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Treasury Inspector General for Tax Administration

Press Release

October 23, 2012
TIGTA - TIGTA - 2012-59
Contact: David Barnes
(202) 622-3062

Business Tax Assessments Increasing; IRS Not Always Following Proper Procedures

WASHINGTON -- As the number of Internal Revenue Service (IRS) assessments against business taxpayers that have not filed required tax returns increases, a new report finds that evidence was sometimes not available to support the basis for these assessments. Further, in some instances, the taxpayers were not provided sufficient time to respond to proposed assessments.

Those are the findings of a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS has the ability to prepare returns and assess taxes under the authority of Internal Revenue Code (I.R.C.) Section (§) 6020(b) when business taxpayers do not file required returns or file false or fraudulent returns. TIGTA conducted its audit to evaluate the impact of the IRS Collection Field function’s use of I.R.C. § 6020(b) authority on taxpayer compliance and to determine whether employees are using the proper procedures to assess tax liabilities.

TIGTA’s review of a statistical sample of 96 6020(b) assessments found that revenue officers (ROs) followed many of the required procedures. However, in 20 (21 percent) of the cases, TIGTA found no evidence for the basis of assessments.

Also, in 10 percent of the cases, ROs did not allow, or there was no evidence to support the allowance of, the required 30 calendar days for taxpayers to respond to proposed assessments prior to the IRS processing the 6020(b) returns.

“Since FY 2009, the number of these assessments entering the collection stream has increased by 58 percent,” said J. Russell George, Treasury Inspector General for Tax Administration. “I am concerned, however, that in fully 20 percent of the cases reviewed by TIGTA, revenue officers did not document the basis of the assessment as required.”

TIGTA recommended that the Director, Enterprise Collection Strategy, Small Business/Self-Employed Division develop internal controls to: 1) help ensure that ROs properly document a complete explanation for the basis of 6020(b) assessments; and 2) allow taxpayers 30 calendar days to respond to proposed assessments before submitting returns for processing. TIGTA also recommended that the IRS establish a methodology to compare actual results with management’s anticipated benefit of improving filing compliance when I.R.C. § 6020(b) authority is used for business taxpayers.

IRS officials agreed with TIGTA’s recommendations and plans to initiate changes to the Integrated Collection System to help ensure that ROs document the required basis for the 6020(b) assessment and to help ensure that they allow taxpayers 30 calendar days to respond to proposed assessments before submitting the prepared returns for processing. The IRS also plans to request a research project to measure the effectiveness of its I.R.C. § 6020(b) program on future filing compliance of business taxpayers and weigh the results against ultimate case resolutions to determine if any program changes are warranted.

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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