TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION

Office of Audit

Fiscal Year 2017 Statutory Review of Restrictions on Directly Contacting Taxpayers

Final Report Issued on September 12, 2017

Highlights

Highlights of Reference Number:  2017-30-076 to the Internal Revenue Service Commissioner for the Small Business/Self-Employed Division.

IMPACT ON TAXPAYERS

The direct contact provisions of Internal Revenue Code (I.R.C.) Section (§) 7521 generally require IRS personnel to stop a taxpayer interview whenever a taxpayer requests consultation with a representative and prohibits IRS personnel from bypassing a qualified representative without supervisory approval if the representative unreasonably delays the completion of an examination, collection, or investigation.  The fair tax collection practices of I.R.C. § 6304 (a)(2) prohibit IRS personnel from communicating with a taxpayer if it is known that the taxpayer has an authorized representative.

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 I.R.C.  Each year, TIGTA focuses on one IRS office or function that interacts with taxpayers and their representatives on a routine basis.  For this year’s review, TIGTA analyzed the extent to which revenue officers in the Small Business/Self‑Employed Division’s Field Collection function comply with the direct contact provisions and fair tax collection practices of the I.R.C. during interactions with taxpayers or their representatives.

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.  In addition, the IRS has a process to handle the review and disposition of taxpayer allegations of direct contact violations.

TIGTA selected a stratified statistically valid sample of case histories for 122 taxpayers from a filtered population of 9,748 taxpayers who had collection actions documented on the Integrated Collection System during Fiscal Year 2016.  TIGTA reviewed the case history narratives for these sampled taxpayers and found a small number of instances in which revenue officers contacted taxpayers directly even though there was an authorized representative on file.  These contacts may have violated I.R.C. § 6304, which could indicate that the rights granted under I.R.C. § 7521 were also not protected.

Additionally, TIGTA interviewed a judgmental sample of 53 revenue officers and 19 supervisory revenue officers to determine their knowledge and understanding of the direct contact provisions and fair tax collection practices.  TIGTA determined that IRS employees could benefit from a better understanding of the direct contact provisions and fair tax collection practices set forth in the I.R.C., specifically as interpreted in the Internal Revenue Manual.

WHAT TIGTA RECOMMENDED

TIGTA recommended that the IRS group managers report the potential I.R.C. § 6304 noncompliance identified in this report to the local Labor Relations Specialist.  Additionally, TIGTA recommended that the IRS update Internal Revenue Manual procedures to be more specific to the laws and provide clarification on certain policies pertaining to a taxpayer’s right to representation under the direct contact procedures.

In their response to the report, IRS officials agreed with both recommendations and plan to take corrective actions.  Specifically, the IRS plans to report the potential I.R.C. § 6304 violations to the local Labor Relations Specialist and provide further guidance and clarification to all revenue officers on the specific policies pertaining to a taxpayer’s right to representation under the direct contact procedures.

READ THE FULL REPORT

To view the report, including the scope, methodology, and full IRS response, go to:

https://www.treasury.gov/tigta/auditreports/2017reports/201730076fr.pdf.