Collection Employees Adhered to Fair Tax Collection Practices During Fiscal Year 2010
April 25, 2011
Reference Number 2011-10-045
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 | TIGTACommunications@tigta.treas.gov
Web Site |
http://www.tigta.gov
HIGHLIGHTS
COLLECTION EMPLOYEES ADHERED TO FAIR
TAX COLLECTION PRACTICES DURING FISCAL YEAR 2010
Highlights
Final
Report issued on April 25, 2011
Highlights of Reference Number:
2011-10-045 to the Internal Revenue Service Chief Counsel and the Internal
Revenue Service Human Capital Officer.
IMPACT ON TAXPAYERS
The abuse or harassment of taxpayers by Internal Revenue Service
(IRS) employees while attempting to collect taxes reflects poorly on the IRS
and can have a negative impact on voluntary compliance. It can also result in civil damages against
the Federal Government when Fair Tax Collection Practices (FTCP) are violated. During Fiscal
Year 2010, there were no cases involving FTCP violations for which an employee
received administrative disciplinary action, and there were no taxpayers who
received civil damages for an FTCP violation. As such, taxpayers have reasonable assurance
that communications with the IRS in connection with the collection of unpaid
taxes generally did not violate the FTCP statute.
WHY TIGTA DID THE AUDIT
Section 1102(d)(1)(G) of the IRS Restructuring and Reform Act of
1998 requires TIGTA to include in one of its Semiannual Reports to Congress
information regarding administrative or civil actions related to FTCP
violations listed in 26 U.S.C. Section 6304. The overall objective of this review was to
obtain information on IRS administrative or civil actions resulting from
FTCP violations by IRS employees.
WHAT TIGTA FOUND
No FTCP violations were identified for cases on the IRS Human
Capital Officer Workforce Relations’ Automated Labor and Employee Relations
Tracking System (ALERTS) that were closed in Fiscal Year 2010. In addition, no cases were identified that
were miscoded as FTCP violations and should not have been or that should have
been coded as violations but were not. While
no FTCP violations were identified, 114 cases were opened and subsequently
removed from the ALERTS and were not available for our review. IRS management did not always maintain
documentation to substantiate removal of these cases. As a result, TIGTA could not verify that these
cases were not FTCP violations. IRS management
indicated that they had previously identified the lack of documentation to be
an issue and had plans to implement a system‑generated audit log for the
ALERTS by approximately June 2011.
In addition, there were no civil actions resulting in
monetary settlements paid to taxpayers because of an FTCP violation.
WHAT TIGTA RECOMMENDED
TIGTA made no recommendations in this report. However, key IRS management
officials reviewed the report prior to issuance and agreed with the facts and
conclusions presented.
April 25, 2011
MEMORANDUM
FOR CHIEF COUNSEL
INTERNAL REVENUE SERVICE HUMAN CAPITAL OFFICER
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Collection Employees Adhered to Fair Tax Collection Practices During Fiscal Year 2010 (Audit # 201110013)
This report presents the results of our review of Fair Tax
Collection Practices[1]
(FTCP) violations during Fiscal Year 2010.
The overall objective of this review was to obtain information on Internal Revenue Service (IRS) administrative or
civil actions resulting from violations of FTCP for cases opened after July 22,
1998, and closed during Fiscal Year 2010. Section 1102(d)(1)(G) of the IRS Restructuring
and Reform Act of 1998[2] requires the Treasury Inspector General for
Tax Administration to include in one of its Semiannual Reports to Congress
information regarding administrative or civil actions related to FTCP violations.
This audit is included in our Fiscal Year 2011 Annual Audit Plan
and addresses the major management challenge of Taxpayer Protection and Rights.
We made no
recommendations in this report. However,
key IRS management officials reviewed the report prior to issuance and agreed
with the facts and conclusions presented.
Copies of this report are also being sent to the IRS managers affected by the report results. 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.
No Fair Tax
Collection Practices Violations Resulted in Civil Damages (Monetary Awards) to
Taxpayers
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Fair Tax Collection Practices Provisions
Appendix
V – Fair Tax Collection Practices Violation Issue Codes
Abbreviations
|
ALERTS |
Automated Labor and Employee Relations
Tracking System |
|
FTCP |
Fair Tax Collection Practices |
|
IRS |
Internal Revenue Service |
The
Fair Debt Collection Practices Act[3] includes provisions that restrict various collection
abuses and harassment in the private sector.
However, prior to the Internal Revenue Service (IRS) Restructuring and
Reform Act of 1998,[4] restrictions such as these did not apply to the Federal
Government. Congress believes that it is
appropriate to require the IRS to comply with certain portions of the Fair Debt
Collection Practices Act and to be at least as considerate to taxpayers as
private creditors are required to be with their customers. Therefore, with the passage of the IRS Restructuring
and Reform Act of 1998, the IRS is required to follow provisions, known as Fair
Tax Collection Practices (FTCP), that are similar to those in the Fair Debt
Collection Practices Act.[5]
IRS employees who violate Fair Tax
Collection Practices are subject to disciplinary actions.
IRS employees who violate the FTCP are subject to disciplinary actions. Violations of the FTCP and
related disciplinary actions are tracked on the IRS Human Capital Officer
Workforce Relations’ Automated Labor and Employee Relations Tracking System (ALERTS). In
addition, if any of the FTCP provisions are violated, the taxpayer can
file a claim against the Federal Government under 26 U.S.C. § 7433,
Civil Damages for Certain Unauthorized Collection Actions. Taxpayers may file an administrative claim
for damages with the applicable IRS executive for the location in which
the taxpayer resides or file for civil damages in Federal district court. Taxpayer civil actions are tracked on the
Office of Chief Counsel’s Counsel Automated System Environment.
The
IRS Restructuring and Reform Act of 1998 § 1102(d)(1)(G)[6] requires the Treasury Inspector General for Tax
Administration to include in one of its Semiannual Reports to Congress
information regarding administrative or civil actions related to FTCP violations
listed in 26 U.S.C. § 6304.[7] This report must
provide a summary of such actions and include any judgments or awards granted. The Treasury Inspector General for Tax
Administration is required to report as violations the actions taken by IRS
employees who were involved in a collection activity and who received a
disciplinary action that is considered an administrative action.[8] Information from
this report will be used to meet the requirements of the IRS Restructuring and
Reform Act of 1998 §
1102(d)(1)(G).
This review was performed at the IRS National Headquarters offices of the Chief Counsel and the IRS Human Capital Officer in Washington, D.C., during the period January through February 2011. 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. Detailed information on our audit objective, scope, and methodology is presented in Appendix I. Major contributors to the report are listed in Appendix II.
No Fair Tax Collection Practices Violations or Miscoded Cases Were Identified; However, Some Records Could Not Be Reviewed
No FTCP violations were identified for cases closed in Fiscal Year 2010 on the ALERTS.[9] As such, taxpayers have reasonable assurance that communications with the IRS in connection with the collection of unpaid taxes generally did not violate the FTCP statute.
The IRS did not document any FTCP violations in Fiscal Year 2010,
and we did not identify any cases that should have been documented as a
violation.
In addition, the IRS has substantially reduced the number of cases miscoded on the ALERTS. In previous reports, a significant number of cases were miscoded. For example, in Calendar Year 2007, 13 cases were miscoded because: 1) the employee was not in a collection‑related job series, 2) the case did not involve a taxpayer or taxpayer representative, or 3) the case should have been coded as an FTCP violation but instead had been coded as “Fighting” or “Unprofessional Conduct.” During this review, we did not identify any cases that were miscoded as FTCP violations but should not have been. To determine whether any cases were miscoded and should have been coded as FTCP violations, we reviewed all 35 cases on the ALERTS involving a taxpayer or taxpayer representative and an employee in a collection-related job series coded as “other case” categories involving employee misconduct allegations, including those coded as either “Unprofessional Conduct” or “Not Otherwise Coded.” No cases were identified that should have been coded as FTCP violations.
Although no FTCP violations were identified in the ALERTS data we reviewed, we determined that 114 out of 20,060 cases opened in Fiscal Year 2010 were subsequently removed from the ALERTS and were not available for our review. As a result, we could not verify that these cases were not FTCP violations. IRS management stated the reasons for removal of the cases included download errors from a system that feeds into the ALERTS and data entry errors. We selected a judgmental sample for review and found that documentation was not maintained supporting the removal of 4 (27 percent) of 15 cases from the sample. Inventory control on the ALERTS is important to prevent the unsubstantiated removal of employee cases, including FTCP violations that may warrant IRS management administrative actions. IRS management indicated that they had previously identified the lack of documentation to be an issue and had plans to implement a system-generated audit log for the ALERTS by approximately June 2011. The audit log will provide a record of the date of removal, the employee initiating the removal, and the reason for removal for all cases removed from the ALERTS. Because the IRS already had plans to address this control weakness, we are not making any recommendations at this time; however, we will review this corrective action in our next audit of FTCP violations.
No Fair Tax Collection Practices Violations Resulted in Civil Damages (Monetary Awards) to Taxpayers
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this audit was to obtain information on any IRS administrative
or civil actions resulting from violations of FTCP for cases opened after July
22, 1998, and closed during Fiscal Year 2010. To accomplish this objective,
we:
I.
Obtained
all available ALERTS data and performed the following tests to validate the
accuracy and completeness of the data.
A. Performed checks of the data to determine
whether information in various data fields was reasonable. For example, we determined if date fields
contained dates, if any blank fields were explainable, and if there were
unexplained gaps in the sequential order[11] of case numbers, etc. We selected a judgmental sample[12] of 15 out of 114 cases that had been
subsequently removed from the ALERTS and were not available for our review, and
requested documentation supporting the removal.
We determined a sample size of 15 cases was appropriate to identify an
inventory control weakness.
B.
Reviewed ALERTS data to verify that cases
identified as miscoded in the Treasury Inspector General for Tax Administration
Fiscal Year 2008–2010 FTCP audits[13] were corrected as recommended.
C.
Performed a query of the ALERTS data to
identify cases opened after July 22, 1998, with an issue code of 141
to 147[14] and closed during the period January 1
through September 30, 2009, and confirmed that the resulting number of
violations matched the number provided by the IRS during the prior year audit.
II.
Identified
the number of FTCP violations resulting in administrative actions for any cases opened after
July 22, 1998, and closed during Fiscal Year 2010.
A. Performed a query of the ALERTS data to
identify cases coded as FTCP violations that were opened after
July 22, 1998, and closed during Fiscal Year 2010, and determined
whether any cases involving FTCP violations resulted in administrative actions.
B.
Performed a query of the ALERTS for cases
opened after July 22, 1998, and closed during Fiscal Year 2010 and analyzed the
results to determine whether any cases were miscoded and should have been coded
as FTCP violations.
C.
Verified query results in II.A and II.B by
confirming the number of violations with IRS personnel responsible for the
ALERTS.
III.
Identified
the number of FTCP violations resulting in IRS civil actions (judgments or
awards granted) by obtaining a computer extract from the Chief Counsel’s Counsel Automated System Environment database of Subcategory 6304 (established to
track FTCP violations) cases opened after July 22, 1998, and closed during
Fiscal Year 2010. Due to time
constraints, we did not conduct validation tests of this system. The Fiscal Year 2010 data were consistent with
those of past years, and there is low risk that cases were misclassified
because qualified attorneys were deciding whether each case met the legal
definition of an FTCP violation. For
these reasons, we considered the data’s reliability as undetermined but
suitable for use in this report.
Internal controls methodology
Internal controls relate to management’s
plans, methods, and procedures used to meet their mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program
operations. They include the systems for
measuring, reporting, and monitoring program performance. We determined that internal controls related
to the reliability of information were relevant to our audit objective. We performed procedures to validate the
ALERTS data and discussed inventory control weaknesses with management. We evaluated these controls by reviewing
cases and determining whether they were correctly coded.
Appendix II
Major Contributors to This Report
Nancy A. Nakamura, Assistant Inspector General for Audit (Management
Services and Exempt Organizations)
Troy D. Paterson, Director
Gerald T. Hawkins, Audit Manager
Melinda H. Dowdy, Lead Auditor
Donald J. Martineau, Auditor
Appendix III
Commissioner C
Office of the Commissioner –
Attn: Chief of Staff C
Deputy
Commissioner for Operations Support OS
Director,
Workforce Relations, IRS Human Capital Officer OS:HC:R
National Taxpayer Advocate TA
Director,
Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and
Risk Analysis RAS:O
Office of Internal Control
OS:CFO:CPIC:IC
Audit
Liaisons:
Chief Counsel CC
IRS Human Capital Officer OS:HC
Appendix IV
Fair Tax Collection Practices Provisions
To ensure equitable treatment of debt collectors in the public and private sectors, the IRS Restructuring and Reform Act of 1998[15] requires the IRS to comply with certain provisions of the Fair Debt Collection Practices Act.[16] Specifically, the IRS may not communicate with taxpayers in connection with the collection of any unpaid tax:
In addition, the IRS may not harass, oppress, or abuse any person in connection with any tax collection activity or engage in any activity that would naturally lead to harassment, oppression, or abuse. Such conduct specifically includes, but is not limited to:
Appendix V
Fair
Tax Collection Practices Violation Issue Codes
|
Issue Code |
Description |
|
141 |
CONTACT
TAXPAYER UNUSUAL TIME/PLACE – Contacting a taxpayer before 8:00 a.m. or after
9:00 p.m., or at an unusual location or time, or location known or which
should be known to be inconvenient to the taxpayer. |
|
142 |
CONTACT
TAXPAYER WITHOUT REPRESENTATIVE – Contacting a taxpayer directly without the
consent of the taxpayer’s Power of Attorney. |
|
143 |
CONTACT
AT TAXPAYER EMPLOYMENT WHEN PROHIBITED – Contacting a taxpayer at his or her
place of employment when it is known or should be known that the taxpayer’s
employer prohibits the taxpayer from receiving such communication. |
|
144 |
USE/THREAT
OF PHYSICAL HARM – Conduct which is intended to harass or abuse a taxpayer,
or conduct which uses or threatens to use violence or harm. |
|
145 |
USE
OBSCENE/PROFANE LANGUAGE TO ABUSE – The use of obscene or profane language
toward a taxpayer. |
|
146 |
CONTINUOUS
PHONE CALLS WITH INTENT TO HARASS – Causing a taxpayer’s telephone to ring
continuously with harassing intent. |
|
147 |
PHONE
CALLS WITHOUT MAKING FULL IDENTIFICATION DISCLOSURE – Contacting a taxpayer
by telephone without providing a meaningful disclosure of the IRS employee’s
identity. |
Source:
IRS ALERTS User Guide (October 2009).
[1] 26 U.S.C. Section 6304 (2007).
[2]
Pub. L. No. 105-206, 112 Stat. 702-703.
[3] 15 U.S.C. Sections (§§) 1601 note, 1692-1692o (2006).
[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] See Appendix IV for a detailed description of FTCP provisions.
[6] Pub. L. No. 105-206, 112 Stat 702-703.
[7] 26 U.S.C. § 6304 (2007).
[8] The law does not provide a definition of “administrative
action;” however, for this review, we used the IRS’s definition, which is
action that ranges from a letter of admonishment to removal.
[9] We could
not validate that the cases identified on the ALERTS constitute all FTCP
violations, or determine if any potential violations were reported to the IRS’s
Workforce Relations office but not recorded on the ALERTS.
[10] 26 U.S.C. § 7433.
[11] Only Fiscal Year 2010 ALERTS data were reviewed to determine if there were unexplained gaps in the sequential order of case numbers.
[12] We used judgmental sampling to select cases because we did not plan to project the results.
[13] Collection Employees Adhered to Fair Tax Collection Practices From January 2009 Through September 2009 (Reference Number 2010-10-037, dated March 17, 2010); Collection Employees Adhered to Fair Tax Collection Practices in Calendar Year 2008 (Reference Number 2009-10-101, dated July 23, 2009); and Five Fair Tax Collection Practices Violations Resulted in Administrative Actions in Calendar Year 2007 (Reference Number 2008-10-162, dated September 5, 2008).
[14] See Appendix V for a description of Fair Tax Collection Practices violation issue codes.
[15] Pub. L. No. 105-206, 112 Stat. 768-769.
[16] 15 U.S.C. §§ 1601 note, 1692-1692p (2006).