Fiscal Year 2011 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns
July 26, 2011
Reference
Number: 2011-30-077
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
FISCAL YEAR 2011 STATUTORY REVIEW OF DISCLOSURE OF
COLLECTION ACTIVITY WITH RESPECT TO JOINT RETURNS
Highlights
Final
Report issued on July 26, 2011
Highlights of Reference Number: 2011-30-077 to the Internal Revenue Service
Commissioners for the Small Business/Self-Employed Division and the Wage and
Investment Division.
IMPACT ON TAXPAYERS
Internal
Revenue Code (I.R.C.) Section (§) 6103(e)(8) gives joint filer taxpayers who
are no longer married or no longer reside in the same household the right to
request information regarding the Internal Revenue Service’s (IRS) efforts to
collect delinquent taxes on their joint return liabilities. The IRS has implemented procedures for
responding to those requests. TIGTA
believes these procedures provide IRS employees sufficient guidance for
handling those requests in accordance with the law.
WHY TIGTA DID THE AUDIT
This audit was initiated because the IRS Restructuring and Reform
Act of 1998 added I.R.C. § 7803(d)(1)(B), which
requires TIGTA to annually review and certify the IRS’s compliance with I.R.C.
§ 6103(e)(8).
WHAT TIGTA FOUND
IRS procedures provide employees with sufficient
guidance for handling joint filer collection activity information requests. However, TIGTA could not determine whether the
IRS fully complied with I.R.C. § 6103(e)(8)
requirements when responding to written collection activity information
requests from joint filers. IRS
management information systems do not separately record or monitor joint filer
requests, and there is no legal requirement for the IRS to do so. Further, TIGTA does not recommend the creation
of a separate tracking system.
WHAT TIGTA RECOMMENDED
Although
TIGTA made no recommendations in this report, IRS officials were provided an
opportunity to review the draft report.
IRS management did not provide any report comments.
July 26, 2011
MEMORANDUM FOR COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED DIVISION
COMMISSIONER, WAGE AND INVESTMENT DIVISION
FROM: Michael R. Phillips /s/ Michael R. Phillips
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Fiscal Year 2011 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns (Audit #201130009)
This report presents the results of our review to determine
whether the Internal Revenue Service (IRS) is in compliance with Internal
Revenue Code (I.R.C.) Section (§) 6103(e)(8) related to the disclosure of collection
activities to joint filers. The Treasury
Inspector General for Tax Administration is required under I.R.C. § 7803(d)(1)(B) to annually evaluate the IRS’s compliance with the
joint filer provisions of the law.
Although we made no recommendations in this report, we did provide IRS officials an opportunity to review the draft report. IRS management did not provide us with any report comments.
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.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Abbreviations
|
I.R.C. |
Internal Revenue Code |
|
IRS |
Internal Revenue Service |
The Taxpayer Bill of Rights 2[1] added Internal Revenue Code (I.R.C.) Section (§) 6103(e)(8), which gives joint filer taxpayers who are no longer married or no longer reside in the same household the right to request information regarding the Internal Revenue Service’s (IRS) efforts to collect delinquent taxes on their joint return liabilities.
The Treasury Inspector General for Tax Administration is required
to annually evaluate the IRS’s compliance with I.R.C. § 6103(e)(8).
I.R.C. § 6103(e)(8) requires the IRS to provide, in writing, collection activity information to joint filers if they send in a written request. After passage of the Taxpayer Bill of Rights 2, the IRS issued procedures which stated that if I.R.C. § 6103(e)(8) is not specifically cited in the request, the IRS can provide either an oral or written response, based upon I.R.C. § 6103(e)(7).
The IRS Restructuring and Reform Act of 1998[2] added I.R.C. § 7803(d)(1)(B), which requires
the Treasury Inspector General for Tax Administration to review and certify
annually whether the IRS is complying with the requirements of I.R.C. § 6103(e)(8).
A study by the IRS concluded there was a low
volume of joint filer requests submitted under I.R.C. § 6103(e)(8). An analysis of
6 former district offices[3] over a 6-month period in Calendar Year 2000
identified only 5 written joint filer requests.
As a result of the study, management in the Small Business/Self-Employed
and Wage and Investment Divisions decided not to develop a separate tracking
system for joint filer information requests.
This review was performed in the offices of the IRS Commissioner and the National Taxpayer Advocate in Washington, D.C.; the Small Business/Self-Employed Division Headquarters in New Carrollton, Maryland; and the Wage and Investment Division Headquarters in Atlanta, Georgia, during the period April through June 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.
The Internal Revenue Manual Provides Employees Sufficient Guidance for Handling Joint Filer Collection Activity Information Requests
The
provision of the Taxpayer Bill of Rights 2 related to joint filers was enacted
out of congressional concern about the treatment of separated or divorced
taxpayers. When introducing the Bill, Representative Nancy L. Johnson (R-Connecticut) stated:
The subcommittee learned of many instances
where divorced taxpayers who had previously signed a joint tax return during
their marriage were treated harshly when the IRS later disputed the accuracy of
their joint tax return. In many cases
the IRS tried to collect the entire amount of taxes from the wife, even though
the omitted income or erroneous deductions which caused the deficiency were
attributable solely to her former husband.
All too often, the woman, being pursued for payment of taxes due, was
not aware that a tax return filed during the marriage had been audited or that
a deficiency had been imposed on the return.
To address this concern, the IRS revised its
Internal Revenue Manual to include procedures for responding to taxpayers who
file jointly and submit written requests for information on IRS collection
activity. The Internal Revenue Manual
instructs employees to disclose whether any attempts have been made to collect
the tax due from either one of the joint filers, the current collection status,
and the amount collected to date.
The Internal Revenue Manual procedures also allow employees to provide both oral and written responses to taxpayers. IRS procedures require employees to respond in writing only when taxpayers specifically cite I.R.C. § 6103(e)(8) as their authority for making written requests for collection information on joint return liabilities. If the taxpayer’s written request does not specifically cite I.R.C. § 6103(e)(8), the IRS has directed employees to provide oral responses when practicable based upon I.R.C. § 6103(e)(7). The IRS believes oral responses provide good customer service to taxpayers because the taxpayers get an immediate answer. We believe these procedures provide IRS employees sufficient guidance for handling these requests in accordance with the law.
Compliance With Statutory Requirements for the Disclosure of Collection Activity With Respect to Jointly Filed Tax Returns Cannot Be Determined
IRS management information systems do not record or monitor joint filer requests for information on collection activities. As such, we could not determine whether the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to written requests from joint filers because of our inability to identify any joint filer requests received for information on collection activities. During this review, management from the Small Business/Self-Employed and Wage and Investment Divisions commented that the IRS’s position has not changed from last year, and the IRS does not plan to implement a system to identify or track joint filer requests for collection activity. In addition, there is no legal requirement for the IRS to record or monitor cases involving these requests.
We do not recommend the creation of a separate tracking system and are making no recommendations in this report. This is the thirteenth year in which we have reported our inability to provide an opinion on the IRS’s compliance with the provisions of I.R.C. § 6103(e)(8).
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the IRS is in compliance with I.R.C. § 6103(e)(8) related to the disclosure of collection activities to joint filers. To accomplish our objective, we:
I. Obtained confirmation from the Small Business/Self-Employed and Wage and Investment Divisions that the IRS neither has, nor plans to implement, a system or process to identify or track joint filer requests for collection information relating to the requirements of I.R.C. § 6103(e)(8).
II. Interviewed various IRS and Treasury Inspector General for Tax Administration personnel responsible for the Taxpayer Advocate Management Information System,[4] the Information Tracking System,[5] and the Performance and Results Information System[6] to determine whether there is a system or process that tracks taxpayer complaints related to the requirements of I.R.C. § 6103(e)(8).
III. Obtained information on the actions taken by the IRS in response to I.R.C. § 6103(e)(8) to determine the impact on IRS programs.
A. Reviewed all prior Treasury Inspector General for Tax Administration audit reports for the statutory Joint Filer Reviews to identify any corrective actions taken by the IRS.
B. Reviewed historical and current Internal Revenue Manual sections to identify any updates made in response to I.R.C. § 6103(e)(8).
C. Reviewed IRS.gov (the public IRS Internet site) and related IRS publications to identify how the IRS informs taxpayers of their right to request collection information on jointly filed tax returns under I.R.C. § 6103(e)(8).
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 the following internal controls were relevant to our audit objective: the Small Business/Self-Employed Division Collection function’s policies, procedures, and practices for responding to taxpayer requests relating to the requirements of I.R.C. § 6103(e)(8). Our assessment did not evaluate the controls for ensuring the IRS’s accuracy in responding to these requests because IRS management information systems do not record or monitor joint filer requests for information on collection activities.
Appendix II
Major Contributors to This Report
Margaret E. Begg, Assistant Inspector General for Audit (Compliance and
Enforcement Operations)
Carl L. Aley, Director
Glen J. Rhoades, Audit Manager
Janis Zuika, Lead Auditor
Frank I. Maletta, Senior Auditor
Appendix III
Commissioner C
Office of the Commissioner – Attn: Chief of Staff C
Deputy Commissioner Services and Enforcement SE
Deputy Commissioner, Small Business/Self-Employed Division SE:S
Deputy Commissioner, Wage and Investment Division SE:W
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
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of Program Evaluation and Risk Analysis RAS:O
Office of Internal Control OS:CFO:CPIC:IC
Audit Liaisons:
Commissioner, Small Business/Self-Employed Division SE:S
Commissioner, Wage and Investment Division SE:W
[1] Pub. L. No. 104-168, 110 Stat. 1452 (1996) (codified as amended in scattered sections of 26 U.S.C.).
[2] 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.).
[3] The IRS now calls locations formerly known as district offices Area Offices.
[4] The Taxpayer Advocate Management Information System is an electronic database and case inventory control system used by Taxpayer Advocate Service employees.
[5] The Information Tracking System is an application used by the IRS to control and track information and correspondence.
[6] The Performance and Results Information System is a management information system that provides the Treasury Inspector General for Tax Administration with the ability to manage complaints received and investigations initiated.