Treasury
Inspector General for Tax Administration
Office of Audit
Multiple
Channels Are Used to Provide Information to Small Business Taxpayers, but More
Information Is Needed to Understand Their Needs
Issued on December 30, 2010
Highlights
Highlights of Report
Number: 2011-40-010 to the Internal
Revenue Service Commissioner for the
Small Business/Self-Employed Division.
IMPACT ON TAXPAYERS
The Small
Business/Self-Employed (SB/SE) Division serves approximately 57 million taxpayers. It supports the Internal Revenue Service’s
(IRS) goal to improve customer service by educating and informing these
taxpayers of their tax obligations, developing educational products and
services, helping them understand and comply with applicable laws, and
protecting the public interest by applying the tax law with integrity and
fairness to all.
WHY TIGTA DID THE AUDIT
The IRS attributes $148 billion (43 percent) of the tax gap
to unreported income earned by unincorporated businesses and the associated
unpaid self-employment tax. The first goal in
the 2009-2013 IRS Strategic Plan is to improve service to make voluntary
compliance easier. This audit was
initiated to determine whether the services
provided by the SB/SE Division to its customers will assist the IRS in
achieving its customer service goals.
WHAT
TIGTA FOUND
Research is needed to identify the needs and
preferences of small business taxpayers. The
IRS is conducting research on individual taxpayers to incorporate taxpayer
needs in making service improvement decisions, but it has only begun to devote
sufficient resources to conduct comparable research to determine the needs of
the small business taxpayer.
Analysis
of the accounts of approximately 19 million taxpayers who filed at least 1
U.S.
Individual Income Tax Return
(Form 1040) Profit or Loss From Business (Schedule C) for the period January 1 through July 24, 2010, showed
that more than 17 million (90 percent) had Schedule C net profit/loss
(gross receipts or sales minus expenses) of $25,000 or less.
The IRS is taking steps to improve customer
service to small business and self-employed taxpayers. Outreach to small business taxpayers is based
on multiple sources and delivered through a variety of channels. The SB/SE Division’s Communications, Liaison,
and Disclosure function has developed a
process to help the IRS determine what services and information to provide
these taxpayers. This allows it to
extend outreach and education and to deliver information and materials through
various channels.
The
Communications,
Liaison, and Disclosure function
maintains the Issue Management Resolution System and the Outreach Initiative
Database to track significant issues and identify trends. However, the Issue Management Resolution
System is not complete because employees do not always appropriately enter
issues, and the System does not help the IRS identify industry needs because
the impacted industry was identified for only 25 percent of the national issues
submitted in Calendar Year 2009. Further,
14 percent of the records were missing from the Outreach Initiative
Database.
WHAT TIGTA RECOMMENDED
TIGTA
recommended that the IRS (1) evaluate the
effectiveness of the industry codes in the Issue Management Resolution
System and (2) ensure
that sufficient preventive controls are activated for the Outreach Initiative
Database to provide an adequate audit trail to record changes or deletions as
well as the associated reasons.
The IRS agreed with
the recommendations and plans to perform a review of industry selections to
identify the need to add/modify the existing selections and determine if the
Industry field should become a required field.
Additionally, during the initial development of the Outreach Initiatives
Database, SB/SE Division Web technicians deleted some unused views as part of
the testing and refinement process. This
action created some confusion and the practice of deleting views has been
discontinued. All views now being
created remain in either the active or the archived database.
READ THE
FULL REPORT
To view the report,
including the scope, methodology, and full IRS response, go
to:
http://www.treas.gov/tigta/auditreports/2011reports/201140010fr.html.
Email
Address: inquiries@tigta.treas.gov
Phone Number:
202-622-6500
Web
Site: http://www.tigta.gov