TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Highlights

FISCAL YEAR 2016 STATUTORY REVIEW OF RESTRICTIONS ON DIRECTLY CONTACTING TAXPAYERS

Final Report issued on August 17, 2016

Highlights of Reference Number:  2016-30-067 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.

IMPACT ON TAXPAYERS

The direct contact provisions of Internal Revenue Code (I.R.C.) Section (§) 7521 generally require IRS personnel to stop a taxpayer interview whenever a taxpayer requests consultation with a representative and prohibits IRS personnel from bypassing a qualified representative without supervisory approval.

WHY TIGTA DID THE AUDIT

This audit was initiated because TIGTA is required to annually report on the IRS’s compliance with the direct contact provisions of the I.R.C.  The overall objective of this review was to determine whether the IRS complied with legal guidelines addressing the direct contact of taxpayers and their representatives as set forth in I.R.C. §§ 7521(b)(2) and (c).

WHAT TIGTA FOUND

The IRS has a number of policies and procedures in place to help ensure that taxpayers are afforded the right to designate an authorized representative to act on their behalf in dealing with IRS personnel in a variety of tax matters.  In addition, the IRS has a process to handle the review and disposition of taxpayer allegations of direct contact violations.

Each year, TIGTA focuses on one IRS office or function that interacts with taxpayers and their representatives on a routine basis.  For this year’s review, TIGTA analyzed the extent to which revenue agents in the Small Business/ Self‑Employed Division’s Field Examination function are complying with the direct contact provisions of the I.R.C. during interactions with taxpayers or their representatives.

TIGTA obtained an extract of electronic audit workpapers from the Correspondence Examination Automation Support system for field examinations closed in Fiscal Year 2015.  TIGTA received more than three million documents from this extract, which represented workpapers from more than 111,000 taxpayer audits.

Using computer software, TIGTA systemically searched these documents for key words that would indicate a potential direct contact violation had occurred.  The systemic search initially identified 493 documents from 391 field examination cases that contained information indicating potential direct contact.  TIGTA reviewed select examination case information in each document and did not identify any revenue agent violations of the direct contact provisions of I.R.C. §§ 7521(b)(2) and (c) during the fiscal year.

Additionally, in the IRS’s E-trak database, which tracks taxpayer and tax practitioner complaints, there were eight cases closed in Fiscal Year 2015 with allegations that IRS employees violated the direct contact provisions of I.R.C. § 7521.  However, in most of these cases, the allegations made by the taxpayers or their representatives were not substantiated after further investigation.

WHAT TIGTA RECOMMENDED

TIGTA made no recommendations in this report.  However, key IRS officials reviewed this report prior to its issuance and agreed with the facts and conclusions presented.

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2016reports/201630067fr.pdf.

 

Phone Number   /  202-622-6500

E-mail Address  /  TIGTACommunications@tigta.treas.gov

Website             /  https://www.treasury.gov/tigta