Treasury  Inspector General for Tax Administration

Inspections and Evaluations

Highlights

Highlights of Report Number:  2016-IE-R008 to the Internal Revenue Service Chief, Appeals, and Commissioner, Small Business/Self-Employed Division.

WHY TIGTA DID THIS STUDY

This project was initiated to determine whether the IRSís offer in compromise (OIC) public inspection files were complete (i.e., available at designated locations), to assess whether the IRSís estimate of the costs to administer the files is reasonable, and to identify any potential efficiencies or cost savings. 

WHAT TIGTA RECOMMENDED

TIGTA recommended that the Commissioner, Small Business/Self-Employed Division, develop processes to convert paper-based OIC public inspection files to an electronic format to better manage the retrieval, movement, retention, and destruction of files.  In addition, the IRS should consider the feasibility of creating an online public website that provides access to all accepted OIC files while ensuring that sensitive information is properly redacted.  TIGTA also recommend that the Commissioner, Small Business/ Self‑Employed Division, and the Chief, Appeals, should develop additional policies and procedures to support the OIC public inspection file process and ensure that public inspection files meet redaction requirements.  These procedures should define the responsibilities of individuals who create the public inspection file.  The Commissioner, Small Business/ Self‑Employed Division, should partner with the Chief, Appeals, to strengthen oversight of the public inspection files by participating in joint oversight reviews.

In response to the report, IRS officials agreed with our recommendations.

Issued on August 18, 2016

THE OFFER IN COMPROMISE PUBLIC INSPECTION FILES SHOULD BE MODERNIZED

IMPACT ON TAXPAYERS

The Internal Revenue Code permits public inspection of accepted OIC case files.  Once an OIC is accepted, the IRS creates a hard‑copy public inspection file that is shipped to one of seven locations around the country based on the taxpayerís geographical residence.  To view the files, individuals must call the IRS in advance and request an appointment.  If public inspection files are not properly redacted, public inspection sites expose sensitive taxpayer information to the risk of unauthorized disclosure and put taxpayers at risk of identity theft.  TIGTA believes that a centralized website available to the public presents an opportunity to decrease taxpayer burden and costs to the IRS while increasing transparency.

WHAT TIGTA FOUND

In the wake of a series of high-profile scandals in the early 1950s, the IRS was required to provide access to information about accepted OICs to the public.  Although the IRS now accepts 20 times more OICs than it did when the offers first became subject to public inspection, the activity continues to rely on labor-intensive procedures to store the files in a decentralized, paper-based system.  In this current environment, it is a challenge for IRS to ensure that paper‑based files are available for review at designated locations and properly redacted of sensitive taxpayer information.  When this review began, the IRS had not evaluated options to modernize its delivery method to meet shifting taxpayer preferences, improve access to information, and better protect sensitive information.  TIGTA identified several improvements that are needed to ensure that the activity is managed more efficiently and effectively.  During the course of this review, the IRS updated written procedures related to the public inspection files, expanded the use of automated redaction tools, and initiated the evaluation of alternative file storage methods.

READ THE FULL REPORT

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

https://www.treasury.gov/tigta/iereports/2016reports/2016ier008fr.pdf

 

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

Phone Number:   202-622-6500

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