On July 22, 1998, the President signed into law the Internal Revenue Service (IRS) Restructuring and Reform Act, Pub. L. No. 105-206, 112 Stat. 685 (1998). The RRA 98 requires that the Treasury Inspector General for Tax Administration (TIGTA) report to the Congress certain information concerning taxpayer complaints involving the IRS and its employees. It also requires the termination of IRS employees under specific instances of misconduct (i.e., violations of the IRS Restructuring and Reform Act, Pub. L. No. 105-206, 112 Stat. § 1203 (1998)). However, authority has been granted to the IRS Commissioner to take an action other than termination if mitigating factors are identified.

Specifically, the RRA 98 requires that the TIGTA must include in each Semiannual Report to the Congress information on taxpayer complaints regarding the IRS, and allegations of IRS employee misconduct. In addition, the RRA 98 requires the TIGTA to report annually to the Congress the number of IRS employee terminations resulting from RRA 98 § 1203 violations, and any terminations mitigated by the Commissioner.

The objective of this audit was to evaluate the adequacy of the IRS’ processes and systems for identifying and reporting to the TIGTA information on taxpayer complaints, allegations of employee misconduct, and RRA 98 § 1203 terminations, including information on terminations mitigated by the Commissioner.

The IRS currently does not have an integrated complaint processing system for identifying and reporting taxpayer complaints and allegations of employee misconduct. Instead, it uses various existing systems and procedures that were implemented prior to the RRA 98. Because these systems do not interface or communicate with each other, the IRS cannot ensure that the reporting of taxpayer complaints is not duplicated. However, the IRS is taking significant actions to improve its complaint processing procedures and systems.

While significant actions are being taken, further improvements are needed to ensure that employees are knowledgeable of the complaint processing procedures and are willing to report complaints and allegations of misconduct.

Various IRS functions and systems are used to identify, track, and report taxpayer complaints and allegations of employee misconduct. Specifically:

• Office of Labor Relations (LR) – Uses its Automated Labor and Employee Relations Tracking System (ALERTS) to track a wide range of labor relations activity, including actions taken based on findings of IRS employee conduct or performance problems. Information on the ALERTS is updated and tracked through the employee relations process until a final decision is reached.
• National Taxpayer Advocate - Uses the Customer Feedback System (CFS) to track allegations of inappropriate behavior by IRS employees. Non-employee specific taxpayer complaints, inquiries, problems, or issues are tracked on the Problem Resolution Office Management Information System (PROMIS). However, the PROMIS does not differentiate between taxpayer complaints, inquires, problems, or issues.
• Equal Employment Opportunity (EEO) and Diversity - Complaints are initially received by the EEO and Diversity field offices as "pre-complaints" (i.e., informal complaints in which a formal complaint has not been filed with the Treasury Department). The National Director, EEO and Diversity, tracks these "pre-complaints" using a manual reporting process. If not resolved in the "pre-complaint" stage, formal complaints are filed with the Department of Treasury and tracked on the Complaints Tracking System (CTS).

The above functions and systems are responsible for tracking and reporting the vast majority of taxpayer complaints and allegations of employee misconduct received by the IRS. However, some employee misconduct allegations may be tracked on other miscellaneous tracking systems, such as the Commissioner’s Mail Tracking System or field managers’ tracking systems.

Because these systems do not interface or communicate with each other, the IRS cannot ensure that the reporting of taxpayer complaints is not duplicated. In fact, it is likely that a specific taxpayer complaint could be recorded and tracked on more than one system. For example, a taxpayer complaint of inappropriate behavior by an IRS employee may initially be included on the CFS. However, if the taxpayer complaint results in a substantiated allegation of employee misconduct requiring disciplinary action, it will be referred to LR and also tracked on the ALERTS.

The IRS has recently conducted or commissioned several reviews and studies related to its complaint processing procedures and systems. As a result of these studies and reviews and the enactment of the RRA 98, the IRS is making several organizational and procedural changes to its processing, tracking, and reporting of taxpayer complaints and allegations of employee misconduct. For example:

• The establishment of the Commissioner's Complaint Processing and Analysis Group (CCPAG), which is responsible for identifying, managing, tracking, and analyzing complaints received by, or referred to, the Commissioner. In addition, the group’s responsibilities include monitoring and coordinating with the current IRS complaint systems; disseminating information on complaint disposition; conducting problem solving inquiries to develop facts pertaining to complaints; and consolidating, validating, and reporting to the TIGTA complaint information required by the RA 98. Also, as a long-range goal, the group plans to develop a more centralized and integrated complaint information system that will interface with the existing complaint tracking systems.
• The development of detailed procedures for processing allegations relating to potential violations of RRA 98 § 1203, including the development of the "Section 1203 Allegation Referral Form." The IRS has developed and delivered employee training on RRA 98 § 1203 issues. In addition, the IRS has developed additional RRA 98 § 1203 training to provide more detailed instructions on the changes in its processes and procedures, and has provided this training to all employees.
• The establishment of the Commissioner’s Review Board to review RRA 98 § 1203 termination decisions and provide mitigation recommendations to the Commissioner.

To determine IRS employees’ perspectives on, and knowledge of, procedures for reporting taxpayer complaints and allegations of misconduct, we sent survey letters to a random sample of 910 IRS employees. An insufficient number of responses were received to allow us to project these results over the entire population of IRS employees. However, based upon the responses received, the survey results indicated that additional actions are needed to ensure that all IRS employees understand the IRS complaint processing procedures and are willing to report taxpayer complaints and allegations of employee misconduct.

Of the 313 IRS employees responding to our survey, only 159 (51 percent) indicated that they understood how to report a taxpayer complaint or allegation of IRS employee misconduct. In addition, 58 (19 percent) of the 313 respondents indicated that they were not comfortable reporting a taxpayer complaint or allegation of employee misconduct and, therefore, would not do so. Of the 58 responding that they would not report a taxpayer complaint or allegation of employee misconduct, 12 (21 percent) indicated that they understood the procedures, while the remaining 46 (79 percent) indicated that they either did not understand the procedures or were unsure.

As part of the development of its centralized and integrated complaint information system under the direction of the CCPAG, we recommend that the IRS ensure that appropriate interfaces exist between the multiple complaint processing systems to facilitate accurate reporting. In addition, we recommend that the IRS ensure that taxpayer complaints be distinguished from taxpayer inquiries, problems, and issues not of a complaint nature.

After assessing the results of its RRA 98 § 1203 training, we recommend that the IRS identify and provide any additional training required on the complaint processing procedures (e.g., non-RRA 98 § 1203). In addition, the IRS should re-emphasize the employee’s responsibility for reporting taxpayer complaints and allegations of employee misconduct. We also recommend that the IRS periodically survey its employees to determine the effectiveness of the training, and the employees’ willingness to report taxpayer complaints and allegations of employee misconduct.

Management’s Response: On September 17, 1999, the Commissioner provided a written response to our report. In his response, the Commissioner agreed with our conclusion that the IRS could further improve its complaint processing procedures and systems and advised us that a specific action plan will be developed within 60 days.

Management’s complete response to the report is included as Appendix IV.