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IRS: Get Off Our Backs About Following Up with Taxpayers That Suck at Math

The IRS’s naggy watchdog, the Treasury Insepector General of Tax Administration, has released a new audit that found the Service doesn’t follow up on math errors quickly enough and that they should start picking up their game, especially in the case of taxpayers who are trying to utilize the Earned Income Tax Credit. The IRS, who is normally looking to do things better, did not appreciate the sentiment:

[T]he IRS was cool to the report’s recommendations, asserting that it has limited resources and noting that it usually sends interim letters to taxpayers if their cases will not be handled within 30 days. The agency’s Richard Byrd also noted that the IRS receives some 20 million paper letters each year. “While important, replies to math errors represent a small fraction of our overall inventory,” Byrd wrote.

Seriously. They’ve got an over-eager AICPA to deal with.

[via OTM/The Hill]

The TaxMasters Guy Has Some Sage Advice on IRS Correspondence Audits

The advice was so good he had to send out a press release:

On the heels of a record reporting year for taxes, taxpayers should be wary – or at a minimum more informed – about audits from the IRS, according to Patrick Cox, CEO of TaxMasters (TAXS), the leading tax compliance and repayment services provider in the nation. According to Cox, the IRS will send out a record number of audits which can be misleading and even wrong.

“Over the past few years the IRS has been shifting gears to use correspondence audits – notices mailed to taxpayers usually showing an alleged discrepancy in a tax filing and asking for a manageable amount of extra money that is owed,” Cox said. “From my experience, most taxpayers – who did their taxes online or had an accountant or friend do them – are scared of the IRS and don’t know enough about their tax filings to argue the audit. Instead of making sure the IRS assessment is accurate, I think most taxpayers just cut a check.”

The latest Taxpayer Advocate Report showed that of the more than 1.6 million Americans who were audited last year, 78 percent received a correspondence audit, while only 22 percent were selected for an in-person examination. A large majority of the correspondence audits are sent due to unqualified or overstated tax deductions.

“Returns claiming tax deductions are the lowest hanging fruit for the IRS in a correspondence audit,” says Cox. “Unfortunately, there are an alarming number of taxpayers that make simple mistakes on the amount of deductions and types of deductions they make and wind up being easy targets for the IRS. A few examples of typically-encountered discrepancies include unreported pension income, home mortgage interest, and cash charitable contributions.”

Conveniently, the Journal of Accountancy also covered the increase in IRS correspondence audits in its August 2011 issue and offers tips on how to manage them for CPA tax practioners.

According to a 2006 report by the Treasury Inspector General for Tax Administration (TIGTA), there has been a 170% increase in correspondence examinations for individual taxpayers with gross incomes or business receipts of at least $100,000 in fiscal years 2002 through 2005, while face-to-face examinations increased by 25%. Since that report, TIGTA has claimed improvements in this area but identifies work yet to be done.

IRS Database Security Could Use a Tuneup

Some of the 2,200 databases that the IRS uses to manage and process taxpayer data are not configured securely, are running out-of-date software, and no longer receive security patches.

Nor has the IRS fully implemented its plans to complete vulnerability scans of its databases — although the IRS spent more than $1.1 million in software licenses and support costs for a database vulnerability scanning and compliance assessment tool, it did not fully implement it. TIGTA used database vulnerability assessment software to conduct remote scans of the primary databases for 13 applications supporting critical tax administration business processes. Its review found high and medium risk vulnerabilities, as classified by the scanning tool in each of the 13 databases. [TIGTA via TaxProf]

TIGTA Scolds IRS for Name-calling…Again

The office of the Treasury Inspector General for Tax Administration has released a report showing that IRS employees continue to use now prohibited language like “tax protester” and (our personal favorite) “Constitutionally-challenged” in reference to non-compliant taxpayers, despite being barred from doing so since 1998.

Congress enacted the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) Section 3707 to prohibit the IRS from labeling taxpayers as “Illegal Tax Protesters” or any similar designations. However, IRS employees continue to refer to taxpayers by these designations in case narratives. Using “Illegal Tax Protester” or other similar designations may stigmatize taxpayers and may cause employee bias in future contacts with these taxpayers.

Prior to enactment of the RRA 98, the IRS used the Illegal Tax Protester Program to identify individuals and businesses that were using methods that were not legally valid to protest the tax laws. Employees identified taxpayers for referral to the program when their tax returns or correspondence contained specific indicators of noncompliance with the tax law, such as the use of arguments that had been repeatedly rejected by the courts. There were tax protester coordinators who were responsible for determining whether a taxpayer should be included in the Illegal Tax Protester Program; if a taxpayer was classified as an Illegal Tax Protester, the taxpayer’s record was coded as such on the Master File. Once a taxpayer’s account was coded, certain tax enforcement actions were accelerated. The designation was also intended to alert employees to be cautious so they would not be drawn into confrontations with taxpayers.

The IRS has not reintroduced past Illegal Tax Protester codes or similar designations on taxpayer accounts. In addition, the Internal Revenue Manual no longer contains any Illegal Tax Protester references. However, TIGTA found that out of approximately 3.6 million records and cases, there were 38 instances in which 34 employees had referred to taxpayers as “Tax Protester,” “Constitutionally Challenged,” or other similar designations in case narratives on the computer systems analyzed.

The TIGTA made no recommendations after their report, as the IRS has continued to use the term “tax protester” in taxpayer case files when it sees fit, despite the fact that the TIGTA feels this is not in compliance with RRA 98 § 3707 for obvious reasons.

It appears they do this once a year:
The TIGTA Would Prefer It if the IRS Could Use a Nicer Term Than “Tax Protester”

Report: IRS Is Better at Junking Computers From Previous Decades

It appears that the IRS prompted this report from the Treasury Inspector General of Tax Administration after a previous report stated that improvements were needed in the replacing the Service’s dinosaur technology.

Employees have to be pleased that can now obtain better equipment to do their jobs, although three years to determine how to point out an Apple II or an IBM running DOS does seem like a long time.

The Internal Revenue Service (IRS) has significantly improved its ability to identify and replace aging computers, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

The IRS purchases new computers to replace aging equipment through its Sustaining Infrastructure Program. A November 2007 TIGTA report recommended several improvements to the IRS’s processes for replacing computer hardware that has reached or surpassed its useful life. TIGTA conducted the review at the IRS’s request.

TIGTA’s new report found that the IRS has implemented a process for identifying, reviewing, prioritizing, and making decisions on funding the replacement of aged computer hardware and is developing the capability to associate information technology problems with the aged hardware that caused the problem. The improved capability could result in as much as $12.3 million in cost savings and $16.4 million in revenue collection increases, according to the report.

“Taxpayers and IRS employees rely heavily on the information technology infrastructure to ensure satisfaction of tax liabilities, quick resolution of issues, and the security of confidential taxpayer information,” said J. Russell George, the Treasury Inspector General for Tax Administration. “The IRS is to be commended for these improvements,” he added.

Making Work Pay Tax Credit May Make Taxpayers Pay

Filed under: ironic press releases from the Treasury that we love to get.

News from our favorite federal taxation authority this morning reveals that while the IRS believes they did everything they were supposed to, some taxpayers may have taken their Making Work Pay credits incorrectly, causing them to actually owe money instead of celebrating free money. Oops! The Treasury Inspector General did their best to warn everyone this could happen and, oh look, it did.

Overall, the Internal Revenue Service (IRS) implemented the Making Work Pay Credit as intended by Congress, according to a report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

However, the report also found that approximately 13.4 million taxpayers who received the credit may owe taxes because adjustments to the withholding tables did not take into consideration all taxpayer circumstances. For example, single taxpayers with more than one job, joint filers where both spouses work or one or both of them have more than one job, taxpayers who receive pension payments, and Social Security recipients who receive wages are among those who may be negatively affected.

The Making Work Pay credit is an economic stimulus provision of the American Recovery and Reinvestment Act of 2009 (Recovery Act). The credit is advanced to taxpayers by their employers through withholding reductions which results in an increase in taxpayers’ take home pay. The credit is effective for Tax Years 2009 and 2010.

“The Making Work Pay Credit is a key tax credit designed to increase spending and stimulate the economy,” said J. Russell George, the Treasury Inspector General for Tax Administration. “However, many taxpayers who are accustomed to receiving refunds when they file their tax returns may have owed taxes and incurred penalties in 2009 and may yet again in 2010 because they were advanced more of the credit than they were entitled to claim,” Mr. George added. “My office issued a report in November 2009 warning of this possibility and encouraging the IRS to increase outreach and waive penalties for taxpayers who may be negatively affected by the credit. We still believe further actions are needed to ensure no taxpayer is unfairly penalized.”

The November 2009 report warning this could go down mentions that some taxpayers were proactive and adjusted their withholding so as not to be impacted by the potential “free money” presented by this “credit” which, for some taxpayers, will turn into money owed back to the Treasury or even tax penalties.

The credit was advanced to taxpayers by their employers through withholding reductions that result in an increase in take home pay, in the hopes that $400 ($800 for joint filers) more in each eligible taxpayer pocket might help increase spending and stimulate the economy. Because of the nature of the credit, however, some taxpayers may have had their taxes underwithheld at the end of the year.

Intended to stimulate whose economy?

The IRS May Want to Stock Up on Shotguns

The IRS is not the most popular government agency. This is not news. What is a developing problem is more and more people feel that reacting to the Service through with violence is somehow an acceptable option. Can we expect another lunatic to fly a plane into a building? Hard to say. But Joe Kristan did warn us about this.

And now the Treasury Inspector General has informed Tim Geithner that this will be one of the “challenges” the Service can expect in the new year:

In addition to safeguarding a vast amount of sensitive financial and personal data, the IRS must also protect approximately 100,000 employees and more than 700 facilities throughout the country. Attacks and threats against IRS employees and facilities have risen steadily in recent years.

The February 2010 attack on an IRS facility in Austin, Texas, is a stark reminder of the dangers that IRS employees face every day in trying to perform their jobs. Animosity towards the tax collection process is nothing new, but the Austin incident and other recent events point to a surge of hostility towards the Federal Government. According to the Anti-Defamation League, the militia movement has almost quadrupled in size in the past two years, growing to more than 200 groups across the country. The Southern Poverty Law Center has reported that anti-government and hate groups have grown from 149 groups in 2008 to 512 groups in 2009, a 244 percent increase. The ongoing public debate regarding the recently enacted health care legislation may also lead to increased threats against IRS employees and facilities, underscoring the need for continuing vigilance in the area of physical security.

It’s good to know that our country is filled with so many level-headed folks that creating hate groups has become a relatively popular thing to do.

Vast Improvement in Volunteer-prepared Tax Returns Proves That the TIGTA’s Nagging Pays Off

Last year the Treasury Inspector General for Tax Administration came down pretty hard on volunteer tax preparers, noting that 41% of the returns contained errors. As is the IG’s wont, they scolded the IRS to improve this shameless display by volunteers and made some suggestions to help them suck less.

And it worked! Ninety percent of the tax returns prepared by volunteers were accurate thus earning praise from the IG:

Ninety percent of the 39 tax returns volunteers prepared for TIGTA auditors were prepared correctly, a sharp increase from the 59 percent accuracy rate reported by TIGTA in its 2009 review. TIGTA attributed the improvement to an increase in volunteers’ use of the IRS’s Intake/Interview and Quality Review Sheet (Form 13614-C), improved training, and enhanced oversight. Only 5 percent of the 39 tax returns were prepared without use of the Form 13164-C, versus 33 percent in TIGTA’s 2008 Filing Season review, and 22 percent in its 2009 Filing Season review.

“This report is a positive indication of the good work that the IRS is doing for America’s taxpayers,” stated J. Russell George, the Treasury Inspector General for Tax Administration. “I commend the IRS on the progress it has made in helping volunteers accurately fulfill the very important task they assumed.”

This isn’t the first time that the TIGTA has managed to give the IRS credit for doing a decent job. Last month J. Russell George managed to give tepid kudos to the Service for providing satisfactory service at assistance centers but also reminded everyone that a mind-numbingly complex government bureaucracy can always get better. They’re blowing off the deaf and mute, after all.

Rest Easy: The IRS Is Preparing for IFRS

For the first times since we started paying attention, the TIGTA is simply putting everyone on notice that the IRS is on top of this IFRS thing. No “You suck at this IRS” or “Here’s a list of things you should considering doing if you are interested in not sucking any more, IRS.” Simply, “Here’s what they’re doing. Have a nice day.”

The IRS began developing plans for strategic and operational activities related to the adoption of the IFRS in 2009.

TIGTA found that the IRS: is training employees about IFRS concepts and potential issues; working with the tax preparer community to identify and outline IFRS implementation concerns; and developing procedures to address issues related to IFRS conversion efforts.

“The IRS is appropriately laying the groundwork for its increased oversight of international taxation by gaining an understanding of the International Financial Reporting Standards,” said J. Russell George, the Treasury Inspector General for Tax Administration.

TIGTA did not make any recommendations in this audit and the IRS did not provide any comments on a draft of the report.

Doesn’t quite feel right, does it?

The IRS Is Taking Action to Address the Impact That International Financial Reporting Standards Will Have on Tax Administration [TIGTA]

TIGTA Concerned That IRS Is Blowing Off Deaf, Mutes (and Presumably Deaf-Mutes)

The IRS sucks at a lot of things. Given.

Thankfully we have Treasury Inspector General of Tax Administration to inform us about said failures opportunities for improvement.

But today’s news that the IRS isn’t doing enough to help our hearing and speech-impaired friends is especially disheartening to the TIGTA overlords. They can (somewhat) understand providing crappy service to regular Americans (try reading the instructions people) but if you’re unfortunate enough to be without speech or hearing, the IG felt obligated to point out the IRS’s shortcomings:

TIGTA performed an audit to evaluate both the IRS’s customer service toll-free telephone access during the 2010 Filing Season and the access and service it provided to hearing and speech-impaired taxpayers. TIGTA found that the IRS exceeded its overall performance measurement goals by 2.3 percent. However, the Level of Service for the TTY/TDD toll-free telephone line for the 2010 Filing Season was just 8.8 percent, meaning that only 8.8 percent of calls placed using the TTY/TTD successfully reached an IRS assistor. The total dialed attempts for the TTY/TDD product line during the 2010 Filing Season were more than 350,000; however, IRS assistors answered only 339 of those calls.

“Our report found that far too few hearing and speech-impaired taxpayers successfully reached an IRS assistor,” said J. Russell George, the Treasury Inspector General for Tax Administration. “The IRS must do a better job of ensuring that all Americans have equal access to its services,” he said.

Actually, that is pretty shitty service. Even by IRS standards.

The IRS Could Improve Toll-Free Telephone Assistance For Hearing and Speech-Impaired Taxpayers [TIGTA]

The IRS Isn’t Interested in Delaying the Issuance of Potentially Bogus Refund Checks

The Treasury Inspector General of Tax Administration sole purpose is giving the IRS shit about anything and everything under the sun. This is known.

We here at Going Concern have a tendency to find the more ridiculous feedback that IG digs up and share it with you. Today however, the TIGTA might be on to something:

WASHINGTON- The Internal Revenue Service (IRS) should make better use of the third-party data it receives from employers, government agencies and financial institutions to reduce erroneous refunds, increase revenues and promote voluntary compliance, according to a new audit report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA found that the IRS:

• Could make better use of available third-party data to identify and prevent more than $1 billion in potentially erroneous refunds;
• Does not have a centralized control point for third-party data requested or received from outside sources; and,
• Lacks a standardized procedure for validating data.
• The report also found that additional validation of taxpayer information using third-party data is needed to validate claims for the Earned Income Tax Credit (EITC) and other credits.

“These problems allow a substantial number of erroneous refunds and credits to be granted that are not allowable by law,” said J. Russell George, the Treasury Inspector General for Tax Administration. “For example, I am troubled that we found a lack of adequate corrective action by the IRS to address improper claims in the EITC Program, which is particularly vulnerable to fraud.”

TIGTA recommended that the IRS freeze refunds for those taxpayers with potentially invalid EITC claims, require valid responses before allowing the EITC claims, and adjust the returns if taxpayers do not respond within a specific time period.

The IRS disagreed with TIGTA’s recommendations to freeze potentially invalid refunds and to create a centralized control point for all third-party data.

Apparently the IRS can’t handle the flood of angry calls from washed up models, degenerate gamblers and dead people demanding their refunds RFN.

Full Report [TIGTA]
TIGTA: IRS Refuses to Stop Issuing $1 Billion in Erroneous Refund Checks [TaxProf Blog]

The TIGTA Manages to Give the IRS Credit for Doing a Decent Job at Taxpayer Assistance Centers

The most nagtastic wing of the Federal Bureaucracy, the Treasury Inspector General of Tax Administration, gave an extremely tepid thumbs-up to the IRS today for satisfying the needs of taxpayers using services at Taxpayer Assistance Centers (“TAC”).

If you look at the TIGTA’s report, you’ll find a fairly neutral title, “Surveys of Taxpayers With Tax Account Issues Indicate They Are Satisfied With the Service They Received at Taxpayer Assistance Centers.”

However, if you read the title of the press release you’ll find things take considerably less enthused turn, “TIGTA Survey Finds Taxpayers Generally Satisfied With Level Of Service Received At Taxpayer Assistance Centers.”


Why the unnecessary adverb TIGTA? If you remove the ‘generally’ the title remains informative, so may we ask what the unspoken element is here? Are you insinuating that the IRS sucks at everything else it does and this particular survey just happens to stray from the narrative?

Hell, even Inspector General/Head IRS nag, J. Russell George, was caught off guard and offered the following “what have you done lately,” statement, “The IRS should continuously ensure it is providing the best available service to all taxpayers, including those with tax account issues who visit their Taxpayer Assistance Centers, and find cost-effective ways to do so.”

When asked, “Overall, I was satisfied with the customer service I received from the IRS during my visit to the IRS walk-in office,” 75% of those surveyed responded “Strongly Agree.” If you can get 3 out of 4 people to say that their experience with the IRS was positive rather than “I was giving strong consideration to strangling one of the employees with my shoelace,” you best recognize a job well done.

TIGTA Survey Finds Taxpayers Generally Satisfied With Level Of Service Received At Taxpayer Assistance Centers [TIGTA]