommendations that continue to provide benefits.  This benefit will be incorporated into our Semiannual Report to Congress.

Type and Value of Outcome Measure:

·        Taxpayer Rights and Entitlements – Actual; 321 taxpayers potentially affected[35] (see page 5).

Methodology Used to Measure the Reported Benefit:

We reviewed:

  • From the Appeals Centralized Database System,[36] approximately 2.6 million open/closed Appeals function narrative comment records with history action dates between October 2007 and September 2008 and identified 48 taxpayer cases with narratives that contained Illegal Tax Protester or a similar designation.
  • From the Automated Collection System,[37] approximately 3 million open cases with history action dates between October 2007 and September 2008 and identified 3 taxpayer cases with narratives that contained Illegal Tax Protester or a similar designation.
  • From the Criminal Investigation Management Information System,[38] approximately 6,600 cases opened and/or closed between October 2007 and September 2008 and identified 4 taxpayer cases with narratives that contained a similar designation.
  • From Desktop Integration,[39] approximately 59 million records with history action dates between October 2007 and September 2008 and identified 94 taxpayer cases with narratives that contained Illegal Tax Protester or a similar designation.
  • From the Integrated Collection System,[40] approximately 519,000 open cases with history action dates between October 2007 and September 2008 and identified 168 taxpayer cases with narratives that contained Illegal Tax Protester or a similar designation.
  • From the Taxpayer Advocate Management Information System,[41] approximately 68,000 open cases with history action dates between October 2007 and September 2008 and identified 3 taxpayer cases with narratives that contained Illegal Tax Protester or a similar designation.
  • From the Taxpayer Information File,[42] approximately 98,000 open records with history action dates between October 2007 and September 2008 and identified 4 taxpayer records that contained Illegal Tax Protester or a similar designation in the Activity Code field.

 

Appendix V

 

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] 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.).

[2] A database that stores various types of taxpayer account information.  This database includes individual, business, and employee plans and exempt organizations data.

[3] A manual containing the IRS’ internal guidelines.

[4] 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.).

[5] A database that stores various types of taxpayer account information.  This database includes individual, business, and employee plans and exempt organizations data.

[6] A database that maintains transactions or records of individual tax accounts.

[7] An electronic researching tool containing many former paper research applications (e.g., publications, the Internal Revenue Manual, the Probe and Response Guide).

[8] A manual containing the IRS’ internal guidelines.

[9] A computerized system used to track case receipts, record case time, document case actions, and monitor the progress of Appeals function workload.

[10] A telephone contact system through which telephone assistors collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices.

[11] A computerized system used to track the status and progress of criminal investigations.

[12] Provides employees access to multiple IRS systems through their computers and allows for inventory management, case delivery, history narratives, print-to-fax capabilities for sending information to taxpayers, and electronic referral generation.  Desktop Integration was renamed Account Management Services in February 2009.

[13] A system used by Collection function employees to report taxpayer case time and activity.

[14] An electronic database and inventory control system used by Taxpayer Advocate Service employees.

[15] Provides tax account information for taxpayers selected for the Integrated Data Retrieval System (the IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records).

[16] We did not analyze the Taxpayer Information File during our Fiscal Year 2008 review.

[17] 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.).

[18] Internal Revenue Code § 7803(d)(1)(A)(v).

[19] A database that stores various types of taxpayer account information.  This database includes individual, business, and employee plans and exempt organizations data.

[20] A database that consists of Federal tax-related transactions and accounts for businesses.  These include employment taxes, income taxes on businesses, and excise taxes.

[21] A database that maintains transactions or records of individual tax accounts.

[22] A manual containing the IRS’ internal guidelines.

[23] An electronic researching tool containing many former paper research applications (e.g., publications, the Internal Revenue Manual, the Probe and Response Guide).

[24] A system used by Collection function employees to report taxpayer case time and activity.

[25] A telephone contact system through which telephone assistors collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices.

[26] The Automated Collection System did not always contain employee identifying information from which we could determine the number of employees using Illegal Tax Protester or a similar designation.  We assumed each comment was made by a different employee.

[27] An electronic database and inventory control system used by Taxpayer Advocate Service employees.

[28] Provides employees access to multiple IRS systems through their computers and allows for inventory management, case delivery, history narratives, print-to-fax capabilities for sending information to taxpayers, and electronic referral generation.  Desktop Integration was renamed Account Management Services in February 2009.

[29] A computerized system used to track case receipts, record case time, document case actions, and monitor the progress of Appeals function workload.

[30] A computerized system used to track the status and progress of criminal investigations.

[31] The Frivolous Return Program handles taxpayers who file tax returns based on some type of frivolous argument that justifies payment of little or no income tax.  This would include filing a tax return claiming no income because paying taxes is voluntary or claiming to be a citizen of a State but not a citizen of the United States.

[32] The Nonfiler Program handles taxpayers who fail to file their required tax returns.

[33] The Potentially Dangerous Taxpayer/Caution Upon Contact Program handles taxpayers who have assaulted and/or threatened IRS employees.

[34] Provides tax account information for taxpayers selected for the Integrated Data Retrieval System (the IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records).

[35] We identified 324 instances in which employees had labeled taxpayers as an Illegal Tax Protester or a similar designation in a case narrative on an IRS computer system.  Three of these taxpayers were labeled as an Illegal Tax Protester or similar designation in a case narrative on more than one IRS computer system.

[36] A computerized system used to track case receipts, record case time, document case actions, and monitor the progress of the Appeals function workload.

[37] A telephone contact system through which telephone assistors collect unpaid taxes and secure tax returns from delinquent taxpayers who have not complied with previous notices.

[38] A computerized system used to track the status and progress of criminal investigations.

[39] Provides employees access to multiple IRS systems through their computers and allows for inventory management, case delivery, history narratives, print-to-fax capabilities for sending information to taxpayers, and electronic referral generation.  Desktop Integration was renamed Account Management Services in February 2009.

[40] A system used by Collection function employees to report taxpayer case time and activity.

[41] An electronic database and inventory control system used by Taxpayer Advocate Service employees.

[42] Provides tax account information for taxpayers selected for the Integrated Data Retrieval System (the IRS computer system capable of retrieving or updating stored information; it works in conjunction with a taxpayer’s account records).