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 ....................................................................................................................... 5
Statutory Mandate ............................................................................................................. 5
Organizational Structure
.................................................................................................... 6
Authorities ........................................................................................................................ 6
Promote
the Economy, Efficiency, and Effectiveness of Tax Administration ................... 7
Audit Emphasis Areas for FY 2008 .................................................................................. 7
Systems Modernization of the IRS .................................................................................... 7
Tax Compliance Initiatives ............................................................................................... 9
Security of the IRS ............................................................................................................ 11
Providing Quality
Taxpayer Service Operations ................................................................ 14
Complexity of the Tax
Law .............................................................................................. 16
Human Capital
................................................................................................................. 17
Taxpayer Protection and
Rights ........................................................................................ 18
Protect the Integrity of Tax
Administration .......................................................................... 21
TIGTA’s
Investigative Performance Model ..................................................................... 22
Employee Integrity.............................................................................................................
23
Employee and
Infrastructure Security ............................................................................... 27
External
Attempts to Corrupt Tax Administration ............................................................. 29
Awards
and Special Achievements ........................................................................................ 35
Audit
Statistical Reports ......................................................................................................... 37
Reports
with Questioned Costs ......................................................................................... 37
Reports with
Recommendations that Funds Be Put to Better Use ...................................... 38
Reports with Additional
Quantifiable Impact on Tax Administration ................................ 39
Investigations
Statistical Reports
............................................................................................ 41
Significant
Investigative Achievements ............................................................................. 41
Status of Closed
Criminal Investigations ........................................................................... 42
Criminal Dispositions ........................................................................................................ 42
Administrative
Dispositions on Closed TIGTA Investigations ........................................... 42
Appendices
Appendix
I – Statistical Reports – Other ............................................................................... 43
Audit Reports with Significant Unimplemented
Corrective Actions .................................. 43
Other
Statistical
Reports ................................................................................................... 50
Appendix
II – Audit Products ................................................................................................ 51
Appendix
III – TIGTA’s Statutory Reporting Requirements ............................................. 55
Appendix
IV – Section 1203 Standards ................................................................................. 61
Appendix
V – Data Tables Provided by the IRS .................................................................. 63
IRS Memorandum ............................................................................................................. 63
Report of Employee
Misconduct, Summary by Disposition Groups ................................. 64
Report
of Employee Misconduct, National Summary ....................................................... 65
Summary of Substantiated I.R.C. § 1203 Allegations Recorded in
ALERTS .................... 66
Inspector General’s Message to Congress
Each
year, millions of Americans send a portion of their income to the U.S. Treasury
to support the programs of the Federal Government. These taxpayers must be confident that their taxes
are fairly and accurately assessed, the tax system is efficient and effective,
and that the personal and financial information they disclose is adequately
protected. Maintaining that confidence
is an essential element of our nation’s financial success, especially
considering that our country is at war and great economic needs are placing an
even greater burden on government resources.
In 1998, Congress created the
Treasury Inspector General for Tax Administration (TIGTA) to ensure that the
nation’s tax system is effectively, efficiently, and fairly administered, and
that the Internal Revenue Service (IRS) is held to a high level of
accountability. I remain dedicated to
upholding this important mission.
I am proud of our accomplishments
and pleased to present TIGTA’s Semiannual Report to Congress. This report highlights our most notable audit
and investigative work conducted from October 1, 2007, to March 31, 2008, and
summarizes the statistical results of that work.
During this reporting period, TIGTA
completed 83 audits identifying hundreds of thousands of dollars in total cost
savings and more than $151 million in increased or protected revenue.
TIGTA’s Office of Chief Counsel has reviewed and made recommendations on the
impact of 175 proposed or existing regulations and laws affecting tax
administration.
In
October, TIGTA issued its annual assessment of the top ten management
challenges confronting the IRS. This report presents a sampling of
TIGTA’s audit work in each of those challenge areas. I remain especially concerned about helping
the IRS meet three of its most critical challenges: the modernization of its
aging computer systems, improving taxpayer compliance, and protecting
the sensitive personal and financial information of 140 million taxpayers.
The IRS’ business modernization
program is in its tenth year and remains a long-term challenge for
the IRS. Thus far, the program has cost
more than $2.5 billion. According to the
IRS’ original plan, the modernization program should have been past the halfway
point this year. While the IRS has
improved its project management and contract oversight, the program remains
behind schedule, over budget, and is not delivering as promised. For example, the backbone of the
modernization program, the Customer Accounts Data Engine, will ultimately
replace the IRS’ Individual Master File.
The IRS originally planned to complete this replacement in 2005; the
estimated date of completion is now 2012.
Ensuring equitable tax compliance
among individual taxpayers and businesses is a vital component of tax
administration and the IRS’ efforts to narrow the nation’s estimated $345
billion annual tax gap. Fairness and
necessity dictate that everyone and every business – large and small – fully
pay the taxes they owe accurately and on time.
Nevertheless, the IRS faces significant challenges in obtaining more
complete and timely data on the various components of the tax gap through
non-compliance with the nation’s tax laws.
The IRS must continue to seek accurate measures of these individuals and
businesses that do not pay and must obtain better research to determine what
actions are most effective in addressing non-compliant taxpayers.
TIGTA issued several audits during
this reporting period that illustrate the need for the IRS to better protect
the security of taxpayer data. The
reports made numerous recommendations, including improving protection of the
IRS’ computer system from external hackers and from employees and contractors
who have unnecessary access to information.
During this reporting period, TIGTA completed 915 employee integrity
investigations, of which 247 involved unauthorized access to confidential
taxpayer information.
I
look forward to working with the newly confirmed Commissioner of Internal
Revenue Douglas Shulman as
he strives to administer an efficient, effective, and equitable tax
system. TIGTA is committed to working
with the IRS, Congress and other stakeholders to ensure that these important
goals are met.
Sincerely,
J. Russell George
Inspector
General
Examples of high profile cases from the Office of Investigations:
Former CEO Pleads Guilty to Bribing a Government Official
In a Department of Justice (DOJ) press
release, Rod J. Rosenstein, the U. S. Attorney for the District of Maryland,
praised the Treasury Inspector General for Tax Administration (TIGTA), the
Federal Bureau of Investigation, IRS Criminal Investigation Division (CID), the
Defense Criminal Investigative Service, and several other Offices of Inspector
General, for their assistance in an investigation that led to a guilty plea by
Michael B. Holiday. Mr. Holiday is the
former chief executive officer and owner of a company that provided security to
Federal buildings in
IRS Employees Indicted for
Fraudulently Obtaining HUD Funds
On October 2, 2007, Cheryl Esters and Michelle
Parker were indicted in the U. S. District Court for the Northern District of
Texas for obtaining U. S. Department of Housing and Urban Development (HUD)
Section 8 funds by fraud. Both
individuals were indicted based on a criminal investigation conducted jointly
by TIGTA and HUD’s Office of Inspector General.
The Housing and Community Development Act of 1974
makes Federal funds available to local housing authorities to assist low-income
individuals in obtaining housing. This
act includes the Section 8 Rental Voucher Program, which authorizes financial
assistance to low-income individuals.
Section 8 payments subsidize the rent of low-income families to help
them afford housing in the private sector market.
According to court documents, Ms. Esters and Ms.
Parker were both IRS employees when they fraudulently obtained HUD Section 8
payments. They each obtained these
payments by concealing their receipt of income as Federal employees while
applying for HUD Section 8 rental assistance payments on a form entitled
“Personal Declaration and Questionnaire for Rental Assistance.” Court documents state that Esters
fraudulently obtained $34,869 from 2002 through 2006, and Parker fraudulently
obtained $26,950 from 2002 through 2005, in HUD Section 8 payments.
John Steven Romero Arrested for Assaulting
IRS Employee
On November 16, 2007, TIGTA special agents arrested
John Steven Romero in response to an arrest warrant issued on November 15, 2007
by the U. S. District Court, Southern District of California. Mr. Romero was arrested for assault on an
Internal Revenue agent while engaged in the performance of his official duties.
According to
court documents, on November 15, 2007, the revenue agent went to Mr. Romero’s
residence to serve a summons. Mr. Romero
approached the revenue agent in an apparent attempt to use force against him,
slapping the summons from the agent’s hand and verbally assaulting him with a
profane threat of bodily harm. These
actions caused the revenue agent to fear that Mr. Romero’s threatened use of
force was imminent.
Examples of accomplishments from the Office of Audit:
Taxpayers Victimized by Tax-Related
Identity Theft
The IRS has yet
to make effective use of available third-party sources to address tax-related
identity theft issues. In Fiscal Years
2004 and 2005, the IRS recommended for prosecution only 100 cases that included
a charge of identity theft. During
Calendar Years 2005 and 2006, the Federal Trade Commission Identity Theft
Clearinghouse received 92,570 employment-related and tax fraud identity theft
complaints. Also, the IRS has not
eliminated the burden it places on taxpayers victimized by identify theft. A TIGTA analysis of Tax Year (TY) 2003 and
2004 identity theft cases in the IRS Automated Underreporter system disclosed
that 449 (3.6 percent of the 2003 cases) were closed for the same underreported
issue in both years.
Identification of
Unreported Self-Employment Taxes Needs to Improve
The IRS needs to
strengthen its process to identify and then audit tax returns that are
potentially subject to the self-employment tax.
Return examiners did not always apply the correct processing code to tax
returns that had apparent self-employment income and no tax withholding. Even when correctly coded, the subject tax
returns were not always examined. An
analysis of a sample of TY 2003 returns that indicated qualifying net income of
at least $2,000, but no reported self-employment tax, concluded that the IRS
could have assessed at least $19 million annually in additional Social Security
and Medicare taxes.
Oversight of Treasury
HSPD-12 Initiative was Ineffective
The IRS
volunteered to be the lead Department of the Treasury agency in delivering a
Homeland Security Presidential Directive-12 solution for issuing and processing
department-wide identification media.
However, ineffective contract management has led to contractors not
being held accountable for work performed; the absence of documentation for
incurred program costs; and the expenditure of $3.5 million for unnecessary
hardware, software, and services.
IRA Contributions and
Distributions Are Not Adequately Monitored
Taxpayers could
be treated inequitably due to the absence of effective IRS monitoring and
resolution of Individual Retirement Account (IRA) activities. TIGTA found that IRS controls were not
effective in assessing excise taxes against both taxpayers who contribute more
than the maximum annual amount to their traditional IRA or Roth IRA accounts as
well as against individuals aged 70½ who had not begun taking minimum
distributions from their traditional IRAs.
A major contributing factor is the significant number of erroneous
documents submitted by IRA financial custodians.
TIGTA's Profile
T |
he Treasury Inspector General for Tax Administration (TIGTA) provides
independent oversight of the Department of the Treasury matters involving
Internal Revenue Service (IRS) activities, the IRS Oversight Board, and the IRS
Office of Chief Counsel. Although TIGTA is
placed organizationally in the Treasury Department and reports to the Secretary
of the Treasury and to Congress, TIGTA functions independently of 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 the IRS’ management challenges, implementing the President’s
Management Agenda and the priorities of the Department of the Treasury,
TIGTA endeavors to protect 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 6).
TIGTA conducts
audits and investigations designed to:
· promote the economy, efficiency, and effectiveness of tax
administration; and
· protect the integrity of tax administration.
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.
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 IRS’
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.
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 IRS
The Business
Systems Modernization program is a complex effort to modernize IRS technology
and related business processes. Modernizing the IRS’ technology has been an ongoing
challenge. 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’ 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 them, and the safety of the people who
operate them.
Aging
Computer Hardware
The
IRS estimates that it should spend $180
million annually to adequately maintain and replenish its computer
hardware, and has initiated several actions to
address the risks associated with the aging computer hardware. However, the
information used to estimate the size and effect of the aging computer hardware
could be improved. The IRS
established a goal to obtain increased resources to address the aging computer
hardware as one of its highest priorities, but permanent program funding
remains uncertain and a disciplined investment management governance process is
needed for all infrastructure initiatives and activities. As a result, the IRS might not fund the
highest priority projects to ensure that investment decisions result in the
most efficient use of available resources on behalf of taxpayers.
The IRS
continues to emphasize that the core of tax administration processing relies
heavily on critical systems designed in the 1960s. Because of the inherent limitations of these
systems, the IRS’ ability to accomplish its mission and provide better service
to taxpayers is hindered. The IRS also
reports that the risk to tax administration is significant, because critical
business systems are currently operating on aged computer hardware (i.e.,
hardware that has exceeded its useful life). At
the beginning of FY 2006, the aged hardware was estimated to be valued at $276
million, with an additional
$161 million in hardware becoming aged during the same fiscal year.
TIGTA
recommended that the IRS:
1) implement procedures to improve inventory
data accuracy and completeness, and periodically prepare an updated aged
computer hardware estimate;
2) improve the integration of asset/inventory
management with incident and problem management;
3) permanently allocate necessary funds to
maintain and replenish the aging hardware;
4) ensure that End of Life Replacement
activity is included in the governance process; and
5) establish a process for monitoring and
reporting Sustaining Infrastructure Program accomplishments to address the
aging computer hardware issue.
IRS management agreed
with four of these five recommendations and stated that it planned to take
appropriate corrective actions. The IRS
did not agree to permanently allocate the necessary funds within its budget to
maintain and replenish the aging computer hardware, but agreed to realign the
base budget whenever appropriate, subject to availability. TIGTA disagrees with the IRS’s decision and believes it
should honor the commitment made to the IRS Oversight Board that the
current $45 million being spent on infrastructure would be augmented by
reallocating an additional $45 million from program efficiencies in Fiscal
Years 2006 through 2008.
TIGTA Report Reference No. 2008-20-002
The
Account Management Services Project
The IRS is
continuing to modernize its databases to provide immediate access to account
data, enable real-time transaction processing, and ensure daily account
settlement to improve customer service and business results. The Account Management Services (AMS) project
was initiated in May 2006 and has been chartered to address these needs. The project’s objective is to provide an
integrated approach to view, access, update, and manage taxpayer accounts. This is accomplished by providing IRS
employees with the tools to access information quickly and accurately in
response to complex customer inquiries and to update taxpayer accounts on
demand.
Reviews of the initial AMS releases
showed that the project team successfully implemented project management
processes and activities, which included project justification, contract, risk,
configuration, performance, and transition management.
The AMS Project Management Plan defines
the project, the scope of work to be performed, and the planned methodology for
managing project activities. The plan
also identifies the capabilities that AMS Release One must implement for it to
be considered complete. The AMS project
team successfully planned work schedules, identified and addressed potential
risks to project development, and coordinated with appropriate staff to implement
initial release capabilities. Although
the AMS project team is on schedule to make the proposed processing
capabilities available, its implementation is dependent on the IRS’s
Modernization and Information Technology Services organization’s abilities to
integrate these project capabilities into taxpayer account processing.
As a result of the
AMS project team’s effective implementation of the project management
practices, TIGTA did not make any recommendations. In
response to the draft report, IRS management noted the comments and
observations, acknowledging the successful implementation of the project
management processes for the AMS Release One.
TIGTA Report Reference No. 2008-20-053
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.
While increasing voluntary compliance and reducing the tax gap are
currently the focus of IRS initiatives, the IRS is facing significant
challenges in obtaining more complete and timely data and developing the
methods necessary for interpreting the data.
It must continue to seek accurate measures for the various components of
the tax gap and the effectiveness of the actions taken to reduce the gap. Broader strategies and better research are
needed to determine what actions are most effective in addressing
noncompliance.
Unreported
Self-Employment Taxes
According to the Government
Accountability Office, outlays from the main trust funds of the Social Security
and Medicare programs are projected to exceed revenues in the next decade. As the tax collector for these programs, the
IRS must ensure that self-employed taxpayers meet their tax responsibilities by
assessing and collecting the proper amount of self-employment taxes. Self-employment tax is estimated to make up
about $39 billion (72 percent) of underreported employment taxes, or 11 percent
of the total gross tax gap, making it one of the largest components of the tax
gap.
Unreported
Self-Employment Taxes
According to the Government
Accountability Office, outlays from the main trust funds of the Social Security
and Medicare programs are projected to exceed revenues in the next decade. As the tax collector for these programs, the
IRS must ensure that self-employed taxpayers meet their tax responsibilities by
assessing and collecting the proper amount of self-employment taxes. Self-employment tax is estimated to make up
about $39 billion (72 percent) of underreported employment taxes, or 11 percent
of the total gross tax gap, making it one of the largest components of the tax
gap.[3]
TIGTA’s review of self-employment tax
found that IRS procedures were inconsistent for
identifying U.S Individual Income Tax Returns (Form 1040) reporting income on
line
21[4] that are potentially subject to the
self-employment tax.
Also, there was a significant problem with assigning an audit code to
returns with potentially unreported self-employment taxes. The code was either improperly assigned when
a return had no self-employment tax issue, or was not assigned when a
self-employment tax issue was present.
Overall, 25 percent of the returns sampled by
TIGTA had potential self-employment tax issues, but were either not selected
for audit or were surveyed (i.e., the audits were closed with little or no examination of
the returns by the IRS Examination function), even though the taxpayers
had not properly reported self-employment tax.
Approximately 43 percent of these returns had refunds available to
offset all or part of the self-employment tax liabilities.
TIGTA recommended that the
IRS:
1) emphasize the importance of assigning the
correct processing code to returns with potential self-employment tax
liabilities and provide additional training to tax examiners to improve the
review of income reported on Form 1040, line 21;
2) strengthen the processes for reviewing
returns upon receipt for potential unpaid self-employment taxes, especially the
processes for including the statutory income indicator in the Wage and Tax
Statement (Form W-2) database and for assigning an audit code when a
self-employment tax issue is present; and
3) reconsider the decision to cancel its corrective
action to address TIGTA’s previous recommendation that it immediately work
significant unreported
self-employment tax cases that have refunds pending, but no
response – or an inadequate response – to any letter issued by the IRS.
IRS management agreed with
the first two recommendations and, as noted, disagreed with the third. The IRS planned to explore the possibility of
expanding existing returns processing training material issued in January 2008. However, IRS management stated that the parameters could not be accurately
identified to ensure that it would not be withholding the refunds of taxpayers
who were not subject to self-employment taxes.
Based on the findings of this and previous
audits, TIGTA maintained that it was feasible for the IRS to begin examining
the returns of taxpayers who appear to owe a significant amount of
self-employment tax, have an available refund, and have not responded to
contact letters from the IRS. TIGTA
encouraged the IRS to move in that direction.
TIGTA Report Reference No. 2008-30-001
Return
Delinquency Cases and Unfiled Returns
In
Calendar Year 2006, the IRS reported that it issued more than 1.6 million
return delinquency notices to business taxpayers who had not filed required tax
returns by the return due date. TIGTA
determined that some IRS operational internal controls had been effectively
established. However, some of the return delinquency cases
reviewed were not resolved accurately and in a timely manner, and the IRS
needed to improve its computer program to identify business taxpayers who might
be liable for employment taxes.
TIGTA’s
recommendations included that the IRS:
1)
ensure that its reviews to assess team managers’ practices in performing
technical case reviews be completed quarterly; and
2)
revise procedures to require full compliance checks for delinquent
employment tax returns of “in business”
employers[5]
IRS management
agreed with all of the report recommendations and has taken or agreed to take
corrective actions.
TIGTA Report Reference No. 2008-30-027
Security of the IRS
Millions of taxpayers entrust the IRS with sensitive financial and
personal data stored and processed by its 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 computer systems, 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 of 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.
Network Security
Because the IRS sends sensitive taxpayer and administrative information
across its networks, network routers and switches must have sufficient security
controls to deter and detect unauthorized use.
Access controls for IRS routers were not adequate, and reviews to
monitor security configuration changes were not conducted to identify
inappropriate use. A disgruntled employee, contractor, or hacker could
reconfigure routers and switches to disrupt computer operations and steal
taxpayer information in a number of ways, including diverting information to
unauthorized systems.
The IRS had
authorized 374 accounts for employees and contractors to access routers and
switches in performing system administration duties. Of these, 141 (38 percent) did not have proper access
authorization. Authorizations for 86 of
the 141 employee and contractor accounts had been provided at some point in
time, but the authorizations had expired at the time of our review. However, TIGTA could not find router access
authorizations for the other 55 employee and contractor accounts. Of particular concern was that 27 of the
55 employees and contractors had accessed the routers and switches to change
security configurations.
To authenticate
users, the IRS employs a security application that requires users to enter an
account name and password. TIGTA found
that users circumvented this control by setting up 34 unauthorized accounts,
which appeared to be shared-user accounts.
Any person who knew the password to these accounts could have changed
configurations without accountability and with little chance of detection. For this reason, the IRS requires that shared
accounts be used only on a limited basis and that they be subjected to special
authorization controls. However, during
FY 2007, 4.4 million (over 84 percent) of the
5.2 million accesses to the routers were made by the 34 user accounts. Audit trail reviews necessary to detect
security events were also not being conducted.
TIGTA recommended that the IRS:
1) clarify responsibilities for providing
authorizations for employees and contractors to access the sensitive network
components;
2) eliminate unnecessary shared accounts;
3) improve the testing of authentication
controls to identify configuration weaknesses; and
4) ensure that audit trails are reviewed to
detect unauthorized actions on the routers and switches.
The IRS agreed with the recommendations and is taking
corrective actions.
TIGTA Report
Reference No. 2008-20-071
Database
Security
The IRS stores
its taxpayer, financial, and other data in more than 2,100 databases. However, it continues to have recurring
information security weaknesses that make its databases susceptible to
penetration attacks. Due to the
sensitivity of these data, the IRS could be a target for malicious users who
are intent on committing identity theft and fraud.
High-risk
weaknesses continue to exist, and sufficient corrective actions have not been
taken. TIGTA scanned IRS networks and determined
that 11 percent of approximately 1,900 databases had one or more installation
accounts with a default or blank password.
A total of 369 installation accounts, including 26 containing powerful
database administrator privileges, had default or blank passwords.
Databases found
with default or blank passwords during our scans included those that contained
personally identifiable tax information.
Malicious users could exploit accounts with default or blank passwords
to steal taxpayer identities and carry out fraud schemes.
TIGTA made
several recommendations, including ensuring that security training is provided
to employees with key security responsibilities and improving the process for
identifying and correcting accounts with blank or default passwords by
expanding the scanning criteria. IRS
management agreed with all of the recommendations in the report and plans to
take appropriate corrective actions.
TIGTA Report Reference No. 2008-20-029
Homeland
Security Presidential Directive-12
The total estimated cost to build and
maintain a Homeland Security Presidential
Directive-12 (HSPD-12) system for the Department of the Treasury is $421
million over 14 years. As the lead
bureau for the Treasury Department, the IRS is charged with ensuring that the
funds are spent prudently. The IRS
estimated it had obligated
$30 million as of June 2007.
The IRS did not administer contracts
effectively and could not provide documentation to support the actual costs
charged to the HSPD-12 program. The
Program Management Office did not effectively manage the contracts for the
HSPD-12 program. Statements of work were
too general to hold contractors accountable for work performed, and the IRS
paid contractors without verifying that work was performed. The IRS could not provide supporting
documentation for the actual costs spent on the program, and TIGTA found that
at least $3.5 million had been spent on unneeded hardware, software and
services.
In addition, the IRS did not follow its
established governance procedures for overseeing the HSPD-12 program because it
did not prepare a formal business case for the program. An internal business case was prepared by the
Program Management Office, but it did not comply with IRS business case
requirements, and it was never provided to the Treasury HSPD-12 governance
committees overseeing the program.
Additionally, program management made statements to Treasury Department
and IRS officials that were inaccurate.
As a result, the governance committees did not have sufficient
information with which to make critical management decisions for the program.
TIGTA
recommended that the IRS require
that future task orders prepared by the
HSPD-12 Program Management Office separate tasks by function, and that the
Program Manager maintain documentation sufficient to support all HSPD-12
program costs and assign costs to specific task orders. TIGTA also recommended that the IRS coordinate
with the Treasury Department to evaluate the possibility of combining its
Public Key Infrastructure efforts with those of the General Services
Administration. The IRS should also
ensure that executive steering committees responsible for providing oversight
to information technology projects enforce the use of IRS Enterprise Life Cycle
requirements.
IRS management
agreed with the recommendations and plans to take several steps to improve
management of the HSPD-12 Program Management Office.
TIGTA Report Reference No. 2008-20-030
Providing Quality
Taxpayer Service Operations
Since the 1990s,
the IRS has increased its delivery of quality customer service to
taxpayers. In its current strategic
plan, the IRS’s first goal is to improve taxpayer service. However, since the late 1990s, the IRS has
gradually allocated more resources to the 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
that would include 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 it moves forward,
inaccuracies and inconsistencies will put the Blueprint at risk of improperly
aligning service content, delivery, and resources with taxpayer and partner
expectations.[6]
Carryback
Loss Claims
When taxpayers
have significant losses from business activities or natural disasters, their
deductions may exceed their income for the tax year, resulting in a net
operating loss. Taxpayers can file claims to apply (or to carry back) these
losses to income in prior years, which result in refunds of taxes previously
paid. The IRS processed 60,865
individual carryback loss refunds totaling approximately $1.2 billion in FY
2007.
The IRS has
processes to review these claims.
However, it does not always identify and correct the errors before the
claims are processed and the refunds are paid.
TIGTA reviewed a statistical sample of 84 carryback loss refund claims
that posted to the IRS Master File between August 1, 2004, and July
30, 2005, and determined that 42 (50 percent) contained at least one
error. The IRS did not correct the
errors on 24 (57 percent) of the 42 claims, resulting in $732,941 in additional
refunds due to taxpayers and $1,126,501 in additional tax due to the IRS. The majority of the errors on the refund
claims fell into three common
categories: Alternative Minimum Tax (AMT), charitable
contributions deductions, and IRS changes to the originally filed loss year tax
return.
Unclear tax form instructions
and tax publications appeared to contribute to taxpayer errors. IRS procedures for working carryback claims
were also vague and open to interpretation.
Therefore, TIGTA recommended that the IRS revise the applicable
instructions for claiming the carryback loss as they related to the charitable
contributions deduction and the AMT.
TIGTA also recommended that the IRS change the instructions for Forms
1045[7] and 1040X[8] as they pertained
to carryback losses, requiring taxpayers to attach the AMT form for each
carryback year.
TIGTA also
recommended that the IRS:
1) revise the procedures for working
carryback refunds to improve the identification and resolution of errors before
the refunds were paid;
2) change the procedures for verifying the
carryback claim to require employees to ensure that the AMT form is attached
for each carryback year; and
3) work to modify the Desktop Integration
tool for the alternative tax net operating loss deduction.
IRS management agreed with most of TIGTA’s recommendations and has taken
or agreed to take appropriate corrective actions. Management partially agreed with the
recommendation to revise the instructions for Forms 1045 and 1040X, and TIGTA
agreed that the planned corrective action was adequate. The IRS disagreed, however, with the
recommendations requiring taxpayers to attach the AMT form for each carryback
year and requiring that IRS employees ensure that the form is attached. The IRS indicated that requiring the taxpayer
to attach this form would impose an unreasonable burden and would likely be
viewed as a violation of the Paperwork Reduction Act of 1995. TIGTA believes that the only additional
taxpayer burden would be to attach a copy of the Form 6251[9] for each loss year
to the carryback claim. Taxpayers are
already required to complete the Form 6251, and they voluntarily included the
form on most of the claims filed.
TIGTA Report Reference No. 2008-40-062
Administration
of Taxes Used to Maintain the Nation’s Highways
The Heavy Highway
Vehicle Use Tax (Heavy Vehicle Use Tax) is a prepaid tax the IRS collects. Combined with other Federal excise taxes, it
is used to provide more than $1 billion annually in Federal highway
transit funds to the States.
The IRS recognizes the unique challenges
and complexity related to the Heavy Vehicle Use Tax and offers a number of
assistance options for taxpayers. The
Alternate Proof of Payment Program is based on an agreement between the IRS and
State Departments of Motor Vehicles that allows taxpayers to simultaneously
file, pay the Heavy Vehicle Use Tax, and register their vehicles. This program can reduce the risk of
noncompliance because the tax return and associated payment are provided at the
time of registration; however, it currently operates in only 11 States.
The IRS has
developed a process that enables Heavy Highway Vehicle Use Tax Return
(Form 2290) filers to electronically file their tax returns because of a law requiring taxpayers with 25 or
more vehicles to electronically file. As
of December 9, 2007, the IRS had received 1,569 electronically filed Forms
2290. Although electronic filing
benefits both taxpayers and the IRS, costs and unfamiliarity with this option
may be limiting participation.
TIGTA
recommended that the IRS:
1)
encourage
more State participation in the Alternate Proof of Payment Program;
2)
develop
a process to identify States participating in the program;
3)
ensure
that agreement provisions are followed; and
4)
promote
the benefits of electronic filing to all Form 2290 filers to increase
electronic filing participation.
IRS management
agreed with the recommendations and plans to take appropriate corrective
actions.
TIGTA Report Reference No. 2008-40-089
Complexity of the Tax
Law
Simplicity, transparency, and ease of administration are interrelated
and desirable features of a tax system. Over the years, the
Federal tax system, especially the Federal income tax, has become more complex,
less transparent, and subject to frequent revision. Tax complexity and frequent revisions to the
Internal Revenue Code make it more difficult and costly for taxpayers who want
to comply with the system’s requirements, and for the IRS to explain and
enforce the tax laws. Tax law complexity
results in higher costs for both tax administration and tax compliance. Simplification and reform have the potential
for reducing the tax gap by billions of dollars.
Individual
Retirement Accounts
As more
taxpayers reach retirement age, their incomes will be transitioning from wages
to investment and retirement benefits.
Individual Retirement Accounts (IRA) are a key,
tax-deferred way for individuals to save for retirement and are an increasingly
important way for individuals to roll over savings from pension plans. In 2005, estimated Roth IRA assets totaled
$147 billion, and traditional IRA assets totaled $3.26 trillion. TIGTA found that taxpayers are sometimes
contributing more than is allowed into tax-deferred or tax-free accounts, and
they are not taking taxable distributions when required, which could result in
lost tax revenues.
The IRS needs to
strengthen its procedures and controls for ensuring that taxpayers and IRA
custodians comply with IRA rules.
Failure to ensure correct reporting by IRA custodians could hinder the
IRS’s ability to identify excess contributions.
Moreover, lack of adequate monitoring and enforcement could result in
lost tax revenues when taxpayers make excess contributions or fail to pay
excise taxes on required minimum distributions that are not taken.
TIGTA
recommended that the IRS:
1)
conduct analyses for identifying and resolving erroneous IRA
Contribution Information (Form 5498);
2)
develop and implement strategies to bring noncompliant taxpayers back
into compliance;
3)
utilize information from the Forms 5498 to identify taxpayers who are
subject to required minimum distributions and compare this information to
subsequent tax returns to determine whether distributions were reported; and
4)
require IRA custodians to compute and provide to the IRS the estimated
required minimum distributions so this information could be used as part of the
Automated Underreporter Program.
The IRS agreed
with the recommendations and plans to take appropriate corrective actions.
TIGTA Report Reference No. 2008-40-087
(Sensitive But Unclassified)[10]
Human Capital
The Federal
workforce is aging, and agencies are facing not only retirements and staff
turnover, but also the unique challenges of the 21st century. The IRS recognizes that it must be prepared
to respond to an increasing 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.[11]
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.
Workers’
Compensation Program
The IRS cash
outlays for workers’ compensation claims continue to increase, driven by
factors such as cost of living increases and higher costs for medical
equipment, medications, and treatment.
These outlays represent financial obligations to care for injured
employees and can be considered a cost of doing business. However, if the costs are not properly
managed and increase significantly, obligations could ultimately affect the
amount of money the IRS has available for enhancing the delivery of service to
the taxpaying public.
TIGTA found that control processes needed
to be established to ensure that the IRS was not overpaying workers’
compensation benefits. TIGTA questioned
more than $1 million in charges that included benefits that were paid
subsequent to Social Security Administration records indicating claimants had
died.
In addition, TIGTA determined that steps
needed to be taken to ensure that required IRS-wide procedures were followed
when initiating claims and that a more strategically oriented approach needed
to be implemented for returning employees back to work following an
injury. A review of case files
associated with 40 claims found problems in
31 of the claim cases. Among other
things, TIGTA found that injury investigations were not thoroughly conducted
and some questionable claims were not challenged while others were improperly
challenged.
Increasing from $1.4 billion in 1990 to
nearly $2.4 billion in 2005, the rising costs of workers’ compensation has
caused concern throughout the Federal government. TIGTA analyzed practices implemented by
agencies that were particularly effective at controlling costs and returning
claimants to work. In contrast to these
practices, TIGTA found that the IRS return-to-work efforts were more reactive,
less strategically oriented, and heavily reliant on its first-line
managers. Moreover, specific policies
and procedures had yet to be implemented to coordinate and collaborate across
functional lines to assist in transitioning more employees back to the workplace.
TIGTA
recommended that the IRS:
1)
develop and implement control processes for reviewing the accuracy of
costs in chargeback reports;
2)
obtain evidence to support the claim that benefits are paid only to
current or former IRS employees; and
3)
seek reimbursement for the compensation paid subsequent to claimants’
deaths and on denied claims.
TIGTA also
recommended that the IRS implement a control to provide assurances that
required procedures are completed in the claims process, and establish a more
strategic approach to enhance return-to-work efforts.
IRS management
agreed with the recommendations and has taken or will be taking corrective
actions.
TIGTA Report Reference No. 2008-30-056
Taxpayer Protection and
Rights
Identity theft
is a growing national problem that increasingly affects tax
administration. Individuals who steal
taxpayer identities affect the tax system in two ways:
In October 1998,
the Identity Theft and Assumption Deterrence Act[12] was enacted. It expanded the criminalization of fraud in
connection with identification documents to cover the unlawful transfer and use
of identity. The law defines identity theft
as when someone “…knowingly transfers or uses, without lawful authority, a
means of identification of another person with the intent to commit, or to aid
or abet, any unlawful activity that constitutes a violation of Federal law, or
that constitutes a felony under any applicable State or local law.”
Employment-Related
and Tax Fraud Identity Theft
The IRS has not placed sufficient
emphasis on employment-related and tax fraud identity theft. The IRS’s 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, 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.
TIGTA recommended
that the IRS:
1)
develop
and implement a strategy to address employment-related and tax fraud identity
theft, including coordinating with other Federal agencies;
2)
update
the Automated Underreporter System to display prior year case closing codes on
the individual case screens and create identity theft closing codes for
multiple issue cases; and
3)
revise
Withholding Compliance function case selection criteria to incorporate special
handling of identity theft victims.
IRS management
generally agreed with all of the recommendations. The IRS is developing a five-year strategy
for the Privacy, Information Protection, and Data Security Office that will
include identity theft issues. However,
due to confidentiality and disclosure restrictions, management does not plan to
more actively identify or stop individuals from committing employment-related
identity theft or to notify employers of their employees’ actions. Management did, however, provide a copy of
TIGTA’s draft audit report to the Office of the Assistant Secretary of the
Treasury for Tax Policy to evaluate whether or not to seek a legislative
remedy.
In January 2008,
the IRS implemented the universal identity theft indicator to mark taxpayer
accounts when a taxpayer self‑identifies as an identity theft victim and
provides the proper documentation to verify his or her identity. This code enables the IRS to centrally track
identity theft incidents and eliminates the need to update the Automated
Underreporter System case screens and develop closing codes for multiple issue
cases. The IRS plans to develop business
rules for various programs to apply unique treatments to cases in which the
universal identity theft indicator is present.
TIGTA
acknowledges the IRS’s efforts to improve business processes to reduce the
burden on identity theft victims.
Effective use of the universal identity theft indicator should reduce
the number of multiple contacts made with taxpayers. However, TIGTA is still concerned about the
lack of action on employment-related identity theft cases and details in the
IRS’s response concerning the responsible officials and implementation dates
for some of its planned actions. In
addition, because the Federal Trade Commission Identity Theft Clearinghouse is
the sole national repository of consumer identity theft complaints, it should
be an important source of data for the IRS’s Criminal Investigation Division.
TIGTA Report Reference No. 2008-40-086
Protect the Integrity of Tax
Administration
TIGTA’s Office of
Investigations (OI) has a unique statutory mandate to protect the tax revenue
that funds the operations of our Federal government. TIGTA’s work touches every citizen of the
TIGTA’s
statutory mandate is substantially broader than that of most Offices of
Inspector General. While all Offices of
Inspector General combat fraud, waste, and abuse, TIGTA is also statutorily
charged with protecting the integrity of Federal tax administration.
To
satisfy its broad mandate, TIGTA performs a variety of functions, including:
TIGTA’s Investigative Performance Model
TIGTA has employed a progressive Performance Model to focus
investigative efforts on its three primary areas of investigative
responsibility: employee integrity; employee and infrastructure security; and
external attempts to corrupt Federal tax administration. Since its introduction, the Performance Model
has served both to focus TIGTA’s investigative activities and to demonstrate
the value of its investigations to external stakeholders.
Over time, the Performance Model has proven to be a far more powerful
management tool than initially anticipated.
Because the Performance Model focuses on TIGTA’s core mission-related
objectives, it has become an essential tool for gauging almost every aspect of
TIGTA’s investigative operations. The
use of performance measures adopted to track investigative activity under the
Performance Model helps quantify investigative productivity and produces
reliable statistical data to better inform budgetary planning, staffing
decisions and training needs.
The objective, measurable data derived by using the performance
measures:
The Performance Model has become an indispensable management tool as the
growing body of data collected by using it has been analyzed and transformed
into information for making better strategic organizational decisions. Use of the Performance Model has shown that
TIGTA needs to focus more investigative resources on the electronic environment
in which Federal tax administration increasingly operates, and in which new
threats to IRS operations are rapidly emerging and known threats are
continually evolving.
During this reporting period, OI has substantially realigned its
existing human capital resources within the Strategic Enforcement Division
(SED) to combat the increasing volume of Internet-based scams and phishing
schemes that corrupt the integrity of online IRS programs and operations. By the end of the next reporting period, OI
will also have completed a rigorous training program for all special agents in
the area of investigating crimes in the electronic environment.
Employee Integrity
IRS employee misconduct affects all Americans because it undermines the
Federal revenue stream that provides for the health, safety, welfare and common
defense of the nation.
TIGTA takes its responsibility to preserve the integrity of Federal tax
administration very seriously. TIGTA
investigates such employee misconduct allegations such as extortion, bribery,
theft, abusive treatment of taxpayers, false statements, financial fraud, and
unauthorized access to confidential taxpayer information (UNAX). These investigations also include contractor
and tax practitioner misconduct and fraud.
Crimes committed by IRS employees within the IRS electronic environment
include diverting taxpayers’ returns by manipulating IRS information systems,
and manipulating IRS information so that an IRS employee or another person can
receive an inflated refund.
UNAX is a persistent vulnerability for the IRS and the Federal tax
system. The IRS is entrusted with
properly maintaining and safeguarding sensitive taxpayer information, including
personally identifiable information, the loss or misuse of which could result
in identity theft and other fraudulent activity. Because the Federal tax system is based on
voluntary compliance, public confidence that personal and financial information
given to the IRS for tax administration purposes will be kept confidential is
essential to that system. Even when an
unauthorized access does not involve unauthorized disclosure of taxpayer
information by an IRS employee, these cases undermine taxpayer confidence in
the tax administration system. TIGTA has
specific programs to protect the confidentiality, integrity, and availability
of this sensitive information.
To protect the privacy of taxpayer data, SED employs a variety
of audit trail and forensic data analysis tools to proactively identify
potential UNAX violators and to identify systemic problems or weaknesses. Once SED develops an investigative UNAX lead,
it is forwarded to the appropriate TIGTA field office for local
investigation. TIGTA’s
UNAX program investigates unauthorized access of the Integrated Data Retrieval
System1 by utilizing proactive and
reactive methods. Over the past 10 years, TIGTA special agents have investigated an average of
470 UNAX cases per year. Over half of those investigations are
proactively generated utilizing data mining techniques by TIGTA’s forensic data
analysts. Other investigations are
initiated because of complaints or allegations made by taxpayers or IRS
officials. Of the UNAX investigations
proactively generated by TIGTA, over 90 percent
result in substantiated UNAX violations.
The UNAX allegations that are investigated as a result of taxpayer or
IRS management complaints are fully investigated by leveraging the forensic data
analysts’ expertise. Of the UNAX
violations investigated this fiscal year, 30 percent have an affiliated
criminal violation in conjunction with the UNAX (e.g., identity theft, bribery,
or theft of government funds through improper adjustments of IRS accounts).
As the IRS continues its modernization efforts and expands its services
to taxpayers by developing new automated systems, TIGTA continues to stress the
importance of incorporating robust audit trail capabilities as an integral defense
against threats to the rapidly expanding IRS electronic environment. This electronic environment in which
sensitive taxpayer information is stored and flows will continue to expand
rapidly, and UNAX will pose an ever-increasing threat to the security of
taxpayer information. Although TIGTA
provided 1,251 fraud awareness presentations last year and the IRS annually trains all of its employees about UNAX,
there is no indication that UNAX violations will subside. In fact, UNAX will likely increase as the IRS
designs new systems that allow easier access to sensitive tax information for
improved response to taxpayer inquiries.
During this reporting period, TIGTA provided fraud awareness
presentations to more than 15,000 IRS employees. In addition, TIGTA completed 915 employee
integrity investigations, of which 247 were UNAX investigations. These investigations resulted in six criminal
prosecutions and 539 administrative disciplinary actions against IRS employees.
The
following cases are examples of IRS employee and contractor integrity
investigations that TIGTA conducted during this period:
Ten Indicted for Illegally Obtaining Confidential Tax Information
On December 5, 2007, ten people were indicted in the U. S. District Court,
Western District of
According to court documents, defendants Emilio A. Torrella and Brandy
N. Torrella owned and operated BNT Investigations in
Mr. Berwick, telephoned State and Federal agencies, including the IRS, posing
as the individuals about whom they were seeking information. Through such fraudulent telephone calls, the
Torrellas and their employees obtained personal wage information, employment
histories, Social Security benefits information, Federal tax records, and
medication and hospitalization records.
Court
documents allege that from approximately January 2004 to May 2007, the
defendants conspired to obtain confidential tax, medical, and employment
information through false pretenses on about 12,000 individuals. To obtain this information, defendants
Victoria J. Tade, Megan M. Ososke, Robert Grieve, Ziad N. Sakhleh, Patrick A
Bombino, Esaun G. Pinto, Sr., and Darci P. Templeton, all private investigators
throughout the nation, submitted requests to the Torrellas and their employees,
including Berwick, to uncover confidential employment, financial, tax, or
medical information of individuals they were investigating on behalf of other
clients. When submitting these requests,
the private investigators provided the Torrellas with the subjects’ identifying
information such as full names, dates of birth, addresses, and Social Security
numbers. The individuals being
investigated were not aware that their identifying information was being
disseminated and used in this manner, nor did they give permission to anyone to
obtain the confidential information.
IRS
Employee Sentenced for Unauthorized Access of Computer Data
On December 20, 2007, Patricia Moreno was sentenced in the U. S.
District Court, Eastern District of California to one year of probation, 50
hours of community service, a $500 fine, and a $25 penalty assessment for
unauthorized access of computer data.
According to court documents, between approximately March 17, 2003, and
April 22, 2004, Ms. Moreno, in her capacity as a tax examining technician for
the IRS, exceeded her authorized access and obtained confidential information
contained in the IRS tax database.
Specifically, Ms. Moreno accessed the confidential tax records of an
individual on at least 85 different occasions.
Former IRS Employee Sentenced for
Unauthorized Inspection of Tax Returns and Return Information
Diane
Snyderman was sentenced on January 8, 2008, in the U.S. District Court of New
Jersey, to four years probation, six months of home confinement, a $10,000
fine, and a
$25 special assessment fee on one count of unauthorized inspection of tax
return information.
On August 9, 2007, Ms. Snyderman,
who was formerly employed by the IRS, pleaded guilty in the United States
District Court for the District of New Jersey, to the unauthorized inspection
of tax returns and return information.
According to court documents, an
investigation was initiated after SED established that on or about April 22,
2005, Ms. Snyderman inspected return information of an individual who was a
Certified Public Accountant (CPA) and who had prepared Ms. Snyderman’s tax
returns for the past 30 years. SED also
established that between about August 1997 and about September 2006, Ms.
Snyderman engaged in a variety of unauthorized activities and accesses that
were outside the scope of her duties.
According to court documents, Ms. Snyderman inspected tax returns and/or
return information for approximately
56 individuals who were all clients of her CPA.
Ms. Snyderman also inspected tax returns and return information relating
to a real estate sales firm listed on her IRS employment application as her
former employer, and tax returns and return information relating to her friends
and relatives, and her friends’ relatives.
IRS Employee Pleads Guilty to Unauthorized
Inspection of Tax Return Information
On December 19, 2007, Ericka Duson pleaded guilty in the U.S. District
Court for the Eastern District of California to unauthorized inspection of tax
return information.
According to court documents, between January 3, 2000, and January 24,
2004,
Ms. Duson, as an employee of the IRS, unlawfully and without authorization
accessed and inspected the tax return information of approximately 183 private
individuals.
Latitia Simmons Indicted on Theft and Forgery Charges
On December 20, 2007, Latitia Simmons was indicted in the Circuit Court
of the Eighteenth Judicial Circuit,
According to court documents, between September 26, 2002, and September
12, 2006,
Ms. Simmons committed theft of
$10,000 that was the property of the IRS.
In addition, Simmons allegedly committed forgery with the intent to
defraud by knowingly delivering employee time reports to the IRS that were purported
to have been made by another individual.
Employee and
Infrastructure Security
Congress
recognized the importance of protecting the Federal Government’s ability to
collect tax revenue when it created TIGTA.
The agency accomplishes its statutory mandate to protect Federal revenue
collection by identifying and investigating threats to IRS employees, physical
infrastructure, and the electronic environment in which Federal revenue
collection largely occurs.
Assaults and
Threats against IRS Employees
TIGTA aggressively responds to assaults or threats
against IRS employees and submits information regarding dangerous taxpayers to
the IRS Office of Employee Protection, which administers the IRS Potentially
Dangerous Taxpayer Program.
The following case is an example of an
assault and threat investigation TIGTA conducted during this reporting period:
Lisa Blechman Arrested for Assaulting IRS
Employee
On November 14, 2007, TIGTA special agents
apprehended Lisa Blechman in response to an arrest warrant issued on November
13, 2007, by the United States District Court, Central District of
California. Ms. Blechman was arrested
for intentionally assaulting an employee of the IRS by unleashing two dogs
while the employee was performing her official duties.
According to court documents, on October 30, 2007, an IRS employee went
to
Ms. Blechman’s residence to serve an IRS summons. When the IRS employee identified herself, Ms.
Blechman became visibly agitated and began yelling and swearing at her. After the IRS employee taped the summons to
the front door, Ms. Blechman told the IRS employee that if she did not remove
the summons from the door, Ms. Blechman was going to come outside with her
dogs. As the IRS employee began to walk
to her vehicle,
Ms. Blechman opened the front door and let the dogs out in an attempt to scare
and intimidate the IRS employee.
Threats to
the IRS Electronic Environment
Crimes within
the IRS electronic environment include those committed by IRS employees and
those committed externally. Examples of
external crimes include refund theft and impersonation of IRS employees to
obtain personal information that is then used to divert a taxpayer’s refund or
to commit identity theft.
SED is staffed with
data analysts, computer specialists, and criminal investigators with the
technical expertise to monitor, probe and investigate in the evolving
electronic environment. Investigators
and computer programmers assigned to the System Intrusion Network Attack
Response Team (SINART) investigate attempts to interfere with the security,
integrity, and availability of IRS information systems by external
sources. They respond to computer
intrusion incidents, investigate IRS network vulnerabilities, and conduct system-wide
penetration tests. Agents assigned to
the Computer Investigative Support Program provide forensic analysis of
computers and other media to develop evidence in support of TIGTA
investigations. TIGTA has also
coordinated efforts with the IRS to protect taxpayer information within the IRS
electronic environment. The SINART
provides security assessments of the IRS network.
Igor Rodov Pleads Guilty to
Aiding and Abetting Commission of Wire Fraud
According to the U. S. Attorney for the District of
Connecticut, Igor Rodov, 31, a citizen of
According to documents filed with the U. S. Federal
Court and court statements, beginning in January 2006, and continuing until
November 2006, Mr. Rodov aided and abetted another individual engaged in a
scheme to defraud the U. S. Department of the Treasury and 120 individual
taxpayers of money by means of materially false and fraudulent
representation. The other individual was
able to obtain the personal information of the individual taxpayers, without
consent, including names, addresses, Social Security numbers, and wage
information. The individual then used
that personal information to file Federal income tax returns electronically for
those taxpayers using two Web sites.
Those filings were done without the consent of the taxpayers. The individual electronically signed each of
the filings and, in so doing, fraudulently represented that he was the
individual taxpayer named in the filings.
Mr. Rodov knowingly associated and participated in
this scheme to defraud by opening several bank accounts in his name with
several banks in
External Attempts to
Corrupt Tax Administration
TIGTA has a
statutory obligation to investigate external attempts to corrupt or impede the
administration of internal revenue laws.
Such attempts include:
·
Taxpayers
offering bribes to IRS employees to reduce their tax liabilities;
·
The
use of fraudulent IRS documentation to advance criminal activity;
·
Impersonation
of IRS officials (in person, telephonically, or via the Internet); and
·
Corruption
of IRS programs or operations through procurement or contractor fraud.
The increasing
reliance on electronic communications and the need to maintain a safe
electronic operating environment for the huge task of collecting the nation’s
revenue present a tremendous challenge to the IRS.
TIGTA is
particularly concerned about phishing schemes that rely on e-mail messages
falsely purporting to relate to legitimate IRS operations. Some of the messages claim to be from the
IRS; others purport to be from legitimate businesses seeking to assist
taxpayers in dealing with the IRS. These
messages have one thing in common: they
solicit personally identifiable information such as Social Security numbers and
banking information, which is then used to commit identity fraud. Some tell the recipient that the IRS wants to
reward them for having filed early, and their personal and banking information
is needed to electronically deposit the money.
These schemes also take the form of telephone calls to taxpayers, often
from untraceable pre-paid cell phones, notifying the taxpayer of a refund and
requesting personal information in order to expedite the deposit
electronically.
During this
reporting period, the IRS reported 1,176 phishing incidents. TIGTA continues its efforts to educate the
public about these abusive schemes and to ensure that misuse of the IRS name,
impersonation of an IRS employee, and identity theft incidents are minimized.
The following cases are examples of
external attempts to corrupt Federal tax administration that TIGTA conducted
during this period:
Wilfredo
Ventura Sentenced for Bribery of IRS Agent
On December 17, 2007, Wilfredo
Ventura was sentenced in the U. S. District Court, Southern District of Texas,
to 21 months of imprisonment, three years of supervised release following
imprisonment, and a $100 criminal monetary penalty for bribery of a public
official.
According to court documents, on
or about October 16, 2006, Mr. Ventura knowingly offered $500 to an IRS revenue
agent, with the intent to influence the agent to aid in committing a fraud
against the
Civil Complaint Filed Against Keith O’Brien Slade
and Controlled Quality Corporation for Approximately $499,782 in False Claims
Against IRS
On October 31, 2007, a civil
complaint was filed by the U. S. Attorney’s Office in the
U. S. District Court, District of Columbia, against the Controlled Quality
Corporation, a defunct company formerly doing business in the District of
Columbia, and its owner,
Keith O’Brien Slade, to recover triple damages and civil penalties under the
False Claims Act, 31 U.S.C. §§ 3729-3733.
According to court documents,
from approximately June 2001 to February 2004, the defendants had a contract
with the Government Printing Office (GPO) to provide printing services. The defendants entered into a contractual
agreement with the GPO beginning June 9, 2001, whereby the defendants agreed to
prepare and duplicate various documents for GPO customer agencies. The IRS was one of those customer
agencies. During the contract period,
the defendants were found to be using a subcontractor to perform 100 percent of
the printing services awarded to the defendants by the GPO. The defendants then prepared and certified
vouchers for payment attesting that they alone prepared and performed the
work. These invoices also contained
inflated prices used in the production of the printed work for the IRS. The IRS made at least 28 procurements from
the defendants; the total amount the IRS paid to the defendants was
approximately $499,782, while the defendants paid the subcontractor a sum of
approximately $61,678.
Ruth Fallis Sentenced to Three Years of
Incarceration and Restitution in Amount of $803,192 to IRS
On October 30, 2007, Ruth Fallis was
sentenced in the U. S. District Court for the District of Delaware to 36 months
of incarceration, three years of supervised release following imprisonment,
restitution in the amount of $803,192 to the IRS and $258,534 to an individual,
and a special assessment of $200. Ms.
Fallis was sentenced after pleading guilty on March 26, 2007, to bank fraud and
wire fraud.
According to court documents,
between approximately December 8, 2001, and October 2005, Ms. Fallis wrote and
negotiated 75 unauthorized checks totaling $557,044.93 from the account
of her employer, the Perry Anthony Design Group (PADG). Between approximately January 2002 and
October 2005, she kept at least $504,681.22 of PADG’s cash receipts that she
was responsible for depositing into PADG’s account. In order to conceal and execute her scheme to
steal from PADG, beginning in 2002, and continuing until the third quarter of
2005, Ms. Fallis deliberately failed to make the quarterly Federal tax deposits
on behalf of PADG. In or around the summer
of 2005, when the IRS attempted to contact PADG to discuss the lack of
payments, Ms. Fallis diverted the IRS’s calls and notices to herself so that
the owner of PADG would not learn of the tax liability and her scheme to steal
from PADG. On June 23, 2005, July 21,
2005, and September 9, 2005, Ms. Fallis diverted the IRS’s calls by contacting
the IRS in
Individual
Charged with Misuse of IRS Symbol
On January 23, 2008, a criminal
information was filed in the U.S. District Court for the Central District of
California, charging Amanda Evans with one count of misuse of a Department of
the Treasury name or symbol.
According to court documents, in
connection with a business activity on July 25, 2006, Evans knowingly used the words
“Internal Revenue Service” and the symbol of the IRS, in a manner that could
reasonably be interpreted and construed as conveying the false impression that
her business activity was endorsed, authorized by, and associated with the
Department of the Treasury.
James Richards Pleads
Guilty to Embezzling IRS Tax Payments from Clients
James Richards
pleaded guilty in U.S. District Court for the Western District of Missouri to
one count of accepting funds intended for the IRS, one count of evasion of tax
assessment, one count of representing himself as a Certified Public Accountant
(CPA) in documents submitted to the IRS, and one count of fabricating documents
purported to be from the IRS.
According to
court documents, Mr. Richards is the owner of Holliday and Associates, a sole
proprietorship that performs general accounting services and tax preparation
for clients. Mr. Richards routinely
asked clients to make payments toward their anticipated tax liability and make
the checks out to him or his company. Mr.
Richards accepted these estimated tax payments from his clients that were
intended for the IRS but failed to make the required tax deposits, pay their
estimated payments, or file the required forms with the IRS.
In addition, Mr.
Richards made false statements by claiming that he was a CPA in
IRS CID and TIGTA worked on this case jointly.
Individual Indicted for Theft of Public
Money
Jennifer Jackson was indicted on
January 17, 2008, in the U.S. District Court for the Southern District of Texas
on one count of theft of public money.
According to court documents, on
or about May 9, 2005, Ms. Jackson knowingly converted for her own use a
cashier’s check for $19,749.69, made payable to the IRS for a client’s tax
payment.
Awards and Special Achievements
Executive Development Program
Graduates
On March 14,
2008, a graduation ceremony was held for the participants in the IRS’s Winter
2008 Executive Development (XD) Program.
The XD Program is the formal training phase of the IRS’s Senior Executive
Service Candidate Development Program.
TIGTA is participating 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. Preston Benoit
(middle row, second from left), Phil Shropshire (front row, second from left),
Deborah Trumbull (front row, third from left), and Nancy Berthold (front row,
fourth from left) graduated and are four of six TIGTA managers currently
enrolled in the program. TIGTA managers
Kenneth Casey and Damon Plummer will attend the Summer 2008 XD Program.
Reports with Questioned Costs
TIGTA issued two
audit reports with questioned costs during this semiannual reporting period.1 The phrase “questioned cost” means a
cost that is questioned because of:
·
an
alleged violation of a provision of a law, regulation, contract, or other
requirement governing the expenditure of funds;
·
a
finding, at the time of the audit, that such cost is not supported by adequate
documentation (an unsupported cost); or
·
a finding
that expenditure of funds for the intended purpose is unnecessary or
unreasonable.
The phrase
“disallowed cost” means a questioned cost that management, in a management
decision, has sustained or agreed should not be charged to the 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 |
16 |
$168,237 |
$82,853 |
2. Reports
issued during the reporting period |
2 |
$182 |
$0 |
3. Subtotals
(Item 1 plus Item 2) 2 |
18 |
$168,419 |
$82,853 |
4. Reports
for which a management decision
was made during the reporting period3 a. Value of disallowed costs |
2 |
$73 |
$0 |
b. Value of costs not disallowed |
7 |
$2,618 |
$0 |
5. Reports with no
management decision at the end of the
reporting period (Item 3 minus Item 4) |
10 |
$165,728 |
$82,853 |
6. Reports with no management decision
within 6 months of issuance |
9 |
$167,568 |
$82,853 |
1 See Appendix II
for identification of audit reports involved.
2 Difference due to
rounding
3.
IRS management disallowed only a part of the questioned cost for one
report.
Reports with Recommendations That
Funds Be Put To Better Use
TIGTA issued one
report 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:
·
reductions
in outlays;
·
deobligations
of funds from programs or operations;
·
costs
not incurred by implementing recommended improvements related to operations;
·
avoidance
of unnecessary expenditures noted in pre-award reviews of contract agreements;
·
preventing
erroneous payment of the following refundable credits: Earned Income Tax Credit and Child Tax
Credit; and
·
any
other savings that are specifically identified.
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 |
1 |
$61 |
3. Subtotals (Item 1 plus Item 2) |
1 |
$61 |
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 |
$61 |
ii. Based on
proposed legislative action |
0 |
$0 |
b. Value of
recommendations to which management did not agree |
0 |
$0 |
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.
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.
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 were derived
from analyses of historical data, and are thus considered potential barometers 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 |
3 |
65,193 |
$149,510 |
Revenue Protection |
2 |
349 |
$1,527 |
Reduction of Burden on Taxpayers |
3 |
1,150,978 |
|
Taxpayer Rights and Entitlements at
Risk |
2 |
11 |
$733 |
Taxpayer Privacy and Security |
1 |
|
|
Inefficient
Use of Resources |
2 |
|
$20,500 |
Reliability
of Management Information |
5 |
63 |
$41 |
Protection
of Resources |
|
|
|
1 See Appendix II
for identification of audit reports involved.
Management did not agree with the outcome measures in the
following reports:
·
Increased Revenue: Reference Number 2008-40-087,
and
·
Inefficient Use of Resources: Reference Number
2008-10-025
The following reports contained quantifiable
impacts in addition to the number of taxpayer accounts and dollar value:
·
Taxpayer Rights and Entitlements and Taxpayer
Privacy and Security: Reference Number
2008-30-082, and
·
Reliability of Management Information: Reference
Numbers 2008-20-002, 2008-10-025, and
2008-20-028.
Investigations
Statistical Reports
Significant Investigative Achievements October 1,
2007 – March 31, 2008 |
|
Complaints/Allegations Received by
TIGTA |
|
Complaints
against IRS Employees |
2,169 |
Complaints
against Non-Employees |
2,464 |
Total Complaints/Allegations |
4,633 |
Status of Complaints/Allegations Received by TIGTA |
|
Investigations
Initiated |
1,798 |
In Process
within TIGTA1 |
359 |
Referred to
IRS for Action |
287 |
Referred to
IRS for Information Only |
822 |
Referred to
a Non-IRS Entity2 |
7 |
Closed with
No Referral |
1,025 |
Closed with
All Actions Completed |
335 |
Total Complaints |
4,633 |
Investigations Opened and Closed |
|
Total Investigations
Opened |
1,728 |
Total
Investigations Closed |
1,795 |
Financial
Accomplishments |
|
Embezzlement/Theft
Funds Recovered |
$45,951 |
Court
Ordered Fines, Penalties and Restitution |
$11,460,982 |
Out-of-Court
Settlements |
0 |
Total Financial
Accomplishments |
$11,506,933 |
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 75 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 |
30 |
66 |
96 |
Referred –
Declined for Prosecution |
359 |
268 |
627 |
Referred –
Pending Prosecutorial Decision |
31 |
79 |
110 |
Total Criminal Referrals |
420 |
413 |
833 |
No
Referral |
456 |
508 |
964 |
1 Criminal referrals include both Federal and State
dispositions.
Criminal Dispositions2 |
|||
|
Employee |
Non-Employee |
Total |
Guilty |
17 |
41 |
58 |
Nolo Contendere (no contest) |
1 |
1 |
2 |
Pre-trial Diversion |
12 |
3 |
15 |
Deferred Prosecution3 |
0 |
0 |
0 |
Not Guilty |
0 |
0 |
0 |
Dismissed4 |
2 |
4 |
6 |
Total Criminal Dispositions |
32 |
49 |
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 |
336 |
Suspended/Reduction in Grade |
116 |
Oral or Written Reprimand/Admonishment |
127 |
Closed – No Action Taken |
104 |
Clearance Letter Issued |
76 |
Employee Resigned Prior to Adjudication |
123 |
Non-Internal Revenue Service Employee
Actions6 |
352 |
Total Administrative Dispositions |
1,234 |
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.
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 |
06/15/08 |
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’ control listing data should be analyzed to ensure
reviews are done and accounts are resolved. |
2003-40-139 |
Tax Compliance Initiatives |
June 2003 |
07/15/08 |
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 that
the disaster recovery environment is completely built-out and tested. |
2004-30-038 |
Tax Compliance Initiatives |
January 2004 |
07/15/08 |
Access
to the Toll-Free Telephone System Was Significantly Improved in 2003, but
Additional Enhancements Are Needed F-3, R-1, P-1. Develop
an Activity Based Costing system that reliably captures and reports both the total
cost and the cost-per-call of providing services on each toll-free product
line. |
2004-30-068 |
Tax Compliance Initiatives |
March 2004 |
07/15/08 |
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 that
have been claimed for EITC purposes that are 20 or more years older than the
primary taxpayer, or are listed as children that 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’ 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’ 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 (OPM). 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 06/15/08 |
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 Low Income Tax Clinic program to
assist Congress and IRS in evaluating the success of the program. |
2005-10-149 |
Human Capital |
September 2005 |
05/15/08 |
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 |
05/15/08 |
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 |
04/15/08 |
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. |
2006-40-061 |
Providing Quality Taxpayer Service Operations |
March 2006 |
06/15/08 |
The F-1, R-1, P-1. Ensure data
used in the Model or any decision-making tool are accurate and reliable and
have been validated before using them to make decisions regarding the TAC
Program. |
2006-10-066 |
Erroneous and Improper Payments |
March 2006 |
07/15/08 |
The Office
of Professional Responsibility Can Do More to Effectively Identify and Act
Against Incompetent and disreputable Tax Practitioners F-1, R-3, P-1. Develop a method
to identify representatives on the Centralized Authorization File that does
not require representatives to use Social Security numbers on Form 2848. |
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
SWETRS 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 ATIP 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 P-2: 06/15/08 P-3: 04/15/09 |
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. F-2, R-2, P-2, P-3. Reinforce the
importance of Privacy Impact Assessment case documentation with specific
instructions or case models and implement a compliance review process to
assess whether IRS business units are adhering to privacy regulations, given
limited resources and staff knowledge in conducting these reviews. |
2006-40-172 |
Security of the IRS |
September 2006 |
P-1: 05/01/08 P-2: 09/15/08 |
Accountability
Over Volunteer Income Tax Assistance Program Computers Continues to Be a
Problem F-1, R-2, P-1, P-2. Integrate the
Information Technology Asset Management System and SPEC Taxpayer Assistance
Reporting System to link the
information between the two and ensure all VITA Program computers are
properly and efficiently controlled |
2006-20-177 |
Security of the IRS |
September 2006 |
10/15/08 04/15/08 |
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 Security Audit and Analysis System
standards, ensuring data collected are valid and arranged in the proper
format. F-2, R-3, P-1. Reevaluate
SAAS procedures and processes to ensure the new SAAS requirements are
incorporated and responsibilities for reviewing modernization audit trails
are adequately defined. |
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. |
2007-20-048 |
Security of the IRS |
March 2007 |
07/01/08 04/01/08 |
The Internal
Revenue Service Is Not Adequately Protecting Taxpayer Data on Laptop Computers
and Other Portable Electronic Media Devices F-3, R-2, P-1. Require
front-line managers to periodically check their employees’ laptop computers
to ensure encryption solutions are being used by employees and sensitive data
are encrypted properly. F-5, R-1, P-1. Implement
procedures to encrypt backup data sent to non-IRS facilities. |
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 |
05/15/08 05/15/08 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-1, R-1, P-1. Consider eliminating
the income restriction on free tax preparation of simple tax returns at
Taxpayer Assistance Centers for taxpayers with disabilities and allow them to
schedule appointments in advance for tax return preparation assistance. F-2, R-1, P-2. Conduct a
study to determine the current and future needs and required services for
taxpayers with vision impairments. 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 |
09/15/08 |
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. |
2007-10-074 |
Using Performance and Financial Information for
Program and Budget Decisions |
April 2007 |
04/15/08 04/15/08 |
More Careful
Monitoring of F-1, R-1, P-1. Develop
procedures requiring that working capital fund (WCF) billings be reviewed and
certified as accurate before entry into IRS records as valid expenses. F-2, R-1, P-1. Revise procedures
to require that WCF expenditures be allocated only to obligations directly
related to the expenditures. |
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 Fraud Detection Centers determined fraud. |
2007-10-082 |
Tax Exempt Organizations |
May 2007 |
07/15/08 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. |
2007-20-080 |
Systems Modernization of the IRS |
July 2007 |
07/01/08 |
Vital Decisions
Must Be Made to Ensure Successful Implementation of Customer Account Data
Engine Capabilities F-3, R-1, P-1. Review
alternative design solutions and identify process improvements for the
Project. |
2007-20-107 |
Security of the IRS |
July 2007 |
06/15/08 10/15/08 |
Employees
Continue to Be Susceptible to Social Engineering Attempts That Could Be Used
by Hackers F-1, R-1, P-1. Continue
security awareness activities to remind employees of the potential for social
engineering attempts and the need to report these incidents. 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 06/15/08 06/15/08 |
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. F-3, R-2, P-1. Ensure
improvements and training opportunities for the use of performance standards
are identified and coordinate with other IRS organizations to encourage the
use of performance standards for systems development task orders outside of
the control of the Modernization and Information Technology Services
organization. F-3, R-4, P-1. Collect and
disseminate guidance for documenting contractor performance and coordinate
with other IRS organizations to communicate the importance of documenting
contractor performance for systems development task orders outside of the
control of the Modernization and Information Technology Services
organization. |
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. |
2007-40-125 |
Using Performance and Financial Information for
Program and Budget Decisions |
August 2007 |
04/15/08 |
Taxpayer
Service Savings Estimates for Fiscal Years 2006 and 2007 Could Not Be
Validated F-1, R-1, P-1. Develop a
thorough process for compiling the data used for the IRS’ budget requests to help
ensure the accuracy of the estimates and to facilitate a better understanding
of the impact of budget reductions on operations. |
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. |
2007-10-166 |
Tax Compliance Initiatives |
August 2007 |
09/15/08 09/15/08 09/15/08 |
Efforts to
Collect Delinquent Employment Taxes Owed by Government Entities Could Be
Improved F-1, R-2, P-2. Reinforce IRS
procedures requiring that revenue officers and/or their managers contact
Federal, State, local governments office specialists designated for their
respective offices prior to pursuing collection actions against government
entities and work with the FSLG office to explore the feasibility of
preparing a quarterly report of new State and local government entities
assigned to the Collection Field function. F-2, R-1, P-2. Ensure
comprehensive guidelines and procedures are developed to guide the
assignment, control, and resolution of Federal Government entity delinquency
cases. F-2, R-2, P-2. Reinforce
existing IRS procedures requiring that revenue officers notify the
appropriate SB/SE Division Territory manager before issuing a final notice of
the intent to levy to a State or local government entity. |
2007-30-172 |
Complexity of the Tax Law |
September 2007 |
08/15/08 |
Like-Kind
Exchanges Require Oversight to Ensure Taxpayer Compliance F-1, R-1, P-1. Conduct a study
of issue-related returns selected by the National Research Program. |
2007-30-173 |
Tax Compliance Initiatives |
September 2007 |
07/15/08 |
Significant
Tax Administration Challenges Exist in Determining Whether Individual Returns
With Schedule C Losses Are Engaged in Tax Abuse F-1, R-2, P-1. Continue to
coordinate with practitioner organizations to encourage compliance with
existing provisions. |
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 March 31, 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 March 31, 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 March 31, 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 March 31, 2008, there were no prior reports
in which 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 175
proposed regulations and legislative requests during this reporting period. |
October 1, 2007 – March
31, 2008
Inspector General Congressional Testimony |
|
Reference Number |
Hearing
Title |
February 2008 |
|
2008-OT-074 |
Hearing Before the Subcommittee on
Federal Workforce, Postal Service and the |
Audit Products |
|
Reference Number |
Report Title |
October 2007 |
|
2008-3E-003 |
Roll-up Report: Issues
Confronting the Federal Tax System |
2008-30-001 |
Identification of Unreported Self-Employment Taxes Can Be Improved
(Increased Revenue, $95,118,395) |
2008-40-004 |
The Customer Account Data Engine Release 2.2 Posted Tax Return
Information Accurately (Revenue Protected: $400,000 impacting 338 taxpayers) |
November 2007 |
|
2008-1C-005 |
Report on Audit of Post Award Survey of
Subcontractor’s Accounting and Billing Systems |
2008-1C-006 |
Report on Audit of Facilities Utilization |
2008-20-002 |
Efforts to Update Aging Computer Hardware Are
Underway, but Program Improvements Are Needed to Minimize Risks (Reliability
of Information: $50 million in lost revenue incorrectly attributed to aging
equipment) |
2008-20-026 |
The Internal Revenue Service’s Compliance With
the Federal Information Security Management Act (Non-Intelligence – National
Security Systems) for Fiscal Year 2007 |
2008-1C-007 |
Incurred
Costs Audit of Contractor's Calendar Year 2004 (Questioned Costs: $21,319) |
2008-1C-008 |
Report
on Concurrent Audit of Adequacy and Compliance of Revised Disclosure
Statement |
2008-1C-009 |
Report
on Audit of Information Technology System General Internal Controls |
2008-1C-010 |
Report
on Followup Audit of Labor Accounting System |
2008-1C-011 |
Incurred
Costs Audit for Fiscal Year Ending December 31, 2004 |
2008-1C-012 |
Report
on Post Award Accounting System Review |
2008-1C-013 |
Audit
Report for Post Award Accounting System |
2008-1C-014 |
Report
on Audit of Billing System |
2008-1C-015 |
Audit
Report on Compliance With Cost Accounting Standard 409, Depreciation of
Tangible Capital Assets |
2008-1C-016 |
Report
on Audit of Adequacy and Compliance of the Contractor's Fiscal Year 2006 Revised
Disclosure Statement (Version 06-03), Effective September 29, 2006 |
2008-1C-017 |
Audit
Report on Compliance With Cost Accounting Standard 407, Use of Standard Costs
for Material and Labor |
2008-1C-018 |
Report
on Audit of Post Award Survey of Subcontractor's Accounting and Billing
Systems |
2008-1C-019 |
Report
on Post Award Accounting System Review |
December 2007 |
|
2008-10-025 |
Management
Oversight Improved, but Expected Benefits and Capabilities for the Tax Exempt
Determination System Release 2 Were Not Delivered (Reliability of
Information: $46.8 million of benefits and costs not accurately tracked;
Inefficient Use of Resources: |
2008-1C-020 |
Accounting
System Review |
2008-1C-021 |
Report
on Audit of Labor Floor Checks and Interviews |
2008-1C-022 |
Audit
of Cost Accounting Standard 411, Accounting for Acquisition Costs of Material |
2008-1C-023 |
Report
on Audit of Compliance With Cost of Money As an Element of the Cost of
Facilities Capital |
2008-1C-024 |
Report
on Purchase Existence and Consumption |
2008-20-029 |
Internal
Revenue Service Databases Continue to Be Susceptible to Penetration Attacks |
2008-20-030 |
Lack
of Proper IRS Oversight of the Department of the Treasury HSPD-12 Initiative Resulted
in Misuse of Federal Government Resources (Inefficient Use of Resources: |
2008-30-027 |
Tax
Examiners Did Not Always Resolve Return Delinquency Cases, and Computer
Checks Did Not Identify Unfiled Returns |
2008-1C-031 |
Audit
of Cost Accounting Standard 415, Accounting for the Costs of Deferred
Compensation |
2008-1C-032 |
Performance
of Labor Floor Checks |
2008-1C-033 |
Audit
of Cost Accounting Standard 410, Allocation of Business Unit General and Administrative
Expenses to Final Cost Objectives |
2008-10-051 |
Appropriate
Actions Were Taken to Prepare for the Receipt of New Filing Information From
Smaller Tax-Exempt Organizations (Taxpayer Burden: 577,713 corrected letters
issued) |
2008-10-052 |
The
Tax Exempt Bonds Office Has Established Controls, but Improvements Are Needed
to Prevent Improprieties |
2008-10-054 |
Invoice
Audit of Fees Paid Under the Private Debt Collection Initiative |
January 2008 |
|
2008-10-055 |
The
Office of Appeals Closed Case Files Are Overwhelming Onsite Storage Space
(Funds Put to Better Use: $60,570) |
2008-20-028 |
The
Modernization and Information Technology Services Organization’s Competitive
Sourcing Program Needs Improvement (Reliability of Information: support not
provided for the reported savings of $77,472,000 and 100 million printed
pages) |
2008-1C-034 |
Audit of Compliance With Cost Accounting Standard 418,
Allocation of Direct and Indirect Costs |
2008-1C-035 |
Post
Award Accounting System Audit |
2008-1C-036 |
Report
on Audit of Post Award Accounting System |
2008-1C-037 |
Report
on Compliance With Cost Accounting Standard 418, Allocation of Direct and
Indirect Costs |
2008-1C-038 |
Audit
of Accounting System Post Award |
2008-1C-039 |
Report
on Audit of Post Award Accounting System |
2008-1C-040 |
Incurred
Costs Audit for Fiscal Years 2004 and 2005 |
2008-10-058 |
Attestation
Review of the Internal Revenue Service’s Fiscal Year 2007 Annual Accounting
of Drug Control Funds and Related Performance |
February 2008 |
|
2008-40-059 |
The
Taxpayer Assistance Blueprint Phase 2 Was Generally Reliable, but Oversight
of the Survey Design Needs Improvement |
2008-1C-041 |
Report
on Post-Contract Award Accounting System Audit |
2008-1C-042 |
Report
on Post-Award Review of Subcontractor’s Accounting System |
2008-1C-047 |
Report
on Post-Award Accounting System Review |
2008-1C-048 |
Report
on Post-Award Accounting System Review |
2008-1C-049 |
Report
on Post-Award Audit of Accounting System |
2008-30-072 |
The
Baltimore Collection Field Function Office Properly Controlled Form 809 Receipt
Books and Timely Transmitted Remittances for Processing |
2008-1C-043 |
Post-Award
Accounting System Review |
2008-1C-044 |
Report
on Post-Award Accounting System Review |
2008-1C-045 |
Report
on Audit of Fiscal Year 2008 Forward Pricing Rates |
2008-1C-046 |
Report
on Compliance With Cost Accounting Standard 410, Allocation of Business Unit
General and Administrative Expenses to Final Cost Objectives |
2008-1C-050 |
Report
on Fiscal Year 2007 Labor Floor Checks |
2008-40-062 |
Processing
of Carryback Loss Claims Needs to Be Improved to Ensure Taxpayers Receive
Accurate Refunds (Increased Revenue: $1,126,501 impacting 11 taxpayers;
Taxpayer Rights and Entitlements: $732,941 impacting 9 taxpayers) |
2008-30-060 |
The
Internal Revenue Service Needs to Emphasize Limited Use of a Collection
Suspension Code That Can Allow Inappropriate Refunds |
2008-20-061 |
Disaster
Recovery Issues Have Not Been Effectively Resolved, but Progress Is Being
Made |
March
2008 |
|
2008-20-053 |
The
Account Management Services Project Is Meeting Its Development Goals |
2008-10-075 |
The
Published Guidance Program Needs Additional Controls to Minimize Risks and
Increase Public Awareness |
2008-20-076 |
Improvements
Are Needed to the Information Security Program Governance Process |
2008-30-056 |
A
More Strategic Approach Could Enhance the Workers’ Compensation Program
Return-to-Work Efforts |
2008-10-057 |
Performance
Measures and Improved Case Tracking Would Help the Exempt Organizations
Function Better Allocate Resources
(Reliability of Information: 63 cases inaccurate cases) |
2008-20-077 |
Actions
Are Needed to Improve the Effectiveness of the Physical Security Program |
2008-1C-063 |
Report
on Post-Award Accounting System Review |
2008-1C-064 |
Noncompliance
With Cost Accounting Standard 401, Consistency in Estimating, Accumulating,
and Reporting Costs |
2008-1C-066 |
Report
on Audit of Direct Costs for TIRNO-00-D-00014 and TIRNO-06-D-00026
(Questioned Costs: $160,186) |
2008-1C-067 |
Results
of Evaluation of Fiscal Year 2003 Cumulative Allowable Costs Worksheets |
2008-1C-065 |
Incurred
Costs Audit for Fiscal Year Ended March 31, 2004 |
2008-10-073 |
Controls
and Performance Measures for the Records Management Program Need to Be
Improved |
2008-40-089 |
Increasing
Federal and State Cooperation and Promoting Electronic Filing Would Improve
Administration of Taxes Used to Maintain the Nation’s Highways (Taxpayer
Burden: Encouraging the Alternate Proof of Payment option would benefit
571,936 taxpayers) |
2008-40-086 |
Outreach
Has Improved, but More Action Is Needed to Effectively Address
Employment-Related and Tax Fraud Identity Theft (Increased Revenue: $2.2 million;
Taxpayer Burden: 1,329 taxpayers receiving unnecessary contacts) |
2008-20-071 |
Inadequate
Security Controls Over Routers and Switches Jeopardize Sensitive Taxpayer
Information |
2008-20-078 |
Private
Collection Agencies Adequately Protected Taxpayer Data |
2008-30-082 |
Fiscal
Year 2008 Statutory Review of Compliance With Lien Due Process Procedures
(Taxpayer Rights and Entitlements: 76,984 notices untimely mailed, proof of
mailing not located or not sent to authorized representatives and notices not
sent to 2 taxpayers; Taxpayer Privacy and Security: 9,057 notices sent to
unauthorized representatives) |
2008-40-090 |
Fiscal
Year 2008 Statutory Review of Restrictions on Directly Contacting Taxpayers |
2008-40-087 |
Individual
Retirement Account Contributions and Distributions Are Not Adequately
Monitored To Ensure Tax Compliance (Increased Revenue: $52.2 million
impacting |
2008-10-092 |
Procurement’s
Control Environment Was Ineffective and Did Not Prevent Overpayments to
Contractors (Reliability of Information: Corrective actions valued at $41,432
were closed before ensuring that questionable charges were recovered) |
2008-10-096 |
The
Internal Revenue Service’s Federal Financial Management Improvement Act
Remediation Plan As of December 31, 2007 |
2008-40-099 |
Fiscal
Year 2008 Statutory Review of Disclosure of Collection Activity With Respect
to Joint Returns |
2008-40-100 |
Interim
Results of the 2008 Filing Season |
TIGTA issued 11 audit
reports required by statute dealing with the adequacy and security of IRS
technology during this reporting period.
In FY 2008, TIGTA will complete its tenth round of statutory reviews
that are required annually by the IRS
Restructuring and Reform Act of 1998 (RRA 98). TIGTA will
also complete its annual review 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 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’ compliance with
restrictions under section 1204 of RRA
98 on the use of enforcement statistics to evaluate IRS employees. |
Audit
in report writing phase. |
Restrictions on Directly Contacting Taxpayers I.R.C. § 7803(d)(1)(A)(ii) |
Requires TIGTA to evaluate the IRS’ 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’ 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 in which 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’ 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 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 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, in 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. |
Audit fieldwork in progress. |
Levies I.R.C. § 7803(d)(1)(A)(iv) |
Requires TIGTA to evaluate the IRS’ compliance with required procedures under I.R.C. § 6330 regarding levies. |
Audit in report writing phase. |
Collection Due Process I.R.C. § 7803(d)(1)(A)(iii) and (iv) |
Requires TIGTA to evaluate the IRS’ compliance with required procedures under I.R.C. §§ 6320 and 6330 regarding the taxpayers’ rights to appeal lien or levy actions. |
Audit
fieldwork in progress. |
Seizures I.R.C. § 7803(d)(1)(A)(iv) |
Requires TIGTA to evaluate the IRS’ compliance with required procedures under I.R.C. §§ 6330 through 6344 when conducting seizures. |
Audit
in report writing phase. |
Taxpayer Designations – Illegal Tax Protester
Designation and Nonfiler Designation I.R.C. § 7803(d)(1)(A)(v) |
An evaluation of IRS’ compliance with restrictions under section 3707 of RRA 98 on designation of
taxpayers. |
Audit fieldwork in progress. |
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 41 of this
report. |
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. |
Audit
fieldwork in progress. |
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). |
Audit fieldwork in progress. |
Adequacy
and Security of the Technology of the IRS I.R.C. § 7803(d)(1)(D) |
Requires TIGTA to evaluate the IRS’ 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 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 |
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 |
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’ Office of National Drug Control Policy (ONDCP) detailed
accounting submission and assertions. |
Reference
No. 2008-10-058, January 2008 TIGTA
determined that the IRS’ 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’ 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. |
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.
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 October 1, 2007, to March 31, 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
October 01, 2007 through March 31, 2008
Summary
by Disposition Groups
(Table
provided by the IRS)
Disposition |
TIGTA Investigations |
Administrative Cases |
Employee
Tax Matter Cases |
Background
Investigations |
Total |
|
Removal |
54 |
62 |
10 |
2 |
128 |
|
Separation of Probationary Employees |
3 |
80 |
4 |
12 |
99 |
|
Separation of Temporary Employees |
1 |
4 |
8 |
2 |
15 |
|
Resignation/Retirement |
76 |
122 |
59 |
16 |
273 |
|
Suspensions |
124 |
223 |
92 |
8 |
447 |
|
Reprimands |
141 |
427 |
462 |
25 |
1,055 |
|
Counseling |
|
243 |
1,110 |
43 |
1,396 |
|
Alternative Discipline |
24 |
83 |
25 |
3 |
135 |
|
Clearance |
83 |
137 |
14 |
|
234 |
|
Closed Without Action |
233 |
250 |
133 |
147 |
763 |
|
Closed Without Action (Caution
Statement) |
142 |
128 |
97 |
101 |
468 |
|
Forwarded to TIGTA |
|
12 |
|
1 |
13 |
|
Suspended – Waiting Supplemental |
|
1 |
|
|
1 |
|
Termination for Abandonment of
Position |
|
20 |
|
|
20 |
|
Forwarded to OPM
for MIF |
|
|
|
18 |
18 |
|
Case Suspended Pending Employee
Return To Duty |
3 |
|
2 |
2 |
7 |
|
Prosecution Pending for TIGTA ROI’s |
8 |
|
|
|
8 |
|
Total |
892 |
1,792 |
2,016 |
380 |
5,080 |
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: Tuesday,
April 01, 2008 Report ID = T1R3a
REPORT OF EMPLOYEE MISCONDUCT
FOR THE PERIOD OCTOBER 01, 2007
THROUGH MARCH 31, 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
|
532 |
844 |
(892) |
(5) |
(0) |
479 |
|
Administrative Case2 |
759 |
1,970 |
(1,792) |
(22) |
(6) |
909 |
|
Employee Tax Compliance Case3 |
879 |
2,004 |
(2,016) |
(72) |
(0) |
795 |
|
Background Investigations4 |
156 |
345 |
(380) |
(2) |
(0) |
119 |
|
Total |
2,326 |
5,163 |
(5,080) |
(101) |
(6) |
2,302 |
|
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: Tuesday,
April 01, 2008 Report ID = T1R1
SUMMARY OF SUBSTANTIATED
I.R.C. § 1203 ALLEGATIONS RECORDED IN ALERTS FOR THE
PERIOD OCTOBER 01, 2007 THROUGH MARCH 31, 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 |
0 |
0 |
0 |
0 |
1 |
1 |
Falsifying
or Destroying Records |
1 |
3 |
0 |
0 |
0 |
0 |
4 |
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 |
4 |
5 |
1 |
5 |
26 |
37 |
78 |
Understatement
of Federal Tax Liability |
13 |
9 |
0 |
2 |
29 |
35 |
88 |
Threat to
Audit for Personal Gain |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
Totals |
18 |
17 |
1 |
7 |
55 |
73 |
171 |
Source: Automated Labor and Employee Relations Tracking System
(ALERTS) and § 1203 Review Board records.
Extract Date: Wednesday,
April 02, 2008
[1] 5 U.S.C.A. app. 3 (West Supp. 2007).
[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] The “gross tax gap” is the difference between the amount of tax that taxpayers should pay under the tax law and the amount they actually pay on time. In February 2006, the IRS released updated compliance estimates, showing that the gross tax gap was $345 billion in tax year 2001. This estimate however, does not take into account taxes that were paid voluntarily but paid late, or recoveries from IRS enforcement activities. Taking these factors into account, the “net tax gap” was an estimated $290 billion in tax year 2001.
[4] Line 21 “Other Income” is used to report income that is not reported elsewhere on the tax return or on other schedules.
[6] The Taxpayer Assistance Blueprint Phase 2 Was Generally Reliable, but Oversight of the Survey Design Needs Improvement (Reference Number 2008-40-059, dated February 5, 2008)
[7] Form 1045, Application for Tentative Refund
[8]
Form 1040X, Amended
[9] Alternative Minimum Tax—Individuals
[10] The term “Sensitive But Classified” originated with the Computer Security Act of 1987. It defines SBU as “any information, the loss, misuse, or unauthorized access to or modification of which could adversely affect the national interest or the conduct of Federal programs, or the privacy to which individuals are entitled under Section 552a of Title 5, United States Code (USC) (the Privacy Act) but which has not been specifically authorized under criteria established by executive order or an act of Congress to be kept secret in the interest of national defense or foreign policy.” – Chapter III, Section 23 of the Department of the Treasury Security Manual (TD P 15-71).
[11] IRS Publication No. 3744, IRS Strategic Plan: 2005-2009, (revised 6-2004).
[12] Pub. L. No. 105-318, 112 Stat. 3007 (codified in part at 18 U.S.C. Section 1028).
1 The Integrated Data Retrieval System is currently the IRS’s
primary system of taxpayer records.
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.