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IRS — Fiscal Year 2014 Review of Compliance With Legal Guidelines When Conducting Seizures of Taxpayers’ Property

August 11, 2014 Comments off

Fiscal Year 2014 Review of Compliance With Legal Guidelines When Conducting Seizures of Taxpayers’ Property
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS

Taking a taxpayer’s property for unpaid tax is commonly referred to as a “seizure.” To ensure that taxpayers’ rights are protected, the IRS Restructuring and Reform Act of 1998 amended the seizure provisions in Internal Revenue Code (I.R.C.) Sections (§§) 6330 through 6344. These provisions govern many aspects of the seizure process from notification of the taxpayer through sale or redemption of the property.

WHY TIGTA DID THE AUDIT

TIGTA is required under I.R.C. § 7803(d)(1)(A)(iv) to annually evaluate the IRS’s compliance with the legal seizure provisions to ensure that taxpayers’ rights were not violated while seizures were being conducted. The overall objective of this review was to determine whether seizures conducted by the IRS complied with legal provisions set forth in I.R.C. §§ 6330 through 6344 and with the IRS’s own internal procedures.

WHAT TIGTA FOUND

TIGTA reviewed a random sample of 50 of the 580 seizures conducted from July 1, 2012, through June 30, 2013, to determine whether the IRS complied with legal and internal guidelines when conducting each seizure.

In the majority of the seizures reviewed, the IRS followed all guidelines. However, in 14 seizures, TIGTA identified 19 instances in which the IRS did not comply with a particular I.R.C. requirement. Specifically, TIGTA found that:

· The sale of the seized property was not properly advertised. (I.R.C. § 6335(b))

· The balance-due letter sent to the taxpayer after sale proceeds were applied to the taxpayer’s account did not show the correct remaining balance. (I.R.C. § 6340(c))

· The amount of the liability for which the seizure was made was not correct on the notice of seizure provided to the taxpayer. (I.R.C. § 6335(a))

· The notice of the intent to levy and the notice of the right to a hearing before the levy was not provided for each tax period listed on Form 668-B, Levy. (I.R.C. §§ 6330(a) and 6331(d))

When legal and internal guidelines are not followed, it could result in the abuse of taxpayers’ rights. However, in the instances above, we did not identify any in which the taxpayers were adversely affected.

In addition, internal procedures do not require the IRS to retain a copy of all seizure sale advertisements, which would help them verify that their actions conformed with statutes, regulations, and Internal Revenue Manual procedural guidelines.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the Director, Collection Policy, Small Business/Self-Employed Division, include an instruction in the Internal Revenue Manual that requires the Property Appraisal and Liquidation Specialist to retain a file copy of all print advertisements, a copy of any Internet advertisements and mail-in bid forms, and a text copy of information provided in any radio and television advertisements of seizure sales.

In their response to the report, IRS officials agreed with the recommendation and plan to take appropriate corrective action.

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TIGTA Issues Report On Accuracy Of Information And Family Size Verification Requests (ACA)

August 5, 2014 Comments off

TIGTA Issues Report On Accuracy Of Information And Family Size Verification Requests
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) is generally providing accurate income and family size information to Health Insurance Exchanges for use in determining eligibility of individuals for health insurance and the Advance Premium Tax Credit, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

Beginning Jan. 1, 2014, most individuals must obtain health insurance that meets minimum requirements. Health Insurance Exchanges are intended to provide a place for Americans to shop for health insurance. Qualified individuals may request the Premium Tax Credit to assist with paying for health insurance. The credit may be paid directly to individual’s health insurance provider as a partial payment for their monthly premiums. This is known as the Advance Premium Tax Credit (APTC).

This audit was initiated to ensure that the IRS is providing accurate information to the Exchanges to assist in determining an individual’s eligibility to use the Exchange and receive the APTC.

“In nearly all instances, the IRS correctly provided accurate information to the Health Exchanges on income and family sizes,” said J. Russell George, Treasury Inspector General for Tax Administration. “Accurate information is essential for an Exchange to determine if an applicant is eligible to obtain insurance coverage through the Exchange.”

TIGTA’s review of the IRS’s response to 101,018 Income and Family Size Verification information requests between Oct. 1 and Oct. 4, 2013 showed that the IRS, based on the information provided by the Exchange, provided accurate responses for 100,985 (99.7) percent of the 101,018 requests.

TIGTA — Processes to Determine Optimal Face-to-Face Taxpayer Services, Locations, and Virtual Services Have Not Been Established

August 2, 2014 Comments off

Processes to Determine Optimal Face-to-Face Taxpayer Services, Locations, and Virtual Services Have Not Been Established
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The IRS provides taxpayers with face-to-face tax assistance at 386 Taxpayer Assistance Centers. The taxpayers most likely to visit Taxpayer Assistance Centers include low-income, elderly, and limited-English-proficient taxpayers who seek assistance in complying with the tax laws. Evaluating the burden and impact that service cuts at Taxpayer Assistance Centers could have before taking action is important because many taxpayers rely on these Centers to help them understand and meet their tax obligations.

WHY TIGTA DID THE AUDIT
The IRS faces many challenges in providing services to taxpayers in its Taxpayer Assistance Centers. One of its most significant challenges is meeting demand for those services with a reduced budget and staffing. This audit was initiated to assess the IRS’s ability to provide effective and efficient service to taxpayers through its Taxpayer Assistance Center Program.

WHAT TIGTA FOUND
As part of its Fiscal Year 2014 Service Approach, the IRS eliminated or reduced tax return preparation, tax law assistance, refund inquiries, and transcript request services. However, prior to developing this plan, the IRS did not evaluate the burden each service change will have on taxpayers who visit Taxpayer Assistance Centers.

In addition, the IRS has not established processes to identify optimal locations to provide face-to-face services or to identify underserved areas that would benefit from virtual service (through computer video). Moreover, the data provided to management for use in assessing potential site closures are based on incomplete information.

The IRS has not adequately addressed two recommendations from previous TIGTA reports. It has not developed sufficient measures and goals for Facilitated Self-Assistance in the Taxpayer Assistance Centers. In addition, controls to ensure that data are entered accurately into management information systems and reviewed were not implemented until after our review.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS ensure compliance with its procedures which require service-related decisions be based on informed research; develop steps to be taken to collect data to monitor, measure, and adjust service changes; complete efforts to obtain data on the services that are most important to taxpayers; establish a methodology to identify the optimal locations for providing face-to-face assistance to the most taxpayers; develop and implement documentation requirements to support data analyses; establish a process to identify the best locations for virtual face-to-face services; and quantify the cost savings and benefits related to Virtual Service Delivery.

The IRS agreed with or indicated completion of four recommendations and disagreed with three recommendations. For certain corrective actions that the IRS proposed or stated were already implemented, TIGTA believes the actions are insufficient. The lack of sufficient corrective action could, in turn, increase the burden on taxpayers who seek face-to-face assistance at the Taxpayer Assistance Centers such as low-income, elderly, and limited-English-proficient taxpayers. The IRS did not gather the necessary data and perform the required analysis to reduce the impact of service eliminations and reductions on these taxpayers.

Office of the Special Inspector General for the Troubled Asset Relief Program – Quarterly Report to Congress: July 30, 2014

July 31, 2014 Comments off

SIGTARP Quarterly Report to Congress: July 30, 2014 (PDF)
Source: Office of the Special Inspector General for the Troubled Asset Relief Program

Quarterly Report Highlights

– $424.5 billion – Amount spent under TARP

– $25.7 billion – Amount available to be spent under TARP

– $38.6 billion – Amount still owed to taxpayers under TARP

– $39 billion, $27 billion, $40.3 billion – Estimated cost of TARP as projected by OMB, CBO, and Treasury, respectively

TIGTA — Fiscal Year 2014 Statutory Review of Disclosure of IRS Collection Activity With Respect to Joint Returns

July 24, 2014 Comments off

Fiscal Year 2014 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns
Source: Treasury Inspector General for Tax Administration

Highlights of Reference Number: 2014-30-046 to the Internal Revenue Service Commissioners for the Small Business/Self-Employed and Wage and Investment Divisions.

IMPACT ON TAXPAYERS
Internal Revenue Code (I.R.C.) Section (§) 6103(e)(8) gives joint filer taxpayers who are no longer married or no longer reside in the same household the right to request information regarding the IRS’s efforts to collect delinquent taxes on their joint tax return liabilities. If the IRS does not provide employees sufficient guidance for handling those requests, taxpayer rights could potentially be violated.

WHY TIGTA DID THE AUDIT
This audit was initiated because the IRS Restructuring and Reform Act of 1998 added I.R.C. § 7803(d)(1)(B), which requires TIGTA to annually review and certify the IRS’s compliance with I.R.C. § 6103(e)(8). The objective of this review was to determine whether the IRS is complying with the provisions of I.R.C. § 6103(e)(8) as related to the disclosure of collection activities with respect to joint filers.

WHAT TIGTA FOUND
IRS procedures provide employees with sufficient guidance for handling joint filer collection activity information requests. However, TIGTA could not determine whether the IRS fully complied with I.R.C. § 6103(e)(8) requirements when 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. Further, TIGTA does not recommend the creation of a separate tracking system.

WHAT TIGTA RECOMMENDED
TIGTA made no recommendations in this report. IRS officials were provided an opportunity to review the draft report and did not provide any comments.

TIGTA Report: IRS Should Modernize Process of Filing Amended Tax Returns

July 11, 2014 Comments off

TIGTA Report: IRS Should Modernize Process of Filing Amended Tax Returns
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) should revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

Taxpayers currently file Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed income tax returns. Claims filed on an amended tax return can relate to any item of income, loss, exclusion, deduction, or credit and may result in a tax refund. The IRS received more than four million amended tax returns in Fiscal Year (FY) 2012.

This audit was initiated because previous TIGTA audits have identified problems with IRS processes for verifying claims on amended tax returns. The objective of this review was to determine whether the IRS has controls in place to ensure that claims for refunds on amended tax returns are appropriate.

TIGTA found that the IRS could reduce erroneous refunds, processing costs, and taxpayer burden by revising the Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns. TIGTA’s review of a statistical sample of 259 amended tax returns claiming tax refunds of $500 or more in FY 2012 identified 44 (17 percent) tax returns for which the IRS issued potentially erroneous tax refunds totaling $103,270.

Based on the sample results, TIGTA estimates the IRS may have issued more than $439 million in potentially erroneous tax refunds claimed on 187,421 amended tax returns during FY 2012. As such, the IRS could issue more than $2.1 billion in potentially erroneous tax refunds claimed on amended tax returns over the next five years.

In addition, TIGTA estimates that allowing taxpayers to amend their tax return by e-filing a modified Form 1040 could have potentially saved more than $17 million in processing costs during Fiscal Year 2012.

New From the GAO

July 7, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Pension Advance Transactions: Questionable Business Practices Identified. GAO-14-420, June 4.
http://www.gao.gov/products/GAO-14-420
Highlights – http://www.gao.gov/assets/670/663799.pdf

2. Private Pensions: Targeted Revisions Could Improve Usefulness of Form 5500 Information. GAO-14-441, June 5.
http://www.gao.gov/products/GAO-14-441
Highlights – http://www.gao.gov/assets/670/663854.pdf

3. IRS Correspondence Audits: Better Management Could Improve Tax Compliance and Reduce Taxpayer Burden. GAO-14-479, June 5.
http://www.gao.gov/products/GAO-14-479
Highlights – http://www.gao.gov/assets/670/663839.pdf

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