The Taxpayer Bill of Rights, as part of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, 102 Stat. 3731 (1988) renumbered Pub. L. No. 101-239, 103 Stat. 2423 (1989), created a number of safeguards to protect the rights of taxpayers when they are being interviewed by an Internal Revenue Service (IRS) employee as part of a tax audit or collection action. Specifically, IRS employees are required by 26 U.S.C. § 7521(b)(2) and (c) (1986) to:

• Stop the interview (unless required by court order) whenever a taxpayer requests to consult with a representative (any person, such as an accountant or attorney, who is permitted to represent taxpayers before the IRS).
• Obtain their immediate supervisor’s approval to contact the taxpayer instead of the representative, if the representative is responsible for unreasonably delaying the completion of a tax audit or collection action.

A taxpayer can file a civil suit against the IRS under 26 U.S.C.§ 7433 (1986) if an IRS employee intentionally or recklessly disregards this provision of the tax code by denying the taxpayer the right to consult with a representative or bypassing the representative without proper approval.

The Restructuring and Reform Act, Pub. L. No. 105-206, 112 Stat. 685 (1998) added 26 U.S.C. § 7803(d) (1986), which requires the Treasury Inspector General for Tax Administration to evaluate the IRS’ compliance with the requirements in 26 U.S.C. § 7521(b)(2) and (c) (1986) described above. Our objective was to determine if the IRS was in compliance with these requirements.

The IRS has written procedures for employees to follow when taxpayers request to consult with a representative during an IRS interview or when representatives are unreasonably delaying an IRS tax audit or collection action. These procedures should enable IRS employees to protect taxpayers’ rights and comply with the law.

However, we could not determine whether employees are protecting taxpayers’ rights because neither we nor the IRS can readily identify cases for review. Current IRS management information systems do not separately record or monitor cases where taxpayers have requested to consult with a representative or where employees appropriately bypass taxpayer representatives and contact taxpayers directly. There is no requirement for the IRS to maintain separate records for these situations. The IRS also does not track taxpayer complaints related specifically to either of these issues.

The IRS’ written procedures require employees to stop the interview and make a notation in the case file whenever a taxpayer requests to consult with a representative during an interview. These written procedures also instruct IRS employees to obtain their immediate supervisor’s approval to directly contact a taxpayer if the representative is unreasonably delaying the completion of a tax audit or collection action. Thirty-six Collection and Examination Division employees in six IRS field offices revealed that they are aware of these procedures, would follow them, and would note in their case files the taxpayer’s request for consultation and their action to stop the interview. They would also document bypassing a representative (when applicable) in the case file.

However, none of the employees interviewed recalled having either situation occur on their cases. Collection and Examination Division managers indicated that these situations rarely occur and that representation issues are usually resolved before the interview takes place.

Although employees were aware of the procedures, there were inconsistencies in the way they would apply the procedures if the situation occurred during an interview. For example, when defining reasonable time allowed to consult with a representative, some employees considered two weeks reasonable while others considered three weeks reasonable.

Collection and Examination Division management indicated that they recognized the need to define "reasonable time," as well as to clarify procedures for the following circumstances, to ensure the consistent treatment of taxpayers:

• Determine who should be contacted if the representative is authorized to represent the taxpayer on only one tax year, but the interview covers more than one year.
• Determine whether enforcement actions (such as seizure of property) should also be considered an "interview" with a taxpayer for the purpose of 26 U.S.C. § 7521(b)(2) and (c) (1986).

Examination Division management has drafted new procedures to include instructions for these circumstances and Collection Division management is planning to clarify their procedures.

The IRS cannot easily determine how many taxpayers request to consult with a representative during an IRS interview or when employees bypass representatives and contact taxpayers directly. To identify these taxpayers’ requests and bypass situations, the IRS would have to conduct a labor-intensive, manual review of every taxpayer case under audit or involved in the collection process, looking for a notation in the case file. There is no requirement for the IRS to maintain separate records of these situations. Without a process that identifies and tracks these requests and bypass instances separately, IRS management cannot determine the number of taxpayers’ requests received or identify cases to review to ensure employees correctly stopped the interview, followed proper procedures for bypassing representatives, when warranted, and protected taxpayers’ rights.

One way to identify possible violations of these taxpayers’ rights is to determine if taxpayers have complained. IRS management in eight field offices and representatives of several practitioner organizations indicated that there were no taxpayer complaints received regarding taxpayer consultation rights during interviews. Only one field office informed us that it had received a complaint alleging that a representative was bypassed. While the lack of complaints alone does not ensure that the IRS is properly stopping the interview to give the taxpayer the opportunity to consult with a representative or is following the procedures for bypassing representatives, it could indicate that this is not a significant concern of taxpayers. It may also indicate that taxpayers are not clearly aware of their rights and simply do not complain if the IRS employee does not stop the interview or bypasses their representative.

To determine how the IRS notifies taxpayers of their rights in dealing with the IRS, we reviewed documents available to taxpayers, which describe their rights and obtained information from some of the IRS managers and employees we interviewed about their procedures for informing taxpayers of their rights. The IRS managers and employees informed us that taxpayers are provided a copy of Your Rights as a Taxpayer (Publication 1), prior to the scheduled interview. This publication explains taxpayers’ rights and includes an explanation of the examination, collection, appeal, and refund processes. IRS employees answer any taxpayer questions regarding the rights included in Publication 1 during the interview. However, prior to December 1998, the right to stop the interview was not specifically mentioned in Publication 1. The IRS revised Publication 1 in December 1998 to address this right.

We recommend the IRS complete efforts to clarify existing procedures to ensure taxpayers and representatives are treated consistently and develop a process to determine whether employees are complying with the law when a taxpayer requests to consult with a representative or the employee bypasses a representative.

Management’s Response: IRS management agreed to the issues addressed in this report and stated that they will clarify national guidance in the Internal Revenue Manual (IRM). The IRS does not foresee developing a new system that will allow for the identification of cases where taxpayers requested to consult with a representative or the employee bypassed a representative. IRS management is planning to revise the Examination and Collection Customer Satisfaction Surveys and will provide instructions to field managers and Quality Review staffs to specifically consider this issue. Management’s complete response to the draft report is included as Appendix IV.