TREASURY
INSPECTOR GENERAL FOR TAX ADMINISTRATION
Fiscal Year 2006 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns
August 28, 2006
Reference Number: 2006-40-135
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
Phone Number |
202-927-7037
Email Address | Bonnie.Heald@tigta.treas.gov
Web Site |
http://www.tigta.gov
August 28, 2006
MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT
FROM: (for) Michael R. Phillips /s/ Michael E. McKenney
Deputy Inspector General for Audit
SUBJECT: Final Audit Report – Fiscal Year 2006 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns (Audit # 200640001)
This report presents the results of our review to determine whether the Internal Revenue Service (IRS) is in compliance with Internal Revenue Code Section (I.R.C. §) 6103(e)(8) (2000 Supple. 3) related to the disclosure of collection activities to joint filers. The Treasury Inspector General for Tax Administration was statutorily required to conduct this audit.
Synopsis
IRS policies and procedures provide employees with sufficient guidance for handling joint filer collection activity information requests. However, we could not determine if the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to all written information requests from joint filers. This is the eighth year in which we have reported our inability to give an opinion on the IRS’ compliance with the provisions of I.R.C. § 6103(e)(8).
The Treasury Inspector General for Tax Administration is
required under I.R.C. § 7803(d)(1)(B) (2000 Supple. 3) to evaluate annually the
IRS’ compliance with the joint filer request provisions of the law. IRS management information systems do not separately
record or monitor joint filer requests, and Congress has not explicitly
required the IRS to do so. Furthermore,
we do not recommend the creation of a separate tracking system. Accordingly, we made no recommendations in
this report.
Response
The IRS agreed with the information presented in this report. Management’s complete response to the draft report is included as Appendix IV.
Copies of this report are also being sent to
the IRS managers affected by the report results. Please contact me at (202) 622-6510 if
you have questions or Michael E. McKenney, Assistant Inspector General for
Audit (Wage and Investment Income Programs), at (202) 622-5916.
Appendices
Appendix
I – Detailed Objective, Scope, and Methodology
Appendix
II – Major Contributors to This Report
Appendix
III – Report Distribution List
Appendix
IV – Management’s Response to the Draft Report
Abbreviations
|
I.R.C. § |
Internal Revenue Code Section |
|
IRS |
Internal Revenue Service |
|
SB/SE |
Small Business/Self-Employed |
|
TBOR2 |
Taxpayer Bill of Rights 2 |
|
TIGTA |
Treasury Inspector General for Tax
Administration |
|
W&I |
Wage and Investment |
The Taxpayer Bill of Rights 2 (TBOR2)[1] added Internal Revenue Code Section (I.R.C. §) 6103(e)(8) (2000 Supple. 3), which gives joint filer taxpayers who are no longer married or no longer reside in the same household the right to request information regarding the Internal Revenue Service’s (IRS) efforts to collect delinquent taxes on their joint return liabilities.
I.R.C. § 6103(e)(8) requires the IRS to provide, in writing, collection activity information to joint filers if they send in a written request. After passage of the TBOR2, the IRS issued procedures which stated that, if I.R.C. § 6103(e)(8) is not specifically cited in the request, the IRS can provide either an oral or written response, based upon I.R.C. § 6103(e)(7) (2000 Supple. 3).
The TIGTA is required to evaluate
annually IRS compliance with I.R.C. § 6103(e)(8).
The IRS Restructuring and Reform Act of 1998[2] added
I.R.C. § 7803(d)(1)(B) (2000 Supple. 3), which requires the Treasury Inspector
General for Tax Administration (TIGTA) to review and certify annually whether
the IRS is complying with the requirements of I.R.C. § 6103(e)(8).
The IRS Restructuring and Reform Act of 1998
also required both the Secretary of the Treasury and the Joint Committee on
Taxation to complete separate studies of the scope and use of provisions
regarding taxpayer confidentiality. The Joint
Committee on Taxation issued its study report in January 2000 and recommended
I.R.C. § 6103(e)(8) be amended to allow for oral information requests in
addition to written requests. The
Department of the Treasury issued its study report in October 2000 with a
recommendation to eliminate the requirement that joint filer information
requests be in writing. The Department
of the Treasury report also suggested that the TIGTA’s reporting requirement
regarding joint filer requests be phased out.
There had been some proposed legislation in 2002 (which did not pass)
that would have eliminated the requirement for taxpayers to provide written
requests under I.R.C. § 6103(e)(8).
A study by the IRS concluded there was a low
volume of joint filer requests submitted under I.R.C. § 6103(e)(8). An analysis of 6 former district offices over
a 6-month period in Calendar Year 2000 identified only 5 written joint filer
requests. As a result of the study,
management in the Small Business/Self-Employed (SB/SE) and Wage and Investment
(W&I) Divisions[3] decided not to develop a management control
process to track joint filer information requests.
This review was performed in the IRS National Headquarters in
the Office of the Commissioner and the National Taxpayer Advocate function in
The Internal Revenue Manual Provides Employees Sufficient Guidance for Handling Joint Filer Collection Activity Information Requests
The
provision of TBOR2 related to joint filers was enacted out of Congressional
concern about the treatment of separated or divorced taxpayers. Representative Nancy L. Johnson (R-Connecticut),
when introducing the TBOR2, stated:
The subcommittee learned of many instances
where divorced taxpayers who had previously signed a joint tax return during
their marriage were treated harshly when the IRS later disputed the accuracy of
their joint tax return. In many cases
the IRS tried to collect the entire amount of taxes from the wife, even though
the omitted income or erroneous deductions which caused the deficiency were
attributable solely to her former husband. All too often, the woman,
being pursued for payment of taxes due, was not aware that a tax return filed
during the marriage had been audited or that a deficiency had been imposed on
the return.
To address this concern, the IRS revised its Internal
Revenue Manual to include procedures for responding to taxpayers who file
jointly and submit written requests for information on IRS collection
activity. The Internal Revenue Manual
instructs employees to disclose whether any attempts have been made to collect
the tax due from either one of the joint filers, the general nature of any
collection activity, and the amount collected to date.
The Internal Revenue Manual procedures allow
employees to provide both oral and written responses to taxpayers. I.R.C. § 6103(e)(8) requires that taxpayers
provide joint filer requests in writing.
IRS procedures require employees to respond in writing only when
taxpayers specifically cite I.R.C. § 6103(e)(8) as their authority for making
written requests for collection information on joint return liabilities.
If the taxpayer’s written request does not specifically cite I.R.C. § 6103(e)(8), the IRS has directed employees to provide oral responses when practicable. The IRS believes oral responses provide good customer service to taxpayers because the taxpayers get an immediate answer.
Compliance With Statutory Requirements for the Disclosure of Collection Activity With Respect to Jointly Filed Tax Returns Cannot Be Determined
IRS management information systems do not record or monitor joint filer requests. As such, we could not determine if the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to all written requests from joint filers because of our inability to identify joint filer requests received nationwide. During this review, management from the SB/SE and W&I Divisions commented that the IRS’ position has not changed from last year, and the IRS does not plan to implement a system to identify or track joint filer requests for collection activity. In addition, there is no statutory or regulatory requirement for the IRS to develop a separate system that records or monitors these requests.
We do not recommend the creation of a separate tracking system and are making no recommendations in this report. This is the eighth year in which we have reported our inability to provide an opinion on the IRS’ compliance with the provisions of I.R.C. § 6103(e)(8).
Appendix I
Detailed Objective, Scope, and Methodology
The overall objective of this review was to determine whether the IRS is in compliance with I.R.C. § 6103(e)(8) (2000 Supple. 3) related to the disclosure of collection activities to joint filers. To accomplish our objective, we:
I. Obtained confirmation from the SB/SE and W&I Divisions that the IRS neither has, nor plans to implement, a system or process to identify or track joint filer requests for collection information relating to the requirements of I.R.C. § 6103(e)(8).
II. Interviewed various IRS and TIGTA personnel responsible for the Taxpayer Advocate Management Information System,[4] the Information Tracking System,[5] and the Performance and Results Information System [6] to determine if there is a system or process that tracks taxpayer complaints relating to the requirements of I.R.C. § 6103(e)(8).
III. Gathered historical information to determine the Congressional intent in passing I.R.C. § 6103(e)(8).
A. Researched Congressional Committee reports to determine the Congressional intent of adding I.R.C. § 6103(e)(8) to the TBOR2,[7] thereby granting divorced or separated taxpayers the right to receive information regarding the IRS’ efforts to collect delinquent taxes on joint tax return liabilities.
B. Researched Congressional Committee reports to determine the Congressional intent of adding I.R.C. § 7803(d)(1)(B) (2000 Supple. 3) to the IRS Restructuring and Reform Act of 1998,[8] thereby requiring the TIGTA to annually assess the IRS’ compliance with I.R.C. § 6103(e)(8).
IV. Obtained information on the actions taken by the IRS in response to I.R.C. § 6103(e)(8) to determine the impact on IRS programs.
A. Reviewed all prior TIGTA audit reports for the Mandatory Joint Filer reviews and summarized the audit results, recommendations, and corrective actions taken by the IRS.
B. Reviewed historic Internal Revenue Manual sections to identify any updates made in response to I.R.C. § 6103(e)(8).
C. Reviewed IRWeb (the IRS Intranet) to identify the impact I.R.C. § 6103(e)(8) has had on any IRS programs.
Appendix II
Major Contributors to This Report
Michael E.
McKenney, Assistant Inspector General for Audit (Wage and
Investment Income Programs)
Mary
V. Baker, Director
Bryce
Kisler, Audit Manager
Craig
Pelletier, Lead Auditor
Gwendolyn
Green, Senior Auditor
Appendix III
Commissioner C
Office of the
Commissioner – Attn: Chief of Staff C
Commissioner, Small Business/Self-Employed Division SE:S
Commissioner, Wage and Investment Division SE:W
National Taxpayer Advocate TA
Director, Collection, Small Business/Self-Employed Division SE:S:C
Director, Communications, Liaison, and Disclosure, Small Business/Self-Employed Division
SE:S:CLD
Director, Compliance, Wage and Investment
Division SE:W:CP
Director, Strategy and Finance, Wage and Investment Division SE:W:S
Chief, Performance Improvement, Wage and
Investment Division SE:W:S:PI
Chief Counsel CC
National Taxpayer Advocate TA
Director, Office of Legislative Affairs CL:LA
Director, Office of
Program Evaluation and Risk Analysis
RAS:O
Office of Internal
Control OS:CFO:CPIC:IC
Audit Liaisons:
Director, Communications and Liaison, National Taxpayer Advocate TA:CCL
Senior
Operations Advisor, Wage and Investment Division SE:W:S
Chief,
GAO/TIGTA/Legislative Implementation Branch
SE:S:CLD:PSP:GTL
Appendix IV
Management’s Response to the Draft Report
The response was
removed due to its size. To see the
response, please go to the Adobe PDF version of the report on the TIGTA Public
Web Page.
[1] Pub. L. No. 104-168, 110 Stat. 1452 (1996) (codified as amended in scattered sections of 26 U.S.C.).
[2] Pub. L. 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 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).
[3] The SB/SE and W&I Divisions were created by the reorganization of the IRS. Components of the former Collection and Customer Service Divisions were made part of these Divisions.
[4] The Taxpayer Advocate Management Information System is an electronic database and case inventory control system used by Taxpayer Advocate Service employees.
[5] The Information Tracking System is an application used by the IRS to assign, control, and track information and correspondence. It replaced the Executive Control Management System.
[6] The Performance and Results Information System is a management information system that provides the TIGTA with the ability to manage and account for the thousands of complaints received and investigations initiated annually.
[7] Pub. L. No. 104-168, 110 Stat. 1452 (1996) (codified as amended in scattered sections of 26 U.S.C.).
[8]
Pub. L. 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 U.S.C., 31 U.S.C., 38 U.S.C., and 49
U.S.C.).