The objectives of this review were to determine whether the Internal Revenue Service (IRS) is complying with the provisions of the Taxpayer Bill of Rights 2 (TBOR2) (1996) related to the disclosure of collection activities to joint filers and to determine the status of corrective actions IRS management agreed to implement in response to recommendations from our Fiscal Year (FY) 1999 statutory audit. To accomplish these objectives, we interviewed Collection and Customer Service management in the National Headquarters and reviewed documentation regarding these topics.

We conducted our review during the period May through June 2000, in accordance with Government Auditing Standards. Major contributors to this report are listed in Appendix I. Appendix II contains the Report Distribution List.

The IRS Restructuring and Reform Act of 1998 (RRA 98) added 26 U.S.C.§ 7803(d)(1)(B) (Supp. IV 1998), which requires the Treasury Inspector General for Tax Administration to review and certify annually whether the IRS is complying with the requirements of 26 U.S.C. § 6103(e)(8).

The TBOR2 added 26 U.S.C. § 6103(e)(8), which gave joint filer taxpayers who are no longer married or no longer reside in the same household the right to receive information regarding the IRS’ efforts to collect delinquent taxes on their joint return liabilities. The procedures in 26 U.S.C. § 6103(e)(8) require that the IRS provide collection activity information to joint filers, in writing, if they send in a written request.

After the passage of the TBOR2, the IRS Disclosure Office issued procedures which stated that if 26 U.S.C. § 6103(e)(8) is not specifically cited in the request, the IRS can provide either oral or written responses, based on 26 U.S.C. § 6103(e)(7). This provision permits the inspection or disclosure of return information to the same individuals who filed the return, if the Secretary of the Treasury determines that such disclosure would not seriously impair federal tax administration.

In our FY 1999 audit, we could not determine whether the IRS was protecting taxpayers’ rights regarding joint filer requests for collection information because neither the IRS nor we could readily identify cases for review. This condition occurred because the IRS’ management information systems do not separately record or monitor joint filer requests. Moreover, the IRS is not required to develop a separate system that records or monitors joint filer requests.

Overall, we could not determine whether the IRS is complying with 26 U.S.C. § 6103(e)(8) requirements for responding to written requests from joint filers because both we and the IRS are still unable to readily identify joint filer requests received nationwide. The IRS has not changed its process for handling these types of requests since our FY 1999 audit. However, the IRS Collection function has initiated a study in six district offices to track the volume of written joint filer requests received. We reviewed the four written requests received by those districts during the period January to May 2000 and determined that, in two of the cases reviewed, the IRS provided the information requested. We could not make a determination for the two remaining cases because the information about the request or the response was either vague or not available for our review.

The remainder of this report discusses IRS management’s actions to implement the recommendations in our FY 1999 audit report.

In our FY 1999 review, we recommended that National Headquarters Collection management contact the appropriate Congressional committees to ensure that the IRS’ practice of allowing oral responses to written joint filer requests complies with the intent of the law. According to National Headquarters Collection management, the IRS Office of Legislative Affairs recommended no contact be made with the Congressional committees until the resolution of the Taxpayer Bill of Rights (TBOR) 2000.

The current language in TBOR 2000 allows for taxpayers to make either oral or written requests for information. The bill, however, is silent concerning whether the IRS can provide oral responses. As such, passage of the TBOR 2000 legislation may not affect the requirements of 26 U.S.C. § 6103(e)(8).

IRS management believes that oral responses provide good customer service to taxpayers because the taxpayers obtain an answer immediately. In addition, if the taxpayer wants a written reply, the IRS will provide one.

At the time of this review, no contacts had been made with the Congressional committees. However, subsequent to the issuance of a discussion draft of this report in July 2000, the Office of Legislative Affairs contacted the staff of the Joint Committee on Taxation. The Office of Legislative Affairs stated that the Joint Committee on Taxation staff was aware of the IRS’ practice of providing oral responses to taxpayers and advised Legislative Affairs that this practice was permissible, even though 26 U.S.C. § 6103(e)(8) requires that the disclosure be in writing.

Based on a recommendation contained in our FY 1999 report, National Headquarters Collection and Customer Service management agreed to conduct separate analyses by January 2001 to determine the volume of written joint filer requests received. Collection management initiated their study in January 2000, with a planned completion date of June 2000. Based upon the results of their analysis, Collection management is planning to determine whether the number of requests warrants a centralized management control process.

Through May 2000 (5 months of data), Collection Field function personnel at 3 of the 6 district offices participating in the study identified 4 written joint filer requests. The other three districts did not receive any written joint filer requests during this period. None of the four requests specifically cited 26 U.S.C. § 6103(e)(8). The IRS provided a written response to one taxpayer and responded orally to the other three taxpayers.

We relied upon information provided by local Collection management to support that an oral response was provided in three of the cases and did not verify with the taxpayers that they received a response to their requests. We reviewed the four requests and determined that, in two of the cases reviewed, the taxpayer was provided the information requested. We could not make a determination for the remaining two cases because the information about the request or the response was either vague or not available for our review.

While Collection management had begun their analysis, National Headquarters Customer Service management had not yet initiated their joint filer study. Because of the low number of joint filer requests identified during the Collection study, Customer Service management stated that they do not believe another study would be productive from a cost/benefit standpoint.

Since the IRS is still working on the corrective actions in response to our FY 1999 report, no new recommendations are being made. However, until IRS management conducts a complete analysis of the volume of written joint filer requests received, they will not be able to determine whether a centralized management control process is warranted.

Management’s Response: IRS management agreed with the observations in this report. Management’s complete response is included as Appendix III.

We could not determine whether the IRS is in compliance with 26 U.S.C. § 6103(e)(8) because both we and the IRS are still unable to readily identify written joint filer requests for review nationwide. In addition, the IRS has not changed its process for handling these types of requests since our FY 1999 audit.

The Office of Legislative Affairs stated that the Joint Committee on Taxation staff advised them that the IRS’ practice of providing oral responses was permissible, even though 26 U.S.C. § 6103(e)(8) requires that the disclosure be in writing.

National Headquarters Collection management is conducting a joint filer study, but Customer Service management had not yet begun their study. Until IRS management conducts a complete analysis of the volume of written joint filer requests received, they will not be able to determine whether a centralized management control process is warranted.

Maurice S. Moody, Associate Inspector General for Audit (Headquarters Operations and Exempt Organizations Programs)

Nancy Nakamura, Director

Jeffrey Jones, Audit Manager

Peggy Anketell, Auditor

Theresa Berube, Auditor

Gwendolyn Green, Auditor

Don Martineau, Auditor

Deputy Commissioner Operations C:DO

Chief Communications and Liaison CL

Chief Operations Officer OP

Office of the Chief Counsel CC

National Taxpayer Advocate TA

Director, Governmental Liaison and Disclosure CL:GLD

Director, Legislative Affairs CL:LA

Assistant Commissioner (Collection) OP:CO

Assistant Commissioner (Customer Service) OP:C

Assistant Commissioner (Examination) OP:EX

Office of Management Controls CFO:A:M

Director, Office of Program Evaluation and Risk Analysis M:O

Audit Liaisons:

The response has been removed due to its size. To see the complete response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.