Enclosed is a copy of our report entitled Tax Administration: IRS Is Improving Its Controls for Ensuring That Taxpayers Are Treated Properly (GAO/GGD-96176). We are sending you this report because of your concern about taxpayer abuse and your request that we respond to three questions you had about the handling of taxpayer abuse allegations. Although we prepared this report at the request of the Chairman, Senate Committee on Finance, it directly responds to your three questions. The report discusses the improvements IRS has made to its controls over the treatment of taxpayers since our 1994 report1 and IRS' recent commitment to establish an information system for tracking taxpayer complaints. This report also discusses information concerning allegations of taxpayer abuse available from the Internal Revenue Service, the Department of the Treasury Inspector General, and the Department of Justice; and the role of the Treasury Inspector General in investigating taxpayer abuse. The major issue in our 1994 report was that IRS did not have a definition for taxpayer abuse, nor did IRS have an adequate information system to identify instances of abuse to ensure that they were properly addressed and prevented from recurring. At that time, IRS found the term taxpayer abuse to be misleading, inaccurate, and inflammatory. Its officials also believed that the Service's information systems already captured data relevant to the elements of taxpayer abuse that we used in our 1994 report--in the absence of an IRS definition. These elements include instances when (1) an IRS employee was in violation of law, regulation, or the Rules of Conduct; (2) an IRS employee was unnecessarily aggressive in applying discretionary enforcement power; or (3) IRS' information systems broke down and the Service continued to generate 'Tax Administration: IRS Can Strengthen Its Efforts to See That Taxpayers Are delinquency notices or payment demands, even though the taxpayer was in continual contact with IRS to resolve such problems. Although IRS still finds the term taxpayer abuse to be objectional, its officials have recently adopted the basic elements of our 1994 report definition in an IRS definition of taxpayer complaints. IRS officials said they are committed to ensuring that its information systems effectively capture data relevant to the three basic elements in its taxpayer complaints definition. They now recognize that the current systems do not capture all the relevant data that they understand is necessary for an effective complaints tracking system. The officials also realize this data is needed to satisfy their Taxpayer Bill of Rights 2 requirement to report annually to Congress on taxpayer complaints and IRS employee misconduct. We are encouraged by the recent IRS commitment, which we believe is critically important and must be sustained. We also believe that if effectively designed and implemented, such a complaints tracking system could allow IRS to better ensure that taxpayers are being treated properly. Given IRS' recent commitment and other initiatives it has taken, this report does not contain any new GAO recommendations. Should you wish to contact us or have any questions, please call me at (202) 512-9044. GAO United States General Accounting Office Report to the Chairman, Committee on August 1996 23-595 97-13 In 1988, concerns about the Internal Revenue Service's (IRS) treatment Results in Brief B-271975 abuse, which are not resolved through normal daily operations. IRS' Inspection Service (Inspection), which includes the Internal Audit and Internal Security Divisions, is to investigate taxpayer allegations involving potential criminal misconduct by IRS employees. Problem Resolution Offices in IRS' district offices and service centers are to help taxpayers who have been unable to resolve their problems through normal IRS channels with other IRS staff. IRS' Office of Legislative Affairs is to track responses to congressional inquiries, often on behalf of constituents, as well as direct correspondence with the Commissioner or other IRS executives involving the tax system or IRS' administration of it. OIG and DOJ may also get involved with taxpayer abuse allegations. OIG may investigate allegations involving senior IRS officials, those who serve in General Schedule (GS) grade-15 positions or higher, as well as IRS Inspection employees. IRS employees accused of criminal misconduct may be prosecuted by a DOJ U. S. Attorney. IRS employees who are sued by taxpayers for actions taken within the employees' official duties may be defended by attorneys with the DOJ Tax Division. In our 1994 report on IRS' controls to protect against taxpayer abuse, we were unable to determine the overall adequacy of IRS' controls and made several recommendations to improve them. Foremost among our recommendations was that IRS define taxpayer abuse and collect relevant management information to systematically track its nature and extent. At that time, in the absence of an IRS definition, we defined taxpayer abuse to include instances when (1) an IRS employee violated a law, regulation, or the IRS Rules of Conduct; (2) an IRS employee was unnecessarily aggressive in applying discretionary enforcement power; or (3) IRS' information systems broke down, e.g. when taxpayers repeatedly received tax deficiency notices and payment demands despite continual contacts with IRS to resolve problems with their accounts. Other recommendations in our 1994 report addressed such concerns as unauthorized access to computerized taxpayer information, improper use and processing of taxpayer cash payments, and the need for IRS notification of potential employee liability for trust fund recovery penalties. IRS did not agree with the need to define taxpayer abuse-a term it found objectionable-nor to track its nature and extent; but IRS agreed to take corrective action on many of our other recommendations. While IRS has made some improvements to its controls over the treatment of taxpayers since our 1994 report, we remain unable to reach a |