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TIGTA — Improvements Are Needed to Ensure That the Search and Seizure Warrant Process Is Adequately Documented and That Evidence Is Properly Secured

November 5, 2014 Comments off

Improvements Are Needed to Ensure That the Search and Seizure Warrant Process Is Adequately Documented and That Evidence Is Properly Secured
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) does not always follow all procedures to ensure that evidence it seizes is properly stored and controlled, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

Each IRS Criminal Investigation (CI) special agent has the authority to perform all duties under all laws and regulations administered by the IRS, including the authority to conduct searches and issue search and seizure warrants.

TIGTA’s audit was initiated to determine whether CI is properly processing search and/or seizure warrants and following the policies for maintaining the chain of custody for any evidence obtained.

TIGTA requested 152 closed search and/or seizure warrant cases from the IRS to review. However, CI management did not provide 91 of these cases. According to CI management, these cases contained grand jury information, were part of an ongoing investigation, or had been sealed by the court.

For 70 of these cases, CI management could not provide any documentation to support that these cases contained grand jury information, were part of an ongoing investigation, or were sealed. As such, TIGTA had to rely on CI management’s verbal statements. This constitutes a significant scope impairment because it prevented TIGTA from fully evaluating CI’s processing of search and seizure warrants and from determining whether the IRS is following established legal requirements to prevent the abuse of taxpayer rights.

However, TIGTA was able to review the remaining 61 closed search and/or seizure warrant cases provided by the IRS and found that 14 cases were missing documentation of the Criminal Tax Counsel’s post-search warrant inventory review, were missing signed affidavits, and/or contained errors on their search warrants.

“Our report found that procedures were not always followed to ensure that seized evidence was properly stored and/or controlled,” said J. Russell George, Treasury Inspector General for Tax Administration. “Without maintaining proper documentation and following evidence procedures, evidence may be inappropriately disclosed, lost, tampered with, or stolen.”

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TIGTA — The Internal Revenue Service Needs to Enhance Its International Collection Efforts

November 3, 2014 Comments off

The Internal Revenue Service Needs to Enhance Its International Collection Efforts (PDF)
Source: Treasury Inspector General for Tax Administration
From press release:

As international tax noncompliance remains a significant area of concern for the Internal Revenue Service (IRS), its collection efforts need to be enhanced to ensure that delinquent international taxpayers become compliant with their U.S. tax obligations, according to a report released publicly today by the Treasury Inspector General for Tax Administration (TIGTA).

The overall objective of TIGTA’s review was to evaluate the IRS’s collection efforts on delinquent taxpayers residing in foreign countries. Income received from international transactions of these taxpayers is subject to U.S. tax rules and reporting requirements.

“The IRS faces many unique challenges in collecting taxes from international taxpayers,” said J. Russell George, Treasury Inspector General for Tax Administration. “In today’s global economy, businesses and individuals are becoming more and more involved in international transactions. Accordingly, the role of an international revenue officer is very important in helping taxpayers comply with the tax laws and improving international tax compliance.”

TIGTA’s review found that ineffective management oversight has contributed to several control weaknesses in the International Collection program. Moreover, the IRS does not have reliable statistics on the rate of noncompliance of these taxpayers with their U.S. tax obligations.

For example, International Collection does not have:

• Adequate policies, procedures, position descriptions, or the training needed to ensure that international revenue officers can properly work International Collection cases.

• A specific inventory selection process that ensures that the International Collection cases with the highest risk are worked.

• Performance measures and enforcement results reported separately from Domestic Collection.

• A process to measure the value of the “Customs Hold” as an enforcement tool.

TIGTA recommended that the IRS: 1) develop a formal International Collection Strategic plan; 2) update International Collection guidance to provide specific policies and procedures to international revenue officers; 3) evaluate and update the current international revenue officer position descriptions; 4) develop a formal International Collection training plan using Subject Matter Experts to develop and teach international specific courses; 5) evaluate the International

Collection inventory selection criteria; 6) develop separate performance measures and track specific enforcement results for International Collection; and 7) continue to pursue direct access to the Customs Hold information.

IRS officials agreed with all of TIGTA’s recommendations and have taken or plan to take corrective actions. However, while the IRS has implemented some corrective actions to improve the selection of International Collection inventory, develop separate performance measures, and track enforcement results, TIGTA does not believe that the IRS’s completed corrective actions fully addressed the recommendations.

TIGTA — Additional Measures Needed to Provide Greater Assurance That Tax Information Provided to Health Exchanges Is Protected

October 27, 2014 Comments off

Additional Measures Needed to Provide Greater Assurance That Tax Information Provided to Health Exchanges Is Protected
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) is authorized to disclose limited tax information to Affordable Care Act Exchanges when an applicant seeks financial assistance in obtaining health insurance. To protect the confidentiality of Federal Tax Information (FTI), the IRS has established safeguards the Exchanges must employ.

While the IRS has provided staff to facilitate the readiness of ACA Exchanges to receive FTI, additional procedures are needed to provide greater assurance that FTI will be protected prior to the IRS approving its release. That is the conclusion of a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA Releases Annual Report on IRS Compliance Trends

October 13, 2014 Comments off

TIGTA Releases Annual Report on IRS Compliance Trends
Source: Treasury Inspector General for Tax Administration

Despite less funding and fewer employees, the Internal Revenue Service (IRS) increased the total dollars received and collected for the third straight year, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

However, the IRS conducted fewer examinations, and its Collection Function continued to receive more delinquent accounts than it closed, the report concluded.

TIGTA — Trends in Compliance Activities Through Fiscal Year 2013

October 9, 2014 Comments off

Trends in Compliance Activities Through Fiscal Year 2013
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
This report is a compilation of statistical information reported by the IRS. The data presented in this report provide taxpayers and stakeholders with information about how the IRS focuses its compliance resources and the impact of those resources on revenue and compliance over time.

WHY TIGTA DID THE AUDIT
TIGTA conducts this review annually in response to continuing stakeholder interest in the analysis and trending of Collection and Examination function activities. The overall objective was to provide various statistical information regarding Collection and Examination function activities.

WHAT TIGTA FOUND
Between Fiscal Years (FY) 2010 and 2013, the IRS’s appropriated budget decreased 7.4 percent, from $12.1 billion to $11.2 billion after sequestration. Sequestration had a significant impact on the IRS’s FY 2013 budget.

These budget reductions resulted in decreases in the number of employees available to provide services to taxpayers and enforce the tax laws. Specifically, the number of full-time equivalents decreased by nearly 9 percent, from 94,618 at the end of FY 2010 to 86,310 at the end of FY 2013, including a 4 percent reduction between FYs 2012 and 2013. The number of enforcement personnel decreased by more than 1,000 employees during FY 2013.

As resources decreased, the IRS’s responsibilities have expanded. For example, in FY 2013, the IRS continued implementing tax‑related portions of the Affordable Care Act and the Foreign Account Tax Compliance Act.

Despite these challenges, total dollars received and collected (gross collections) increased for the third straight year to $2.9 trillion (a 13 percent increase) in FY 2013. Enforcement revenue collected also increased from $50.2 billion in FY 2012 to $53.3 billion in FY 2013 due, in part, to several large Appeals case settlements. Tax return filings continued to increase as did gross accounts receivable, which increased to $400 billion.

The FY 2013 Collection function activities showed mixed results. The amount collected on delinquent accounts by both the Automated Collection System and Field Collection decreased. The Collection function continued to receive more delinquent accounts than it closed, although the number of delinquent accounts in the Collection queue decreased due, in part, to the removal of millions of accounts that were not resolved. Fewer Notices of Federal Tax Lien were filed, fewer levies were issued, and fewer seizures were made. Meanwhile, taxpayers’ use of payment options such as offers in compromise increased.

The Examination function conducted 6 percent fewer examinations in FY 2013 than in FY 2012. The decline in examinations occurred across all tax return types, including individual, corporation, S corporation, and partnership. Seventy percent of return examinations were conducted via correspondence. While the number of tax return examinations declined, productivity indicators were mixed. The dollar yield per hour for most return types increased. However, the no-change rates increased for some types of examinations (corporations and partnerships), while it decreased for others (individuals and S corporations).

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.

See also: Fiscal Year 2014 Statutory Review of Compliance With the Freedom of Information Act

TIGTA – Fiscal Year 2014 Statutory Review of Restrictions on Directly Contacting Taxpayers

September 24, 2014 Comments off

Fiscal Year 2014 Statutory Review of Restrictions on Directly Contacting Taxpayers
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The direct contact provisions of Internal Revenue Code Section 7521 generally require IRS personnel to stop a taxpayer interview whenever a taxpayer requests to consult with a representative, and prohibits IRS personnel from bypassing a qualified representative without supervisory approval once a taxpayer authorizes one to act on his or her behalf and informs the IRS of that authorization. A taxpayer can file a civil suit seeking monetary damages against the IRS if an IRS employee intentionally disregards these provisions by denying the taxpayer the right to appropriate representation.

WHY TIGTA DID THE AUDIT
This audit was initiated because TIGTA is required to annually report on the IRS’s compliance with the direct contact provisions of the Internal Revenue Code. The overall objective of this review was to determine whether the IRS complied with legal guidelines addressing the direct contact of taxpayers and their representatives as set forth in Internal Revenue Code Sections 7521(b)(2) and (c).

WHAT TIGTA FOUND
The IRS has a number of policies and procedures in place to help ensure that taxpayers are afforded the right to designate an authorized representative to act on their behalf in dealing with IRS personnel in a variety of tax matters.

Each year, TIGTA focuses on one IRS office or function that interacts with taxpayers and their representatives on a routine basis. For this review, TIGTA analyzed how well the Small Business/Self-Employed Division’s Examination function has ensured that its personnel are appropriately including taxpayers’ representatives in its office audit activities. A review of a statistical sample of 96 tax return audits out of 77,817 office audits closed in Fiscal Year 2013 showed that tax compliance officers are generally involving the authorized representatives in case activities.

TIGTA did find one issue that warrants clarification in the IRS’s procedures. Two Internal Revenue Manual procedures provide slightly different requirements concerning what actions must be delayed while the taxpayer is obtaining representation.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS ensure that consistent guidance is provided in the Examination sections of the Internal Revenue Manual, detailing the procedures for allowing taxpayers adequate time to obtain representation and for documenting case actions.

The IRS agreed with TIGTA’s recommendation and plans to provide consistent guidance in the Small Business/Self-Employed Division’s Examination sections of the Internal Revenue Manual detailing the procedures for allowing taxpayers adequate time to secure representation before taking any follow-up action to schedule an appointment. The guidance will clarify actions the examiner can take during the 10-business-day period and clarify adequate case file documentation.

Fiscal year 2014 statutory audit of compliance with notifying taxpayers Of their rights when requested to extend the assessment statute

September 18, 2014 Comments off

Fiscal year 2014 statutory audit of compliance with notifying taxpayers Of their rights when requested to extend the assessment statute
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
The IRS is required by law to notify taxpayers of their rights when requesting an extension of the statute of limitations for assessing additional taxes and penalties. Taxpayers might be adversely affected if the IRS does not follow the requirements to notify both the taxpayers and their representatives of the taxpayers’ rights related to assessment statute extensions.

WHY TIGTA DID THE AUDIT
TIGTA is required by law to annually determine whether the IRS complied with Internal Revenue Code Section 6501(c)(4)(B), which requires that the IRS provide notice to taxpayers of their rights to decline to extend the assessment statute of limitations or to request that any extension be limited to a specific period of time or specific issues.

WHAT TIGTA FOUND
TIGTA’s review of a statistical sample of 59 closed taxpayer audit files with assessment statute extensions found that the IRS is generally compliant with Internal Revenue Code Section 6501(c)(4)(B). However, TIGTA identified a few instances in which the taxpayer audit files did not contain documentation to support that the taxpayer or the taxpayer’s representative were properly notified of the taxpayer’s rights.

WHAT TIGTA RECOMMENDED
TIGTA did not make any recommendations in this report because the number of errors was relatively small and the recommendations made in previous TIGTA audit reports are still valid for the issues reported. IRS officials were provided an opportunity to review the draft report and did not provide any comments.

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