TreasuryInspector General for Tax
Administration
Semiannual
Report to Congress
Table of Contents
Inspector
General’s Message to Congress ............................................................................ 1
TIGTA’s Highlights .................................................................................................................. 3
TIGTA’s
Profile ........................................................................................................................ 7
Statutory Mandate .............................................................................................................. 7
Organizational Structure
...................................................................................................... 10
Authorities ......................................................................................................................... 10
Promote
the Economy, Efficiency, and Effectiveness of Tax Administration ....................... 11
Systems Modernization of the Internal
Revenue Service ........................................................ 11
Tax Compliance Initiatives .................................................................................................. 14
Security of the Internal
Revenue Service .............................................................................. 18
Providing Quality
Taxpayer Service Operations .................................................................... 20
Human Capital ................................................................................................................... 24
Erroneous and Improper
Payments ...................................................................................... 25
Taxpayer Protection and
Rights ........................................................................................... 27
Processing Returns and Implementing Tax Law Changes During
the Tax Filing Season .......... 27
Using
Performance and Financial Information for Program and Budget Decisions .................. 31
Protect the Integrity of Tax Administration ............................................................................ 35
Internal
Revenue Service Employee Misconduct ................................................................... 38
Unauthorized Accesses........................................................................................................
40
Assaults and Threats .......................................................................................................... 41
Contract
Fraud ................................................................................................................... 41
Bribery .............................................................................................................................. 42
Other
External Investigations ............................................................................................... 43
Congressional
Testimony..........................................................................................................
47
Awards
and Special Achievements .......................................................................................... 49
Audit
Statistical Reports .......................................................................................................... 51
Reports
with Questioned Costs ............................................................................................ 51
Reports with
Recommendations that Funds Be Put to Better Use .......................................... 52
Reports with Additional
Quantifiable Impact on Tax Administration ....................................... 53
Investigations
Statistical Reports
........................................................................................... 55
Significant
Investigative Achievements ................................................................................. 55
Status of Closed
Criminal Investigations ............................................................................... 56
Criminal Dispositions ........................................................................................................... 56
Administrative
Dispositions on Closed TIGTA Investigations ................................................. 56
Appendices
Appendix
I – Statistical Reports – Other ................................................................................ 57
Audit Reports with Significant
Unimplemented Corrective Actions ......................................... 57
Other
Statistical Reports ..................................................................................................... 64
Appendix
II – Audit Products ................................................................................................... 65
Appendix
III – TIGTA’s Statutory Reporting Requirements ................................................ 71
Appendix
IV – Section 1203 Standards ................................................................................... 79
Appendix
V – Data Tables Provided by the Internal Revenue Service ................................ 81
Internal Revenue Service
Memorandum ............................................................................... 81
Report of Employee
Misconduct, Summary by Disposition Groups ......................................... 82
Report
of Employee Misconduct, National Summary ............................................................. 83
Summary of Substantiated
I.R.C. §
1203 Allegations
Recorded in ALERTS ........................... 84
List
of Abbreviations ................................................................................................................ 85
Inspector General’s
Message to Congress
I
am honored to present the Treasury Inspector General for Tax Administration’s (TIGTA)
Semiannual Report to Congress for the time period covering April 1, 2008 to
September 30, 2008. As required by the Inspector General Act of 1978, as
amended, we submit this report summarizing our independent audit and
investigative oversight of tax administration, including Internal Revenue
Service (IRS) activities, systems, and operations. TIGTA completed 179 audits as of the close of
Fiscal Year 2008 that identified $2.4 billion in financial accomplishments.
Three
critical challenges affecting the IRS remain a priority for TIGTA: modernization of its aging computer systems;
expanding taxpayer compliance; and protecting the secured personal and
financial information of millions of taxpayers.
During
this time of economic crisis, citizens are relying on the Federal Government to
protect our Nation’s economic interests.
Now, more than ever, the IRS must focus efforts to close the Tax Gap –
the difference between the amount of tax that taxpayers should pay and the
amount that is paid voluntarily and on time.
In audits conducted over this reporting period, TIGTA found that the IRS
has neglected to consistently assess penalties on non-compliant businesses and
individuals. Additionally, TIGTA noted
that the IRS generally does not penalize taxpayers for making false statements
when filing official tax forms. The IRS
must aggressively address the lack of taxpayer compliance and hold those in
violation accountable for their actions.
In
the process of ensuring taxpayer compliance, IRS agents sometimes encounter
threats and other potentially dangerous situations. I am pleased to report that special agents of
TIGTA’s Office of Investigations now have the
authority to provide armed escorts to IRS employees thanks to the recent
passage of the Improving Government Accountability Act (P.L. 110-409). The President signed it into law on October 14, 2008.
While
the IRS has experienced positive results with its Modernized
e-File System, the overall modernization effort continues to face challenges
with adequate funding and maintaining of the projected 15-year system overhaul
plan. Currently, the program is in its
tenth year; however, it has not met the goals set forth in the initial
timeline. System glitches, budget
shortfalls, and increased taxpayer activity have negatively impacted the
project schedule.
Further,
each year, millions of taxpayers entrust the IRS with sensitive financial and
personal data. TIGTA remains committed
to assisting the IRS by assessing current practices and finding innovative
means to safeguard this information.
This year, TIGTA recommended that the IRS implement additional controls
at all levels of its computer environment to maintain adequate security over
sensitive taxpayer data. Secured
Internet connections, system access restrictions and monitoring, and emergency
preparedness and disaster recovery must be strengthened.
The
2008 Filing Season was unique for the IRS.
During this busiest time of the year, the IRS also processed and
distributed funds in accordance with the Recovery
Rebates and Economic Stimulus for the American People Act of 2008. In
addition to the expected filing rate, an estimated 20 million individuals who
normally would not file a tax return did so.
Despite this, the IRS achieved a high level of accuracy in calculating
the 129.1 million economic stimulus payments.
TIGTA identified less than a half percent inaccuracy rate in their
calculations.
In
addition to the critical challenges facing the IRS, TIGTA continues to review
and make recommendations for providing quality taxpayer service operations,
eliminating erroneous and improper payments, curtailing unauthorized access to
IRS information and systems, and using performance and financial information
for program and budget decisions.
While
TIGTA promotes the stewardship of the taxpayer dollar through our audit and
investigative efforts, we also look internally to ensure that our operations
are serving the taxpaying public in the most economical, efficient, and
effective manner. As a result, we have
expanded our evaluative and reporting capabilities with the new Office of
Inspections and Evaluations. This office
provides an additional level of oversight and allows for flexibilities in evaluating
certain IRS activities. Some notable
reports already published by this new office involve the use of religious
compensatory time for Federal employees, IRS’s security measures for personally
identifiable information, and improvements to strengthen lockbox bank
oversight.
I
look forward to continuing our relationship with Congress. I want to
acknowledge the extraordinary efforts of the IRS and of our auditors,
investigators, evaluators, attorneys, and support personnel who work tirelessly
to ensure our Nation’s tax system is operating efficiently, effectively and
fairly.
Sincerely,
J. Russell George
Inspector
General
TIGTA’s Highlights
The following
table shows TIGTA’s statistical highlights for this
semiannual reporting period, as well as all of Fiscal Year 2008.
|
Number of Audit Reports Completed |
Cost Savings Identified |
Increased/ Protected Revenue |
No. of Investigations Opened |
No. of Investigations Closed |
Regulations/ Legislative Requests Reviewed |
April 1, 2008 – Sept. 30,
2008 |
96 |
$350 million |
$1.4 billion |
1,826 |
1,895 |
284 |
FY 2008 |
179 |
$350 million |
$1.6 billion |
3,554 |
3,690 |
459 |
Examples of high profile cases from the
Office of Investigations:
Randy Nowak Charged in Murder for Hire
Plot of IRS Revenue Officer
In
July 2008, Randy Nowak was charged in a criminal complaint in
According to court documents, in June 2008, Nowak, owner of RJ Nowak Enterprises, Inc., had been asking around to find someone to kill an IRS employee. Nowak sought to kill the IRS employee because she was auditing Nowak and he stood to lose $4,000,000 that he had hidden offshore. Nowak had an outstanding liability to the IRS of approximately $300,000 related to his personal income tax obligations and had four years of outstanding corporate tax returns for his business that he had not filed.
In
July 2008, Nowak met with an undercover Federal Bureau of Investigation Task
Force agent posing as a hit man and paid him $10,000 as a down payment for
killing the IRS Revenue Officer. Nowak
also asked the undercover agent if he would be willing to burn down the IRS’s
office in
IRS Employee Sentenced for Unauthorized
Accesses of Celebrities’ Accounts
In
August 2008, IRS employee John Snyder was sentenced in
According to court documents, between 2003 and 2008, Snyder accessed the accounts of at least 202 taxpayers for which no business-related purpose could be identified. All but five of the taxpayers consisted of celebrities, spouses of these celebrities, sports figures, and well-known individuals. Snyder confessed to making the unauthorized accesses, stating that he did so out of curiosity.
TIGTA’s Strategic Enforcement Division detected the
unauthorized accesses during routine analysis of suspicious accesses by IRS
employees.
Former IRS Employee Pleads Guilty to
Receipt of More Than $9 Million in
According to a Department of Justice (DOJ) press release, in June 2008, former IRS employee Robert Steven pleaded guilty to receipt of stolen property and conspiracy to commit money laundering in connection with a property tax refund scheme in which millions of dollars were stolen from the District of Columbia Office of Tax and Revenue.
From
1990 to 2007, 67 deposits were made in the form of fraudulently obtained
Examples of accomplishments from the
Office of Audit:
Economic Stimulus
Payments
TIGTA reviewed a
number of phases in IRS’s efforts to issue economic stimulus payments to more
than 130 million households. The review
included a series of audit reports designed to provide Congress with an ongoing
status of the IRS’s execution of the more than $100 billion in payments.
The first report
focused on the IRS’s efforts to plan for the implementation of the stimulus
payments and its actions through April 1, 2008, and found their efforts
generally sufficient. The second report
dealt with the impact that the economic stimulus program had on toll-free telephone
access for the 2008 Filing Season.
Lastly, the third report involved evaluating the IRS’s processes for
computation of the payments and the adequacy of controls to prevent ineligible
individuals from receiving payments.
Most of the
differences and findings of TIGTA’s reports resulted
from business decisions made by the IRS in concurrence with the Department of
the Treasury, taxpayer errors, and/or tax software errors.
Questionable Refund
Program
TIGTA found that
the number of falsified tax returns, filed in an attempt to obtain fraudulent
tax refunds, has increased dramatically between 2006 and 2007. TIGTA estimates the IRS has issued
approximately $1.6 billion in fraudulent tax refunds during this two-year
timeframe.
The Questionable
Refund Program is a nationwide program designed to detect and stop fraudulent
claims for refunds on income tax returns.
For the 2006 Filing Season, the IRS detected and stopped $188 million in
fraudulent refunds, but failed to stop an estimated $894 million in fraudulent
refunds because its detection system was not operational.
IRS Modernized Systems
were Deployed with Known Security Vulnerabilities
Key components of
the Customer Account Data Engine (CADE) and the Account Management Services (AMS)
have been deployed with known security weaknesses in the controls over
sensitive data protection, system access, and disaster recovery. The CADE will provide the foundation for
managing all taxpayer accounts and will replace existing tax processing systems
and AMS will provide faster and improved access by employees to taxpayer
account data. TIGTA found that the IRS
has established policies and procedures for security and privacy requirements,
but it did not follow those guidelines during the planning and design phases
for both systems. The report also found
that IRS officials did not carry out their responsibilities for ensuring the
identified weaknesses had been fully addresses prior to deployment.
TIGTA's Profile
TIGTA provides independent oversight of Treasury Department
matters involving IRS activities, the IRS Oversight Board, and the IRS Office
of Chief Counsel. Although TIGTA is
placed organizationally in the Treasury Departmental Offices and reports to the
Secretary of the Treasury and to Congress, TIGTA functions independently from
the Departmental Offices and all other offices and bureaus within the
Department.
TIGTA’s work is devoted to all aspects of
activity related to the Federal tax system as administered by the IRS. By identifying and addressing IRS’s
management challenges, implementing the President’s Management Agenda and
the priorities of the Department of the Treasury, TIGTA protects the public’s
confidence in the tax system.
TIGTA’s organizational structure is comprised of
five functional offices: the Office of
Audit; the Office of Investigations; the Office of Inspections and Evaluations;
the Office of Chief Counsel; and the Office of Mission Support (see chart on
page 10).
TIGTA conducts
audits and investigations designed to:
· Promote the economy, efficiency, and effectiveness of tax
administration; and
· Protect the integrity of tax administration.
Office of Audit
The Office of
Audit (OA) identifies opportunities to improve the administration of the
nation’s tax laws by conducting comprehensive, independent performance and
financial audits of IRS programs, operations, and activities to:
The Audit
program is comprised of reviews mandated by statute or regulations, as well as
reviews identified through Audit’s planning and evaluation process. The OA strategically evaluates IRS programs, activities
and functions so that resources are expended in areas of highest vulnerability
to the nation’s tax system. TIGTA’s OA program is presented in the Annual Audit Plan
which is published at the beginning of each fiscal year.
Office of Investigations
The Office of
Investigations (OI) is charged with protecting the integrity of tax
administration. OI investigates
allegations related to fraud, waste, abuse, and mismanagement involving IRS
programs and operations, and IRS employee misconduct. OI also strives to detect and prevent IRS
internal misconduct and external manipulation of tax administration through its
proactive investigative initiatives program and presentations to IRS employees,
tax practitioners, and other community groups. TIGTA’s
investigations are based on a progressive performance model consisting of three
primary areas of responsibility:
employee integrity; employee and infrastructure security; and external
attempts to corrupt tax administration.
The use of the performance model has allowed OI to direct its crucial
resources to the most vulnerable areas.
Office of Inspections and Evaluations
TIGTA’s Office of Inspections and Evaluations
(I&E) provides TIGTA with additional flexibility, capacity, and capability
to produce value-added products and services to improve tax administration and
promote good government. A
proof-of-concept pilot was tested in FY 2006.
The new organization, with a staff of eight, was formally
established in March 2008, with the intent to complete responsive, timely, and cost-effective inspections and evaluations of
IRS challenge areas by reviewing critical systems, programs, projects, and
activities. I&E will provide a range of specialized services and products
related to tax administration, including quick response reviews, on site
inspections, and in-depth evaluations of major agency functions, activities or
programs.
Inspections will usually be more limited in scope and will be completed
in a more compressed period than a traditional audit. Evaluations are expected to be both broader
in scope and longer-term reviews that focus on complete programs or major
components of a program.
Inspections do the
following:
·
Provide
factual and analytical information;
·
Monitor
compliance;
·
Measure
performance;
·
Assess
the effectiveness and efficiency of programs and operations;
·
Share
best practices; and
·
Inquire
into allegations of fraud, waste, abuse, and mismanagement.
Evaluations often
result in recommendations to streamline operations, enhance data quality, and
minimize inefficient and ineffective procedures. As a learning organization,
I&E seeks to expand capacity to create results by nurturing new and
expansive approaches to thinking, while maintaining independent and
objective oversight of IRS programs and operations. Its work is not a substitute for audits and
investigations; in fact, its findings may result in subsequent audit and/or
investigations.
Office of Chief Counsel
The Office of
Chief Counsel provides legal guidance, advice, and disclosure services to
support TIGTA’s accomplishment of its mission. The Office is comprised of attorneys,
analysts, and support personnel providing a full range of legal and disclosure
related services to the other functions.
The attorneys in
the legal branches provide independent legal analysis, advice, and assistance
to TIGTA’s senior management, and the Offices of
Investigations, Audit, Inspections and Evaluations, and Mission Support to
accomplish TIGTA’s statutory mandate to promote the
economy, efficiency and effectiveness of tax administration while protecting
the integrity of tax administration. The
legal staff reviews proposed or existing regulations and laws affecting tax
administration and their impact on TIGTA and is involved in all legal matters
affecting TIGTA and its stakeholders. As
agency counsel, the legal staff manages TIGTA’s
ethics program to ensure high ethical standards for all TIGTA employees;
reviews claims, debt collection, and procurement activities; serves as counsel
in administrative litigation; and assists the Department of Justice in
litigation in which TIGTA is a party or witness.
The analysts in
the disclosure branch process all Freedom of Information Act and Privacy Act
requests received by TIGTA, review all referrals to law enforcement agencies,
determine the disclosability of TIGTA’s
final audit reports for posting on TIGTA’s Web site,
and prepare testimony authorizations for TIGTA employees who are subpoenaed or
requested to testify on matters of official business.
Office of
The Office of
Mission Support delivers integrated management services to all of TIGTA’s business units.
This includes all aspects of human capital planning and support, budget
formulation and execution, information technology services, and administrative
operations. The Office of Mission
Support also supports TIGTA’s mission by facilitating
strategic planning, coordinating performance management as mandated by the
Government Performance and Results Act, and ensuring compliance with Inspector
General Act reporting requirements.
Organizational
Structure
Authorities
TIGTA has all of
the authorities granted under the Inspector General Act of 1978, as amended.[1] TIGTA has access to tax information in the
performance of its tax-administration responsibilities. TIGTA also has the obligation to report
potential criminal violations directly to the Department of Justice. TIGTA and the Commissioner of Internal
Revenue have established policies and procedures delineating responsibilities
to
investigate potential criminal offenses under the
internal revenue laws. In addition, the IRS
Restructuring and Reform Act of 1998 (RRA 98)[2]
amended the Inspector General Act of 1978 to give TIGTA statutory
authority to carry firearms, execute and serve search and arrest warrants,
serve subpoenas and summonses, and make arrests as set forth in Section 7608(b)(2) of the Internal
Revenue Code (I.R.C.).
Promote the Economy, Efficiency, and Effectiveness of Tax Administration
TIGTA’s Office of Audit (OA) strives to promote
the economy, efficiency, and effectiveness of tax administration. TIGTA provides recommendations to improve IRS
systems and operations while ensuring fair and equitable treatment of
taxpayers. TIGTA’s
comprehensive, independent performance and financial audits of IRS programs and
operations primarily address mandated reviews and high-risk challenges facing
the IRS.
The IRS’s
implementation of audit recommendations results in cost savings and increased
or protected revenue, reduction of taxpayer burden, and protection of taxpayer
rights and entitlements, taxpayer privacy and security, and IRS resources.
Each year, TIGTA
identifies and addresses the major management challenges facing the IRS. TIGTA places audit emphasis on statutory
coverage required by RRA 98, and areas of concern to Congress, the Secretary of
the Treasury, the Commissioner of Internal Revenue, and other key stakeholders.
The following summaries
highlight significant audits completed in each of the above areas of emphasis
during this six-month reporting period.
Systems
Modernization of the Internal Revenue Service
The Business
Systems Modernization program is a complex effort to modernize IRS technology
and related business processes.
According to the IRS, this effort involves integrating thousands of
hardware and software components while replacing outdated technology and
maintaining the current tax system. The IRS’s goal of providing high-quality, efficient, and
responsive information services to its operating divisions is heavily dependent
on modernizing its core computer business systems while maintaining the
existing systems. It also relies on the
security of those systems, the buildings that house those systems, and the
safety of the people who operate them.
Annual
Assessment of the Business Systems Modernization Program
The IRS has achieved
success when the Modernization program followed its systems development and
management guidance. The program has
progressed more effectively with the implementation of the Enterprise Services
organization’s management components, and with the development of the
Information Technology Modernization Vision and Strategy (MVS) as a map for
future development. However, the IRS and
its contractors must overcome significant barriers to successfully implement
the program goals. The Modernization
program and processes have not progressed enough to eliminate its material
weakness designation, and further reductions in funding could jeopardize the
program’s ability to deliver planned improvements.
The IRS originally estimated that the
Modernization program would last up to 15 years and incur contractor costs of
approximately $8 billion. According to
the IRS’s original plan, the Modernization program would be past the halfway
point by Calendar Year (CY) 2008. The
program is in its tenth year and has received approximately $2.5 billion for
contractor services, plus an additional $310 million for internal IRS
costs. The IRS planned to spend $267
million to manage the Modernization program in Fiscal Year (FY) 2008.
TIGTA provided an assessment
of the Modernization program’s status and accomplishments through FY 2008 but
did not offer any recommendations. The
IRS responded that it was pleased that the annual assessment recognized the
progress in implementing Modernization projects, validating improvements in
contracting procedures affecting the Modernization program, and documenting
work to institutionalize the MVS. The
IRS also stated that it has taken additional steps to improve Modernization program
performance, including developing strategies to confront risks and issues to
future system releases, efforts to address human capital challenges and
succession planning, and developing and implementing a methodology for
quantitatively measuring and reporting on project scope.
Report Reference No. 2008-20-129
Modernized e-File System
The Modernized
e-File System replaces the current IRS tax return filing technology with a
modernized, Internet-based electronic filing platform. So far, it has successfully processed electronically filed (e-filed) tax returns for corporations, partnerships, and exempt
organizations. The number of tax returns
filed through the Modernized e-File System increased
127 percent in 2007 to approximately 2.23 million from 982,000 in 2006. This System facilitates taxpayer account
processing and also allows e-filed tax
information to be accessed for use in tax administration compliance activities
by the IRS business operating divisions.
TIGTA found that the IRS does not have a formal process for identifying,
reporting, and resolving issues related to tax returns processed by the
Modernized e-File System, nor does it have a process for submitting and
tracking issues requiring attention by the Wage and Investment Division’s
Submission Processing function and the Electronic Tax Administration office.
In addition, available front-end tax return validation
controls were not being used. These
controls can prevent unnecessary tax return processing, error resolution
activity by the Submission Processing function, and correspondence with
taxpayers.
The Modernized e-File System also makes e-filed tax return data available to the business operating
divisions and allows authorized users to access, print, and download
tax return information. However, because
of system limitations, the Large and Mid-Size Business Division and the Tax
Exempt and Government Entities Division use their own applications to access Modernized e-File System filed tax return data. The Small Business/Self-Employed Division
does not use the Modernized e-File System for tax return control, delivery, or
examination processes, nor does it capture cost data for printing, shipping, and handling of tax
returns filed using the Modernized e-File System.
TIGTA
recommended that the IRS:
1)
Develop
a formal process for identifying, reporting, and resolving Modernized e-File
System application processing issues that require subsequent tax return and
account adjustment activity;
2)
Perfect
the validation controls in the Modernized e-File System to verify that
taxpayers file the correct tax form based on their established filing election;
and
3) Coordinate the
capabilities of the Enterprise
Return Retrieval System and the Small
Business/Self-Employed Division’s Technology and Data Integration Plan into the
Information Technology MVS.
IRS management agreed with the recommendations and has planned
appropriate corrective actions.
Report Reference No.
2008-20-122
Customer
Account Data Engine Project Management Practices
The IRS has developed
a strategy for a phased replacement of its computer systems to better support
today’s tax laws, tax policies, and taxpayer needs. As the centerpiece of the IRS’s Modernization
program, the CADE is an essential project in this strategy. The modernized CADE database will allow the
IRS to update taxpayer accounts, support account settlement and maintenance,
and process refunds daily, which will contribute to improved service to
taxpayers. However, long-term objectives and the ability to adjust for unplanned
initiatives have challenged the IRS’s ability to meet the goal of having the
CADE perform as the Modernization program’s centerpiece.
Although the
project team has made progress to ensure that CADE releases contain a
reasonable scope of work and sufficient staffing, long-term issues continue to
challenge the CADE project. The CADE’s ability to access historical taxpayer account
information currently residing on the Individual Master File must be resolved
to enable requirements for soon-to-be- developed releases. Additionally, with the expectation of
significant increases in the CADE taxpayer population, processing capacity and
data storage meeting the future operational requirements need to be considered.
The processing
of payments related to the Economic
Stimulus Act of 2008[3] put the CADE Release 4 Project Schedule
at risk. In January 2008, the IRS
engaged the PRIME contractor[4] to conduct an impact analysis and
develop a preliminary design assessment for the work needed for the CADE to
process economic stimulus payment checks.
The project team included the work related to this effort in the scope
of Release 4 with a task order modification.
However, the IRS did not have funds appropriated for this work until the
effort was already underway.
TIGTA
recommended that the IRS:
1)
Ensure
that a Historical Data Conversion solution is in place to enable the CADE to
process transactions related to issues such as balance-due conditions;
2)
Develop
an updated estimate of the processing and storage requirements (including the
related costs) to support the long-term objectives and goals of CADE
operations; and
3)
Use
a standardized process, including measurement and reporting to appropriate
parties, to determine the effect on the CADE project’s scope, cost, and
delivery schedules when unplanned initiatives are mandated for implementation.
IRS management agreed with the recommendations and has planned
appropriate corrective actions.
Report Reference No. 2008-20-151
Tax
Compliance Initiatives
Tax compliance initiatives include administering tax regulations,
collecting the correct amount of tax for businesses and individuals, and
overseeing tax-exempt and government entities for compliance. Increasing voluntary compliance and reducing
the Tax Gap are currently the focus of IRS initiatives. Nevertheless, the IRS is facing significant
challenges in obtaining complete and timely data, as well as developing the
methods necessary for interpreting the data.
The IRS must continue to seek accurate measures for the various
components of the Tax Gap and the effectiveness of the actions taken to reduce
it.
The Department of
the Treasury and the IRS developed a multiyear strategy for improving
compliance and reducing the Tax Gap.
However, the strategy is dependent on overcoming several high-risk
challenges. The strategy is
significantly more comprehensive and detailed than previous efforts. The strategy identifies seven components that
support a multifaceted approach to reducing the Tax Gap: reducing opportunities for evasion; making a
multiyear commitment to research; continuing improvements in information technology; improving compliance activities;
enhancing taxpayer service; reforming and simplifying the tax law; and
coordinating with partners and stakeholders.
The long-term success of the strategy will, in large part, be dependent
on addressing several risk factors, some of which are beyond the control of the
IRS. As a result, broader strategies and
better research may be needed to determine what actions are most effective in
addressing noncompliance.
IRS
Compliance Trends
During FY 2007, many of the IRS’s
compliance activities increased, resulting in improved collections. Since FY 2000, the IRS has reversed
numerous downward trends in compliance activities that had occurred in prior
years. Some of the positive changes
might be attributable to management emphasis on Collection and Examination
function programs. Over the last few
years, the Small Business/Self-Employed Division has implemented reengineering
and organizational changes, and both the Collection and Examination functions
continue to study ways to improve their workload selection.
The level of
compliance activities and the results obtained in many Collection functional
areas showed a continued increase. Use
of collection enforcement tools was greater and enforcement revenue collected
continued to increase (to $59.2 billion), but the total dollar amount of
uncollected liabilities increased to $290 billion. By the end of FY 2007, the gap between new
delinquent account receipts and closures had widened by 63 percent.
During FY 2007,
the overall percentage of tax returns examined increased by almost
9 percent, even though the number of field examiners decreased by just
over 4 percent. In addition, the
overall percentage of tax returns examined was 2 percent higher than in
FY 1998. The number of individual
tax returns examined increased. However,
83 percent were conducted via
correspondence examinations, which are usually not as comprehensive as face‑to‑face
examinations. Also in FY 2007, the
number of corporate tax returns that were examined increased by just over
4 percent, after decreasing 1 percent in FY 2006. However, this number has decreased almost
45 percent since FY 1998.
Due to the nature
of this review, TIGTA made no recommendations in the report. However, key IRS management officials
reviewed the report prior to issuance and agreed with the facts and
conclusions.
Report Reference No. 2008-30-095
IRS
Enforcement Trends
Results of several
key performance measures that had declined in prior years improved during FY
2007. For example, the number of subject
investigations initiated increased 7.8 percent, the number of subject
investigations recommended for prosecution increased 4.3 percent, and the
numbers of subjects convicted and sentenced increased 6.7 percent and 5.1
percent, respectively. In addition, the
Department of Justice acceptance rate for the Criminal Investigation Division’s
(CID’s) prosecution cases increased to 94.6 percent from 92.2 percent in FY
2006. Similarly, the acceptance rate by
U.S. Attorney Offices for the CID’s prosecution cases increased to 90.2 percent
from 88.3 percent in FY 2006.
Continued
progress
in enforcement of the tax laws and prosecution of
criminal tax violations is important to enhancing voluntary compliance by taxpayers
and fostering confidence in the integrity of the tax system.
Due to the nature of this review,
TIGTA made no recommendations in the report.
However, key IRS management officials reviewed the report prior to
issuance and agreed with the facts and conclusions.
Report Reference No. 2008-10-133
Use
of Penalties to Encourage Compliance
According to the
Internal Revenue Manual, penalties exist to encourage voluntary compliance by
supporting the standards of behavior expected by the I.R.C. Penalties encourage voluntary compliance by:
However,
penalties are not consistently used.
TIGTA evaluated the IRS’s actions to address underwithholding
of taxes on wages. Not only has the IRS
not taken enforcement actions against employers who do not comply with notices
(known as lock-in letters), it also generally does not penalize taxpayers for
making false statements on the Employee’s Withholding Allowance Certificate
(Form W-4) that result in the underwithholding of
taxes. The I.R.C.[5] and related tax regulations allow
assessment of a $500 civil penalty for furnishing a false statement on the Form
W-4 if:
1)
The
statement made on the Form W-4 results in less income tax withheld than what
would have been withheld if the Form W-4 had been correctly completed; and
2)
There
was no reasonable basis for such a statement.
The IRS is not
following its own procedures to consider penalties for taxpayers referred from
other IRS functions for underwithholding. If the IRS had been following its procedures,
it could have assessed potentially $11 million in civil penalties. The following table shows the number of
lock-in letters issued and the number of penalties assessed:
Figure 1: Taxpayers Issued Lock-in Letters Compared to
Form W-4 Civil Penalties Assessed in FYs 2006 and 2007
Fiscal
Year |
Taxpayers
Issued Lock-in Letters |
Referred
Taxpayers Issued Lock-in Letters |
Penalties
Assessed |
Total
Penalty Amount[6] |
2006 |
122,140 |
9,182 |
29 |
$14,500 |
2007 |
131,803 |
12,786 |
0 |
$0 |
Source: IRS
Withholding Compliance Program management and TIGTA analysis of Individual
Master File data.
TIGTA made
several recommendations that included:
1)
Developing
a process to identify employers who do not adequately withhold taxes after
receiving a lock-in letter;
2)
Developing
criteria that will expand the use of the Form W-4 civil penalty beyond the
current limited use; and
3)
Providing
related guidance and training to ensure consistent application of the criteria.
IRS management
agreed with the recommendations and has planned appropriate corrective actions.
Report Reference No.
2008-40-167
Accuracy
of Notices
The IRS Oversight
Board expressed concern about the accuracy of notices sent to taxpayers when
there is a discrepancy between the income reported by the taxpayer and the
amount reported by the payor. The CP 2000 notice[7] is the primary notice that the IRS
issues to taxpayers as a result of underreporting discrepancies. From the approximately 1.3 million cases
closed in FY 2007 (related to Tax Year (TY) 2005 returns), TIGTA reviewed a
sample of CP 2000 notices sent to 138 taxpayers for accuracy and found that
7 (5.1 percent) taxpayers had inaccurate assessments. Employee errors on the CP 2000 notices
resulted in some taxpayers being overassessed a total
of $18,968 and others being underassessed a total of
$1,146 in tax.
While errors
identified were a result of employee mistakes, TIGTA believed that the
complexity of the CP 2000 notices might also be a contributing factor in
taxpayers agreeing to incorrect assessments.
During FY 2007, customer satisfaction surveys for the Automated Underreporter Program (Program) indicated that, depending
on the survey quarter, 24 to 32 percent of the taxpayers who responded stated
that their primary reason for calling the IRS was to have someone explain the
CP 2000 notice to them.
TIGTA
recommended that the IRS:
1)
Ensure
that management incorporates additional information on notice review procedures
and quality service expectations into its refresher training for Program
employees;
2)
Simplify
the CP 2000 notices issued by the Program; and
3)
Ensure
that Program management monitors site compliance with requirements to submit
and implement corrective action plans when notice review error rates exceed 10
percent.
IRS management
agreed with the recommendations and has planned appropriate corrective actions.
Report Reference No.
2008-40-180
Security
of the Internal Revenue Service
Millions of
taxpayers entrust the IRS with sensitive financial and personal data stored and
processed by IRS computer systems.
Recent reports of identity theft from both the private and public
sectors have heightened awareness of the need to protect this data. The risks that sensitive data could be
compromised and that computer operations could be disrupted continue to
increase. These risks are due to
internal factors such as the increased connectivity of the computer systems and
the increased use of laptop computers, and external factors such as the
volatile threat environment resulting from increased terrorist and hacker
activity.
To
maintain adequate security over sensitive taxpayer data, the IRS must implement
controls at all levels of its computer environment to guard against external
intruders as well as malicious employees and contractors who have been given
access to IRS systems to carry out their responsibilities. For example, controls are needed at the
perimeter to keep unauthorized persons from intruding into IRS systems, the
network architecture used to transmit data back and forth, and the applications
and databases used to store taxpayer data.
Control Weaknesses at IRS Internet
Connections
The IRS has three
primary Internet gateways that make it possible for employees to communicate
with outside partners and carry out other tax administration duties. However, audit logs were not adequately saved
and reviewed, and the gateways had weak security configuration settings. These weaknesses increase the likelihood that
intruders from the Internet could gain access to sensitive taxpayer data
residing on the IRS network without being detected.
To strengthen
security controls over audit logs, TIGTA recommended that the IRS ensure
that:
1)
Someone
other than the database or system administrator reviews the logs;
2)
Audit
log data are transmitted to two separate servers; and
3)
Audit
logs are configured to show time stamps for events using the Coordinated
Universal Time.[8]
To ensure that
security configuration settings on routers and firewalls are adequate and
consistent, the IRS should require that the Enterprise Networks and the Cybersecurity organizations develop standard security
configurations and that the Enterprise Networks organization regularly tests
the firewalls and routers to ensure compliance with the configurations.
The IRS agreed
with the recommendations and has planned to take appropriate corrective
action.
Report Reference No.
2008-20-143 (Sensitive But Unclassified)
Unauthorized
Internal Web Servers
A
Web server is a computer that contains the software necessary for a Web site to
operate.
During the time
of TIGTA’s review, 1,811 internal Web servers on the
IRS network had not been approved to connect to the network, and 2,093 internal
Web servers connected to the network had at least one
security vulnerability. These
unauthorized and insecure Web servers placed both the computers and the entire
IRS network at risk of unauthorized access to taxpayer and personally
identifiable information.
TIGTA
recommended that the IRS:
1)
Establish
official ownership and responsibility for the Web registration program;
2)
Enforce
IRS procedures to block unauthorized Web servers from providing data over the
IRS network; and
3)
Require
an annual scan of Web servers and compare the Web server to the Web
registration database to identify unauthorized Web servers.
Unauthorized Web
servers should be immediately disconnected from the IRS network, and inappropriate
Web sites should be referred to the TIGTA Office of Investigations. In addition, the IRS should require quarterly
network scans of Web servers to measure compliance with security requirements.
IRS management
agreed with the recommendations and has planned appropriate corrective actions.
Report Reference No.
2008-20-159
IRS
Modernized Systems Have Known Security Vulnerabilities
The
CADE system will provide the foundation for managing all taxpayer accounts and
will replace existing tax processing systems.
The AMS will interface with the CADE and provide IRS employees faster
and improved access to taxpayer account data.
Security weaknesses in the controls over sensitive data protection,
system access, monitoring of system access, and disaster recovery have
continued to exist, although key phases of the CADE and the AMS have been
deployed. As a result, the IRS is
jeopardizing the confidentiality, integrity, and availability of an increasing
volume of tax information for millions of taxpayers as application releases are
put into operation.
TIGTA
recommended that the IRS consider all vulnerabilities that affect the overall
security of the CADE and the AMS before approving unconditional milestone
exits. In addition, the CADE and AMS
Project Managers should place more emphasis on preventing and resolving
security vulnerabilities identified during Enterprise Life Cycle
processes. TIGTA also recommended that
the IRS recommend and approve interim authorities to operate when significant
security vulnerabilities exist in system environments, and continue efforts to
improve the accuracy and completeness of risk information in the security
assessment reports. The IRS should also
approve interim authorities to operate when significant security control weaknesses
exist in system environments.
IRS management
agreed with the recommendations and has planned appropriate corrective actions.
Report Reference No.
2008-20-163
Providing
Quality Taxpayer Service Operations
Since the 1990s,
the IRS has improved its delivery of quality customer service to
taxpayers. In fact, in its current
strategic plan, the IRS’s first goal is to improve taxpayer service. However, since the late 1990s, the IRS has
allocated more resources to its collection, examination, and criminal
investigation functions and fewer resources to taxpayer service functions. As a result of this resource shift and other
factors, in July 2005, Congress requested that the IRS develop a five-year
plan, including an outline of which services the IRS should provide and how it
would improve services for taxpayers. In
response, the IRS developed the Taxpayer Assistance Blueprint to help it focus
on providing the appropriate types and amounts of service. However, the IRS is
already facing challenges with the Blueprint.
As the IRS moves forward, inaccuracies and inconsistencies will put the
Blueprint at risk of improperly aligning service content, delivery, and
resources with taxpayer and partner expectations.
Rejected
Electronic Tax Returns
The IRS rejected
more than 6.8 million (8.5 percent) of the nearly 80 million electronically
filed (e-filed) tax returns it
received for TY 2006. More than 5.4
million of these returns were corrected and successfully e-filed. The methods currently
used to assist customers with rejected e-filed
returns are burdensome for the customer and create unnecessary expenses for the
IRS, and resulted in the IRS maintaining redundant information in multiple
systems. Providing a self-assistance
option would help the IRS ensure that it continues to deliver a high level of
service and support to customers who participate in electronic filing (e-file).
TIGTA
recommended that the IRS:
1)
Develop a self‑assistance option on IRS.gov (the public IRS
website) that allows customers to obtain detailed explanations of e-file reject conditions, including the
steps to resolve them; and
IRS
management agreed with the first recommendation and disagreed with the
second. With regard to the first, for the
13 most common reject codes, a self‑assistance option providing
descriptions and suggested solutions was added to IRS.gov. IRS management also plans to study the
feasibility of adding a more comprehensive self-assistance option to IRS.gov. IRS management disagreed that a business case to
determine the feasibility of providing information in the e-file acknowledgement file for customers to resolve their reject
conditions is necessary. As the IRS
transitions to the Modernized e-File System, customers will be provided reject codes that contain
a clear and concise explanation of the reject conditions. This transition is scheduled for
implementation by September 2009.
TIGTA agreed that the Modernized e-File System should provide customers with
explanations of error reject codes.
However, error explanations alone, no matter how clear and concise, will
not consistently communicate the steps required to correct the errors.
Report Reference No. 2008-40-128
Economic
Stimulus Payments
The Economic Stimulus Act of 2008 was passed
February 13, 2008, to energize the national economy. The first payments were issued May 2,
2008. Most of the IRS’s planning and
implementation activities had to take place during the IRS’s busiest time of
the year, the tax filing season. In
addition, individuals must have filed a 2007 tax return to receive a stimulus
payment. The IRS estimated that an
additional 20 million individuals who do not normally need to file a tax return
would file. The IRS expected to issue
more than $100 billion in stimulus payments to more than 130 million
households.
Following are
examples of reviews completed by TIGTA to date.
TIGTA will continue to evaluate the IRS’s
efforts to ensure that all eligible individuals receive a stimulus
payment. Because of the
significance and potential risks associated with the planning and issuance of
economic stimulus payments, TIGTA planned to conduct its audit work in four
phases. The first two phases, which
evaluated the planning, computation, and the issuance of the checks as well as
an evaluation of the controls to prevent erroneous or improper checks, are
completed. This required rapid planning
and coordination to evaluate the IRS’s efforts to provide real-time feedback
and recommendations.
Planning Efforts for the Issuance of Economic Stimulus Payments
The most
significant part of the Economic Stimulus
Act of 2008 was the individual stimulus payment. The economic stimulus payment is a credit
for TY 2008. However, the payments were
estimated using income figures reported on TY 2007 tax returns and were issued
in 2008, so individuals can benefit from the payments as soon as possible.
Recognizing that
the stimulus payments would affect millions of individuals, the IRS designed a
wide-reaching media campaign focused on educating individuals on the
requirements to receive the stimulus payment along with ways to receive
assistance. A number of methods were
used to inform and notify all eligible individuals and households about the
stimulus payments. This included media
contacts, public service announcements, information on the IRS Web site,
issuance of advance notices, and partnering with other Federal Government
agencies and organizations. The IRS also
established tools to provide assistance to the anticipated thousands of
individuals who would contact the IRS with stimulus payment questions. This assistance had to be provided without
harming service to taxpayers who were in the process of filing their annual income
tax returns.
Although the IRS’s planning for the
stimulus payments was generally sufficient, TIGTA noted areas where
improvements were needed. The IRS
addressed these concerns as they were brought to management’s attention. Addressing these concerns in a timely manner
helped ensure that accurate and consistent information was provided to millions
of individuals regarding requirements for receiving the payment, and helped
reduce the risk of errors when stimulus-only returns were processed and
payments were issued.
Report Reference No. 2008-40-149
Evaluation of the Computation of Economic Stimulus Payments
In preparing for
computing the amount individuals would receive for an economic stimulus
payment, the IRS was required to take a number of actions. These included:
·
Coordinating
with the Department of the Treasury to ensure correct interpretation of the
law;
·
Obtaining
and reviewing the specific statutory language to identify requirements that
must be met to qualify for an economic stimulus payment;
·
Developing
computer programming to identify characteristics included on a tax return that
result in an individual not qualifying for an economic stimulus payment;
and
·
Developing
computer programming to identify characteristics included on a tax return to be
used to calculate the economic stimulus payment.
The IRS
correctly calculated 99.6 percent of the 129.1 million economic stimulus
payments TIGTA reviewed. In addition,
IRS programs ensured that payments were not issued to individuals who were not
entitled to receive an economic stimulus payment. These included individuals who:
1)
Did
not have a valid Social Security Number;
2)
Did
not meet qualifying income, gross income, and net tax liability requirements;
3)
Had
income that exceeded requirements; and
4)
Indicated
that they can be claimed by someone else on a tax return.
Although the
accuracy rate for economic stimulus payments was very high, TIGTA identified
539,550 returns (0.4 percent) for which its calculation of the payment and the
IRS’s calculation did not agree. Most of
the differences identified resulted from business decisions made by the IRS in
concurrence with the Department of the Treasury, taxpayer errors, and/or tax
software errors.
TIGTA made no
recommendation in this report. However,
IRS management agreed that the accuracy rate for the economic stimulus payments
was very high.
Report Reference No. 2008-40-174
Increased Call Volume Associated With Economic Stimulus Payments
Each year, millions of taxpayers contact the IRS by calling the various
toll-free telephone assistance lines to seek help in understanding tax laws and
meeting their tax obligations. The IRS had planned to achieve an 81.1
percent Level of Service and a 270-second Average Speed of Answer for the 2008
Filing Season.[9] However, because of the large volume of calls
related to the economic stimulus payments, it instead achieved a
77.4 percent Level of Service and a 347‑second Average Speed of
Answer, indicating that the ability of taxpayers to access the toll‑free
telephone lines was lower than that in prior years.
Due
to the anticipated volume of calls about the rebates, the IRS implemented a
series of automated messages to address rebate questions during the 2008 Filing
Season. Management decided not to route
callers back to the main menu because the IRS assumed that once the caller had
heard the rebate message, the caller would require no further information or
would go to the IRS’s Web site, IRS.gov.
TIGTA’s recommendations included ensuring that
callers had the option of returning to the main menu when the IRS used a
recorded message to provide information to taxpayers. The IRS disagreed with this recommendation.
Report
Reference No. 2008-40-168
Human
Capital
The Federal
workforce is aging, and agencies are faced not only with retirements and staff
turnover, but also with the unique challenges of the 21st
Century. The IRS recognizes that it must
be prepared to respond to a growing and more demanding population, a more
global and multilingual environment, and an increasing number of taxpayers who
have complex financial holdings, and the means and motives to resist paying
their taxes.[10]
In addition, the IRS, along with other Federal agencies, is slowly
moving toward changing pay, classification, and performance management systems
to transition to a more market-based and performance-oriented culture.
Strategic
Human Capital Management
The IRS has not
made substantial progress in developing and implementing an agency-wide process
that will consistently and accurately project future human resource needs. If accurate projections are not made, the IRS
might struggle to fill unforeseen vacancies, which could affect overall service
to taxpayers. The potential loss of a
large number of employees increases the importance of the IRS having a process
in place to fill anticipated vacancies quickly and effectively.
The IRS has
recognized this and has acted to identify potential qualified leaders to ensure
continuity and stability, and it has established some key parts of a workforce
planning foundation. Additional actions
are necessary to ensure that the IRS can fully identify qualified candidates
for future leadership positions and assess its efforts. If these actions are not taken, it will be
difficult for the IRS to assess the progress of its leadership succession
efforts, and more importantly, it will be difficult for the IRS to determine
whether it can in a timely manner identify potential future leaders with the
skills to address future challenges.
TIGTA
recommended that the IRS develop a written strategic leadership succession plan
and establish
a more collaborative, integrative process to implement agency-wide roles and responsibilities
for effectively creating, refining, and using projections of future human
resource needs. In addition, TIGTA
recommended that the IRS:
1)
Prepare
a plan specifying the key activities that should be completed in the short term
to ensure that the leadership succession program continues to move forward; and
2)
Revise
written guidance and develop agency-wide templates for more consistent
projections of future human resource needs.
IRS management
agreed with the recommendations and has planned appropriate corrective actions.
Report
Reference Nos. 2008-10-132 and 2008-10-169
Erroneous
and Improper Payments
As
defined by the Improper Payments
Information Act of 2002,[11] an improper payment is any payment that should not have been made or that was made
in an incorrect amount (including overpayments and underpayments) under
statutory, contractual, administrative, or other legally applicable
requirements. It includes any payment to
an ineligible recipient, any payment for an ineligible service, any duplicate
payment, payments for services not received, and any payment that does not
account for credit for applicable discounts. For the IRS, improper and erroneous payments
generally involve improperly paid refunds, tax return filing fraud, or
overpayments to vendors or contractors.
An Estimated $1.6
Billion in Fraudulent Refunds Was Issued During the 2006 and 2007 Filing
Seasons
The
IRS’s CID Questionable Refund Program is a nationwide, multifunctional program
designed to detect and stop fraudulent claims for refunds on income tax
returns. TIGTA estimated that the number
of potentially fraudulent returns that would have been identified without
threshold restrictions rose by an alarming 70 percent between PYs 2006 and 2007.
As a result, the IRS worked only 48.7 percent of these returns,
potentially allowing $742 million in fraudulent refunds to be issued. If this trend
continues over the next few years, the IRS might issue an even greater number
of fraudulent refunds, possibly resulting in a significant annual revenue loss
to the Federal Government. As a result,
additional burden is placed on honest taxpayers whose tax dollars are being
used to support this criminal activity.
TIGTA made
several recommendations, including that the IRS:
1)
Develop
a more urgent approach to achieving the legislative change that will exempt the
IRS from having to issue statutory notices of deficiency on fraudulent returns;
2)
Develop
a long-term, strategic approach to balancing available resources with the
growth in refund fraud;
3)
Review
potentially fraudulent prisoner returns identified during PY 2006 and pursue
recovery or offset through future non-fraudulent refunds;
4)
Identify
all fraudulent PY 2006 tax returns for which the PY 2007 return was verified as
being false; and
5)
Implement
procedures to ensure that
suspicious tax returns filed with an attached U.S. Individual Income Tax Return
(Form 1040) Profit or Loss From Business (Schedule C) are identified by the
fraud detection system during future processing years.
IRS management
agreed with most of the recommendations and has planned to take appropriate
corrective actions. However, IRS
management disagreed with the recommendation to pursue recovery or offsets of
payments associated with the PY 2006 fraudulent prisoner returns.
TIGTA continues to
believe that several of the corrective actions to the recommendations will not
fully address the reported concerns.
These recommendations need to be reconsidered as part of the Pre-Refund
Program Office’s long-term strategy.
Report Reference No.
2008-10-172
Accuracy
of Tax Refund Direct Deposits
The IRS states
that having direct deposit provides taxpayers with a faster, more secure, more
convenient means by which to receive their tax refunds. However, the IRS has not developed processes
to ensure that the tax refunds were deposited only to an account in the name of
the filer. Analysis of IRS direct
deposit data identified bank accounts receiving multiple (three or more) tax
refunds. For CY 2007, over 700,000 bank
accounts received three or more tax refunds, totaling approximately $8.14
billion. Twelve bank accounts received
over 1,000 direct deposit tax refunds with one receiving over 58,000
refunds.
Taxpayer refunds
can be deposited into a wrong bank account as a result of an error. When direct deposits are made to the wrong
account, the assistance provided to taxpayers is inconsistent. Specifically, the IRS has not established a
consistent process to assist taxpayers in recovering their tax refunds when
erroneously deposited. The inability of
the IRS to ensure the accuracy of direct deposit account information increases
fraud potential and taxpayer burden.
TIGTA
recommended that the IRS:
1)
Coordinate
with responsible Federal agencies and banking institutions to develop a process
to ensure that direct deposit payments are made only to a deposit account in
the name of the recipient, and until a process is in place, should limit the
number of direct deposits being sent to the same account;
2)
Develop
an education campaign to clearly alert taxpayers and tax return preparers of
the requirement that direct deposits be made only to accounts in the name of a
recipient; and
3)
Improve
procedures for assisting taxpayers in recovering their erroneously deposited
tax refunds.
IRS management
disagreed with most of the first recommendation but agreed with the second and
third recommendations. Although IRS
management agreed that coordination between responsible Federal agencies and
banking institutions is necessary to develop a direct deposit process, IRS
officials do not believe they should initiate this coordination. In addition, the IRS disagreed with the
recommendation to limit the number of direct deposits to the same account,
but offered no
alternative actions to reduce the potential fraud associated with multiple
direct deposits to the same account.
Report Reference No.
2008-40-182
Taxpayer
Protection and Rights
The IRS
continues to place increased emphasis on tax compliance activities, such as
better identifying corporations and individuals who fail to report or do not
pay what they owe. However, all
collection efforts must be balanced against the rights of taxpayers to receive
fair and equitable treatment, both in the assessment of taxes and in all
initiatives undertaken to collect open account balances. In summary, all collection efforts must
ensure that
taxpayer rights are protected.
Private
Debt Collection Program
The I.R.C. authorizes the IRS to enter into contracts with private
collection agencies to assist
in the collection of delinquent Federal taxes. Although many of the Private Debt Collection
program procedures were being followed, improvements can be made in how a
taxpayer’s identity is authenticated, how contractors handle taxpayer requests
to opt out of the program, the quality control system, and case
processing. These improvements will help
to ensure that taxpayer rights are protected during the collection process.
TIGTA made
several recommendations including that the IRS:
1)
Continue
to monitor the contractors’ authentication process and implement improvements
as necessary to assist contractors in increasing the number of authenticated
taxpayer contacts;
2)
Ensure
that the Quality Unit provides statistically valid, weighted estimates of
quality, conducts the required number of case action reviews, and that it has
the quality analysts meet with the Statistics of Income Division staff
semiannually; and
3)
Ensure
that the Quality Unit establishes a procedure for backup quality analysts to
conduct telephone monitoring and case action reviews as needed.
IRS management
agreed with the recommendations and has taken or has planned appropriate
corrective actions.
Report Reference No.
2008-30-157
Processing
Returns and Implementing Tax Law Changes During the Tax
Filing Season
Each filing
season tests the IRS’s ability to implement tax law changes made by
Congress. It is during the filing season
that most individuals file their income tax returns and call the IRS with
questions about specific tax laws or filing procedures. Correctly implementing tax law changes is a
continuing challenge, because the IRS must identify the tax law changes, revise
the various tax forms, instructions, and publications, and reprogram the computer
systems used for processing returns.
Changes to the tax laws have a major effect on how the IRS conducts its
activities, what resources are required, and how much progress can be made on
strategic goals. Congress frequently
changes the tax laws; thus, some level of change is a normal part of the IRS
environment. However, certain types of
changes can significantly impact the IRS in terms of its quality and
effectiveness of service and in how taxpayers perceive the IRS.
Alternative
Minimum Tax Discrepancies
The number of
taxpayers affected by the Alternative Minimum Tax (AMT) is expected to grow
significantly in the next ten years if Congress does not continue to increase
exemption amounts. AMT revenue increased
from $16.7 billion for TY 2005 to $21.4 billion for TY 2006. Determining whether the AMT is owed is
complex and time-consuming, and the complexity causes taxpayer errors. Recognizing the complexity of the AMT, the IRS
provides taxpayers with tools to determine whether they will have to prepare an
Alternative Minimum Tax–Individuals (Form 6251) to determine their AMT
liabilities.
In
CY 2006, computer checks identified about 226,000 discrepancies between the AMT
figures reported, or not reported, by the taxpayers and the amounts computed by
the IRS. TIGTA reviewed a random sample of
52 tax returns filed in CY 2006 on which IRS computers identified a
discrepancy. For all 52 cases, computer
checks correctly identified that there was a discrepancy, and the cases were
correctly sent to tax examiners for further review. However, examiners did not follow procedures
when resolving 11 (21 percent) of the 52 cases.
Of these 11 cases, 3 resulted in the examiners incorrectly computing the
amount of tax owed. Correct
identification and resolution of discrepancies is essential to avoid further
increasing the burden for taxpayers subject to the AMT.
TIGTA recommended and the IRS agreed that it should provide information to tax examiners
reiterating the importance of correctly resolving AMT discrepancies and
highlighting specific issues that could lead to incorrect resolution.
Report Reference No.
2008-40-146
2008
Filing Season
The
filing season (January through April 15th) is critical for the IRS
because it is the time when most individuals file their income tax returns and
contact the IRS if they have questions about specific tax laws or filing
procedures. The 2008 Filing Season
presented additional challenges for the IRS due to the late and unexpected
enactment of two significant tax laws -- the Tax Increase Prevention Act of 2007, signed on December 26, 2007,
limiting the number of taxpayers who would be subject to the AMT for TY 2007,
and the Economic
Stimulus Act of 2008, signed on
February 13, 2008. Through May 30, 2008, the IRS had received 144.2 million
individual tax returns. Of those,
approximately 86.7 million were electronically filed and approximately 57.5
million were filed on paper.
TIGTA conducted filing season audits that addressed the IRS’s
efforts to accurately process tax returns as well as the accuracy of tax returns
prepared by unenrolled preparers
and volunteers. Following is a synopsis
of these reviews:
Late Tax Legislation
In spite of the
late and unexpected enactment of two significant tax laws, the IRS generally
had a successful 2008 Filing Season.
Most
key tax law and administrative changes were correctly implemented, and the IRS
completed processing returns on schedule and issued refunds within the
required 45 calendar days of the April 15, 2008 due date. While the IRS was able to meet the challenges
of late and unexpected enacted legislation and accurately process most returns
in a timely manner, TIGTA identified the following opportunities to improve the
processing of some tax deductions:
·
Taxpayers
improperly claimed the Qualified Mortgage Insurance Premiums deduction;
·
Taxpayers
age 70½ or older improperly claimed the Individual Retirement Account
deduction;
·
Taxpayers
did not claim the sales tax deduction; and
·
Taxpayers
who improperly claimed a “dual benefit” for both the tuition and fees deduction
and the Education Credit are not receiving the dual benefit. However, improvements still need to be made
in processing these returns.
TIGTA
recommended that the IRS:
1)
Ensure
that the computer systems are programmed to identify taxpayer returns claiming the
Qualified Mortgage Insurance Premiums deduction with Adjusted Gross Income that
exceeds the maximum phase-out limitations;
2)
Ensure
that the computer systems are programmed to identify taxpayer returns claiming
Individual Retirement Account (IRA) deductions for taxpayers age 70½ or older;
3)
Continue
to inform taxpayers that they are eligible for a sales tax deduction if they
itemize and do not claim a State income tax deduction, if the sales tax
deduction is extended beyond TY 2007.
The possibility of calculating the sales tax deduction for taxpayers if
it is not claimed or sending a notice to the affected taxpayers should be
considered; and
4)
Revise
or verify the computer programming to ensure that all taxpayers claiming a dual
benefit are identified if the tuition and fees deduction is extended beyond TY
2007. This should include verifying the
programming to forward paper returns with this condition to the Error
Resolution System for correction.
IRS management
fully agreed with two of the recommendations and partially agreed with one
other recommendation. They did not agree
to update computer programs to identify taxpayer returns claiming IRA
deductions for taxpayers age 70½ and older because math error authority cannot
be used for this condition. IRS management
did, however, propose an alternative approach to identify these taxpayers. In addition, IRS management agreed to
continue to inform taxpayers of eligibility for the sales tax deduction, but
did not agree to calculate the sales tax deduction for the taxpayer or to send
a notice.
Report Reference No. 2008-40-183
Most
Tax Returns Prepared by Some Unenrolled Preparers Contained Significant Errors
Although taxpayers
are ultimately responsible for the information reported on their tax returns,
millions of taxpayers rely on preparers to prepare correct tax returns. Currently, there are no national standards
that preparers are required to satisfy before selling tax preparation services
to the public. Because more than half of
all taxpayers use preparers to file their tax returns, preparers have a
significant effect on taxpayer compliance.
In CY 2007, the IRS processed approximately
83 million individual Federal income tax returns
prepared by paid preparers. In
February and March 2008, TIGTA auditors posed as taxpayers in a large
metropolitan area and paid to have 28 tax returns prepared at
12 commercial chain and 16 small independently owned tax return
preparation offices. The preparers were
unlicensed and unenrolled. That is, they were not practitioners (attorneys, Certified Public Accountants, Enrolled Agents,
or Enrolled Actuaries). Preparers
often made substantial errors when completing tax returns and correctly
prepared only 11 (39 percent) of the 28 tax returns where the tax returns
showed the correct amount of taxes owed or the refunds due. However, 17 tax returns (61 percent)
were prepared incorrectly:
·
Eleven
(65 percent) of the 17 returns contained mistakes and omissions that were
considered to have been caused by human error and/or misinterpretation of the
tax laws; and
·
Six
(35 percent) of the 17 contained misstatements and omissions that were
considered to have been caused by willful or reckless conduct.
If these incorrect
tax returns had been filed, the net effect to the Federal Government would have
been $12,828 in understated taxes (this is the net effect–there were instances
in which tax liabilities and tax refunds were both overstated and understated).
The IRS does not
have one list or database for collecting information on preparers such as the
preparer’s name, associated identifying numbers, or whether the preparer is a
practitioner or unenrolled preparer. Additionally, the IRS does not require
preparers to have a unique identification number. The IRS acknowledges that it does not know
how many paid preparers exist and cannot determine the full extent of
noncompliance and incompetence among practitioners.
TIGTA
recommended that the IRS develop and require a single identification number to
control and monitor all paid preparers.
IRS management agreed to study this issue. It plans to commission a cross-functional
team to study the feasibility and methodology associated with
requiring a single identification number to
control and monitor all paid preparers.
The IRS plans to evaluate the results of the study and consider if it is
feasible to implement.
Report Reference No.
2008-40-171
Free
Tax Preparation Services
Millions of
taxpayers borrow against all or part of their expected tax refunds to receive
their money more quickly through short-term loans called Refund Anticipation
Loans (RAL), that cost taxpayers fees and interest
payments. During the 2008 Filing Season,
almost 10 million taxpayers borrowed against all or part of their expected tax
refunds using RALs.
TIGTA conducted
a telephone survey of 350 taxpayers whose IRS TY 2007 tax accounts
contained RAL indicators. Only 250
respondents claimed to have actually received RALs.[12]
These respondents stated that they were aware they had received RALs and obtained these loans to receive their money more
quickly to pay bills. Most respondents received their loans the same day of or within
two business days of their tax return preparation. Respondents stated that preparers made
it clear they were receiving loans.
Additionally, most respondents stated that the preparers explained the
fees and explained how long it would take for the taxpayers to receive their
tax refunds if they chose not to obtain the loans. More than one-half of the respondents already
had checking or savings accounts with financial institutions.
An analysis of taxpayer account data for the respondents showed
that 158 (63 percent) received the Earned Income Tax Credit. Additionally, the majority of all survey
respondents would have qualified for IRS’s free tax preparation assistance;
however, 81 percent (284 of 350) stated that they were unaware of these free
services. Taxpayers may visit IRS
walk-in offices called
TIGTA
recommended and the IRS agreed to use taxpayer account data for taxpayers who
apply for RALs and Refund Anticipation Checks to
better focus the IRS’s marketing and education efforts so that more taxpayers
can make use of the available free services.
Report
Reference No. 2008-40-170
Using
Performance and Financial Information for Program and
Budget
Decisions
While the IRS
has made some progress in using performance and financial information for program
and budget decisions, this area is still a major challenge. The IRS lacks a comprehensive, integrated
system that provides accurate, relevant, and timely financial and operating
data that describes performance measures, productivity, and associated program
costs. In addition, the IRS cannot
produce timely, accurate, and useful information needed for day-to-day
decisions, which inhibits its ability to address financial management and
operational issues in order to fulfill its responsibilities. TIGTA has continued to report that various
IRS management information systems are insufficient to enable IRS management to
measure costs, determine if performance goals have been achieved, or monitor
progress in achieving program goals.
Benefits
of Performance-Based Acquisition Are Not Being Fully Realized
When
used properly, performance-based acquisition (PBA) increases performance,
innovation, and competition, and results in the Federal Government receiving
better value for its acquisitions. In
addition, PBA shifts much of the risk from the Federal Government to industry
and allows the Federal Government to focus its monitoring efforts on the
desired outcomes rather than on how the work is to be performed. This saves taxpayer dollars because
significantly fewer contract administration resources are needed.
When
used within the IRS, PBA was performed in accordance with established
guidelines. However, the IRS’s overall
use of PBA is well below the goals established by the Federal Government. Lack of internal expertise within program
offices on how to implement PBA as an acquisition strategy, insufficient time
to complete procurements, lack of a vigorous planning phase, and the inability
of program managers to define requirements contributed to the underuse of PBA.
TIGTA
recommended that the IRS ensure that program office management develops and
implements a comprehensive plan to meet Federal Government goals for use of PBA
methods. These methods should emphasize
the collective responsibility of program offices and the procurement function
to plan, manage, and execute PBA. Furthermore, if not already included,
the insertion of PBA use as a measure in individual performance standards might
provide the necessary incentive to achieve PBA goals and advantages. In addition, program personnel involved in
writing contract requirements should be trained in PBA methods. The IRS should continue to advocate and
educate program personnel on the benefits of PBA.
IRS management
agreed with the recommendations and has planned to take appropriate corrective
actions.
Report Reference No.
2008-10-098
Improvements
in the Distribution and Design of Internal Documents
In
FY 2007, the IRS spent more than $237 million to print, process, and
distribute internal documents, tax publications, forms, and written
correspondence (including notices) to taxpayers and employees. The IRS can strengthen internal controls and
increase oversight to reduce costs for the publishing and postal budget. Taxpayers indirectly benefit when management
of tax administration is efficient and cost-effective.
TIGTA
recommended that the IRS:
1)
Establish
a control system to ensure that the level of inventory of tax products at
Taxpayer Assistance Centers is cost-effective;
2)
Ensure
that functional offices are aware of the significance of the Internal Management Document Distribution System
(IMDDS);
3)
Establish
and implement a system of internal controls to ensure that IMDDS data are
current and reliable; and
4)
Enhance
the notice improvement process to include reviews of all notices and letters to
ensure that they use the fewest possible resources.
IRS management
agreed with the recommendations and has taken or planned to take actions to
improve oversight and reduce costs.
Report Reference No.
2008-40-125
Protect the Integrity of
Tax Administration
T |
IGTA’s Office of Investigations accomplishes
its investigative activities through the work of seven field divisions (see map
on page 36), which are geographically located throughout the
·
Operations Division – Provides oversight and guidance to OI
field and headquarters divisions, OI executives, and the Inspector
General. The division consists of the following
five teams:
¨
Complaint Management Team - Reviews and refers complaints received
in TIGTA’s hotline and maintains OI’s
investigative records.
¨
Policy Team - Prepares policy and procedures, reports
and other documents for internal and external customers, responds to
congressional inquiries, and oversees national programs.
¨
Data Analysis Team - Prepares, trends, and analyzes OI’s statistical data maintained in its management
information system, and administers OI’s national
budget.
¨
Inspection Team - Conducts internal reviews of field and
headquarters operations.
¨
Training Team - Administers training to OI criminal
investigators and support staff.
·
Strategic Enforcement Division
– Executes an aggressive, proactive program to detect computer-based fraud
in IRS operations, unauthorized accesses (UNAX) to IRS computer systems by
internal users, and attempts to interfere with the security of IRS computers by
external sources. The Strategic
Enforcement Division has also teamed with the IRS to thwart phishing
scams and minimize their impact on tax administration. One example of TIGTA and the IRS’s combined
efforts to combat phishing is the issuance of press
releases to warn taxpayers about new scams (see press release on page 37).
·
Technical and Firearms Support Division – Provides technical support,
investigative assistance, equipment, training, and other specialized services
to enhance OI’s investigative activities through
programs that include land-mobile radio, firearms and officer safety, and
electronic surveillance equipment.
·
Special Inquiries and Intelligence
Division – Conducts
sensitive investigations involving IRS senior management officials, the IRS
Oversight Board, and IRS Chief Counsel, criminal investigation, and
international employees. The division
also operates two specialized programs:
1)
A
procurement fraud program that investigates allegations concerning IRS
procurements and procurement-related misconduct by IRS employees and
contractors; and
2)
A
criminal intelligence program that provides field investigators with criminal
intelligence and coordinates criminal intelligence collection and dissemination
within TIGTA nationwide.
·
Forensic Science Laboratory – Provides crime lab services in direct support of TIGTA
investigations, including handwriting and document analysis, latent print
identification, and expert witness testimony.
OI Field Divisions
Internal
Revenue Service Employee Misconduct
IRS employee
misconduct can hinder the IRS’s ability to collect revenue for the Federal
Government. In addition to UNAX
violations, TIGTA investigates other IRS employee misconduct, such as theft,
extortion, false statements, and financial fraud. TIGTA also administers a proactive integrity
program to help detect IRS employees who might be committing fraud and other
misconduct.
The following are examples
of significant investigations TIGTA conducted during the reporting period that
involved IRS employee misconduct.
Revenue Officer Indicted in $13 Million
Securities Fraud Scheme
In
April 2008, Revenue Officer Luis Acosta-Andino was
charged in
According
to the indictment, from about 2003 through about 2005, Acosta-Andino worked part-time as a promoter and sales agent in
the high-yield investment program of CIA Financial Consulting Services, Inc.
(CIA), a for-profit corporation in
In
one program, CIA offered and sold investments through investment contracts in
which participants were solicited to invest money with the promise of a 100
percent rate of return in a short period of time. Acosta-Andino
offered and sold these investment contracts on behalf of CIA. He also gave private promotional presentations. In August 2004, Acosta-Andino
and other defendants sent and caused to be sent via mail a security, that is, an investment contract, for sale to
an investor in
The
indictment also alleges forfeiture to the
IRS Mail Clerk Indicted for Theft of
More Than $75,000 in Taxpayer Checks
In
May 2008, Shaun Lertswan was indicted in
According
to court documents, beginning in February 2008 through April 2008, Lertswan, a mail clerk at the
IRS Employee Sentenced for False Claims
on Employee Time Reports
In
June 2008, Charles Scoville was sentenced in
According
to court documents, Scoville, while acting as an IRS
employee at the Prestonsburg,
During the same time frame, Scoville used his government vehicle for personal use on a regular basis, including, but not limited to: driving the vehicle on several trips to visit family in Lawrenceburg, Kentucky; driving the vehicle for personal use on weekends and holidays; and driving the vehicle to work at his second job as a sportscaster for a local radio station.
In June 2008,
Emmanuel Ekwuruke was indicted in
According to court documents, from February 2006 through May 2008, Ekwuruke, employed at the
IRS Chicago Employee Pleads Guilty to
Embezzlement of More Than $12,000 in Payroll Compensation
In
June 2008, Monique Steward pleaded guilty in
According
to court documents, beginning as early as February 2004 and continuing through
about August 2007, Steward embezzled money in the form of payroll compensation from
the IRS. Steward worked as a secretary
in the
IRS
Agent Sentenced for Conspiring to Launder Drug Proceeds
In August 2008,
Evelyn Millen was sentenced in
According to a
DOJ press release, in June 2003, Millen, an IRS Agent, conspired with another
individual to purchase a $65,000 BMW 745i with drug trafficking proceeds. The BMW was titled to Millen in order to
conceal that the other individual was the true owner. Both individuals conspired to pay off the
balance on the BMW with five cashier’s checks that were purchased from five
different banks on July 6, 2005, and four money orders that were all purchased
on the same day, all totaling $40,000.
The payment was structured in a manner to avoid Federal bank reporting
requirements for cash transactions over $10,000.
Unauthorized
Accesses
The protection
of confidential taxpayer information is of critical importance to
The following are examples
of significant investigations TIGTA conducted during the reporting period that
involved UNAX.
Two IRS Employees Sentenced for
Unauthorized Inspection of Tax Return Information
In
August 2008, in two separate cases filed in
According to court documents, Yepez and Moisa, as IRS employees, unlawfully and without authorization accessed and inspected the tax return information of private individuals and intentionally exceeded their authorized access to a computer to do so.
Melody Woods Sentenced for Intentionally
Accessing IRS Computer Without Authorization
In
June 2008, Melody Woods was sentenced in
According to court documents, Woods intentionally and knowingly accessed a computer system maintained by the U.S. Department of Treasury without authorization. Woods exceeded her authorized access in order to access and obtain information from the Internal Revenue Service concerning at least six individuals.
Assaults
and Threats
IRS employees
routinely interact with taxpayers in the performance of their official
duties. Sometimes these contacts can become
volatile and a taxpayer might resort to violence, such as making threats
against or physically assaulting the employee.
TIGTA’s highest priority complaints are those
involving threats and assaults. TIGTA
works aggressively and takes swift action to protect IRS employees. During this six-month reporting period, TIGTA
investigated 211 threat and assault complaints.
The following is an example
of a significant investigation TIGTA conducted during the reporting period that
involved a threat.
Donita Williams Sentenced for Threatening TIGTA
Agent with Bodily Harm
In July 2008, Donita Williams was sentenced in
According to court documents, in March 2007, Williams had her return prepared
by a volunteer at a Volunteer Income Tax Assistance (VITA) site. In April 2007,
an employee sent a letter to Williams explaining that her return was rejected
because someone else claimed her as a dependent on their return.
Subsequently, Williams left a threatening voicemail message and, during a phone
call to Williams, a TIGTA special agent was threatened by Williams.
Contract
Fraud
TIGTA is
committed to conducting procurement investigations that ensure the highest
degree of integrity, economy, and efficiency in IRS contracts. This includes ensuring that improper contract
activities or illegal acts are effectively identified and pursued in a timely
manner. TIGTA special agents conduct
independent reviews of contractor invoicing to ensure that the IRS is complying
with the contract terms and conditions.
They also conduct reactive and proactive investigations to detect and
deter criminal activity by contractors. TIGTA’s contract investigations have produced significant
results in the form of criminal indictments, civil penalties, and
debarments.
The following is an example
of a significant investigation TIGTA conducted during the reporting period that
involved contract fraud.
Former GSA Employee Sentenced for
Bribery in Scheme Involving Security for IRS Locations
In
July 2008, Dessie Ruth Nelson was sentenced in
According to court documents, Nelson, a long-time employee of the General Services Administration (GSA), was responsible for contracting on GSA’s behalf with private companies to assist in providing security to GSA-managed buildings. GSA’s Public Buildings Service (PBS) was responsible for acquiring and managing real estate for other civilian branches of the Federal Government. PBS in turn leased the space to Federal customer agencies, including the IRS.
Bribery
IRS employees
have frequent contact with taxpayers, which make them potential targets for
bribes. Bribery is an act of corruptly giving, offering, or
promising anything of value to a public official to influence the person to commit or
allow fraud against the
The following are examples
of significant investigations TIGTA conducted during the reporting period that
involved bribery.
Victor
John Indicted for Bribery of IRS Auditor
In April 2008,
Victor John was indicted in
According to court
documents, between about March 24, 2008 and April 3, 2008, John corruptly gave
$4,900 to an auditor employed by the IRS to influence a pending assessment of
tax due and owed by John.
Edward Sobczewski Indicted for Bribery of Revenue Agent with
In July 2008, Edward Sobczewski
was indicted in
According to
court documents, in April and May 2008, Sobczewski
offered and promised Colorado Rockies tickets to a Revenue Agent (RA) if the RA
changed audit results of Sobczewski’s 2006 personal
income tax return. Later in May 2008, Sobczewski gave
season tickets for the Colorado Rockies in exchange for changed audit results
of his 2006 personal income tax return.
Former
IRS Employee Pleads Guilty to Soliciting Bribe
In June 2008,
former IRS employee Robert Rosner pleaded guilty in
According to
court documents, from August 2004 to December 2006, Rosner
served as an Internal Revenue Agent with the IRS and was responsible for
conducting taxpayer audits. From July
2006 through early December 2006, Rosner solicited a
$5,000 cash payment in order to close and not further pursue an audit of a
taxpayer.
Rosner sent a letter to a small business in
Other
External Investigations
TIGTA is
statutorily mandated to investigate external attempts to corrupt tax
administration, which includes criminal misconduct by non-employees, such as
impersonation, interference with the administration of internal revenue laws,
misuse of Treasury names, symbols, etc., and tax practitioner fraud relating to
the theft of remittances intended for the IRS and the theft of taxpayer
refunds. TIGTA is committed to
protecting the IRS’s ability to collect revenue by investigating individuals
who interfere with tax administration.
During this reporting period, TIGTA received 2,253 complaints regarding
improprieties by tax practitioners and other non-employees.
The following are examples
of significant investigations TIGTA conducted during the reporting period that
involved non-employees.
Superseding Indictment Charges
Conspiracy and Interfering With Administration of Federal Internal Revenue Laws
A
superseding indictment was issued in April 2008 in
According to the indictment, from about 1993 and continuing thereafter up to and including the date of this indictment, Thomas, Herrington, and others willfully and knowingly conspired and agreed to defraud the U.S. for the purpose of impeding, obstructing, and defeating the lawful functions of the IRS in the computation, assessment, and collection of revenue. Thomas and Herrington advanced their conspiracy by promoting and selling abusive trusts, preparing and advocating the preparation of false Federal income tax returns, submitting and/or assisting in the submission of false and fraudulent documentation to the IRS in an effort to eliminate tax liabilities and harass IRS employees, and organizing/attending meetings to discuss methods of tax evasion and evading the payment of tax liabilities with fictitious financial instruments.
The indictment also charges that Herrington prepared and submitted to the IRS fraudulent Forms 1099, which falsely reported that IRS employees associated with the Federal criminal investigation against her had failed to report personal income in excess of $2 million, in an attempt to harass them.
Individual Indicted for Impersonating an
IRS Employee and Preparing Fraudulent Tax Returns
Morgan
Taylor Mayfaire pleaded guilty in August 2008 in
According
to court documents, Mayfaire prepared tax returns for
taxpayer clients, and in return, her clients paid tax return preparation fees
to her in the amount of ten percent of the amount of the refund claimed on
their Federal tax returns. Mayfaire caused approximately $472,904 to be fraudulently
refunded by the IRS to her clients based on false deductions she included on
the clients’ tax returns. She did so by
willfully aiding and assisting in the preparation of Forms 1040 and 1040
In furtherance of the scheme, Mayfaire pretended to be an IRS employee by falsely representing to taxpayers that, as an IRS employee, she had ways of increasing taxpayer deductions on tax returns that no other person would know. She thereby induced taxpayers to hire her to prepare their taxes, file false tax returns, collect improper tax refunds, and to pay her fees totaling approximately $13,478.
Taxpayer Pleads Guilty to Theft of
Public Money
In
August 2008, Peter Kurhan Jr. pleaded guilty in
According to court documents, Kurhan Jr. owed money to the IRS based on his failure to pay Federal taxes. From about May 2003 through about July 2005, Kurhan Jr. sent more than eighty payment checks to the IRS in amounts exceeding his tax debt. The checks were drawn on closed, unfunded and non-existent bank accounts. Because the amounts on the checks exceeded his tax debt, the IRS sent refund checks before the agency discovered that his checks were fraudulent and unfunded. Kurhan Jr. cashed the IRS refund checks, knowing that he was not entitled to do so. He knowingly stole U.S. Treasury checks in an aggregate sum of $83,996.61.
Congressional
Testimony
During this
reporting period, Inspector General J. Russell George testified before Congress
on three occasions.
The Growing Problem of the Threat Identity Theft Poses to the
Administration of our Nation’s Tax System
On April 10,
2008, Mr. George testified before the Senate Committee on Finance regarding
identity theft and the 2008 Filing Season.
Mr. George noted that the IRS has placed only limited emphasis on
employment-related and tax fraud identity theft. Although the Internal Revenue Code currently
permits the referral of tax information to certain Federal law enforcement
agencies, the IRS does not appear to be fully utilizing this authority, he
said. The IRS Criminal Investigation
Division investigates identity theft crimes only if they are committed in
conjunction with other criminal offenses having a large tax effect. As a result, the IRS has mainly focused on
combating identity theft through public outreach. In addition, Mr. George noted that current
processes have been inadequate in reducing burden for taxpayers victimized by
identity theft. The IRS still lacks the
comprehensive data needed to determine the impact identity theft is having on
tax administration, he said.
Mr. George also
noted that TIGTA is concerned about the proliferation of phishing
scams that attempt to trick taxpayers into providing sensitive tax
information. Insider attacks by IRS employees
and contractors remain a concern, he said.
Because of their familiarity with the IRS network, they can potentially
do more harm than outsiders. Whether the
attacks come from outside intruders or inside the IRS, the target is personal
and financial information. However, he
said, while the IRS relies on its Questionable Refund Program (QRP) to identify
fraudulent refund claims and prevent them from being paid, TIGTA is concerned
that the QRP is becoming increasingly unmanageable due to the growing number of
fraudulent claims and the IRS’s lack of resources to combat the fraud.
Mr. George said
that overall, the 2008 Filing Season appeared to be progressing without major
problems. The IRS had taken positive
actions to prepare for the issuing of over $100 billion in stimulus payments
beginning in May. In addition, the IRS
improved the quality of customer service by creating a strategic plan to focus
on service improvement and performance measures.
Internal Revenue Service Fiscal Year 2009 Budget Request
On April 16,
2008, Mr. George testified before the Senate Appropriations Committee’s
Subcommittee on Financial Services and General Government on the IRS’s Fiscal
Year 2009 budget request.
Mr. George said
that the IRS’s request of approximately $11.4 billion includes funding for
programs that pose long and short-term challenges for the Service, including
enhancing enforcement of the tax laws and business systems modernization
efforts, and improving taxpayer service, all while attempting to ensure their
security.
Mr. George noted
that the IRS’s budget request for systems modernization is $40 million less
than the Fiscal Year 2008 enacted amount.
The IRS did not specify which programs will absorb the cuts, although it
stated that the requested amount will allow continued progress on key
modernization projects, including the Customer Account Data Engine, Accounts
Management Services and Modernized e-File, he said. Furthermore, TIGTA continues to be concerned
that the IRS is developing its modernized systems and bringing them online
without adequately contemplating the security implications.
The Economic Stimulus Act of 2008
On June 19,
2008, Mr. George testified before the House Committee on Ways and Means, Subcommittee
on Oversight and Social Security regarding TIGTA’s
audit and investigative actions pertaining to the Economic Stimulus Act of 2008, which was signed on February 13,
2008, and enacted to energize the national economy.
Mr. George said
that the IRS issued approximately 76.5 million stimulus payment as of June 13,
2008, totaling approximately $63.9 billion, and that the IRS plans to issue
stimulus payments through December 2008 for those tax returns filed by October
15th. TIGTA determined that the IRS is
correctly calculating the stimulus payment for approximately 99.6 percent of
the returns, he said. However, TIGTA
identified approximately 385,000 stimulus payments in which our calculation of
the payment does not agree with the IRS’s payment calculation.
Mr. George also
said that TIGTA has initiated 12 complaints involving economic stimulus
payments. One case involves an alleged return preparer scheme, two cases
involved allegations of false impersonators requesting bank information, and
nine cases involve phishing e-mails. TIGTA will continue to closely monitor the
issuance of the economic stimulus payments and to promptly alert the IRS of any
problems or emerging issues, he said.
Awards and Special Achievements
Executive Development Program Graduates
On August 8,
2008, a graduation ceremony was held for the participants in the Summer 2008 Executive Development (XD) Program. The XD Program is the formal training phase
of the Senior Executive Service Candidate Development Program. TIGTA participated in this program as a
partner with the IRS. Its purpose is to identify outstanding employees with
demonstrated leadership competencies, to help participants better understand
the strategic vision of the Department of the Treasury as it relates to their
future role as an executive, and to prepare them for senior executive
positions. Damon Plummer (middle row,
far right) and Kenneth Casey (third row, third from right) graduated and are
two of the six TIGTA managers who participated in the program. Four TIGTA managers attended the Winter 2008 XD Program that ended in March 2008.
TIGTA
Recognized by the President’s Council on
Integrity
and Efficiency
The President’s Council
on Integrity and Efficiency 2008 Awards Committee presented an Award of
Excellence to a team within TIGTA’s Office of Audit.
The Identity Theft
Audit Team was recognized for its outstanding achievement in
identifying and reporting employment-related and tax fraud identity theft
issues. The audit team members included
Marybeth Schumann, Director, Compliance; Bryce Kisler,
Acting Director; Alan Lund, Acting Audit Manager; Julia Tai, Lead Auditor; and
Jean Kao, Auditor.
TIGTA
Recognized by
On
April 10, 2008, Chuck Rosenberg, U.S. Attorney for the Eastern District of
Virginia (far right), presented TIGTA Special Agent Charles Venini
(far left), TIGTA Forensic Data Analyst James Avery Jr. (second from left), and
TIGTA Special Agent Brendan Soden (second from right)
with an award for their outstanding work on an investigation involving
unauthorized access and disclosure of tax records by an IRS employee. The case was prosecuted by Assistant U.S.
Attorney Sally Chase (middle).
Audit Statistical Reports
Reports with
Questioned Costs
TIGTA issued
four audit reports with questioned costs during this semiannual reporting
period1. The phrase
“questioned cost” means a cost that is questioned because of:
The phrase
“disallowed cost” means a questioned cost that management, in a management
decision, has sustained or agreed should not be charged to the Federal
Government.
Reports
With Questioned Costs |
|||
Report Category |
Number |
Questioned Costs (in thousands) |
Unsupported Costs (in thousands) |
1. Reports with no management decision
at the beginning of the reporting period |
10 |
$165,728 |
$82,853 |
2. Reports issued
during the reporting period |
2 |
$72 |
$44 |
3. Subtotals (Item 1 plus Item 2) 2 |
12 |
$165,800 |
$82,897 |
4. Reports for
which a management decision was made during the reporting period a. Value of disallowed costs |
3 |
$767 |
$728 |
b. Value of costs not disallowed |
1 |
$22 |
$22 |
5. Reports with no management decision at
the end of
the reporting period (Item 3 minus Item 4) |
8 |
$165,011 |
$82,147 |
6. Reports with no management
decision
within 6 months of issuance |
7 |
$165,000 |
$82,147 |
1 See Appendix II for identification of audit reports involved.
2 Difference due to rounding
Reports with
Recommendations that
Funds Be Put to
Better Use
TIGTA
issued three reports with recommendations that funds be put to better use
during this semiannual reporting period.1
The phrase “recommendation that funds be put to better use” means
a recommendation that funds could be used more efficiently if management took
actions to implement and complete the recommendation, including:
The
phrase “management decision” means the evaluation by management of the findings
and recommendations included in an audit report, and the issuance of a final
decision concerning its response to such findings and recommendations,
including actions concluded to be necessary.
Reports
With Recommendations That Funds Be Put To Better Use |
||
Report Category |
Number |
Amount (in thousands) |
1. Reports with no management decision at the beginning of the
reporting period |
0 |
$0 |
2. Reports issued
during the reporting period |
3 |
$350,203 |
3. Subtotals (Item 1 plus Item 2) |
3 |
$350,203 |
4. Reports for which a management
decision was made during the reporting period a. Value of recommendations to which
management agreed |
|
|
i. Based on
proposed management action |
1 |
$36 |
ii. Based on proposed legislative action |
0 |
$0 |
b. Value of recommendations to which
management did not agree 2 |
2 |
$350,166 |
5. Reports with no management decision at end of the reporting
period (Item 3 minus Item 4) |
0 |
$0 |
6. Reports with no management decision within 6 months of issuance |
0 |
$0 |
1 See Appendix II
for identification of audit reports involved.
2 Difference due to rounding
Reports with Additional Quantifiable Impact
on Tax Administration
In
addition to questioned costs and funds put to better use, the Office of Audit has
identified measures that demonstrate the value of audit recommendations to tax administration and business operations. These issues are of interest to IRS
and Treasury Department executives, Congress, and the taxpaying public, and are
expressed in quantifiable terms to provide further insight into the value and
potential impact of the Office of Audit’s products and services. Including this information also promotes
adherence to the intent and spirit of the Government Performance and Results Act (GPRA).
Definitions
of these additional measures are:
Increased Revenue: Assessment or collection of additional taxes.
Revenue Protection: Proper denial of claims for refunds,
including recommendations that prevent erroneous refunds or efforts to defraud
the tax system.
Reduction of Burden on Taxpayers: Decreases by individuals or businesses in the
need for, frequency of, or time spent on contacts, record keeping, preparation,
or costs to comply with tax laws, regulations, and IRS policies and procedures.
Taxpayer Rights and
Entitlements at Risk: The protection of due
process (rights) granted to taxpayers by law, regulation, or IRS policies and
procedures. These rights most commonly
arise when filing tax returns, paying delinquent taxes, and examining the
accuracy of tax liabilities. The
acceptance of claims for and issuance of refunds (entitlements) are also
included in this category, such as when taxpayers legitimately assert that they
overpaid their taxes.
Taxpayer Privacy and Security: Protection of taxpayer financial and account
information (privacy). Processes and programs that provide protection of tax
administration, account information, and organizational assets (security).
Inefficient Use of Resources: Value of efficiencies
gained from recommendations to reduce cost while maintaining or improving the
effectiveness of specific programs; resources saved would be available for
other IRS programs. Also,
the value of internal control weaknesses that resulted in an unrecoverable
expenditure of funds with no tangible or useful benefit in return.
Reliability of Management Information: Ensuring the accuracy, validity, relevance,
and integrity of data, including the sources of data and the applications and
processing thereof, used by the organization to plan, monitor, and report on
its financial and operational activities.
This measure will often be expressed as an absolute value (i.e., without
regard to whether a number is positive or negative) of overstatements or
understatements of amounts recorded on the organization’s documents or systems.
Protection of Resources: Safeguarding human and capital assets, used
by or in the custody of the organization, from inadvertent or malicious injury,
theft, destruction, loss, misuse, overpayment, or degradation.
The
number of taxpayer accounts and dollar values shown in the following chart was
derived from analyses of historical data, and is thus considered a potential
barometer of the impact of audit recommendations. Actual results will vary depending on the
timing and extent of management’s implementation of the corresponding
corrective actions and the number of accounts or subsequent business activities
impacted from the dates of implementation.
Also, a report may have issues that impact more than one outcome measure
category.
Reports
With Additional Quantifiable Impact On Tax Administration |
|||
Outcome Measure Category |
Number of Reports1 |
Number of Taxpayer Accounts |
Dollar Value (in thousands) |
Increased Revenue |
4 |
131,051 |
$46,589 |
Revenue Protection |
4 |
218,038 |
$1,359,284 |
Reduction of Burden on Taxpayers |
4 |
1,027,203 |
0 |
Taxpayer Rights and Entitlements at
Risk |
9 |
2,993,822 |
$450,838 |
Taxpayer Privacy and Security |
2 |
545 |
0 |
Inefficient Use of
Resources |
2 |
0 |
$15,572 |
Reliability of
Management Information |
9 |
99,061 |
$213,515 |
Protection of
Resources |
0 |
0 |
0 |
1 See Appendix II for identification of audit reports involved.
Management did not agree with the outcome
measures in the following reports:
The following reports
contained quantifiable impacts in addition to the number of taxpayer accounts
and dollar value:
Investigations
Statistical Reports
Significant Investigative Achievements April 1, 2008 – September 30, 2008 |
|
Complaints/Allegations Received by
TIGTA |
|
Complaints
against IRS Employees |
2,262 |
Complaints
against Non-Employees |
2,253 |
Total Complaints/Allegations |
4,515 |
Status of Complaints/Allegations Received by TIGTA |
|
Investigations
Initiated |
1,601 |
In Process
within TIGTA1 |
291 |
Referred to
IRS for Action |
379 |
Referred to
IRS for Information Only |
757 |
Referred to
a Non-IRS Entity2 |
6 |
Closed with
No Referral |
1,129 |
Closed with
All Actions Completed |
352 |
Total Complaints |
4,515 |
Investigations Opened and Closed |
|
Total
Investigations Opened |
1,826 |
Total
Investigations Closed |
1,895 |
Financial
Accomplishments |
|
Embezzlement/Theft
Funds Recovered |
$18,559,077 |
Court
Ordered Fines, Penalties and Restitution |
$2,839,314 |
Out-of-Court
Settlements |
0 |
Total Financial
Accomplishments |
$21,398,391 |
1 Complaints
for which final determination had not been made at the end of the reporting
period.
2 A non-IRS entity includes other law
enforcement entities or Federal agencies.
Note:
The IRS made 76 referrals to TIGTA that would more appropriately be handled by the
IRS, and therefore were returned to the IRS.
These are not included in the total complaints shown above.
Status of Closed Criminal Investigations |
|||
Criminal
Referrals1 |
Employee |
Non-Employee |
Total |
Referred – Accepted
for Prosecution |
31 |
84 |
115 |
Referred –
Declined for Prosecution |
381 |
341 |
722 |
Referred –
Pending Prosecutorial Decision |
11 |
54 |
65 |
Total Criminal Referrals |
425 |
479 |
904 |
No
Referral |
479 |
536 |
1,015 |
1 Criminal referrals include both Federal and State dispositions.
Criminal Dispositions2 |
|||
|
Employee |
Non-Employee |
Total |
Guilty |
19 |
38 |
57 |
Nolo Contendere (no contest) |
0 |
3 |
3 |
Pre-trial Diversion |
0 |
8 |
8 |
Deferred Prosecution3 |
0 |
2 |
2 |
Not Guilty |
0 |
1 |
1 |
Dismissed4 |
2 |
8 |
10 |
Total Criminal Dispositions |
21 |
60 |
81 |
2 Final criminal
dispositions during the reporting period. This data may pertain to investigations referred
criminally in prior reporting periods and do not necessarily relate to the
investigations referred criminally in the Status of Closed Criminal
Investigations table above.
3 Generally in a deferred prosecution the
defendant accepts responsibility for his/her actions and complies with certain
conditions imposed by the court. Upon
the defendant’s completion of the conditions, the court dismisses the
case. If the defendant fails to fully
comply, the court reinstates prosecution of the charge.
4 Court dismissed charges.
Administrative Dispositions on Closed TIGTA
Investigations5 |
|
|
Total |
Removed, Terminated or Other |
357 |
Suspended/Reduction in Grade |
101 |
Oral or Written Reprimand/Admonishment |
119 |
Closed – No Action Taken |
96 |
Clearance Letter Issued |
78 |
Employee Resigned Prior to Adjudication |
166 |
Non-Internal Revenue Service Employee
Actions6 |
340 |
Total Administrative Dispositions |
1,257 |
5 Final administrative dispositions during
the reporting period. This data may pertain to investigations
referred administratively in prior reporting periods and does not necessarily
relate to the investigations closed in the Investigations Opened and Closed
table.
6 Administrative actions taken by the IRS
against non-IRS employees.
Appendix I
Statistical Reports
- Other
Audit Reports with
Significant
Unimplemented Corrective
Actions
The Inspector General Act of 1978
requires identification of significant recommendations described in previous semiannual
reports for which corrective actions have not been completed. The following list is based on information
from the IRS Office of Management Control’s automated tracking system
maintained by Treasury Department management officials.
Reference Number |
IRS Management Challenge Area |
Issued |
Projected Completion Date |
Report Title and Recommendation Summary (F = Finding No., R = Recommendation No., P = Plan No.) |
2001-30-052 |
Tax Compliance Initiatives |
March 2001 |
12/15/10 |
Program Improvements Are Needed to Encourage Taxpayer
Compliance in Reporting Foreign Sourced Income F-3, R-1, P-1, P-2. Improve
systems that process data the IRS receives on foreign sourced income. |
2003-10-094 |
Erroneous and Improper Payments |
March 2003 |
10/15/08 |
Improvements Are
Needed in the Monitoring of Criminal Investigation Controls Placed on
Taxpayers’ Accounts When Refund Fraud is Suspected F-1, R-2, P-1. Ensure that
regular reviews of the Questionable Refund Program are conducted to assess
compliance with procedures and that feedback is provided regarding program
effectiveness. Also, analyses of the
Fraud Detection Centers’ (FDC) control listing data should be analyzed to
ensure reviews are done and accounts are resolved. |
2003-40-139 |
Tax Compliance Initiatives |
June 2003 |
10/15/08 |
Opportunities Exist
to Improve the Administration of the Earned Income Tax Credit F-1, R-2, P-1. Establish a
consistent method to measure progress toward the Earned Income Tax Credit
(EITC) Program’s long-term goals. |
2003-30-176 |
Tax Compliance Initiatives |
August 2003 |
01/15/09 |
Interest Paid to
Large Corporations Could Significantly Increase Under a Proposed New Revenue
Procedure F-1, R-2, P-1.
Gather pertinent information concerning the affected proposed
procedure to reduce the length of examinations and interest costs by
conducting a pilot program to demonstrate the actual benefits that could be
achieved. |
2004-20-001 |
Systems Modernization of the IRS |
October 2003 |
12/31/10 |
Risks Are
Mounting As the Integrated Financial System Project Team Strives to Meet An
Aggressive Implementation Date F-2, R-1, P-1. Ensure the
disaster recovery environment is completely built-out and tested. |
2004-30-068 |
Tax Compliance Initiatives |
March 2004 |
06/15/09 |
Additional
Efforts Are Needed to Improve the Bank Secrecy Act Compliance Program F-2, R-1, P-1. Develop standard
risk-based case selection criteria that would provide minimum requirements
and parameters for case selection. |
2004-40-098 |
Erroneous and Improper Payments |
May 2004 |
12/15/08 |
Better Use of
the National Account Profile During Returns Processing Can Eliminate
Erroneous Payments F-2, R-1, P-1. Conduct
studies on the accuracy of EITC claims on tax returns for individuals who
have been claimed for EITC purposes who are 20 or more years older than the
primary taxpayer, or are listed as children who are up to 19 years older than
the primary taxpayer. |
2004-20-131 |
Security of the IRS |
September 2004 |
04/30/12 |
The Use of Audit
Trails to Monitor Key Networks and Systems Should Remain Part of the Computer
Security Material Weakness F-2, R-4, P-1. Develop and
implement a reasonable approach for reviewing audit trails over major
applications. |
2005-40-026 |
Providing Quality Taxpayer Service Operations |
February 2005 |
12/31/10 12/31/10 |
Processes
Used to Ensure the Accuracy of Information for Individual Taxpayers on
IRS.GOV Need Improvement F-1, R-1, P-4. Develop a process
to ensure that only authorized personnel have access to IRS.gov content. F-1, R-2, P-1, P-2. Enhance the
IRS’s content management software application to provide the ability to
identify specific content accessed or revised by individual users. |
2005-20-024 |
Security of the IRS |
March 2005 |
12/31/10 |
The Disaster
Recovery Program Has Improved, But It Should Be Reported as a Material
Weakness Due to Limited Resources and Control Weaknesses F-1, R-1, P-1, P-5. Report a disaster recovery program material weakness to the
Department of the Treasury as part of the IRS’s Federal Managers’ Financial Integrity Act of 1982 annual
evaluation of controls and include any new or currently underway
activities in the corrective action plan. |
2005-10-107 |
Human Capital |
July 2005 |
10/15/08 10/15/08 10/15/08 10/15/08 |
Improved
Policies and Guidance Are Needed for the Telework
Program F-1, R-1, P-1. Ensure an
IRS-wide Flexiplace Program policy is developed and
implemented that addresses all the elements recommended by the Office of
Personnel Management. F-2, R-1, P-1. Implement
guidelines to assist managers in evaluating employees’ abilities to
participate in the Flexiplace Program without a
loss in productivity. F-2, R-2, P-1. Ensure Flexiplace Program training is provided as needed to help
address productivity concerns. F-2, R-3, P-1. Assess the
logistical support and equipment needs of Flexiplace
Program participants to help ensure there is no loss in productivity. |
2005-40-110 |
Providing Quality Taxpayer Service Operations |
July 2005 |
10/15/08 09/15/09 |
The
Effectiveness of the F-1, R-1, P-1. Enhance the
management information system to capture the number of taxpayers served, the
numbers and types of services provided, and the related resources. F-1, R-3, P-1. Develop a
process that includes routine assessments of Taxpayer Assistance Center (TAC)
operations to ensure the TACs are optimally located
and the services provided at the TACs are the most
effective and cost efficient. |
2005-10-129 |
Providing Quality Taxpayer Service Operations |
September 2005 |
05/31/10 |
Progress Has
Been Made, but Further Improvements Are Needed in the Administration of the
Low Income Taxpayer Clinic Grant Program F-1, R-1, P-2. Establish
goals and performance measures for the LITC program to assist the Congress
and IRS in evaluating the success of the program. |
2005-10-149 |
Human Capital |
September 2005 |
12/31/09 |
The Internal
Revenue Service Does Not Adequately Assess the Effectiveness of Its Training F-2, R-1, P-2. Ensure all IRS
components follow established procedures to evaluate training in order for
the IRS to comply with the training assessment requirement of the Federal Workforce Flexibility Act of 2004. |
2005-30-154 |
Processing Returns and Implementing Tax Law Changes
During the Tax Filing Season |
September 2005 |
04/15/10 |
The Clarity
of Math Error Notices Has Been Improved, but Further Changes Could Enhance
Notice Clarity and Reduce Unnecessary Notices F-1, R-2, P-1. Revise tax
statement tables contained on notices to include specific amounts from at
least some line items on which taxpayers made errors on their tax returns. |
2006-40-007 |
Erroneous and Improper Payments |
November 2005 |
12/15/08 |
Efforts to
Prevent Improper Tax Benefits Resulting From Multiple Uses of Taxpayer
Identification Numbers Can Be Improved F-1, R-1, P-2. Lead a
collaborative effort to identify a workable solution to resolve multiple identification
number use cases where an identification number is used as a primary
identification number on one return and a secondary identification number on
another return. |
2006-30-132 |
Tax Gap |
September 2006 |
02/15/09 02/15/09 |
Additional
Enhancements Could Improve Tax Compliance of Employees Who Receive Tips F-3, R-2, P-1. Ensure the
Service Wide Employment Tax Research System program remains funded through
completion and include the Gaming tip agreements in the Tip Agreement database. F-4, R-1, P-1. Ensure the
results of initial testing of the Attributed Tip Income Program Revenue
Procedure are analyzed and consider developing similar Revenue Procedures for
small businesses in other industries to increase the chance of improving the
tip income reporting compliance. |
2006-20-166 |
Security of the IRS |
September 2006 |
10/15/08 |
The
Monitoring of Privacy Over Taxpayer Data Is Improving, Although Enhancements
Can Be Made to Ensure Compliance With Privacy Requirements F-2, R-1, P-2, P-3,
P-4.
Initiate a program providing for the routine evaluation of employee
training activities relative to current privacy policy requirements and
develop a system for the tracking and monitoring of these activities. |
2006-20-177 |
Security of the IRS |
September 2006 |
10/15/08 |
Improvements
Are Needed to Ensure the Use of Modernization Applications Is Effectively
Audited F-2, R-2, P-1. Modify
modernized system audit trails to comply with SAAS standards, ensuring data collected
are valid and arranged in the proper format. |
2006-20-178 |
Security of the IRS |
September 2006 |
10/01/08 |
Complete
Certification and Accreditation Is Needed to Ensure the Electronic Fraud Detection
System Meets Federal Government Security Standards F-3, R-1, P-1. Develop a
Business Impact Analysis for the |
2007-40-026 |
Providing Quality Taxpayer Service Operations |
January 2007 |
04/15/09 |
Improvements
to the E-Help Desk Are Needed to Support Expanding Electronic Products and Services F-1, R-4, P-2, P-3. Develop
processes and procedures to ensure management information is complete and
accurate. |
2007-30-049 |
Tax Compliance Initiatives |
March 2007 |
01/15/09 |
The Internal
Revenue Service Needs to Improve Procedures to Identify Noncompliance With
the Reporting Requirements for Noncash Charitable
Contributions F-2, R-1, P-3. Develop
procedures to address returns without required substantiation for noncash charitable contributions. |
2007-40-057 |
Providing Quality Taxpayer Service Operations |
March 2007 |
05/15/09 01/15/10 |
Steps Can Be
Taken to Reduce the Challenges Taxpayers With Vision Impairments Face When
Attempting to Meet Their Tax Obligations F-2, R-2, P-1. Using the
results of the study, develop a long-term strategy to assist taxpayers with
vision impairments, including seniors. F-3, R-1, P-1. Provide
additional viewing options on IRS.gov, such as scalable fonts, enlarged text
size, or background colors to make it more accessible to taxpayers with
vision impairments. |
2007-10-061 |
Tax Exempt Organizations |
March 2007 |
11/30/08 |
F-1, R-1, P-1. Ensure the
interim report includes an assessment of how tax-exempt hospitals are
providing a community benefit, as well as any planned actions that is
determined necessary to address the community benefit standard. |
2007-30-062 |
Tax Compliance Initiatives |
March 2007 |
01/15/09 01/15/09 01/15/09 |
Social Security
and Medicare Taxes Are Not Being Properly Assessed on Some Tips and Certain
Types of Wage Income F-1, R-1, P-5. Use Form 4137
exclusively for calculating Social Security and Medicare taxes on tip
income. Revise the form to capture the
data necessary to assess the employer’s share of Social Security and Medicare
taxes on unreported tip income. F-1, R-2, P-1, P-2. Develop a
compliance program to ensure the revised Form 4137 is used effectively to
identify and assess the employer’s share of Social Security and Medicare
taxes on unreported tip income. F-3, R-2, P-1, P-2. Develop a
compliance program to help ensure only qualifying individuals use the new
form and the appropriate amounts of Social Security and Medicare taxes are
assessed for self-employed taxpayers or employers that are misclassifying
their employees. |
2007-10-076 |
Erroneous and Improper Payments |
May 2007 |
01/31/09 12/15/08 |
Actions Have
Been Taken to Address Deficiencies in the Questionable Refund Program; However,
Many Concerns Remain, With Millions of Dollars at Risk F-2, R-2, P-1. Initiate a
legislative proposal to exempt the IRS from issuing a deficiency notice for
disallowance of EITC and other refundable credits when the deficiency and
credits are the result of fraudulent returns, if its current efforts through
a regulatory change are not successful. F-4, R-1, P-1. Reemphasize
the requirement to maintain documentation and/or notations to describe how
the FDCs determined fraud. |
2007-10-082 |
Tax Exempt Organizations |
May 2007 |
01/31/09 01/15/09 |
Screening
Tax-Exempt Organizations Filing Information Provides Minimal Assurance That
Potential Terrorist-Related Activities Are Identified F-1, R-1, P-1. Develop and
implement a long-term strategy to automate the matching of Forms 1023 and 990
information against a consolidated terrorist watch list to initially identify
potential terrorist activities related to tax-exempt organizations. F-1, R-2, P-1. Evaluate
whether more comprehensive terrorist watch lists should be used in
conjunction with the Department of the Treasury’s Office of Foreign Assets
Control list during the screening of tax-exempt filing data to improve the
identification of organizations and/or individuals potentially involved in
terrorist-related activities. |
2007-20-107 |
Security of the IRS |
July 2007 |
10/15/08 |
Employees
Continue to Be Susceptible to Social Engineering Attempts That Could Be Used
by Hackers F-1, R-2, P-1. Conduct internal
social engineering tests on a periodic basis to increase employees’ security
awareness and the need to protect usernames and passwords. |
2007-20-123 |
Systems Modernization of the IRS |
July 2007 |
03/01/09 |
While Improvements
Continue in Contract Negotiation Methods and Management Practices,
Inconsistencies Need to Be Addressed F-2, R-1, P-1. Collect and
review lessons learned from the use of independent estimates to determine
whether independent estimates can become a consistently more useful
negotiations tool. |
2007-20-121 |
Systems Modernization of the IRS |
August 2007 |
12/31/10 |
Annual
Assessment of the Business Systems Modernization Program F-1, R-1, P-1. Continue to address
Modernization program corrective actions from TIGTA and Government
Accountability Office reports through the Highest Priority Initiatives
process. |
2007-40-164 |
Providing Quality Taxpayer Service Operations |
August 2007 |
10/15/08 |
The Internal
Revenue Service Provides Helpful Tax Law Assistance, But Still Has Problems
With Tax Return Preparation Assistance F-2, R-2, P-1. Consider
revising the appointment procedures to alleviate taxpayer burden, i.e.,
having to return to the TACs multiple times to
schedule appointments. |
2008-30-001 |
Tax Compliance Initiatives |
October 2007 |
01/15/08 |
Identification
of Unreported Self-Employment Taxes Can Be Improved F-2, R-1, P-1. Strengthen the
processes for reviewing returns upon initial receipt for potential unpaid
self-employment taxes. |
2008-30-027 |
Tax Compliance Initiatives |
December 2007 |
01/15/09 |
Tax
Examiners Did Not Always Resolve Refund Delinquency Cases, And Computer Checks
Did Not Identify Unfiled Returns F-2, R-1, P-1. Modify the
Refund Delinquency case creation criteria to ensure delinquency inquiries are
made of related tax period Forms 941 and Form 940. |
2008-20-029 |
Security of the IRS |
December 2007 |
10/01/08 12/01/08 12/01/08 |
Internal
Revenue Service Databases Continue to Be Susceptible to Penetration Attacks F-1, R-3, P-1. Expand the
criteria used for scanning IRS databases for the presence of administrator
accounts with default or blank passwords. F-1, R-4, P-1. Ensure the
employees responsible for correcting default and blank passwords directly
review the F-2, R-1, P-1. Establish a
process for monitoring database patch installations and updates to current
versions of database software. |
2008-20-030 |
Security of the IRS |
December 2007 |
01/01/09 10/01/08 |
Lack of
Proper IRS Oversight of the Department of the Treasury HSPD-12 Initiative Resulted
in Misuse of Federal Government Resources F-1, R-4, P-1. Coordinate
with the Treasury to evaluate the possibility of combining its Public Key
Infrastructure efforts with those of the General Service Administration. F-2, R-1, P-1. Ensure
executive steering committees responsible for providing oversight to
information technology projects take an active role to address these
challenges and, specifically, to enforce use of the IRS Enterprise Life Cycle
requirements. |
2008-40-062 |
Providing Quality Taxpayer Service Operations |
February 2008 |
12/15/08 |
The
Processing of Carryback Loss Claims Needs to Be
Improved to Ensure Taxpayers Receive Accurate Refunds F-1, R-1, P-2. Revise the
applicable tax form instructions for claiming carryback
losses to ease the burden on taxpayers and reduce the number of errors on
claims. |
2008-30-056 |
Human Capital |
March 2008 |
10/15/08 02/15/09 05/15/09 |
A More
Strategic Approach Could Enhance the Workers’ Compensation Program Return-To-Work-Efforts F-1, R-1, P-1. Develop and
implement control processes for reviewing the accuracy of the costs in Office
of Workers’ Compensation Program’s chargeback reports. F-2, R-1, P-1. Implement a
control to provide greater assurances that required procedures are completed
in the claim process by managers and employees IRS-wide. F-3, R-1, P-1. Develop and
establish a more strategic approach to enhance return-to-work efforts that
include specific policies and procedures for working across functional areas
to transition injured employees into productive activities in the workplace. |
2008-40-086 |
Taxpayer Protection and Rights |
March 2008 |
10/15/08 |
Outreach Has
Improved, But More Action Is Needed to Effectively Address Employment-Related
and Tax Fraud Identity Theft F-2, R-1, P-1. Update the
individual case screens on the Automated Underreporter
system to display prior year closing codes and ensure revision of the case
selection criteria to incorporate special handling of identity theft victims. |
2008-40-087 |
Complexity of the Tax Law |
March 2008 |
12/15/11 01/15/10 01/15/10 03/15/11 |
Individual Retirement
Account Contributions and Distributions Are Not Adequately Monitored to
Ensure Tax Compliance F-1, R-1, P-1. Analyze Forms
5498 to identify the causes of the errors and possible corrective actions. F-2, R-1, P-1. Develop and
implement strategies to bring noncompliant taxpayers back into compliance. F-3, R-1, P-1. Consider
using the indicator on the Form 5498 to identify taxpayers who are subject to
required minimum distributions. F-3, R-2, P-1. Consider
requiring custodians to report estimated required minimum distribution
amounts on the Form 5498. |
2008-40-089 |
Providing Quality Taxpayer Service Operations |
March 2008 |
03/15/09 |
Increasing
Federal and State Cooperation and Promoting Electronic Filing Would Improve Administration
of Taxes Used to Maintain the Nation’s Highways F-1, R-1, P-1, P-2. Encourage
more participation in the Alternate Proof of Payment Program, develop a
process to identify States participating in the program, and ensure agreement
provisions are followed. |
Other
Statistical Reports
The Inspector General Act of 1978 requires Inspectors
General to address the
following issues: |
|
Issue |
Result for TIGTA |
Access to Information Report unreasonable refusals of
information available to the agency that relate to programs and operations
for which the Inspector General has responsibilities. |
As
of September 30, 2008, there were no instances in which information or
assistance requested by the Office of Audit was refused. |
Disputed Audit Recommendations Provide information on
significant management decisions in response to audit recommendations with
which the Inspector General disagrees.
|
As
of September 30,
2008, no reports
were issued in which significant recommendations were disputed. |
Revised Management Decisions Provide a description and
explanation of the reasons for any significant revised management decisions
made during the reporting period. |
As
of September 30, 2008, no significant management decisions were revised. |
Audit Reports Issued in the Prior Reporting
Period with No Management Response Provide a summary of each audit report
issued before the beginning of the current reporting period for which no
management response has been received by the end of the current reporting
period. |
As
of September 30, 2008, there were no prior reports where management’s
response was not received. |
Review of Legislation and Regulations Review existing and proposed
legislation and regulations, and make recommendations concerning the impact
of such legislation or regulations. |
TIGTA’s Office of Chief Counsel reviewed 284 proposed
regulations and legislative requests during this reporting period. |
Appendix II
Audit Products
April 1, 2008 –
September 30, 2008
Inspector General Congressional Testimony |
|
Reference Number |
Hearing Title |
April 2008 |
|
2008-OT-115 |
Identity Theft |
2008-OT-116 |
The Internal Revenue Service’s
Fiscal Year 2009 Budget |
June 2008 |
|
2008-OT-145 |
Joint hearing, Subcommittee on Oversight,
Subcommittee on Social Security, Committee on Ways and Means, U.S. House of
Representatives |
Audit Products |
|
Reference Number |
Report Title |
April 2008 |
|
2008-1C-068 |
Audit
of Cost Accounting Standard 417, Cost of Money As an Element of the Cost of
Capital Assets Under Construction |
2008-1C-069 |
Report
on Contractor’s Overall Fiscal Year 2007 Floor Check |
2008-1C-070 |
Report
on Examination of Fiscal Year 2004 Incurred Costs and Indirect Expense Rates |
2008-1C-079 |
Incurred
Cost Audit for Fiscal Year 2005 |
2008-1C-080 |
Report
on Audit of Compliance With Cost Accounting Standard 411, Accounting for
Acquisition Costs of Material |
2008-1C-081 |
Report
on Audit of Adequacy and Compliance of the Contractor’s Fiscal Year 2007
Revised Disclosure Statement |
2008-1C-083 |
Incurred
Cost Audit for Fiscal Year Ended August 31, 2003 |
2008-1C-084 |
Examination
of Paid Vouchers |
2008-1C-085 |
Incurred
Cost Audit for Fiscal Year 2004 |
2008-10-098 |
Due
to the Lack of Experienced Users, the Benefits of Performance-Based
Acquisition Are Not Being Fully Realized |
2008-30-097 |
Fiscal
Year 2008 Statutory Review of Compliance With Legal Guidelines When Issuing
Levies |
2008-40-108 |
Fiscal
Year 2008 Statutory Audit of Compliance With Legal Guidelines Restricting the
Use of Records of Tax Enforcement Results |
2008-30-095 |
Trends
in Compliance Activities Through Fiscal Year 2007 |
2008-10-088 |
The
Taxpayer Advocate Service Needs to Improve Its Processing of Economic Burden
Cases (Revenue Protection: $21,296, impacting 1,083 taxpayers; Taxpayer
Burden: 36,003 taxpayers unnecessarily burdened; Taxpayer Rights and
Entitlements: 1,354 taxpayers contacted despite having a power of attorney on
file; Taxpayer Privacy and Security: 541 taxpayer accounts in which an
unauthorized disclosure was made to third parties; Reliability of Information:
The Primary Core Issue Code was incorrectly entered in 14,076 cases) |
2008-30-094 |
Additional
Actions Are Needed to Effectively Address the Tax Gap |
2008-30-091 |
The
Telephone Excise Tax Refund Program Was Successfully Implemented for Businesses;
However, a Large Amount of Overcollected Tax Has
Gone Unclaimed |
2008-30-093 |
Lack
of Compensation for Unused Sick Leave at Retirement Has contributed to Higher
Use by Employees in the Federal Employees Retirement System |
2008-40-112 |
Oversight
and Administration of the Tax Counseling for the Elderly Program Need
Improvement (Reliability of Information: Information not available to
determine if funding of $3.9 million was appropriately spent) |
2008-10-106 |
While
Renowned for Its Forensic Capabilities, the Digital Evidence Program Faces
Challenges and Needs More Controls |
May 2008 |
|
2008-30-107 |
The
Complexity of the Law Makes Administering the Alternative Motor Vehicle Credit
Difficult (Revenue Protection: $151,828 impacting 69 taxpayers) |
2008-40-113 |
Installment
Agreement User Fees Were Not Properly Calculated or Always Collected
(Increased Revenue: $1,087,003 impacting 33,711 taxpayers; Taxpayer Rights
and Entitlements: $12,818,705 of excess or duplicate user fees paid impacting
941,256 taxpayers) |
2008-40-118 |
Inaccurate
and Incomplete Data Have Adversely Affected Implementation of the |
2008-40-124 |
Fiscal
Year 2008 Statutory Audit of Compliance With Legal Guidelines Prohibiting the
Use of Illegal Tax Protester and Similar Designations (Taxpayer Rights and
Entitlements: 427 taxpayers improperly identified) |
2008-1C-101 |
Report
on Audit of Compliance With Cost Accounting Standard 409, Depreciation of
Tangible Capital Assets |
2008-1C-102 |
Report
on the Contractor's Information Technology System General Internal Controls |
2008-1C-103 |
Report
on Compliance With Cost Accounting Standard 403, Allocation of Home Office
Expenses to Segments |
2008-1C-104 |
Fiscal
Year 2005 Incurred Costs Audit |
2008-1C-105 |
Audit
of the Contractors Fiscal Years 2008 through 2012 Forward Pricing and
Provisional Billing Indirect Expense Rates |
2008-1C-109 |
Audit
of Cost Impact Statement Change in Executive Compensation |
2008-30-114 |
Actions
Are Needed to Control Risks With International Transactions Reported on
Corporate Income Tax Returns |
June 2008 |
|
2008-10-123 |
Chief
Counsel Should Address Questions Related to Proposed Changes in the Automatic
Consent Process |
2008-40-127 |
Fiscal
Year 2008 Statutory Audit of Compliance With Notifying Taxpayers of Their Rights
When Requested to Extend the Assessment Statute (Taxpayer Rights and
Entitlements: 984 taxpayer and taxpayer representative case files not
adequately documented) |
2008-30-126 |
Fiscal
Year 2008 Review of Compliance With Legal Guidelines When Conducting Seizures
of Taxpayers’ Property (Taxpayer Rights and Entitlements: 19 taxpayers whose
rights could be adversely affected) |
2008-40-125 |
Improvements
in the Distribution and Design of Internal Documents and Tax Publications,
Forms, and Notices Could Reduce Costs Considerably (Funds Put to Better Use:
$20,166,340) |
2008-40-128 |
A
Self-Assistance Option Would Reduce Burden and Costs Associated With
Resolving Rejected Electronic Tax Returns (Inefficient Use of Resources: $15,080,138
in reduced contact costs; Taxpayer Burden: 774,930 fewer contacts by
taxpayers) |
2008-10-117 |
Improvements
Have Been Made to Educate Tax-Exempt Organizations and Enforce the
Prohibition Against Political Activities, but Further Improvements Are
Possible |
2008-20-122 |
Improvements
to the Modernized e-File System Will Help Provide Intended Benefits to the
Internal Revenue Service and Taxpayers (Taxpayer Burden: 142,475 taxpayers
with delayed return processing; Reliability of Information: incorrect data on
82,871 returns) |
2008-20-129 |
Annual
Assessment of the Business Systems Modernization Program |
2008-10-132 |
Progress
Has Been Made, but Important Work Must Be Completed to Ensure Timely
Identification of Future Leaders |
July 2008 |
|
2008-1C-110 |
Calendar
Year 2005 Incurred Cost Audit (Cost Savings: $10,627) |
2008-1C-111 |
Report
on Audit of Compliance With Cost Accounting Standard 416, Accounting for
Insurance Costs |
2008-1C-119 |
Report
on Follow-up Audit of Budget and Planning System Internal Controls |
2008-1C-120 |
Report
on Audit of Compliance With Cost Accounting Standard 404, Capitalization of
Tangible Assets |
2008-1C-121 |
Fiscal
Year 2005 Incurred Cost Audit |
2008-40-131 |
While
Progress Has Been Made, Limits on the Number of Examinations Reduce the
Effectiveness of the Earned Income Tax Credit Recertification Program |
2008-20-130 |
Correspondence
Imaging System Performance Has Improved, but Additional Measures Are Needed to
Ensure That the System Performs As Expected (Reliability of Information:
Costs and benefits overstated by $201.6 million) |
2008-10-133 |
Statistical
Portrayal of the Criminal Investigation Division’s Enforcement Activities for
Fiscal Years 2000 Through 2007 |
2008-20-143 |
Control
Weaknesses at Internal Revenue Service Internet Connections Increase Security
Risks |
2008-30-147 |
While
Documentation Was Not Available to Fully Assess the Return Preparer Program,
Identification and Processing of Preparer Penalties Can Be Improved
(Increased Revenue: $750; Taxpayer Privacy and Security: 4 instances with
potential for unauthorized disclosure) |
2008-30-144 |
Better
Management of Some Procedures for Sales of Seized Property Is Needed |
2008-40-146 |
Procedures
Were Not Always Followed When Resolving Alternative Minimum Tax Discrepancies |
2008-20-134 |
The
Information Technology |
2008-10-142 |
Improved
Controls Over Grants Provided to Low Income Taxpayer Clinics Would Lower the
Risk of the Inappropriate Use of Federal Government Funds (Questioned Costs:
$61,327; Reliability of Information: Controls not sufficient to ensure
reported $7.7 million in financial information is accurate) |
2008-40-149 |
Evaluation
of Planning Efforts for the Issuance of Economic Stimulus Payments |
2008-20-153 |
Treasury
Inspector General for Tax Administration – Federal Information Security Management
Act (Intelligence – National Security Systems) Report for Fiscal Year 2008 |
August
2008 |
|
2008-30-150 |
The
Automated Collection System Gap Case Test Initiative Was Not Effectively
Conducted (Reliability of Information: $315,000 collected from taxpayers were
not considered when assessing the results of the Gap Test) |
2008-1C-135 |
Report
on Fiscal Year 2008 Floor Check |
2008-1C-136 |
Incurred
Cost Audit for Fiscal Year Ended June 30, 2006 |
2008-1C-137 |
Report
on Audit of Noncompliance With Cost Accounting Standard 420, Accounting for
Independent Research and Development Costs and Bid and Proposal Costs |
2008-1C-138 |
Audit
of Contractor’s Billing System Internal Controls |
2008-1C-139 |
Audit
of Subcontract Costs Billed in Fiscal Years 2004 Through 2006 on Prime
Contract Number TIRNO-00-D-00014 |
2008-1C-141 |
Report
on Audit of Compliance With Cost Accounting Standard 404, Capitalization of
Tangible Assets |
2008-1C-152 |
Report
on Audit of Compliance With Cost Accounting Standard 409, Depreciation of
Tangible Assets |
2008-30-155 |
Computer
Programming Changes Are Needed to Reduce Delays in Reissuing Some Undelivered
Refund Checks (Questioned Costs: $36,160; Taxpayer Burden: 73,795 taxpayers
with delayed refunds after notices were sent to incorrect addresses) |
2008-20-159 |
Unauthorized
and Insecure Internal Web Servers Are Connected to the Internal Revenue
Service Network |
2008-30-154 |
Guidance
Could Be Enhanced for Deciding to Use a Qualified Intermediary in Like-Kind
Exchanges |
2008-10-140 |
Indian
Tribal Noncompliance With the Bank Secrecy Act Is Effectively Identified and
Addressed, but Improvements Can Be Made (Reliability of Information: 270 accounts
on database are not accurate or complete) |
2008-30-164 |
The
Office of Disclosure Continued to Improve Compliance With the Freedom of
Information Act Requirements (Taxpayer Rights and Entitlements: 274 responses
in which information was incorrectly withheld or that were not timely
processed) |
2008-40-167 |
The
Withholding Compliance Program Is Improving Taxpayer Compliance; However,
Additional Enforcement Actions Are Needed (Increased Revenue: $45.5 million) |
2008-40-168 |
Increased
Call Volume Associated With Economic Stimulus Payments Reduced Toll-Free
Access for the 2008 Filing Season |
2008-10-169 |
A
More Strategic and Consistent Approach to Estimating Retirements and Other
Separations Is Needed to Better Plan for Future Human Resource Needs |
2008-40-170 |
Many
Taxpayers Who Obtain Refund Anticipation Loans Could Benefit From Free Tax
Preparation Services |
September 2008 |
|
2008-40-171 |
Most
Tax Returns Prepared by a Limited Sample of Unenrolled
Preparers Contained Significant Errors |
2008-40-174 |
Evaluation
of the Computation of Economic Stimulus Payments |
2008-10-162 |
Five
Fair Tax Collection Practices Violations Resulted in Administrative Actions
in Calendar Year 2007 (Reliability of Information: 13 employee cases not
properly coded on the Automated Labor and Employee Relations Tracking System |
2008-30-157 |
The
Internal Revenue Service and Contractors Are Generally Following Procedures Established
for the Private Debt Collection Program, but Improvements Are Needed |
2008-20-173 |
Treasury
Inspector General for Tax Administration – Federal Information Security
Management Act Report for Fiscal Year 2008 |
2008-20-151 |
Customer
Account Data Engine Project Management Practices Have Improved, but Continued
Attention Is Needed to Ensure Future Success |
2008-10-160 |
The
Office of Appeals Continues to Show Improvement in Processing Collection Due
Process Cases (Taxpayer Rights and Entitlements: 6,437 closed Collection Due
Process and Equivalency Hearing cases that did not contain required or
sufficient documentation; Reliability of Information: 1,844 cases with
incorrect computer codes) |
2008-20-161 |
The
|
2008-30-166 |
Tax
Forms and Publications Were Generally Obtainable, but the Time Required to
Acquire Forms Could Be Reduced |
2008-30-156 |
Opportunities
Exist to Improve the Correspondence Examination Process for High-Income Nonfilers |
2008-30-158 |
The
Internal Revenue Service Needs to Evaluate Tolerance Levels to Ensure That
Program Objectives Are Met |
2008-10-148 |
Emergency
Preparedness at Internal Revenue Service Facilities Needs to Be Improved |
2008-30-175 |
The
Telephone Excise Tax Refund Was Not Claimed on Business Tax Returns Primarily
Because of the Perceived Work and Expense Involved to Do So |
2008-20-176 |
The
Office of Research, Analysis, and Statistics Needs to Address Computer
Security Weaknesses |
2008-20-178 |
Weaknesses
in Business Resumption Plans Could Delay Recovery From a Disaster |
2008-40-177 |
Accuracy
of Volunteer Tax Returns Continues to Improve, but Better Controls Are Needed
to Ensure Consistent Application of Procedures and Processes |
2008-30-165 |
Additional
Steps Need to Be Completed to Ensure the Success of the Service-wide
Non-filer Strategy |
2008-10-172 |
An
Estimated $1.6 Billion in Fraudulent Refunds Was Issued During the 2006 and
2007 Filing Seasons (Revenue Protection: $1.356 billion; 206,208 taxpayers
impacted) |
2008-20-163 |
The
Internal Revenue Service Deployed Two of Its Most Important Modernized
Systems With Known Security Vulnerabilities |
2008-40-180 |
Most
Automated Underreporter Program Notices Are
Correct; However, Additional Oversight Is Needed (Increased Revenue: $1,146
and 97,340 taxpayers impacted; Taxpayer Rights and Entitlements: $18,968 and
243,345 taxpayers impacted) |
2008-40-182 |
Processes
Are Not Sufficient to Minimize Fraud and Ensure the Accuracy of Tax Refund
Direct Deposits |
2008-20-179 |
Treasury
Inspector General for Tax Administration – Federal Information Security
Management Act (Non-Intelligence – National Security Systems) Report for
Fiscal Year 2008 |
2008-30-181 |
Although
the Large and Mid-Size Business Division’s Currency Initiative Was Considered
a Success, Improvements Could Be Made in Future Initiatives |
2008-40-183 |
The
2008 Filing Season Was Generally Successful Despite the Challenges of Late
and Unexpected Tax Legislation (Revenue Protection: $3.5 million impacting
10,678 taxpayers; Taxpayer Rights and Entitlements: $438 million impacting
1.8 million taxpayers) |
Appendix III
TIGTA’s Statutory
Reporting Requirements
TIGTA
issued 25 audit reports required by statute dealing with the adequacy and
security of IRS technology during this reporting period. In FY 2008, TIGTA completed its tenth round
of statutory reviews that are required annually by the Internal Revenue Service
Restructuring and Reform Act of 1998. TIGTA also completed its annual review
requirement of the Federal Financial
Management Improvement Act of 1996 and the Office of National Drug Control
Policy Detailed Accounting Submission and Assertions. The following table reflects the status of
the FY 2008 statutory reviews.
Reference to Statutory Coverage |
Explanation of the Provision |
Comments/TIGTA Audit Status |
Enforcement Statistics Internal
Revenue Code (I.R.C.) § 7803(d)(1)(A)(i) |
Requires TIGTA to evaluate the IRS’s compliance with restrictions under
section 1204 of RRA 98 on the
use of enforcement statistics to evaluate IRS employees. |
Reference No. 2008-40-108, April 2008 Potential violations
were identified in 7 (1 percent) of the 660 performance evaluation documents
reviewed. In addition, four managers
did not document that they had evaluated employees on the retention standard
that requires the fair and equitable treatment of taxpayers,
and 29 (45 percent) of the 65 employees and managers that TIGTA asked did not
understand the intent of the retention standard. Further, five managers of employees could
not substantiate compliance with IRS procedures by providing evidence that
they had completed the requested RRA 98 Section 1204 Manager’s Self‑Certification
Forms. |
Restrictions on
Directly Contacting Taxpayers I.R.C. § 7803(d)(1)(A)(ii) |
Requires TIGTA to evaluate the IRS’s compliance with restrictions under I.R.C. § 7521 on directly contacting taxpayers who have indicated they prefer their representatives be contacted. |
Reference No. 2008-40-090, March 2008 The IRS’s Internal Revenue Manual provides employees guidance
to help ensure compliance with the direct contact provisions of the
I.R.C. In addition, the IRS has
informed taxpayers of these rights through various IRS publications. However, this is the tenth year that
TIGTA could not determine whether IRS employees followed proper procedures to
stop an interview if the taxpayer requested to consult with a
representative. Neither TIGTA nor the
IRS could readily identify cases where a taxpayer requested a representative
or the IRS contacted the taxpayer directly and improperly bypassed the
representative. IRS management
information systems do not separately record or monitor direct contact
requirements, and there is no legal requirement for the IRS to do so. TIGTA does not recommend the creation of a
separate tracking system. |
Filing of a
Notice of Lien I.R.C. § 7803(d)(1)(A)(iii) |
Requires TIGTA to evaluate the IRS’s compliance with required procedures under I.R.C. § 6320 upon the filing of a notice of lien. |
Reference
No. 2008-30-082, March 2008 The IRS may not have complied with the law in all cases. TIGTA’s review of a statistically valid sample of 150 Federal Tax Lien cases identified 145 cases (97 percent) for which the IRS did mail lien notices correctly and in a timely manner, as required by I.R.C. § 6320 and internal procedures. For the other five lien notices (3 percent), TIGTA could not determine if the law was complied with because the IRS could not provide proof of mailing. When an initial lien notice is returned because it could not be delivered and a different address is available for the taxpayer, the IRS does not always meet its statutory requirement to send the lien notice to the taxpayer’s last known address. For 29 (7 percent) of the 400 cases, employees did not research IRS computer systems for different addresses. For 104 (26 percent) of the 400 cases, the research was not performed within five business days. TIGTA also identified two cases for which a new lien notice should have been sent to the taxpayer at the updated address because the IRS systems listed the address prior to the lien filing. These two cases could involve legal violations because the IRS did not meet its statutory requirement of sending lien notices to the taxpayer’s last known address. Also, the IRS did not always follow its own internal guidelines for notifying taxpayer representatives of the filing of lien notices. For 12 (40 percent) of the 30 cases in which the taxpayer had an authorized representative at the time of the lien actions, the IRS did not notify the taxpayer’s representative of the lien filing. In addition, on two cases, it sent notifications to representatives not authorized to receive such information. |
Extensions of the Statute of Limitations for Assessment of Tax I.R.C. § 7803(d)(1)(C) I.R.C. § 6501(c)(4)(B) |
Requires TIGTA to include information regarding extensions of the
statute of limitations for assessment of tax under I.R.C. § 6501 and the provision of notice to
taxpayers regarding the right to refuse or limit the extension to particular
issues or a particular period of time. |
Reference No. 2008-40-127, June 2008 The IRS has
shown improvement over prior years when documenting that taxpayers were
informed of their rights. The
percentage of case files without documentation has steadily decreased over
the last 5 years. However, there were
still instances in which there was no documentation in the related case files
to show that taxpayers were advised of their rights regarding assessment
statute extensions. In TIGTA’s statistical sample of 139 tax returns, 8 (6
percent) of the related case files reviewed did not adequately document that
the taxpayers had been advised of their rights regarding assessment statute
extensions. This sample included
109 case files with authorizations for third-party representation. TIGTA found that 9 (8 percent) of the 109
files did not document that the taxpayers’ representatives were provided with
the required notifications. TIGTA’s discussions with employees who worked these
exception cases determined that some employees overlooked the fact that the
required information was not documented in the case file. Other employees indicated that when a
taxpayer asked them to deal directly with his or her representative, the employees
did so exclusively. Because the
taxpayer did not want to be involved in the audit process, the employees
informed only the representative of the taxpayer’s rights. This is consistent with the IRS’s position
that informing a taxpayer’s representative meets the requirement that the
taxpayer be informed. |
Levies I.R.C. § 7803(d)(1)(A)(iv) |
Requires TIGTA to evaluate the IRS’s compliance with required procedures under I.R.C. § 6330 regarding levies. |
Reference No. 2008-30-097, April 2008 The IRS is protecting taxpayers’ rights when
issuing manually prepared levies.
TIGTA reviewed Additionally, TIGTA evaluated the effectiveness of program
changes on the ACS for sending reminder notices to taxpayers when more than
180 calendar days passed since the date of the notification letter. TIGTA reviewed 30 manual levies issued more
than 180 calendar days after the original notices of intent to levy had been
sent. The review showed that the IRS
had sent appropriate reminder letters if there had been no other contacts
with taxpayers within 180 calendar days of the date of the notices. |
Collection Due Process I.R.C. § 7803(d)(1)(A)(iii) and (iv) |
Requires TIGTA to evaluate the IRS’s compliance with required procedures under I.R.C. §§ 6320 and 6330 regarding the taxpayers’ rights to appeal lien or levy actions. |
Reference No. 2008-10-160, September 2008 The IRS has continued to show
improvements in the processing of Collection Due Process cases as a whole by
generally classifying taxpayer requests properly, developing additional
procedures, and ensuring that the Collection Statute Expiration Dates for
taxpayer accounts were correct. However, TIGTA identified a
few instances in which taxpayers were not provided with their right to a
hearing because Appeals employees did not make sufficient attempts to contact
the taxpayers before closing their cases.
In addition, some taxpayers might not have received an appropriate or
complete response to the issues raised in their appeals because some case
files did not include required documentation.
Without the appropriate case documentation, TIGTA could not identify
the issues raised by the taxpayer or whether Appeals adequately addressed all
issues in the taxpayer’s hearing.
Further, hearing officers are still not always documenting their
impartiality in the case files. TIGTA
also found correspondence to some taxpayers was not accurate or clear or did
not fully address all issues raised by the taxpayers. As a result, taxpayers could experience
increased burden if they have to contact the IRS for additional
assistance. Finally, TIGTA identified
taxpayer accounts that did not contain required computer coding to identify
those taxpayers who had exercised their appeal rights. As a result, IRS employees who access the
taxpayers’ accounts for review or to take subsequent actions will not be
aware of the taxpayers’ appeals. This
could result in erroneous collection actions, inappropriate suspension of
collection activity, or incorrect information or advice from IRS personnel. |
Seizures I.R.C. § 7803(d)(1)(A)(iv) |
Requires TIGTA to evaluate the IRS’s compliance with required procedures under I.R.C. §§ 6330 through 6344 when conducting seizures. |
Reference No. 2008-30-126, June 2008 TIGTA reviewed a random
sample of 50 of the The Seized Property
Sale Report (Form 2436) contains
the required entries for expenses and proceeds, as well as a summary section
for expenses incurred. However, Form
2436 was not required for all seizure expenses and proceeds transactions. Consistent use of this Form might have
prevented many of the instances TIGTA identified from occurring. |
Taxpayer Designations – Illegal Tax Protester
Designation and Nonfiler Designation I.R.C. § 7803(d)(1)(A)(v) |
An evaluation of the IRS’s compliance with restrictions under section 3707 of RRA 98 on designation of
taxpayers. |
Reference No. 2008-40-124, May 2008 In general, the IRS is in compliance with the prohibition on using Illegal Tax Protester (ITP) or similar designations. The IRS has not reintroduced past ITP codes on the Master File, and formerly coded taxpayer accounts have not been assigned similar Master File designations. In addition, the IRS does not have any current publications with ITP references, and it has removed all ITP reference from the Internal Revenue Manual. However, there were some references in case files. In 430 instances out of approximately 65.2 million records and cases, IRS employees referred to taxpayers as ITPs or other similar designations in case narratives. |
Disclosure of Collection Activities With Respect to Joint Returns I.R.C. § 7803(d)(1)(B) I.R.C. § 6103(e)(8) |
Requires TIGTA to review and certify whether the IRS is
complying with I.R.C. § 6103(e)(8) to disclose information to an individual filing a joint return on collection activity involving the other individual filing the return. |
Reference No. 2008-40-099, March 2008 IRS procedures provide employees sufficient guidance for
handling joint filer collection activity information requests. However, this is the tenth year that TIGTA
could not determine whether the IRS is complying with the statutory
requirements for responding to written collection activity information requests
from joint filers. IRS management
information systems do not separately record or monitor joint filer requests,
and there is no legal requirement for the IRS to do so. TIGTA does not recommend the creation of a
separate tracking system. |
Taxpayer Complaints I.R.C. § 7803(d)(2)(A) |
Requires TIGTA to include in each of its Semiannual Reports to Congress the number of taxpayer complaints received and the number of employee misconduct and taxpayer abuse allegations received by IRS or TIGTA from taxpayers, IRS employees and other sources. |
Statistical results on
the number of taxpayer complaints received are shown on
page 55. |
Administrative or Civil Actions With Respect to the Fair
Tax Collection Practices Act of 1996 I.R.C. § 7803(d)(1)(G) I.R.C. § 6304 |
Requires TIGTA to include information regarding any administrative or civil actions with respect to violations of the fair debt collection provision of I.R.C. § 6304, including a summary of such actions, and any resulting judgments or awards granted. |
Reference No. 2008-10-162, September 2008 In
Calendar Year 2007, there were five fair tax collection practices violations
that resulted in an administrative action being taken against an IRS
employee. There were no civil actions that resulted in the IRS paying
monetary settlements to taxpayers because of a fair tax collection practices
violation. |
Denial of Requests for Information I.R.C. § 7803(d)(1)(F) I.R.C. § 7803(d)(3)(A) |
Requires TIGTA to include information regarding
improper denial of requests for information from the IRS, based on a
statistically valid sample of the total number
of determinations made by the IRS to deny written requests to disclose
information to taxpayers on the basis of I.R.C. § 6103 or 5 U.S.C. § 552(b)(7). |
Reference No. 2008-30-164, August
2008 The IRS continued to improve the accuracy,
timeliness, and completeness of its responses to requests for information
covered by the Freedom of Information Act (FOIA). For example, the percentage of untimely
responses to FOIA/Privacy Act requests continued to decrease. In the previous eight years’ audits, the
percentages of untimely responses ranged from a high of 43.5 percent to a low
of 2.3 percent. In addition, TIGTA
noted no exceptions in the 84 I.R.C. § 6103 cases reviewed. This is a marked improvement over the
results from last year, when information was improperly withheld in 14.5
percent of the cases reviewed. The improved performance can be attributed in large part to the
policies, procedures, and techniques (management controls) in place to help
ensure that disclosure personnel handle requests under the FOIA in a timely
manner and in accordance with laws and regulations. While improvement was noted, management’s
continued attention is needed to ensure that disclosure personnel follow
required procedures. In 3.7 percent (3
of 82 cases) of the FOIA/Privacy Act cases reviewed, information was
improperly withheld from requestors.
These errors occurred mainly because of inadequate research or simple
oversight by disclosure personnel. |
Adequacy
and Security of the Technology of the IRS I.R.C. § 7803(d)(1)(D) |
Requires TIGTA to evaluate the IRS’s adequacy and security of its technology. |
Information
Technology Reviews: Reference Number
2008-20-002, November 2007 Reference Number
2008-20-028, January 2008 Reference Number
2008-20-053, March 2008 Reference Number
2008-20-122, June 2008 Reference Number
2008-20-129, June 2008 Reference
Number 2008-20-130, July 2008 Reference Number
2008-20-134, July 2008 Reference Number
2008-20-151, September 2008 Reference Number
2008-20-161, September 2008 Security Reviews: Reference Number
2008-20-026, November 2007 Reference Number
2008-20-029, December 2007 Reference Number
2008-20-030, December 2007 Reference Number
2008-20-061, February 2008 Reference Number
2008-20-071, March 2008 Reference Number
2008-20-076, March 2008 Reference Number
2008-20-077, March 2008 Reference Number
2008-20-078, March 2008 Reference Number
2008-20-143, July 2008 Reference Number
2008-20-153, July 2008 Reference Number
2008-20-159, August 2008 Reference Number
2008-10-148, September 2008 Reference Number
2008-20-163, September 2008 Reference Number
2008-20-176, September 2008 Reference Number
2008-20-178, September 2008 Reference Number
2008-20-179, September 2008 |
Federal
Financial Management Improvement Act of 1996 (FFMIA) 31 U.S.C. § 3512 |
Requires TIGTA to evaluate the financial management systems to ensure compliance with Federal requirements, or establishment of a remediation plan with resources, remedies, and intermediate target dates to bring the IRS into substantial compliance. |
Reference No. 2008-10-096, March 2008 TIGTA
determined that no intermediate target dates were missed on the 35 open
remedial actions. However, the IRS
extended target dates related to 10 (29 percent) of the 35 open remedial
actions. The extensions ranged from 6
months to 18 months. Although the IRS
has reasonable explanations for the extended dates, these delays further
hinder the IRS’s ability to address its noncompliance with the FFMIA in a
timely manner. In addition, the IRS is
still in the process of updating the remediation plan with specific actions
to develop timely and reliable cost accounting information. |
Office of
National Drug Control Policy Detailed Accounting Submission and Assertions National Drug
Enforcement Policy 21 U.S.C. §
1704(d) and the Office of National Drug Control Policy Circular entitled Annual Accounting of Drug Control Funds,
dated |
Requires
TIGTA
to
authenticate the IRS’s Office of National Drug Control Policy (ONDCP) detailed
accounting submission and assertions. |
Reference No. 2008-10-058, January
2008 TIGTA
determined that the IRS’s FY 2007 ONDCP detailed accounting submission and
performance summary report was clearly explained and adequately
documented. However, in TIGTA’s opinion, the performance measure reported by the
IRS could be improved to better represent the IRS’s contribution to the
National Drug Control Strategy.
Specifically, by reporting only the number of ONDCP-related investigations
completed, the IRS is providing very little information on the effectiveness
of its efforts. |
Appendix IV
Section 1203 Standards
In general, the Commissioner of Internal Revenue shall terminate
the employment of any IRS employee if there is a final administrative or
judicial determination that, in the performance of official duties, such
employee committed any misconduct violations outlined below. Such termination shall be a removal for cause
on charges of misconduct.
Misconduct violations include:
·
Willfully failing to obtain the
required approval signatures on documents authorizing the seizure of a
taxpayer’s home, personal belongings, or business assets;
·
Providing a false statement under oath
with respect to a material matter involving a taxpayer or taxpayer
representative;
·
Violating, with respect to a taxpayer,
taxpayer representative, or other employee of the IRS, any right under the Constitution of the United States, or
any civil right established under Title
VI or VII of the Civil Rights Act of 1964; Title IX of the Education
Amendments of 1972; Age Discrimination in Employment Act of 1967; Age
Discrimination Act of 1975; Section 501 or 504 of the Rehabilitation Act
of 1973; or Title I of the Americans
with Disabilities Act of 1990;
·
Falsifying or destroying documents to
conceal mistakes made by any employee with respect to a matter involving a
taxpayer or taxpayer representative;
·
Committing assault or battery on a
taxpayer, taxpayer representative, or other employee of the IRS, but only if
there is a criminal conviction or a final judgment by a court in a civil case,
with respect to the assault or battery;
·
Violating the Internal Revenue Code of 1986, Treasury
regulations, or policies of the IRS (including the Internal Revenue Manual) for the purpose of retaliating against,
or harassing a taxpayer, taxpayer representative, or other employee of the IRS;
·
Willfully misusing provisions of Section 6103 of the Internal Revenue Code of 1986 for the
purpose of concealing information from a congressional inquiry;
·
Willfully failing to file any return of
tax required under the Internal
Revenue Code of 1986 on or before the date prescribed therefore
(including any extensions), unless such failure is due to reasonable cause and
not to willful neglect;
·
Willfully understating Federal tax
liability, unless such understatement is due to reasonable
cause and not to willful neglect; and
·
Threatening to audit a taxpayer for the
purpose of extracting personal gain or benefit.
The
Commissioner of Internal Revenue may mitigate the penalty of removal for the
misconduct violations outlined above.
The exercise of this authority shall be at the sole discretion of the
Commissioner and may not be delegated to any other officer. The Commissioner, in his/her sole discretion,
may establish a procedure that will be used to determine whether an individual
should be referred to the Commissioner for determination. Any mitigation determination by the
Commissioner in these matters may not be appealed in any administrative or
judicial proceeding.
Appendix V
Data Tables Provided
by the IRS
The memorandum
copied below is the IRS transmittal to TIGTA.
The tables that follow the memorandum contain information as provided by
the IRS to TIGTA and consist of IRS employee misconduct reports from the IRS
Automated Labor and Employee Relations Tracking System (ALERTS) for the period
from April 1, 2008 through September 30, 2008.
Also, data concerning substantiated I.R.C. § 1203 allegations for the
same period are included. IRS management
conducted inquiries into the cases reflected in these tables.
Report of Employee Misconduct for the Period
April 01, 2008 through
September 30, 2008
Summary by Disposition Groups
(Table Provided by the IRS)
Disposition |
TIGTA Investigations |
Administrative Cases |
Employee Tax Matter Cases |
Background Investigations |
Total |
|
Removal |
37 |
98 |
9 |
6 |
150 |
|
Separation of Probationary Employees |
1 |
153 |
1 |
5 |
160 |
|
Separation of Temporary Employees |
|
43 |
10 |
0 |
53 |
|
Resignation/Retirement |
69 |
156 |
43 |
22 |
290 |
|
Suspensions |
95 |
270 |
124 |
8 |
497 |
|
Reprimands |
124 |
497 |
381 |
21 |
1,023 |
|
Counseling |
|
338 |
364 |
46 |
748 |
|
Alternative Discipline |
17 |
83 |
39 |
5 |
144 |
|
Clearance |
81 |
189 |
9 |
|
279 |
|
Closed Without Action |
211 |
292 |
139 |
141 |
783 |
|
Closed Without Action (Caution
Statement) |
161 |
175 |
73 |
133 |
542 |
|
Forwarded to TIGTA |
|
16 |
|
1 |
17 |
|
Suspended – Waiting Supplemental |
1 |
|
|
|
1 |
|
Termination for Abandonment of
Position |
|
12 |
|
|
12 |
|
Termination for Other Than Job
Abandonment |
|
3 |
|
|
3 |
|
Forwarded to OPM for MIF |
|
|
|
1 |
1 |
|
Case Suspended Pending Employee Return
To Duty |
3 |
6 |
4 |
|
13 |
|
Prosecution Pending for TIGTA ROI’s |
11 |
|
|
|
11 |
|
Total |
811 |
2,331 |
1,196 |
389 |
4,727 |
Source: Automated Labor and Employee
Relations Tracking System (ALERTS) This report is being produced in accordance with 26 USC § 7803(d)(2) and §
4(a)2 of Treasury Delegation Order 115-01,
January 14, 1999 Extract Date:
Thursday, October 02, 2008 Report ID = T1R3a
Report of Employee
Misconduct for the Period
April 01, 2008 through
September 30, 2008
National Summary
(Table provided by the IRS)
Case Type |
Opening Inventory |
Conduct Cases Received |
Cases Closed |
Closing Inventory |
|
||
Conduct Issues |
Duplicates |
Non-Conduct Cases |
|||||
TIGTA
Investigations ROI1 |
491 |
824 |
(811) |
(0) |
(0) |
504 |
|
Administrative Case2 |
918 |
2,404 |
(2,331) |
(33) |
(8) |
950 |
|
Employee Tax Compliance Case3 |
801 |
926 |
(1,196) |
(27) |
(0) |
504 |
|
Background Investigations4 |
124 |
483 |
(389) |
(1) |
(0) |
217 |
|
Total |
2,334 |
4,637 |
(4,727) |
(61) |
(8) |
2,175 |
|
Source:
Automated Labor and Employee Relations Tracking System (ALERTS)
This report is being produced in accordance
with 26 USC § 7803(d)(2) and § 4(a)2 of Treasury
Delegation Order 115-01, January 14, 1999
Extract Date: Thursday,
October 02, 2008 Report ID =
T1R1
Summary of Substantiated I.R.C. § 1203
Allegations
Recorded in ALERTS for the Period
April 01, 2008 through September 30, 2008
(Table provided by the IRS)
§ 1203 Violation |
Removals1 |
Resigned/ Retired |
Probation Separation |
Removed On Other Grounds |
Penalty Mitigated1 |
In Personnel Process |
Total |
Seizure Without Approval |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
False Statement Under Oath |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Constitutional & Civil Rights Issues |
0 |
1 |
0 |
0 |
0 |
0 |
1 |
Falsifying or Destroying Records |
0 |
0 |
0 |
0 |
0 |
1 |
1 |
Assault or |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Retaliate or Harass |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Misuse of §6103 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Failure to File Federal Tax Return |
6 |
4 |
0 |
10 |
40 |
28 |
88 |
Understatement of Federal Tax Liability |
6 |
5 |
0 |
2 |
22 |
22 |
57 |
Threat to Audit for Personal Gain |
0 |
2 |
0 |
0 |
0 |
0 |
2 |
Totals |
12 |
12 |
0 |
12 |
62 |
51 |
149 |
Source: Automated Labor and Employee Relations Tracking System (ALERTS)
and § 1203 Review Board records.
Extract Date: Thursday,
October 02, 2008
List of Abbreviations
ACS Automated
Collection System
ALERTS Automated Labor
and Employee Relations Tracking System
AMS Account
Management Services
AMT Alternative
Minimum Tax
CADE Customer
Account Data Engine
CID Criminal
Investigation Division
CY Calendar
Year
DOJ Department
of Justice
EITC Earned
Income Tax Credit
FDC Fraud
Detection Centers
FFMIA Federal
Financial Management Improvement Act
FOIA Freedom of
Information Act
FY Fiscal
Year
GAO General
Accountability Office
GPRA Government
Performance and Results Act
GSA General
Services Administration
I&E Inspections
and Evaluations
IMDDS Internal
Management Document Distribution System
I.R.C. Internal
Revenue Code
IRA Individual
Retirement Account
IRS Internal
Revenue Service
ITP Illegal
Taxpayer Protester
LITC Low
Income Tax Payer
MVS Modernization
Vision and Strategy
OA Office
of Audit
OI Office
of Investigations
ONDCP Office of
National Drug Control Policy
PBA Performance
Based Acquisition
PBS Public
Buildings Service
PY Processing
Year
QRP Questionable
Refund Program
RA Revenue
Agent
RAL Refund
Anticipation Loans
ROI Report
of Investigation
RRA 98 IRS
Restructuring and Reform Act of 1998
SED Strategic
Enforcement Division
TAC
TIGTA Treasury
Inspector General for Tax Administration
TY Tax
Year
UNAX Unauthorized
Accesses
USC
VITA Volunteer
Income Tax Assistance
[1] 5
U.S.C.A. app. 3 (West Supp. 2008).
[2] Public Law No.
105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19
U.S.C., 22 U.S.C., 23 U.S.C., 26 I.R.C., 31 U.S.C. 38 U.S.C., and 49 U.S.C.).
[3] Pub. L. No. 110-185, 122 Stat. 613
[4] The PRIME contractor is the Computer Sciences Corporation, which heads an alliance of leading technology companies brought together to assist with the IRS’s efforts to modernize its computer systems and related information technology.
[5] I.R.C. § 6682.
[6] The total penalty amount was calculated by multiplying the $500 penalty by the number of penalties assessed during the fiscal year (i.e., $500 x 29 = $14,500).
[7] The CP 2000 notice is an IRS letter sent to a taxpayer to resolve discrepancies between income, credits, and/or deductions claimed on a tax return and those reported by a third party, and to propose an additional tax assessment.
[8] Coordinated Universal Time is a high-precision atomic time standard. It closely tracks Universal Time, which is a time standard based not on the uniform passage of seconds but on the Earth's angular rotation.
[9] Level of Service is the IRS’s primary measure of providing taxpayers with access to an assistor. Average Speed of Answer is the average number of seconds taxpayers waited in the queue (on hold) before receiving services.
[10] IRS, Publication No. 3744, IRS Strategic Plan: 2005-2009, (revised 6-2004).
[11] Pub. L. No. 107-300, 116 Stat. 2350.
[12] Taxpayers may not have actually received RALs, applied but did not obtain the loans, or actually received Refund Anticipation Checks. A Refund Anticipation Check is a non-loan alternative to an RAL.
1 TIGTA Investigations - Any matter involving an
employee in which TIGTA conducted an investigation into alleged misconduct and
referred a Report of Investigation (ROI) to IRS for appropriate action.
2 Administrative Case - Any matter involving an
employee in which management conducted an inquiry into
alleged misconduct.
3 Employee Tax Compliance Case - Any conduct
matter that is identified by the Employee Tax Compliance program which becomes
a matter of official interest.
4 Background
Investigation - Any matter involving an NBIC investigation into an employee’s
background that is referred to management for appropriate action.
1 The cases reported as “Removals” and “Penalty
Mitigated” do not reflect the results of any
third-party appeal.