Treasury Inspector General for Tax Administration
October 18, 2012
TIGTA - TIGTA - 2012-57
Contact: David Barnes
WASHINGTON – The Internal Revenue Service (IRS) needs to timely and accurately post audit results to taxpayer accounts and protect the statutory period for assessing tax deficiencies, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
This audit was initiated to determine whether audits performed by the IRS’s Small Business/Self-Employed Division are timely and accurately processed, and to ensure that the statutory period for assessing taxes is protected.
TIGTA analyzed Fiscal Year 2011 audit closures and found 229 audits with short statute expiration dates that should have been sent for expedited processing in accordance with established procedures. These audits had deficiencies totaling $4.9 million. TIGTA also found that procedures were not followed to expedite the processing of 891 of 1,377 large dollar audits so actions could be initiated to collect the $100,000 or more that the taxpayers agreed they owed. This, in turn, cost the Federal Government approximately $324,000 of lost interest revenue. In addition, TIGTA identified three audits with deficiencies totaling approximately $134,000 that were incorrectly posted to taxpayer accounts.
Further, 80 employees had access to sensitive command code combinations that gave them capabilities such as inputting adjustments to taxpayer accounts and changing key taxpayer account information, including addresses. TIGTA found that the IRS does not have adequate controls over the employees’ access to and use of such combinations. As a result, there will continue to be a risk of potentially fraudulent transactions occurring and going undetected.
“The IRS has a responsibility to conduct its audit work in a way that is both accurate and timely,” said J. Russell George, the Treasury Inspector General for Tax Administration. “Any failure to do so can create an unnecessary burden on taxpayers and compromise the integrity of the tax system,” he added.
TIGTA made six recommendations to the IRS, including establishing procedures to ensure that all audits with short statute expiration dates and large dollar deficiencies are timely and accurately assigned and processed in accordance with applicable procedures. Procedures also need to be established to ensure that accurate information is posted to taxpayer accounts and employees’ use of sensitive command code combinations is monitored.
IRS management agreed with five recommendations and partially agreed with one recommendation. IRS management stated that they plan to implement monitoring procedures to ensure that all audits with short statute expiration dates and large dollar deficiencies are timely and accurately assigned and processed in accordance with applicable procedures. In addition, the IRS stated that training was implemented to ensure appropriate monitoring and use of command codes.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.
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