Anti-Deficiency Act, Innocent Spouse Relief Among Reform Targets for Taxpayer Advocate in 2012

Over the last year there has been a great deal of positive activity at the IRS, including the transition to the Customer Account Data Engine 2 (CADE 2) system, which will fundamentally change (for the better) how the IRS processes tax return information. Several areas of significant change involve programs that I identified as "Areas of Focus" in our past Objectives Reports to Congress. In many of these areas, by pursuing an advocacy strategy that involved both TAS's Office of Systemic Advocacy and our Case Advocacy (Local Taxpayer Advocate) function, the Taxpayer Advocate Service (TAS) has provided the impetus for this systemic change and then has worked with the IRS or Congress to turn that impetus into reality. To highlight just a few of these areas:

• The initial implementation of regulation of federal tax return preparers, which will improve filing compliance and provide consumer protection for taxpayers;³

• The test involving outbound calling in the Centralized Offer in Compromise (COIC) units, which has shown that primarily by reaching out and talking with taxpayers the IRS has increased its offer acceptance rate to 66 percent for test cases and from 26 percent to 39 percent for all COIC cases from fiscal year (FY) 2010 to FY 2011;⁴ and

• The repeal of the Form 1099 reporting requirement for purchases of goods (or other property) made in the course of business, which, if implemented, would have imposed substantial burden on business taxpayers without a corresponding compliance benefit.⁵

Admittedly, many of the issues we identify are complex. In fact, the most difficult changes are often the most necessary and urgent, because their difficulty has caused them to be deferred, ignored, or brushed under the rug. It is TAS's job to identify issues that must be addressed in order to mitigate taxpayer problems with the IRS, and to advocate compellingly -- with research and analysis, logic, policy, and real-world examples -- for the IRS to address those issues now. But our work does not end when the IRS agrees to address our recommendations in theory -- which it does most of the time.⁶ As former IRS Commissioner Charles Rossotti once pointed out to me, TAS was placed inside the IRS not just to make recommendations but also to be part of the solution.

TAS continues to advocate for stronger taxpayer protections in the area of collection.

In last year's Objectives Report to Congress (and in several of the Annual Reports to Congress we deliver at the end of each year), we identified the IRS's Notice of Federal Tax Lien (NFTL) filing and withdrawal policies⁷ and the IRS's handling of cases similar to the Vinatieri case, where economic hardship is present, as two areas of focus for us in fiscal year 2011.⁸ Our strategy was two-fold: first, advocate forcefully, compellingly, and persistently in specific cases involving these issues and issue Taxpayer Assistance Orders (TAOs) where the IRS did not agree with our case-specific recommendations; and second, use the case examples to advocate for changes to Internal Revenue Manual (IRM) provisions and other internal guidance as well as training. In FY 2010 and FY 2011, TAS issued 42 TAOs dealing with NFTLs and 19 dealing with levy releases where economic hardship was present, and the IRS ultimately complied with the terms of the TAOs in 76 percent and 74 percent of the cases, respectively.⁹ We worked with Collection Policy to change various IRM provisions to make clear that if a taxpayer meets the criteria for currently not collectible (CNC) hardship status, the taxpayer's account should be placed in that status even if the taxpayer has unfiled returns.¹⁰ We also worked with Collection Policy to revise various IRM provisions to make clear that the IRS must release a levy where the taxpayer demonstrates economic hardship, even if the taxpayer has unfiled returns.¹¹

Most significantly, we negotiated the recently issued guidance on the IRS's NFTL withdrawal policies.¹² In addition to allowing NFTL withdrawals where the taxpayer agrees to a direct debit installment agreement (within certain dollar limits), the IRS has finally issued guidance allowing NFTL withdrawals after the lien has been released, reversing its longstanding position that it could not legally do so.¹³ From securing the counsel opinion authorizing such withdrawals,¹⁴ to issuing TAOs in these cases,¹⁵ to negotiating with other IRS organizations and providing language and examples for the guidance, to working with members of Congress on lien filing legislation,¹⁶ TAS has driven the development of this new NFTL withdrawal policy. It may have taken two years from start to finish, but true systemic change -- in which all parties understand the need for change so they can implement it properly and not repeat the problem somewhere else -- takes time. I am proud of TAS employees for their extraordinary advocacy on this issue, and I applaud the IRS for listening, heeding, and implementing this change. It will benefit taxpayers and tax compliance for years to come.

Having said that, there is much more to do. As we describe in this year's Areas of Focus, TAS still must work with the IRS to improve its NFTL filing (as opposed to NFTL withdrawal) policies. Both TAS and the IRS must focus on improving Earned Income Tax Credit (EITC) case procedures, so that they are not disallowing the EITC simply because the taxpayer cannot comply with all of the burdensome audit requirements.¹⁷ TAS will continue to work with the IRS to help improve its procedures for resolving identity theft cases and reducing the burdens on identity theft victims during future filing seasons.¹⁸ TAS will develop training for IRS public contact employees on working with victims of domestic abuse and violence. TAS will continue to work with the IRS on health care implementation. TAS will advocate for small exempt organizations that must re-apply for exempt organization status because their status was revoked for failing to file Form 990-N (the e-Postcard). TAS will monitor the IRS's implementation of its voluntary disclosure initiatives to ensure fairness and protection of taxpayers' rights.

Budget limitations may drive the IRS to automate more decision-making, curtailing personal interaction with taxpayers and failing to consider their specific circumstances.

Notwithstanding the progress made in several areas over the last year, I remain concerned that the IRS is falling backward in its commitment to taxpayer service and being a customer-focused organization. As we discuss in this report, the overriding concern here is the impact of budget decisions.¹⁹ Simply put, if the IRS is not funded adequately while its work is increasing and expanding into new areas, it will turn to more automation and less interaction with taxpayers.

In the context of enforcement initiatives, automation means more rule-based decisions to issue levies and file liens, with enforcement actions occurring without any personal contact with taxpayers; more pressure for the (inappropriate) use of math error authority or truncated audit processes; greater use of correspondence examinations with no outbound calls to taxpayers; and more decision-making tools like the Reasonable Cause Assistant, which supplants the individual employee's determination regarding whether a penalty should be abated for reasonable cause.

On the taxpayer service side, automation could be a positive thing -- if only the IRS could harness the use of electronic accounts and communication to enable taxpayers to see their own accounts, communicate directly with the IRS electronically, and have videoconferences with the IRS in remote locations (even as part of "correspondence" audits or collection matters). The IRS could also communicate with taxpayers through cellphone/smartphone technology, for example, by sending text or email message reminders of filing or payment deadlines, or due dates for submission of information in audits or collection matters.²⁰ The possibilities are endless, and the resources freed up by these initiatives could be retained to meet the needs of those taxpayers who need to talk with the IRS about their tax issues, either by phone or in person.

As noted above, the downside of having to do more with fewer resources is that the IRS will apply more "bright-line" tests to taxpayer situations, because having to look at a taxpayer's specific facts and circumstances is time-consuming and costly.²¹ Indeed, bright-line tests are useful, since many -- even a great majority -- of taxpayers will still get fair results. But the test of fairness -- of due process -- is how government action applies to all taxpayers, including the minority.

So bright-line tests require a safety valve, and that safety valve involves allowing for and encouraging the exercise of judgment and discretion when the bright-line test brings about an unfair or improper result. What I see in parts of the IRS, however, is a trend toward greater reluctance to exercise discretion with respect to the non-bright line situations, and this reluctance is reinforced by the fact that exercising discretion takes time and resources, which in this budget environment the IRS believes it does not have.

At its heart, though, the IRS's discomfort with exercising judgment and discretion is not about budgets. I believe it reflects a failure on the IRS's part to view taxpayers as human beings and to recognize that as a tax agency we deal with taxpayers as we find them, with all the vagaries of human existence, i.e., "life in all its fullness." Think about it -- there are few more intimate acts that a person has with his government than to tell it about one's family, income, expenses, losses, gains, educational activities, purchasing activities, retirement saving activities, and so on. Tax returns are not mere pieces of paper. Tax returns are reflections of people's lives -- who they are and what they did -- and to an astounding extent, they are voluntarily sharing this information with their government.²²

The human drama of taxation and tax return filing was brought home to me this filing season during the First-Time Homebuyer Credit (FTHBC) debacle. As discussed elsewhere in this report, taxpayers who received the first iteration of the FTHBC were required to make their first repayment of the interest-free loan on their 2011 tax returns.²³ The IRS's failure to program its systems with sufficient lead time for review and issuance of guidance led to a massive breakdown in the return filing process for these taxpayers. In short, as I write this preface in June, there are still taxpayers who filed in January 2011, reporting the repayment of the FTHBC, who have not received the balance of their refunds.

These taxpayers did not take these delays quietly. They banded together, creating a Facebook page and sharing their stories. They published my own email address, along with those of other IRS officials. To date, I have received 114 emails from taxpayers, pleading for assistance. Their emails describe sustained economic difficulties caused by inexcusable refund delays. Even more disturbing for the prospect of ongoing compliance, they describe the lack of compassion evidenced by IRS (and even TAS) employees. These taxpayers write that after being given numerous promises of dates on which their refunds would be issued, none of which were met, they are "tired of being lied to" by their government. Several taxpayers speculated about what would happen if they took as long to pay a balance due on a tax return as the IRS was taking to pay them their refunds. All of this is out there on the web. None of this bodes well for the public's confidence in the tax system.

Taxpayers have also demonstrated how seriously they think about taxation by responding to my invitation in the 2010 Annual Report to Congress to share with us their thoughts about tax reform. On our website, we asked that taxpayers tell us what tax provision(s) they would give up if doing so would make taxes simpler, and what tax provision(s) they think is most unfair. I wanted to get the direct participation of taxpayers because I believe that true tax reform will not occur until the taxpaying public itself demands it, and I wanted to know what was on their minds.

To date, we have received over 1,500 comments,²⁴ and with the publication of this report, we are posting some of them on our tax toolkit website at www.TaxpayerAdvocate.irs.gov. My selection of these comments is not meant to be statistically representative of the whole. Instead, I have selected a range of comments that illustrate the diversity of thought and the seriousness with which taxpayers responded. In some instances, the comments show the need for more education about the different forms of taxation.²⁵ My office is considering how we may be able to use our web-based tax toolkit to provide taxpayers with a general understanding of taxes and tax systems, so that they can better understand the choices available to the government as it moves along the road to tax reform and be better equipped to participate in the discussion.

These two experiences -- the FTHBC returns and the tax reform comments -- have enabled me to hear directly from taxpayers. They also demonstrate the power of social media and the Internet to communicate and exchange (not just push out) information. As a result, I am establishing a blog on the TAS website, so I can communicate directly with taxpayers on a variety of topics, including filing season issues and education about taxpayer rights and the tax system. But most importantly, it will provide the National Taxpayer Advocate with an opportunity to hear from taxpayers and do a better job advocating on their behalf.

During the recent threat of a lapse in appropriation, the IRS revised its Contingency Plan²⁶ to identify the limited functions it could perform if the government shut down, as required by the Anti-Deficiency Act.²⁷ Although the plan took into consideration the special circumstances presented during a tax filing season, and identified excepted activities pertaining to the protection of government property, it did not provide protections for taxpayers' lives and property.

Examples of excepted activities under the current plan include depositing remittances and protecting statute expirations, bankruptcies, liens, and seizure cases. To protect the associated electronic remittances, the IRS would process electronically filed tax returns and issue any refunds generated, absent processing errors. Taxpayer phone assistance would be limited to callers with questions relating to return filing.²⁸

The IRS Plan made no allowance for processing paper tax returns and issuing related refunds, providing taxpayer account assistance, or resolving lien issues.²⁹ Although the Plan provided for Automated Collection System (ACS) representatives across the country to assist callers with levy releases,³⁰ it is unclear whether this workforce could have met taxpayers' needs if those employees were otherwise engaged in activities pertaining to the protection of government property. Consequently, taxpayers suffering from an immediate financial hardship would be offered no remedy. Thus, a taxpayer who was unable to close on a loan because of a federal tax lien or who could not pay for fuel to heat a home without a tax refund would get no assistance when calling the IRS, or would become lost in the accumulated stockpile of unprocessed paper returns and correspondence. TAS estimates that, during the week in which the shutdown might have occurred, over a million callers would have experienced long delays (if their call was answered at all);³¹ a quarter of a million taxpayers would have been turned away at Taxpayer Assistance Centers;³² and more than 100,000 pieces of correspondence would have been added to open inventories across the country.³³

The National Taxpayer Advocate believes the Anti-Deficiency Act as written and interpreted does not sufficiently protect taxpayers' rights and interests in the event of a government shutdown. The National Taxpayer Advocate recommends that the permissible activities defined in the Anti-Deficiency Act be clarified to provide protection of taxpayers' lives and property and will address this issue in the 2011 Annual Report to Congress.

B. TAS Will Continue to Focus on the IRS's Ability to Collect Taxes and Meet Taxpayer Needs as Its Responsibilities Have Expanded and Its Funding Has Been Reduced

The National Taxpayer Advocate has repeatedly expressed concern that the IRS is not sufficiently funded to effectively fulfill its mission of collecting taxes and meeting taxpayer needs. In FY 2011, this subject will again be an area of emphasis.

The job of the IRS is, in essence, to do whatever Congress directs it to do. As long as the IRS has sufficient data to verify taxpayer eligibility for authorized tax benefits, the National Taxpayer Advocate believes the IRS is capable of fulfilling its congressionally assigned tasks if given sufficient resources.³⁴ In recent years, the IRS has been given more and more tasks, but it is not receiving the resources it needs to fulfill these tasks without cutting corners. And when the IRS cuts corners, taxpayers can be harmed and revenue collection may suffer.

The IRS's challenges have been heightened as the tax code has grown longer and more complex by the year. In addition, the increasing number of late-year tax-law changes, most notably the extension of expiring tax breaks, has required the IRS annually to make extensive last-minute programming changes and forced the IRS to defer accepting certain tax returns until well after the filing season has begun. During the 2011 season, for example, the IRS could not process Form 1040 returns on which deductions were itemized until February 15.³⁵ Because more than 75 percent of taxpayers are entitled to refunds that average over $2,800,³⁶ these delays often have a significant adverse financial impact on taxpayers.

Finally, Congress has increasingly been tasking the IRS with administering economic and social benefits programs. In 2008, Congress directed the IRS to make Economic Stimulus Payments. Also beginning in 2008, Congress made available the first of three iterations of the First-Time Homebuyer Credit. Beginning in 2009, Congress provided the Making Work Pay Credit. Then last year, Congress enacted the Hiring Incentives to Restore Employment (HIRE) Act, which provides incentives for small businesses to hire additional workers, and the Patient Protection and Affordable Care Act, which contains numerous provisions that will require interaction between the IRS and businesses or individuals.

Administering a more complex tax code, implementing last-minute tax-law changes just before the filing season, and running benefits programs all require resources. Yet for FY 2011, the IRS's budget was reduced slightly as compared with FY 2010,³⁷ and its funding for FY 2012 remains unclear. The Administration has proposed an increase of more than nine percent over FY 2011 levels,³⁸ the House Appropriations Committee has approved a bill that would reduce funding by five percent below FY 2011 levels,³⁹ and the Senate has not yet acted.

Prior to FY 2011, the IRS had received budget increases for several years. Yet even so, the agency was falling behind in its ability to meet taxpayer needs. Two key indicators of taxpayer service are the IRS's ability to answer taxpayer telephone calls and the IRS's ability to respond to taxpayer correspondence. From FY 2004 to FY 2010, the percentage of calls the IRS answered from taxpayers seeking to speak with a telephone assister dropped from 87 percent to 74 percent.⁴⁰

Over the same period, the IRS's ability to timely process taxpayer correspondence also declined. Comparing the final week of FY 2004 with the final week of FY 2010, the backlog of taxpayer correspondence in the tax adjustments inventory jumped by 76 percent (from 357,151 to 628,016), the percentage of "uncontrolled" correspondence received but not yet entered into IRS computer systems increased by 134 percent (from 8.3 percent to 19.4 percent of correspondence), and the percentage of taxpayer correspondence classified as "overage" increased by 135 percent (from 11.5 percent to 27.0 percent of correspondence).⁴¹

If subjected to spending freezes or cuts, the IRS will fall further behind in collecting taxes and serving America's taxpayers. The National Taxpayer Advocate has previously expressed the view that the IRS, as the tax collector, should generally be exempt from any budget freeze or reduction. According to the most recent estimate available, $345 billion in tax is due but not timely and voluntarily paid each year.⁴² As the de facto "Accounts Receivable Department" of the federal government, the IRS collects well over 90 percent of all federal revenue.⁴³ On a budget of about $12.1 billion,⁴⁴ the IRS collected about $2.35 trillion in FY 2010.⁴⁵ In other words, every $1 appropriated for the IRS produced about $194 in federal revenue.⁴⁶

For that reason, dollars appropriated for the IRS are not a cause of the deficit problem. Rather, they are better viewed as part of the solution to the deficit problem. Despite differing views about the appropriate level of taxation, there is widespread agreement that taxes that are due and owing under the law should be collected. Spending cuts mean the IRS will not have the resources to ensure that all taxpayers pay their fair share, thereby effectively forcing compliant taxpayers to pay more to subsidize noncompliance by others and giving noncompliant business taxpayers a competitive advantage. Moreover, the IRS will not have the ability to meet the service needs of the taxpayers who are paying our nation's bills.

During the coming year, TAS will continue to study the adequacy of resources available to the IRS to enable it to fulfill the responsibilities Congress has assigned it and will continue to advocate for a reasonable balance between its responsibilities and its resources.

C. TAS Will Focus on Its Own Ability to Meet Sharply Increasing Taxpayer Needs

The workload facing our own organization, the Taxpayer Advocate Service (TAS), has increased substantially in recent years. Although TAS has other important responsibilities, Congress created TAS largely to serve as the IRS's "safety net" for taxpayers who are experiencing significant hardships. In practice, TAS is often a taxpayer's last resort for resolving a tax problem.⁴⁷ We assist taxpayers who are experiencing a current or imminent financial hardship as a result of an IRS action or inaction (e.g., where an IRS levy against a taxpayer's paycheck will lead to eviction or a shutoff of utilities) or who are experiencing a systemic hardship because the IRS has not served them on a timely or accurate basis (e.g., where the IRS has failed to issue a refund or adequately consider a taxpayer's response to an audit or collection notice). By statute, Congress has required that TAS make at least one advocate available for each state,⁴⁸ and we currently have 74 offices serving taxpayers.

Through May, TAS receipts have remained relatively steady at 190,204 cases in FY 2011 as compared with 191,901 for the same period in FY 2010. However, these levels reflect a steady increase in cases over the last several years, as receipts rose from 168,856 in FY 2004 to 298,933 in FY 2010. There are two main reasons why TAS cases increase. First, the majority of TAS's cases stem from IRS compliance actions, and the IRS has substantially increased the number of these actions in recent years.⁴⁹ Second, TAS receives more cases during economic downturns, when more taxpayers cannot pay their tax bills and get into trouble with the IRS.

To date, TAS has managed to handle the increased caseload. After several years of declining staffing, TAS has been able to hire three new categories of employees over the past few years to assist our Case Advocates in doing their jobs. We now have 116 "Intake Advocates," who answer telephone calls, respond to simple taxpayer questions, and assist with case-building by identifying key facts and issues and requesting necessary documentation. We also have 127 "Lead Case Advocates," who mentor and assist Case Advocates with unusually challenging cases, maintain partial caseloads of their own, and help develop TAS best practices. Finally, we have 18 "Campus Technical Advisors," who provide technical guidance and support on complex cases worked by the IRS in each of its ten campuses. These additional specialty positions have freed up our Case Advocates to spend more direct time resolving taxpayer cases and have given them helpful resources when they get stuck on technical issues. TAS management has also taken steps to improve efficiencies.⁵⁰

As a result of these measures, TAS has continued to perform well. In FY 2010, TAS obtained full relief for taxpayers in 69 percent of our cases and partial relief for taxpayers in an additional five percent.⁵¹ (In other cases, taxpayers generally are not entitled to relief.) These levels are consistent with historical norms. In addition, ongoing surveys conducted by an independent polling firm among taxpayers assisted by TAS show that customer satisfaction stood at 84 percent in FY 2004 and at 85 percent in FY 2010.

Despite these positive results and despite actions taken by TAS management to offset the significant increase in case receipts, including the creation of Intake Advocate, Lead Case Advocate, and Campus Technical Advisor positions, the deployment of automated tools and improved, more efficient processes, the growth in casework is beginning to strain TAS's capacity. (A more in-depth discussion of our productivity efforts relating to human capital, systems, and process improvements is provided in Sections VI and VI of this report.) Because cases generally come to TAS only when a taxpayer is suffering from a financial hardship or the IRS's regular processes have not worked as they should, TAS has had a policy of assisting all taxpayers who meet our case-acceptance criteria since Congress created our organization in 1998. If the imbalance between our resources and the demand for our services widens much further, however, we will have no choice but to decline to accept certain categories of cases, leaving taxpayers to fend for themselves.

During the coming year, we will continue to seek efficiencies and continue to call attention to the imbalance between our increasing case inventories and our relatively static budgets, as well as the impact this imbalance is having on taxpayers.

D. TAS Will Engage Taxpayers in a Dialogue About Tax Complexity and Tax Reform

In FY 2012, the Office of the Taxpayer Advocate will continue its research concerning the trade-offs between the benefits delivered through the tax system and the tax code complexity that erodes compliance. Numerous social tax expenditures may offer popular benefits with a relatively light administrative burden, yet other provisions may be so complex as to deter compliance or even participation.⁵² While lawmakers debate the policy merits of various provisions, taxpayers need to understand their practical impact.

Unless the tax system becomes more transparent and user-friendly, taxpayers' perceptions of fairness and ultimately their compliance with the system may continue to erode. Complexity may benefit those who can afford expensive advice that offers access to certain tax breaks, effectively discriminating against taxpayers who cannot afford advice. Taxpayers who believe others are unfairly paying less may feel justified in "fudging" to right the perceived wrong. Even at the cost of relinquishing prized tax credits, deductions, deferrals, or exclusions, taxpayers may wish to reduce complexity. The payoff would be improved taxpayer morale.⁵³

To further this dialogue about tax reform, the Taxpayer Advocate Service is operating an electronic suggestion box to monitor comments from taxpayers on what they would be willing to give up if others also would relinquish tax breaks, resulting in a simpler tax system.⁵⁴ What particular provisions of the existing tax system are especially burdensome or seem particularly unfair? Thus far, TAS has received approximately 1,500 comments.⁵⁵ Interestingly, some of the suggestions use terms of art at variance with their technical meaning; for example, describing a "flat" tax as imposing higher rates at graduated income levels. These comments highlight a need for education on technical tax terms as well as an underlying instinct for fairness with respect to ability to pay. A selection of these comments is posted at www.TaxpayerAdvocate.irs.gov.

E. TAS's Continued Advocacy Efforts to Improve the Earned Income Tax Credit Program

Noncompliance has long been a concern associated with the Earned Income Tax Credit (EITC). Generally, noncompliance is best described as a continuum of behavior from inadvertent error to negligence to recklessness (in disregard of the law) to fraud at civil or criminal levels.⁵⁶ Similarly, social scientists have classified noncompliance of different types, such as procedural, unknowing, asocial, brokered, symbolic, social, or habitual.⁵⁷ Compliance may be influenced by factors such as demographic affiliations, personal morals, social norms, deterrence probabilities, trust in government, complexity and convenience, as well as preparers and other third parties.⁵⁸ In view of the diverse aspects of noncompliance as applied to the EITC, "it seems likely that there is not one compliance problem, but a series of sometimes distinct compliance problems that call for a more focused but still multifaceted approach to reflect specific types of noncompliance problems."⁵⁹

Heeding this observation, in FY 2012 TAS will review proposals and apply previous research findings to help reduce EITC noncompliance.⁶⁰ Previous TAS research findings suggest that the EITC claims of many taxpayers are denied for lack of documentation even if they could meet applicable residence and relationship requirements.⁶¹ In addition, TAS is actively focusing on its own advocacy in EITC TAS cases, as discussed later in this report.⁶²

1. Certain EITC Proposals Do Not Address Underlying Causes of Noncompliance and Could Result in Incorrect Disallowance

A significant level of noncompliance has resulted in the classification of the EITC as the fourth largest source of "improper payments" by the government in FY 2010.⁶³ Several proposals attempt to address concerns about noncompliance and improper payments. At the end of 2010, the Department of the Treasury announced a pilot program to assess the usefulness of state benefits data "to help validate EITC eligibility."⁶⁴ Meanwhile, the Treasury Inspector General for Tax Administration (TIGTA ) has reiterated a recommendation that the IRS consider "Federal Case Registry [FCR] information to determine its accuracy and applicability for exercising existing math error authority to deny the EITC during upfront processing of the tax return."⁶⁵ The National Taxpayer Advocate continues to object specifically to the use of FCR data for summary denial of EITC claims "since the underlying factual situation is inherently qualitative in nature."66 Moreover, applying data collected for other purposes to an EITC claim is akin to verifying addresses with a telephone directory to deny a home mortgage interest deduction. Even if virtually all of the entries in a directory were accurate, they were compiled for a different purpose, do not disprove eligibility under the tax law, were compiled at a prior date and may not be current, and should not deprive a taxpayer of a due process right to present his or her own facts. Enforcement on a mass-production model may not be as effective as service to low income taxpayers on an individual basis.⁶⁷

While the Improper Payments Information Act of 2002 requires reporting on certain payments,⁶⁸ it does not prescribe any particular remedy.⁶⁹ A report on actions to correct causes of improper EITC payments could address the service necessary to administer complex eligibility requirements. Meanwhile, there are other tax credits, such as those creating incentives for alternative fuels or for incremental expenditures on research and experimentation, that can result in large refunds; thus, investigating whether these credits have been properly granted would be worthwhile whether or not they fit the definition of "improper payments."⁷⁰

Additionally, TIGTA objects to "the IRS' use of a dollar tolerance" in limiting the number of EITC recertification examinations, notwithstanding the cost- benefit analysis inherent in tolerances.⁷¹ This objection suggests an approach to EITC that appears disproportionate to potential noncompliance at low income levels. In sum, TAS continues to monitor EITC administration to ensure that enforcement initiatives do not replace or undermine service efforts that could increase taxpayer compliance.⁷²

2. TAS Is Conducting Research to Better Understand the Causes of EITC Noncompliance

TAS is collaborating with the IRS on two pilot programs to reduce EITC noncompliance through improved service to taxpayers. As discussed below, one program tests the use of affidavits to establish qualifying child status, while the other tests improvements to the examination process. Additionally, TAS's efforts to improve EITC case advocacy by TAS employees are discussed elsewhere in this report.⁷³ These efforts complement applied research on increasing EITC compliance.

A. Effectiveness Of Affidavits During EITC Audits

To verify the accuracy of the millions of EITC claims every year, the IRS audits some of the returns filed.⁷⁴ EITC audits represent approximately 30 percent of all individual taxpayer audits in FY 2010.⁷⁵

      FIGURE II.1, COMPARISON OF ALL INDIVIDUAL TAX RETURNS TO INDIVIDUAL

The IRS first tested the use of affidavits in a tax year 2003 IRS initiative to use affidavits to document residency of qualifying children of low income taxpayers who participated in a test of a proposed EITC pre-certification process. At that time, the IRS concluded that affidavits would be acceptable as well as convenient documentation:

The objectives of this study are to answer the following questions:

• To what extent does the use of affidavits reduce underclaims or increase overclaims?

• What percentage of taxpayers used affidavits to try to demonstrate residency of their qualifying children?

• How does the option of using a third-party affidavit affect the efficiency of the audit process?

Typical EITC taxpayers working near or at minimum wage levels tend to have limited education and literacy skills, and minimal understanding of financial matters. They are also likely not skilled at dealing with the IRS on issues involving complicated matters of tax law. The law clearly places the burden of proof on the taxpayer, but if the taxpayer cannot sufficiently understand the rules or negotiate the audit process, reaching the goal of a correct audit outcome is brought into question. The National Taxpayer Advocate has long been concerned that various barriers are preventing the IRS from treating taxpayers fairly. To address this concern, TAS is collaborating with the Wage and Investment (W&I) and Small Business/Self-Employed (SB/SE) divisions to test whether alternative approaches to conducting EITC correspondence examinations affect the audit change rate, because some audits have denied taxpayers EITC for which they qualify. This pilot program was initiated in response to research and recommendations TAS has made in past years.⁷⁹ Results will help guide recommendations for improvements to the examination process.

The first phase of the pilot program is taking place during the 2011 filing season. A representative sample of taxpayers undergoing EITC correspondence audits has been selected. Participating IRS examiners have attended training sessions with the National Taxpayer Advocate, among others. The training included a panel discussion with Low Income Taxpayer Clinic (LITC) directors who shared their experiences working with EITC taxpayers and recommendations for overcoming communication challenges.

During the first phase, IRS correspondence examiners are placing outbound calls to taxpayers in this test group at two points during the examination process: about ten days after the initial contact letter, and just prior to issuing the Statutory Notice of Deficiency for taxpayers who have not responded. During the calls, the IRS examiners explain the examination process to the taxpayers and answer taxpayer questions. TAS Research will collect data on audit outcomes to determine if this revision to IRS examination procedures has helped taxpayers overcome communication barriers they may be experiencing during the examination process.

During the second phase, taxpayers who did not retain all of their EITC and who did not agree to their audit outcomes will be referred to TAS. TAS Case Advocates will then attempt to contact these taxpayers to help them through the process of proving eligibility for EITC. TAS Research will analyze the final audit outcomes after this phase to determine whether TAS assistance impacted the audit results. The goal is to complete this study by the end of March 2012.

F. The IRS Needs To Do More to Alleviate the Harm Its Lien Filing Practices Can Create For Many Taxpayers

The National Taxpayer Advocate addressed the adverse impact of the IRS lien filing policies on taxpayers and future tax compliance in her 2009 and 2010 Annual Reports to Congress. She proposed several administrative and legislative steps to improve these policies and procedures and to grant relief to taxpayers harmed by the automatic filing of liens, and issued two Taxpayer Advocate Directives (TADs) on this subject.⁸⁰ On February 24, 2011, the IRS announced a new effort to help financially struggling taxpayers get a "fresh start," which included several changes to the processes used to file and withdraw Notices of Federal Tax Lien (NFTL).⁸¹ Specifically, the IRS raised the dollar threshold that governs the issuance of most NFTLs from $5,000 to $10,000, an action the IRS claims will result in fewer tax liens.⁸² The IRS also announced plans to make it easier for taxpayers to obtain NFTL withdrawals after fully paying their tax debts, or after they have arranged with the IRS to pay their outstanding tax debts through "direct debit" installment agreements.

TAS has worked closely with the IRS in developing guidance for the implementation of these initiatives. TAS actively collaborated with the SB/SE Collection Policy function in drafting internal guidance to allow withdrawals of NFTLs after lien releases, conforming to the IRS Office of Chief Counsel opinion issued on October 8, 2009.⁸³ The National Taxpayer Advocate is very pleased with the recently-issued guidance that adopts her recommendations and provides significant relief to affected taxpayers.⁸⁴ TAS is looking forward to working with the IRS in revising its lien filing policies so fewer withdrawals will be necessary.

From January 1 to March 31, 2011, the IRS filed approximately 612,000 NFTLs, an increase of 25 percent over the same period in fiscal year (FY) 2010.⁸⁵ While it may be premature to evaluate the full impact of the IRS's recent changes to the lien filing process, the National Taxpayer Advocate remains concerned that these changes do not rescind the IRS policy of automatically filing liens based on a dollar threshold of the unpaid tax liability, which continues to harm millions of taxpayers, instead of requiring a lien-filing determination to be based on a thorough analysis of the taxpayer's circumstances.⁸⁶ Such analysis should balance the need to protect the government's interests in the taxpayer's assets with a corresponding concern for the financial harm the lien will create for that taxpayer. In FY 2012, TAS will work with the IRS to fully evaluate the results of its limited changes to the lien filing process, and identify additional opportunities to improve this critical area of tax administration. In the meantime, TAS is conducting its own study of the impact of NFTL filings on future tax compliance and will refine its recommendations based on study findings.⁸⁷ TAS will also continue to advocate for taxpayers that experience harm from current NFTL policies and issue Taxpayer Assistance Orders (TAOs) when necessary.⁸⁸

G. The IRS Needs to Improve Its Identity Theft Victim Assistance Strategy

Effective June 2010, the Wage and Investment Division's Identity Protection Specialized Unit (IPSU) began working the majority of non-economic burden identity theft (IDT) cases.⁸⁹ In fiscal year (FY) 2010, the IPSU worked nearly 3,400 cases that TAS would otherwise have worked; in FY 2011 to date, this number has already increased to 8,954 cases.⁹⁰

However, despite these process improvements, TAS's IDT receipts continued to increase substantially in FY 2011, as reflected in Figure II.2 below.

 

FIGURE II.2, TAS IDENTITY THEFT RECEIPTS, FY 2007 --

 

SECOND QUARTER FY 2011, ECONOMIC AND SYSTEMIC BURDEN

 

 

 

Identity theft cases present unique complexities for IRS employees and the TAS Case Advocates assigned to help the taxpayers. For example, steps for resolving identity theft cases include:

• Verifying taxpayer identity and researching of account history;⁹¹

• Identifying illegitimate tax information on a taxpayer's account;⁹²

• Addressing the immediate needs of a taxpayer experiencing economic hardship;⁹³

• Proposing account adjustments and ensuring an identity theft marker is placed on the account;⁹⁴ and

• Conducting a global account search to identify possible related problems, and correcting those problems.⁹⁵

In addition, it is often quite difficult for the IRS to ascertain which person is the true owner of the Social Security number (SSN) in question. When the IRS requests certain documents to verify the victim's identity before taking steps to resolve the tax account, the true owner of the SSN may feel victimized again by this process. We will train our Case Advocates to understand the unique anxiety that identity theft causes in its victims. Additional interim communication may be required to reassure such taxpayers, and will be a key component of issue resolution.

One reason for the increase in IDT cases is the "unpostable" process, in which the IRS flags certain questionable refund claims and does not allow these returns to post. Since the IRS started using an electronic indicator in 2009 to flag SSNs as being potentially compromised by identity theft, it has tracked over 980,000 incidents impacting over 600,000 taxpayers.⁹⁷ The IRS, in anticipation of the increase in flagged accounts, enlisted IPSU and Accounts Management Taxpayer Assurance Program (AMTAP) employees to resolve IDT unpostable returns, and directs most IDT unpostable cases to AMTAP for resolution.

However, TAS is concerned that AMTAP does not have adequate staffing to handle this additional workload. This is evident from the 107 Taxpayer Assistance Orders issued by TAS to AMTAP in FY 2011 as a result of AMTAP 's unresponsiveness to TAS Operations Assistance Requests.⁹⁸ TAS met with AMTAP to discuss the backlog of TAS OARS. For the remainder of FY 2011 and throughout FY 2012, TAS will work with AMTAP to improve taxpayer service and reduce inventory for both organizations.

One of the uglier faces of identity theft involves misuse of a deceased taxpayer's SSN to obtain federal refunds. Identity thieves utilize publicly-available information provided by the Social Security Administration (SSA) to obtain a decedent's full name, SSN, date of birth, address, etc.⁹⁹ When the identity of a decedent is stolen and used to file a fraudulent tax return, the mourning relatives must submit multiple documents including an identity theft affidavit, Social Security card, and birth certificate to prove the deceased was a victim of identity theft. If the IRS has previously processed a return on which the deceased individual's SSN was used, surviving relatives and executors of estates must re-submit returns involving deceased taxpayers on paper (electronically filed returns will be rejected).¹⁰⁰ It then takes months to get these accounts corrected and to process a refund.

Thus far in 2011, the IRS has received 660,000 decedent returns.¹⁰¹ Effective April 17, 2011, the IRS instituted business rules to filter out some of these "decedent scheme" returns; within one month, it stopped 42,441 decedent-related returns claiming questionable refunds estimated at $194 million.¹⁰² The IRS estimates that an additional 221,000 returns claiming $700 million in refunds would have been stopped had the business rules been in place at the beginning of the filing season.¹⁰³ To combat this issue, the IRS has instituted measures to identify and invalidate fraudulent returns, and delete refunds claimed on returns filed with SSNs belonging to decedents. The IRS is notifying taxpayers when a return and refund are held pending investigation of items reported on the return.¹⁰⁴

Recently, the National Taxpayer Advocate testified before Congress regarding the IRS's response to identity theft. In this testimony, she identified the following recommendations, including:

• Work cooperatively with the IRS to determine if the identity theft cases coming to TAS should instead be worked by the IRS's specialized identity theft unit (the IPSU) under an agreement between TAS and the IRS;

• Encourage Local Taxpayer Advocates (LTAs) to advocate for identity theft victims by issuing Taxpayer Assistance Orders in appropriate situations;¹⁰⁵

• Identify additional authentication procedures for taxpayers who have been victims of identity theft, to ensure that identity thieves cannot pose as the taxpayer and obtain access to taxpayer data;

• Provide additional training to TAS employees on how to resolve identity theft cases; and

• Advocate that the SSA find a way to redact portions of decedents' SSNs before public release in order to eliminate the ability of identity thieves to commit tax fraud using the Death Master File.

Congress enacted "innocent spouse" rules as a recognition that it is sometimes appropriate to relieve spouses of the tax liability that stems from a joint return¹⁰⁶ or arises due to the operation of community property laws.¹⁰⁷ The current rules, found in IRC §§ 6015 and 66(c) (last sentence), were enacted as part of the IRS Restructuring and Reform Act of 1998 (RRA 98).¹⁰⁸ IRC § 6015(f) and the last sentence of IRC § 66(c), referred to as equitable relief provisions, allow relief when, taking into account all the facts and circumstances, it would be inequitable to hold the taxpayer liable for the tax.

While sections 6015(b) and (c) of the Internal Revenue Code require taxpayers to request relief within two years after the IRS commences collection activity, section 6015(f) and section 66(c) do not contain any time limit for requesting equitable innocent spouse relief. Instead, these provisions provide that the Secretary shall prescribe procedures for granting equitable relief. A Treasury regulation, added after RRA 98, however, imposes a two-year time limit for requesting equitable relief under section 6015(f).¹⁰⁹ In 2009, the Tax Court, in Lantz v. Commissioner¹¹⁰ and Mannella v. Commissioner¹¹¹ held that the two-year rule for section 6015(f) in the regulation was invalid and granted equitable relief. In a number of subsequent cases in which the taxpayer requested relief after the two-year period expired,¹¹² including, in 2010, Jones v. Commissioner,¹¹³ the Tax Court granted relief. In 2010, the Tax Court's decisions in Lantz and in Mannella were reversed by two Courts of Appeals that found the regulation valid,¹¹⁴ and in 2011, a third Court of Appeals also found the regulation was valid and reversed the Tax Court's decision in Jones.¹¹⁵ Other cases are pending in various appellate courts.¹¹⁶

The National Taxpayer Advocate, in her 2006 Annual Report to Congress, submitted a legislative recommendation that Congress remove the two-year rule for requesting equitable innocent spouse relief.¹¹⁷ In her 2010 Annual Report to Congress, the National Taxpayer Advocate described the legislative history of IRC § 6015, and again recommended that Congress remove the two-year rule.¹¹⁸ Some taxpayers with cases pending in appellate courts filed supplemental briefing materials in which they advised the courts of the National Taxpayer Advocate's analysis.¹¹⁹ Local Taxpayer Advocates also raised this issue during their annual congressional visits in which they discuss the Annual Report to Congress with members of Congress and their staffs.

Members of Congress, including a senator who served on the conference committee that fashioned the equitable relief provisions as part of RRA 98, have urged the IRS to remove the two-year rule.¹²⁰ The Commissioner has agreed to review the rule,¹²¹ but in the meantime the IRS continues to follow the Treasury regulation even in cases in which it concedes the taxpayer otherwise qualifies for equitable relief.¹²² TAS will continue to advocate for removal of the two-year rule as a condition for obtaining equitable relief.

In a related development, recent cases demonstrate that the IRS may have difficulty evaluating claims of domestic violence or abuse raised by taxpayers seeking innocent spouse relief.¹²³ In partnership with a Washington, DC coalition for the prevention of domestic violence, TAS will produce training materials and a video to assist IRS public-contact employees in recognizing domestic violence and abuse and the special needs and issues these taxpayers may present in cases throughout the IRS.

The training will include a case study and will address a wide range of issues, such as how to avoid interpreting a taxpayer's survival techniques, which may involve denial, inconsistent statements, or evasiveness, as a lack of truthfulness. Because traditional forms of documentary evidence are often unavailable, the training will explore the acceptability of alternative forms of substantiation, such as testimony and third-party affidavits. The confidentiality of taxpayer information, especially current whereabouts, may be of paramount importance to the taxpayer, and the training will suggest tactics for discussing disclosure rules, and for maintaining contact with elusive or transient taxpayers.

I. TAS Maintains a Close Eye on the IRS's Health Care Implementation Efforts

The National Taxpayer Advocate outlined the main health care tax provisions in the 2010 Annual Report to Congress and identified potential challenges and concerns with how the law may be administered. Because of the far-reaching scope of the health care provisions and their potential impact on taxpayers and the IRS, TAS maintains a close eye on the IRS's implementation efforts. TAS continues to participate in regularly scheduled briefings with senior IRS officials as well as holding bi-weekly internal meetings regarding implementation efforts. Additionally, TAS is reviewing all IRS guidance and proposed guidance to identify potential issues prior to implementation.

TAS has also engaged in extensive training of its own employees and external partner organizations. TAS has just completed a three-part health care training class delivered to all employees, providing an overview of the health care tax provisions, with a focus on the small business tax credit. TAS has also provided training to all Low Income Taxpayer Clinics and community groups¹²⁴ to ensure they know how the new health care provisions will affect the taxpayers they assist.

In FY 2012, TAS will continue its efforts to identify potential issues early in the implementation process and raise those issues to the IRS or propose legislative changes when necessary. TAS will also continue identifying training needs for TAS employees as well as outreach opportunities to educate taxpayers.

While TAS has taken the lead on the calculator, TAS is hopeful that it will serve as a model for future development by the IRS of additional tools to assist its employees and taxpayers.

In FY 2011, TAS will also partner with the IRS to get information about health care implementation out to stakeholders to increase awareness of coming tax law changes. TAS will work with the IRS to ensure stakeholder participation in the IRS notice and comment process.

J. Exempt Organization Reinstatement Applications May Cause Significant Delays in Processing Exempt Organization Applications

The Pension Protection Act of 2006 added § 6033(i) and (j) to the Internal Revenue Code, requiring exempt organizations previously below the filing threshold to file a so-called electronic postcard annually or undergo automatic revocation of tax-exempt status for failure to file for three years in a row.¹²⁷ In July 2010, the tax-exempt status of approximately 300,000 organizations was at risk.¹²⁸ Meanwhile, the Commissioner extended a May 17, 2010, filing deadline to October 15, 2010, by which time about 50,000 of those organizations filed, coming off the at-risk list.¹²⁹ On June 8, 2011, the IRS revoked the exempt status of approximately 275,000 organizations.¹³⁰ Even if fewer than half of these nonprofits apply for reinstatement of exempt status, a six-figure caseload would represent an historic spike in the volume of applications and would impact processing of all new exempt organization applications, not just reinstatements.¹³¹

Consequently, TAS is concerned about possible delays in processing. An organization that does not receive a determination on its application for exempt status within approximately nine months of filing has a right to file suit for a declaratory judgment regarding its exemption status.¹³² However, a court procedure could be practically inaccessible to small charities. It is unclear if the pro bono bar and the judiciary itself would have adequate capacity if demand is voluminous. Accordingly, the pressure is on the IRS to provide taxpayer service through timely application processing.

Moreover, TAS is aware of certain issues raised by previous waivers of filing for certain classes of organizations, especially quasi-public entities.¹³³ As it has done previously, the IRS could achieve a measure of efficiency by resolving common issues all at once, rather than solely on a case-by-case basis.¹³⁴ In other words, reinstatement could be accomplished for certain classes of organizations all at once. For instance, the IRS recently announced transitional relief for certain small organizations allowing reinstatement retroactive to the automatic revocation date.¹³⁵ This is a good example of relief for a class of organizations.

K. IRS's Inconsistency and Failure to Follow Its Published Guidance Damaged Its Credibility With Practitioners Involved in the Offshore Voluntary Disclosure Program

U.S. persons are generally required to report foreign accounts on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) and to report income from such accounts on U.S. tax returns. The IRS "strongly encouraged" taxpayers who failed to file these and other similar returns to participate in the 2009 Offshore Voluntary Disclosure Program (OVDP), rather than quietly filing amended returns and paying any taxes due.¹³⁶ It warned that those making "quiet" corrections could be "criminally prosecuted." OVDP participants would generally be subject to a 20 percent "offshore" penalty in lieu of various other penalties.¹³⁷ The IRS announced, however, that "[U]nder no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes."¹³⁸ Taxpayers who would not be subject to significant penalties because their violations were not willful, or because they qualified for the "reasonable cause" exception, believed this statement applied to them.

On March 1, 2011, more than a year after the 2009 OVDP ended, the IRS "clarified" its seemingly unambiguous statement.¹³⁹ It would no longer consider whether taxpayers in the 2009 OVDP would pay less under existing statutes on the basis of non-willfulness or reasonable cause. Such taxpayers could either agree to pay more than they believed they owed or withdraw from the 2009 OVDP and face the possibility the IRS would assert massive civil penalties and seek criminal prosecution. Both options were problematic. Withdrawal would waste all of the resources already expended on the 2009 OVDP application and would not bring the taxpayer closure or certainty, as advertised. Moreover, in any future examination the IRS might have to request and review the items that were before the examiner processing the 2009 OVDP submission.¹⁴⁰

Pressuring taxpayers who would pay less under existing statutes to remain in the program and pay more than they believe they owed was even worse. It violated longstanding IRS policy along with most conceptions of fairness and due process.¹⁴¹ The IRS's inconsistency and failure to follow its published guidance damaged its credibility with practitioners and could be subject to legal challenge.¹⁴² In 2011, TAS will continue to communicate with taxpayers and practitioners to determine the impact of the IRS's apparent reversal, advocate for the IRS to abide by the plain language of the original terms of the OVDP (as reasonably interpreted by the public and many of the IRS's examiners), and document our findings in the National Taxpayer Advocate's 2011 Annual Report to Congress.¹⁴³

L. TAS Will Work with the IRS on Taxpayer Communication and Correspondence Issues

The IRS issues more than 200 million notices each year, but these notices have a longstanding problem. The notices and letters sometimes confuse taxpayers and tax practitioners, do not always provide accurate and timely information, and do not achieve the intended business results.¹⁴⁴ In August 2008, the IRS Commissioner chartered the Taxpayer Communications Taskgroup (TACT), a cross-functional team (including TAS) created to study and improve the clarity, accuracy, and effectiveness of written communications to taxpayers.¹⁴⁵ TACT 's objectives included:

• Simplifying and clarifying language;

• Streamlining and improving business processes;

• Developing alternative electronic solutions;

• Eliminating unnecessary or duplicative notices, letters, reminders, and inserts;

• Reducing erroneous correspondence; and

• Instituting effective measures, including taxpayer responsiveness.

Siegel and Gale found, among other things, that the IRS's proliferation of notices contributes to an unwieldy process. IRS notices are confusing, do not help people respond effectively, contribute to noncompliance, and lack a consistent, compelling IRS voice.¹⁴⁷ The firm also found the IRS's "one-size-fits-all" approach is ineffective because notices have static content, e.g., referring to an overpayment and an underpayment in the same notice; and employ a monotonous, adversarial voice highlighting punishment above all else.¹⁴⁸ Moreover, IRS notices did not consistently offer all payment options, including offers in compromise, and did not explain the differences between voluntary and involuntary payment methods, such as levies.¹⁴⁹ With this in mind, Siegel and Gale helped the TACT in redesigning 40 notices that account for approximately 70 percent of IRS correspondence.¹⁵⁰ Further, Siegel and Gale conducted tests comparing comprehension of existing and redesigned notices, such as the CP 2000, Automated Underreporter, L1058, Final Notice -- Notice of Intent to Levy and Notice of Your Right to a Hearing, and CP 521, Installment Agreement Reminder to "test market" them to members of the public.¹⁵¹

TACT wrapped up most of its activities at the end of 2009. The group made progress by developing a prototype for a Correspondence Management Information System to track measurement data related to correspondence, eliminating inserts for representatives' copies of notices, implementing a new "red button" error reporting mechanism for employee reporting of taxpayer receipt of erroneous notices, and submitting a legislative proposal to permit future electronic delivery of notices. The TACT also developed a pilot to test the timing and potential elimination of the interim letter, which the IRS sends to taxpayers 30 days after receiving their correspondence to let taxpayers know that the IRS will respond to their letters or inquiries in the future. The IRS's interim letter causes increased telephone call volume from taxpayers and additional taxpayer correspondence when the IRS fails to timely respond to issues raised in taxpayers' letters.¹⁵²

Following the TACT's success, the Commissioner created the Office of Taxpayer Correspondence (OTC) to continue its work.¹⁵³ On January 10, 2010, the IRS released nine of the redesigned notices, including notice CP 08, Additional Child Tax Credit, CP 53, Unable to Direct Deposit Refund, CP 120, Confirmation of Tax-Exempt Status, and CP 139, Form 940/941 Not Required.¹⁵⁴ To date, the OTC has redesigned 85 notices.¹⁵⁵

The OTC also grapples with undelivered mail issues.¹⁵⁶ The National Taxpayer Advocate addressed undelivered mail and taxpayer correspondence as two of the IRS's Most Serious Problems in her 2010 Annual Report to Congress.¹⁵⁷ TAS is working on OTC 's Undelivered Mail Team to implement recommendations made in the report; specifically, trying to integrate address hygiene¹⁵⁸ into all affected IRS systems, expand correct international addressing, and implement intelligent mail bar coding into all IRS correspondence.¹⁵⁹

In FY 2012, TAS will work with the OTC on correspondence design in other program are as that affect taxpayers. In addition, we will advocate for a test of accounts that the IRS shelved or placed in the queue whereby the IRS will send taxpayers monthly balance due notices to determine if taxpayers will increase or accelerate their payments, or contact the IRS to resolve their accounts or avoid pyramiding of their tax liabilities.

A. IRS Administration of the First-Time Homebuyer Credit Became a Debacle

The IRS also included FTHBC repayments and dispositions reflected on Page 2 of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, in its list of forms delayed by the late legislation passed on December 17, 2010, even though the legislation had no impact on the credit.¹⁶⁶ While the IRS knew for more than two years that FTHBC repayment programming was necessary, it did not start the program changes until the 2011 filing season was already underway. This last-minute implementation prevented the IRS from properly testing the programming to identify and correct flaws. These flaws in turn prevented the IRS from processing (1) returns filed jointly by couples attempting to repay the first installment of the FTHBC, (2) returns filed by anyone attempting to pay more than the required minimum; and (3) returns filed by anyone completing Part II of Form 5405, dealing with sales or dispositions of the home. In late March 2011, the IRS estimated the number of taxpayers falling into the latter two categories at 128,000.¹⁶⁷

Initially, IRS employees had no way to fix all these problems, and the tax returns remained unprocessed. Although the IRS had multiple opportunities to share news of the problems and proposed fixes with taxpayers early in the filing season, the IRS did not issue its first update until March 18, 2011, and then only to software developers and authorized e-file providers.¹⁶⁸ The IRS provided the first update on the processing problems to taxpayers just three weeks before the filing season ended, on March 30.¹⁶⁹ The lack of information was not limited to external customers; IRS employees were equally uninformed. Programming problems made the computer codes that provide updates unreliable, which led the IRS to provide incorrect refund dates to taxpayers on its toll-free line, on IRS.gov, and on the new smart-phone application IRS2GO.

As a result of these delays, TAS unpostable/rejected return receipts rose by 3,387 cases, with all of the gain caused by an increase in FTHBC "unpostable/rejected" cases.¹⁷⁰

          FIGURE III.1, TAS FTHBC RECEIPTS (THROUGH APRIL 30, 2011)¹⁷¹

The chart below shows the additional processing time required to resolve cases involving the FTHBC during FY 2011. The first section of each bar represents the IRS's maximum normal timeframes, in days, for processing an original or amended return.¹⁷³ The second section of each bar reflects the IRS's normal processing timeframe, in days, for the next issue involving the account -- a math error, rejected or unpostable return, or an audit of the return or claim. The last section of the bar represents the average number of days it took TAS to resolve cases involving these issues for taxpayers with FTHBC who came to TAS for assistance after already waiting the normal timeframe for processing (cases received by TAS under systemic burden criteria). TAS taxpayers experienced, on average, an additional 11 weeks beyond normal processing timeframes to resolve their issues, even with TAS involvement.

 

FIGURE III.2, IRS PROCESSING TIMEFRAMES (IN DAYS)

 

AND TAS FTHBC CASE CLOSURE TIMEFRAMES,

 

FY 2011, THROUGH APRIL 30¹⁷⁴

 

 

 

Taxpayers affected by these delays include those with pending foreclosures or eviction, utility shut-offs, or imminent combat deployment. It is inexcusable that the IRS did not consider the consequences to these taxpayers when it scheduled its programming changes. TAS will closely review all filing season plans to ensure that this type of harm is not imposed on taxpayers again.

B. Legislation Passed Late in 2010 Impacted the 2011 Filing Season

On December 17, 2010, Congress enacted legislation that extended deductions for state and local sales taxes, higher education tuition and fees, and educator expenses.¹⁷⁸ On January 4, 2011, the IRS advised taxpayers affected by this "extender" legislation not to file their returns until mid-February so the IRS could update its systems.¹⁷⁹ The IRS was forced to ask electronic return originators not to transmit 6.5 million e-file returns until February 14 when the IRS finished reprogramming its computers and held approximately 100,000 paper returns.¹⁸⁰

Since the IRS accurately updated its systems to restore these deductions, TAS received few related systemic burden cases. However, TAS did receive a few economic burden cases from taxpayers whose hardships could not wait for the IRS to implement the changes required by the late legislation. TAS successfully worked with the Wage and Investment operating division to allow TAS to issue refunds to these taxpayers prior to the actual processing of their returns.

C. IRS Implements a Revised Procedure for Processing Unsigned Returns that Results in a Loss of Valuable Taxpayer Data

In FY 2010, the IRS changed its procedures for unsigned tax returns. Instead of returning them to the taxpayers for signature, the IRS suspended the returns in the Rejects function and corresponded with the taxpayer to obtain the signature. This change increased the inventory for Rejects, causing delays for taxpayers whose returns had errors of any kind, not just missing signatures.¹⁸¹ For the 2011 filing season, the IRS implemented a revised procedure where if the tax return is missing only a signature, the IRS returns it to the taxpayer with a "check the box" form.¹⁸² This new procedure solved the Reject inventory problem by reducing the time IRS employees spend dealing with unsigned tax returns, but created other problems.

When the IRS sends the unsigned tax return back to the taxpayer, it does not retain an image of the tax return it mails back, or even track that the IRS received an unsigned return. In the case of balance due tax returns, the IRS cashes any attached payment, but loses all the information on the unsigned return, with no guarantee that the taxpayer will sign and re-mail the tax return back to the IRS. The taxpayer may not bother mailing the return a second time, especially since the taxpayer is filing a tax return to show a balance due, not a refund. The tax return may include income not reported by payers on information returns to the IRS. We are concerned that the IRS is choosing not to keep that valuable information.

If the taxpayer does sign and mail a balance due tax return back to the IRS, the received date used to compute penalties and interest (if the taxpayer did not timely full pay the balance) will never be the original received date of the unsigned return. At best, if the taxpayer mails the tax return back to the IRS within 30 days, the IRS uses the date it sent the tax return back for signature as the received date.¹⁸³ Without any tracking of the unsigned returns, the IRS must rely on what the taxpayer mails back to the IRS to make this determination, which introduces many opportunities for error. The National Taxpayer Advocate is concerned that this process will result in taxpayers with balances owed being assessed incorrect penalties and interest if:

• The taxpayer submits a new copy of the return;

• The taxpayer removes the IRS correspondence before mailing it back;

• The IRS encounters delays in sending the unsigned tax return back to the taxpayer; or

• Submission Processing erroneously processes the return as received when returned.

D. IRS Measures of Filing Season Success Are Limited

The IRS traditionally measures filing season success by reporting:

• Number of returns received;

• Refunds issued;

• Visits to the IRS website (www.irs.gov); and

• Total assistor calls answered and the accuracy rates of those calls.¹⁸⁴

The IRS has increased and improved its online tools for taxpayers to find out if they qualify for credits and obtain refund information. But the increase in rejected returns during the 2010 and 2011 filing seasons is a clear indication that taxpayers are still confused by the ever-changing nature of eligibility for certain tax credits and may still make errors that cause processing problems with their returns.¹⁸⁶

Filing season measures should include more than just return receipts and phone call statistics. The annual aging of amended return processing and correspondence overage are equally important indicators of filing season "success" because they measure the IRS's level of service to taxpayers.

E. TAS Is Concerned that IRS Implementation of the Adoption Credit May Unduly Burden Eligible Taxpayers

The Patient Protection and Affordable Care Act increased the maximum adoption credit amount from $12,150 to $13,170 to adopt an eligible child (IRC § 36C),¹⁸⁷ and made the credit fully refundable for 2010 and 2011. The eligibility rules are different for domestic, foreign, and special needs child adoptions. However, in all three categories, taxpayers claiming the credit are no longer eligible to file electronically because the IRS requires filing of paper documentation with Form 8839, Qualified Adoption Expenses.

Because the IRS held the refund of the adoption credit, taxpayers once again shared their frustration on Facebook, blogs, and tax software forums -- and came to TAS for assistance. Although the IRS held the adoption credit refunds to combat fraud, such decisions do have a downstream effect on taxpayers who are eventually deemed eligible for the credit, and these cases should be provided timely review.

TAS identified the following concerns stemming from IRS administration of the refundable adoption credit:

• During audits, IRS examiners sent letters to taxpayers asking them to provide documentation before reviewing what information the taxpayers had included with the original returns; thus, taxpayers who submitted documentation with their returns had to send it in twice;

• The IRS did not clearly inform taxpayers about how long it would take to audit their returns and when they could expect their refunds;

• IRS examiners were not knowledgeable about the expanded adoption credit under the Patient Protection and Affordable Care Act and how to handle the credit claimed for special needs children; and

• The hold on issuing the adoption credit portion of the refund caused financial burden for some taxpayers.

• 2. TAS Actions in FY 2012

A. TAS Analyzes Economic and Systemic Burden Case Receipts for Process Improvements

Taxpayers come to TAS when:

• They have experienced a tax problem that causes financial difficulty;

• They have encountered problems trying to resolve their issues directly with the IRS; or

• An IRS action or inaction has caused or will cause them to suffer a long-term adverse impact, including a violation of their rights.

• Economic Burden -- Cases in which a taxpayer is experiencing financial difficulty;

• Systemic Burden -- Cases in which an IRS process, system, or procedure has failed to operate as intended, and as a result, the IRS has failed to timely respond to or resolve a taxpayer's issue;

• Equitable Treatment or Taxpayer Rights Issues -- Cases accepted to ensure that taxpayers receive fair and equitable treatment or that taxpayers' rights are protected; and

• Public Policy -- Cases accepted when the National Taxpayer Advocate determines that compelling public policy warrants assistance to an individual or group of taxpayers.¹⁹⁵

          FIGURE IV.1, TAS CASE RECEIPTS, CLOSURES, AND RELIEF RATES,

 

FIGURE IV.2, TAS ECONOMIC BURDEN RECEIPTS BY QUARTER,

 

FY 2007 THROUGH SECOND QUARTER FY 2011²⁰⁰

 

 

 

      FIGURE IV.3, TOP FIVE ECONOMIC BURDEN CASE ISSUES FY 2009 THROUGH FY

• A continued increase in tax-related identity theft;

• Increased public awareness of identity theft;

• Identity thieves have become more proficient; and

• Personal information has become readily-accessible.²⁰⁷

B. TAS Identifies Problems and Trends Which Negatively Impact Taxpayers and Advocates to Resolve These Issues

By analyzing the underlying issues involved in individual casework, TAS identifies trends that also affect larger groups of taxpayers and uses that information to work with the IRS to resolve the broader issues.²⁰⁹ Figure IV.4 lists the top 15 issues facing taxpayers.

             FIGURE IV.4, TOP 15 ISSUES FOR CASES RECEIVED IN TAS,

The civil side (as opposed to the criminal side) of the Questionable Refund Program, previously administered by the IRS Campus Fraud Detection Centers, was transferred to the W&I Division's Accounts Management function and is now referred to as the Accounts Management Taxpayer Assurance Program. AMTAP 's primary focus is revenue protection and to accomplish this, it selects questionable returns for verification prior to releasing refunds. These returns are screened through the Electronic Fraud Detection System (EFDS) to verify the accuracy of taxpayers' wages and withholding.

If income documents are not initially verifiable, AMTAP employees begin a manual process to verify wages and withholding.²¹⁶ This verification process can take up to 13 weeks.²¹⁷ While this is necessary, such delays can create financial hardship for taxpayers who are awaiting legitimate refunds.

So far in FY 2011, thousands of TAS's requests for assistance from AMTAP to release legitimate refunds have gone unanswered.²¹⁸ Through May, TAS issued 106 Taxpayer Assistance Orders to AMTAP in FY 2011.²¹⁹ The National Taxpayer Advocate has identified the AMTAP program as having systemic problems. She will research this issue in FYs 2011 and 2012, and discuss the findings and recommendations in the 2011 Annual Report to Congress.

C. Improvements in Advocacy

Creating an environment in which Case Advocates and Local Taxpayer Advocates are advocating for taxpayers on a case-by-case basis takes experience, encouragement, and training.²²⁰ In FY 2012, TAS will:

• Emphasize the importance of using TAO authority to resolve cases timely;

• Focus on specific issues where advocacy is needed to make improvements, such as EITC claims; and

• Improve the systems and guidance provided to Case Advocates, to make their jobs easier.

• 1. Importance of the Taxpayer Assistance Order

          FIGURE IV.5, TAOS ISSUED THROUGH MAY IN FY 2011²²⁷

D. Improving Advocacy in TAS Earned Income Tax Credit Cases

In FY 2010 TAS leadership evaluated what steps it could take to improve advocacy for taxpayers claiming the Earned Income Tax Credit.²²⁸ Relief rates in TAS for taxpayers claiming the EITC are below the rates TAS achieves on other issues.²²⁹ In 2004, the National Taxpayer Advocate conducted a study in cooperation with the IRS to determine whether additional contacts and interaction with the taxpayer improved the chances of taxpayers receiving the credit, during audit reconsiderations.²³⁰ The study found that several approaches could increase the likelihood of taxpayers receiving the EITC to which they are entitled, including:

• Increasing telephone usage to engage taxpayers;

• Providing taxpayers a better explanation of the specific documentation needed to support the EITC claim, and assistance in securing the documentation; and

• Improving communication with taxpayers during the initial audit.²³¹

• Additional Phone Contacts in No Relief Cases -- In 38 percent of the cases, TAS had no direct phone contact with the taxpayer. In an additional 37 percent of cases, there was only one direct phone contact. In other words, in over 75 percent of these cases there was either no telephone contact or only one contact with the taxpayer. The interactive nature of a phone call allows taxpayers to better understand what supporting documentation they need to substantiate an EITC claim.

• Need to Provide More Assistance and Explanation of Documentation Requirements -- In cases where the taxpayer's relationship to the child was at issue, only eight percent of the relationships as presented were non-qualifying relationships.²³³ Moreover, in 70 percent of the cases with a qualifying relationship (where the relationship is known), the relationship was other than the taxpayers' biological children. This suggests that taxpayers struggle with proving qualifying relationships, particularly when the child is not the taxpayer's biological child.

• More Use of IRS Information Systems -- In 24 percent of cases, the Case Advocate did not utilize Examination-based systems that reflect what aspect of the taxpayers' claims are at issue. Failure to identify the item questioned by the IRS leads to TAS requesting unnecessary information from the taxpayers.

• EITC Cases Worked in the Campus -- EITC cases in TAS are worked predominantly (98 percent of cases) in the ten TAS campus offices and not in the local TAS offices in the states where the taxpayer lives. In a 2007 TAS survey of taxpayers involved in EITC audits, 70 percent of respondents preferred to communicate with the IRS in a manner other than correspondence, with 23 percent preferring to communicate in person.²³⁴ However, meeting face-to-face with a taxpayer at a campus is difficult.

• Improve Training Material -- The team also found that EITC training material for TAS Case Advocates does not adequately explain how to advocate for taxpayers claiming the credit.

• Developing guidance for employees that emphasizes the following: increased phone contacts with taxpayers; increased use of internal IRS systems; awareness of alternative documents that can satisfy some EITC substantiation requirements; and additional steps TAS can take to effectively advocate for the taxpayers. The National Taxpayer Advocate will conduct EITC training for all TAS Case Advocacy and Systemic Advocacy employees.

• Changing the case transfer guidelines that now direct EITC cases to TAS campus offices so that the bulk of these cases can be worked in the TAS local office near the taxpayer's residence. EITC cases will be transferred to the TAS office in the state where the taxpayer lives. TAS can better assist and explain required documentation when Case Advocates have knowledge of specific state requirements for securing documentation, such as copies of birth certificates, to prove taxpayer/qualifying child relationships. In addition, routing cases to the local TAS office increases the opportunity to meet face-to-face with the taxpayer.

• Longer timeframes for taxpayer response, including reminders by letter or telephone;

• Enhanced phone contact with taxpayers;

• More informative explanations and examples of what documentation is required;

• Improved quality of correspondence; and

• Additional training.

E. TAS Access to IRS Systems and Other Automated Technologies

As described above, with respect to TAS's EITC advocacy improvement, TAS employees advocate more effectively and efficiently when they have access to the same compliance systems as IRS employees. This access allows employees to identify the issues raised by the IRS on the taxpayers' accounts, and minimize burden on the taxpayer by only requesting documentation on aspects of the taxpayer's account that are at issue.

TAS employees currently have access to key IRS systems, including:

• Integrated Data Retrieval System (IDRS), used by most IRS employees working taxpayers' accounts;

• Integrated Collection System (ICS), used by revenue officers and Technical Service employees;

• Report Generating Software (RGS) system, used by examination personnel;

• Treasury Check Information System (TCIS), used to provide tracing data on checks issued by the Treasury department;

• Automated Insolvency System, which provides information on taxpayers in bankruptcy;

• Correspondence Imaging System (CIS), which allows users to view correspondence and case notes online; and

• Automated Offer in Compromise (AOIC ) System, which tracks and controls offers in compromise.

• Online Retrieval System (provides Social Security data);

• Automated Lien System (provides information about liens filed in local jurisdictions);

• Integrated Automation Technologies (an entire suite of tools programmed to make the jobs of employees easier), including an Erroneous Manual Refund tool that prevents the release of an erroneous refund to taxpayers; a Credit Transfer tool to make credit transfers easier; and a Balance Due/Refund tool to make determination of the exact amounts due to and from taxpayers easier); and

• Return Request Display (displays taxpayer returns without the need to obtain a paper copy).

F. Improving Case Advocacy Business Measures

Case Advocacy maintains various business measures, including case quality, efficiency, customer satisfaction, and employee satisfaction.²³⁶ These measures constitute part of TAS's balanced measures system, which is structured not to emphasize achieving numerical targets, but rather the management of processes and people to achieve TAS's mission of helping taxpayers resolve problems with the IRS.²³⁷

With respect to business measures across the IRS, the National Taxpayer Advocate has encouraged measures that promote the IRS's underlying mission, as opposed to measuring the number of activities completed during a short-term measurement period, e.g., cycle time.²³⁸ Measuring for cycle time can promote premature case closures, and can de-emphasize getting to the right answer for all taxpayers. Likewise, TAS engages in periodic assessments to determine whether its own measures are promoting the TAS mission of advocacy. TAS has changed its case quality measures, is planning to improve its customer satisfaction survey process, and is developing an efficiency measure to provide the organization with information about the volume and quality of work performed relative to the resources devoted to complete the work.²³⁹

While TAS leadership was pleased with these results, comments from taxpayers, employees, and practitioners, as well as case quality data, convinced the National Taxpayer Advocate that performance of TAS's underlying mission could be enhanced by emphasizing attributes closer to the roots of taxpayer advocacy. These include correspondence written in plain English without technical tax jargon, more phone contacts with the taxpayer, taxpayer education, an explanation of administrative appeal rights, and decisive substantive actions on cases as opposed to periodic "touches" of a case simply to meet a quality standard.²⁴²

In FY 2011, TAS substantially expanded its quality review process to emphasize taxpayer advocacy, including explanation of recourse and applicable appeal rights. TAS's new review measures identify performance in four primary categories:

• Timeliness -- Are we resolving taxpayer issues in an expeditious manner?

• Communication -- Do communications provide correct information, with a clear and complete explanation of the actions we took?

• Accuracy -- Have we addressed and resolved all issues?

• Technical -- Were the actions we took technically correct?

In FY 2010, nearly 16,000 taxpayers or their representatives, sampled from the 74 TAS offices, responded to TAS's customer satisfaction survey.²⁴³ TAS customers continue to report favorable overall satisfaction with TAS (85 percent satisfied in FY 2010 and 84 percent in FY 2009).²⁴⁴

In FY 2012, TAS will seek to enhance customer service through survey program changes that will better enable TAS to target improvements. TAS evaluated whether the existing telephonic survey reached a representative sample of the population served by TAS and allowed the taxpayer a sufficient ability to respond. TAS also considered how well the survey data accurately reflected taxpayers' satisfaction, whether it enabled TAS to target specific areas of improvement, and how TAS could more effectively use the data to drive improvements.

As a result of its review, and to enhance the effectiveness of the survey program for FY 2012 and beyond, TAS will:

• Explore alternative survey methods, such as adding an online survey option, to secure greater and more diverse customer participation and potentially reduce administrative costs;

• Determine whether revised survey questions encourage customers to fully describe their experience and level of satisfaction;²⁴⁵ and

• Improve advocacy by focusing on improvement efforts around the two questions that have the greatest impact on TAS's ability to provide better service.²⁴⁶

In March, the National Taxpayer Advocate issued a memo to senior staff outlining the TAS vision for systemic advocacy, including the overall approach to the organization.²⁴⁷ By design and by statute,²⁴⁸ systemic advocacy is the responsibility of all TAS employees. The Executive Director of Systemic Advocacy is responsible for coordination of various aspects of systemic advocacy efforts, but each function within TAS has a responsibility to identify and work systemic issues. To reinforce the National Taxpayer Advocate's vision, the TAS Office of Systemic Advocacy,²⁴⁹ hereinafter referred to as Systemic Advocacy, has implemented several new initiatives:

The majority of Systemic Advocacy's work is generated through submissions to the SAMS system.²⁵¹ Between April 1, 2010 and March 31, 2011, TAS received 1,245 SAMS submissions, an increase of 44 percent over the previous year.²⁵² TAS employees remained our largest source of submissions, but TAS experienced a large increase in submissions from taxpayers and practitioners, which account for 42 percent of the total.²⁵³ Figure V.1 shows the breakdown of SAMS submissions by the type of submitter.

 

FIGURE V.1, SAMS SUBMISSIONS BY SUBMITTER, APRIL 1, 2010 THROUGH

 

MARCH 31, 2011²⁵⁴

 

 

 

 

FIGURE V.2, SAMS SUBMISSIONS BY ISSUE AREA, APRIL 1, 2010 THROUGH

 

MARCH 31, 2011²⁵⁶

 

 

 

At Levels 2 and 3, cross-functional TAS teams will review all issues and related research gathered at Level 1, and rank the issues based on a set of criteria.²⁵⁸ Systemic Advocacy has expanded the issue-ranking methodology to mirror the criteria used to rank Most Serious Problems for the Annual Report to Congress.²⁵⁹ The new process will incorporate the perspective of individuals from throughout TAS who have exposure to the issues and can lend their expertise and experience to help determine their true scope and impact, as well as the most effective way to resolve the systemic problems.

C. Proactive Solicitation of Potential Systemic Issues

While the new SAMS review process will improve the analysis of potential systemic problems, in FY 2012 Systemic Advocacy will focus on improving awareness of its program responsibilities and efforts and increasing the quality of SAMS submissions. TAS will develop and implement a comprehensive outreach and marketing strategy to promote proactive identification and elevation of potential systemic problems through SAMS. To increase the use of SAMS, TAS will work to promote awareness within the IRS, as well as with the public, and will examine any link between outreach activities and an increase in SAMS submissions. TAS will conduct a similar analysis to determine if new legislation or IRS program implementation (such as health care or regulation of return preparers) have produced any significant increase in SAMS submissions. Systemic Advocacy will also improve its analysis of Case Advocacy data, including identifying emerging case issues, to ensure that it receives the right issues and selects the right projects.

D. Collaborative Approach to Resolving Systemic Issues

• Information Gathering Projects (IGPs) identify emerging trends or issues generated from new legislation or significant IRS policy, process, or procedural changes. An IGP allows Systemic Advocacy to capture and track emerging issues for potential systemic problems. An IGP may be reclassified as an Immediate Intervention, Advocacy Project, or other ongoing advocacy effort if the research indicates additional action must be taken to resolve the issue.

• Immediate Interventions are the result of an operational issue that causes immediate, significant harm to multiple taxpayers and demands an urgent response. These issues cannot be resolved quickly through the normal corrective process, have clear sources, and are highly visible and sensitive locally, area-wide, or nationally.

• Advocacy Projects identify and address systemic and procedural issues, analyze the underlying causes of problems, and propose corrective action.²⁶⁰ Although advocacy projects are similar to Immediate Interventions, the nature of the issue does not require immediate action by Systemic Advocacy and may require more extensive research and negotiation with the IRS.

      FIGURE V.3, SYSTEMIC ADVOCACY INVENTORY, APRIL 1, 2010

• Advocacy Portfolios -- Local Taxpayer Advocates (LTA s) maintain Advocacy Portfolios as assigned by the National Taxpayer Advocate.²⁶³ Advocacy Portfolios bring a grassroots perspective to national advocacy issues and help TAS integrate case advocacy with systemic advocacy. Each LTA is assigned an Advocacy Portfolio for which he or she will serve as a TAS representative from a national perspective. When a systemic problem is related to an existing Advocacy Portfolio, the issue may be elevated to the Portfolio Advisor in the Office of Systemic Advocacy to be included in his or her ongoing work.

• Executive Steering Committees -- TAS executives sit on various Executive Steering Committees within the IRS. These groups discuss ongoing high-level issues and make policy decisions. When a systemic problem is related to an existing Executive Steering Committee, the submission may be elevated to the TAS executive sitting on the Committee.

• Task Forces -- Task Forces are temporary working groups established to accomplish a defined objective. A task force may be internal to TAS or a collaborative venture with the IRS. When a systemic problem is related to an ongoing Task Force, the issue may be elevated to the Task Force for inclusion in its efforts.²⁶⁴

• IMD/SPOC -- The Systemic Advocacy Internal Management Documents (IMD)/Single Point of Contact (SPOC) group is responsible for TAS clearance of IRS Internal Management Documents including Internal Revenue Manuals (IRMs), Servicewide Electronic Research Program (SERP) alerts,²⁶⁵ and revisions to forms, publications, and notices. The IMD/SPOC group coordinates TAS review and response to all IRS IMDs that impact taxpayers. IMD/SPOC coordinates and manages the review process with a wide range of subject matter experts within TAS to ensure taxpayer rights are protected and burden is minimized. IMD/SPOC has responsibility for TAS input on clarity of correspondence, notice redesign, and notice elimination activities. IMD/SPOC also plays a key role in monitoring IRMs, notices, forms, and publications for changes that relate to Annual Report recommendations. Between April 1, 2010 and March 31, 2011, Systemic Advocacy made 698 suggestions to the IRS on IMD/SPOC documents.²⁶⁶ Of those suggestions, 68 percent or 474 were accepted.²⁶⁷

• Advocacy Proposal -- When the IRS is slow or reluctant to embrace the concerns raised by TAS through an immediate intervention or advocacy project, an advocacy proposal may be considered. An advocacy proposal is a formal, written memorandum of a recommended change presented to an Operating Division (OD) or function empowered to implement the change. Analysts typically make informal advocacy proposals to their peers in the operating divisions. When informal advocacy proposals are not accepted, Systemic Advocacy assembles a formal, written advocacy proposal that highlights the problem and proposes changes to policy or procedure to alleviate taxpayer burden. The Executive Director, Systemic Advocacy signs all advocacy proposals and issues them to the OD or function.

• Taxpayer Rights Impact Statement -- A Taxpayer Rights Impact Statement (TRIS) is a written analysis from the National Taxpayer Advocate to the particular OD or function relating to the IRS activity or procedure that infringes on taxpayers' rights or unnecessarily burdens taxpayers. TAS will generally not send a TRIS until after the OD or function is given an opportunity to work with the National Taxpayer Advocate to resolve the issue.²⁷¹

• Taxpayer Advocate Directive -- Delegation Order 13-3 provides the National Taxpayer Advocate with the authority to issue a Taxpayer Advocate Directive (TAD).²⁷² TADs mandate that the IRS make certain administrative or procedural changes to improve a process, or grant relief to groups of taxpayers (or all taxpayers).²⁷³ The authority to issue a TAD is delegated solely to the National Taxpayer Advocate and may not be redelegated. TAD s are limited to situations in which the National Taxpayer Advocate has previously requested, in writing, a change to improve a functional process or grant relief to a group of taxpayers. TADs do not interpret law and will only be used when the National Taxpayer Advocate believes specific actions are necessary to:

• • Protect the rights of taxpayers;

  • Ensure equitable treatment of taxpayers; or

  • Provide an essential service to taxpayers.

• Annual Reports to Congress -- IRC § 7803(c)(2)(B) requires the National Taxpayer Advocate to submit two reports each year to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate. These reports are the National Taxpayer Advocate's Fiscal Year Objectives Report to Congress and the National Taxpayer Advocate's Annual Report to Congress.²⁷⁴ The National Taxpayer Advocate can elevate systemic issues and make recommendations for resolution through inclusion in the Annual Report to Congress. In instances where resolution of a systemic issue involves a legislative change, the National Taxpayer Advocate can include a Legislative Recommendation in the Annual Report.

E. Advocating through the National Taxpayer Advocate's Annual Report to Congress

Each year in the Annual Report to Congress, the National Taxpayer Advocate makes numerous recommendations to improve tax administration for both taxpayers and the IRS. These recommendations play an important role in TAS's efforts to resolve systemic problems within the IRS. TAS's efforts do not end when the Annual Report is published, as Systemic Advocacy tracks TAS's recommendations and the IRS's response and subsequent actions. For each Annual Report, Systemic Advocacy develops a report outlining TAS's recommendations and the IRS's responses. These reports are updated regularly, are an effective means of tracking TAS's ability to effect change and can be found on the TAS website.²⁷⁵

Figure V.4 details the status of the National Taxpayer Advocate's Annual Report recommendations over the past four years.

         FIGURE V.4, STATUS OF ARC RECOMMENDATIONS, CALENDAR YEAR (CY)

F. TAS Is Implementing Significant Changes to Systemic Advocacy Quality Measures

While Systemic Advocacy has made significant changes in FY 2011, the organization will undergo further changes in FY 2012. As part of the previously discussed memo on systemic advocacy, the National Taxpayer Advocate explained the need to bring current quality measures more in line with the systemic advocacy work done throughout TAS. However, measuring the effectiveness of TAS is a significant challenge, not least because systemic problems do not lend themselves to "unit" measurement and TAS usually has no direct control over whether the IRS actually implements any of its recommendations. Moreover, by design and statute, systemic advocacy is the responsibility of all TAS employees. Although the Office of Systemic Advocacy is responsible for coordination of various aspects of TAS's systemic advocacy efforts, and Field Systemic Advocacy works many of TAS's systemic advocacy projects, other TAS personnel have a responsibility to identify and work on systemic issues. Therefore, any measures of TAS systemic advocacy initiatives cannot be designed to solely measure the performance of a particular TAS office (e.g., the Office of Systemic Advocacy). Instead, the suite of measures should be designed to reflect the performance of TAS as a whole with respect to advocating for systemic improvements and change.

Future Systemic Advocacy quality measures will be broken down into three categories:

Following is a discussion of the research initiatives that TAS will conduct or take part in for the remainder of FY 2011 and during FY 2012.

TAS Research is currently collaborating with the IRS on two research studies addressing problems impacting taxpayers undergoing EITC audits. One study explores the use of third-party affidavits as an alternative form of documentation that would allow taxpayers to establish that the children they claimed meet the residency requirement. This would alleviate the burden many taxpayers experience when trying to prove that their children resided with them for the required six-month period during the calendar year. The second study is exploring whether enhanced communication with taxpayers during the EITC audit process helps them overcome communication barriers that can cause eligible taxpayers to be denied EITC.²⁸¹

A. Estimating the Impact of Liens on Taxpayer Compliance Behavior

The National Taxpayer Advocate has asked that TAS Research investigate the impact of Notices of Federal Tax Lien on the compliance behavior of delinquent taxpayers. This study is designed to explore the impact of lien filings on taxpayers' future payment and filing compliance and their ability to earn income.

To accomplish these objectives, TAS is analyzing a group of delinquent individual tax return filers who had no unpaid tax liabilities at the time they incurred liabilities on their TY 2002 returns. In the first phase of the study, we are developing a dataset of matched pairs of taxpayers, with each pair consisting of one case where the IRS filed a lien and another case where no lien was filed. The matched cases will be very similar, however, with respect to the characteristics the IRS uses to make a lien filing determination. We expect to complete this phase by the end of June 2011.

We will use the matched pairs in the second phase of the analysis to compare the lien and non-lien groups. This phase will employ regression analysis to determine what factors, including the NFTL itself, significantly affect the outcomes we are investigating (e.g., dollars collected or future filing compliance), and the extent to which the various factors influence these outcomes. TAS plans to complete this study by the end of December 2011.

B. Evaluating the Limited English Proficiency (LEP) Populations Served by the Low Income Taxpayer Clinics

Low Income Taxpayer Clinics (LITCs) represent low income taxpayers in disputes with the IRS, or educate taxpayers for whom English is a second language about their rights and responsibilities as U.S. taxpayers. LITCs provide services to eligible taxpayers for free or for no more than a nominal fee.²⁸²

In response to a GAO audit reviewing IRS responsiveness to taxpayers with limited English speaking ability, TAS will provide LITCs with analyses of the LEP populations the clinics serve.²⁸³ TAS will conduct the analyses by using data from the Census American Community Survey, which annually collects information from approximately two million respondents throughout the United States. Researchers can aggregate multiple years of data to ensure an adequate sample size when they conduct local-level analyses.

One area the survey investigates is English speaking proficiency, asking respondents to identify the language they speak at home and state their level of proficiency in English. TAS will use this data to identify the LEP communities of significant size in the areas the LITCs serve, and will share the results of the analysis with the clinics.²⁸⁴ Our target date for completion of this initiative is the end of April 2012.

C. Factors Impacting Taxpayer Compliance

TAS is pursuing a multi-year initiative to explore the factors that motivate taxpayer compliance behavior. Broadly speaking, these include not only the expected likelihood and cost of getting caught cheating (called "economic deterrence"), but other factors such as compliance norms, trust in the government and the tax administration process, complexity and the convenience of complying, and the influence of preparers.

As a part of this effort, TAS has contracted with a vendor to help design and conduct two telephone-based surveys whose objectives include identifying and quantifying the major factors that drive taxpayer compliance behavior. TAS is currently developing questions for the survey, which will cover a representative sample of taxpayers with sole proprietor income (i.e., Schedule C, Profit or Loss From Business (Sole Proprietorship)). One of the surveys will cover a national sample of taxpayers and will explore the factors potentially influencing compliance behavior at a high level. The second survey will cover a small sample of high and low compliance communities and will "drill down" to evaluate whether taxpayers' affiliations within their communities appear to influence compliance behavior. TAS will gauge the respondents' level of compliance by using the IRS's "DIF" computer algorithm that estimates the likelihood that an audit of the taxpayer's return would produce an adjustment.²⁸⁵

In 2011, TAS will complete the survey design, develop the sample, and seek Office of Management & Budget (OMB) approval.²⁸⁶ In 2012, the vendor will conduct the survey. TAS and the vendor will jointly analyze the results for any evidence of a significant correlation between relevant taxpayer attitudes and beliefs and taxpayer compliance behavior. Our goal is to complete the survey analysis and publish our final report by the end of 2012.

D. Identification of Excessive Collection Statute Expiration Dates (CSEDs)

In general, once tax has been assessed, the IRS only has ten years after the assessment to collect the tax.²⁸⁷ In certain situations, however, the IRS and a taxpayer can agree to an extension of the statute of limitations on collection. SB/SE and TAS recognize the burden that CSEDs extended beyond 15 years after assessment (plus any statutory suspensions) may impose on taxpayers. For that reason, SB/SE now prohibits CSED extensions in excess of five years beyond the normal ten-year collection statute period.²⁸⁸ TAS and SB/SE have formed a workgroup to review all cases where CSED extensions may be excessive given current law and IRS policies. This initiative is the result of previous TAS recommendations concerning erroneous and excessively long CSEDs.²⁸⁹ The workgroup objectives are:

• To identify and review all accounts with CSEDs extended beyond 15 years after assessment (plus any statutory suspensions);

• To resolve accounts, and if necessary correct CSEDs on accounts with CSEDs extended beyond 15 years after assessment (plus any statutory suspensions); and

• To report findings on each account and propose appropriate resolutions.

E. TAS Efficiency Measure

The GAO issued a report in 2007 acknowledging TAS customers' ongoing satisfaction with TAS services, also noting that customer satisfaction and case quality remained high despite significant increases in inventory.²⁹⁰ The report also found, however, that TAS had not developed a true measure of case advocacy efficiency or developed a unit cost per case type.²⁹¹ The National Taxpayer Advocate and the TAS Office of Research reviewed efficiency models used throughout government and private industry with the goal of identifying an efficiency measure that is meaningful to management, easy to understand, and that when applied to TAS will assist the organization in furtherance of its advocacy mission. TAS did not identify an existing efficiency measure to meet its goals during this review. As a result, TAS is developing a measure that will provide management with important information about the resources used to serve taxpayers who come to TAS each year, factoring in the complexity of the case work, as well as a time factor, and adjusted for the overall quality of the work so that quality is not sacrificed for efficiency's sake.²⁹² In particular, the plan requires TAS to capture the direct time actually spent by caseworkers on cases.

By June of 2009, TAS had completed the programming changes and other enhancements needed to implement a time-tracking system that allows us to measure direct case time. TAS is now collecting and analyzing the direct time spent on cases. TAS expects that some types of cases will require more direct time from Case Advocates than others because they are inherently more complex, so the efficiency measure will account for the complexity of the case and include many different complexity factors. This research will pave the way for the development of a TAS case advocacy efficiency measure. TAS will also incorporate case quality measures that address timeliness and effectiveness in the case efficiency measure calculation.

TAS plans to develop recommendations for possible formulas for efficiency measure by the end of FY 2011 and to test these formulas and establish baseline data during FY 2012. TAS will implement a final case efficiency measure when the Taxpayer Advocate Service Information System (TASIS) is operational.²⁹³

F. TAS Workload Distribution Case Weighting

TAS is improving its workload distribution system and is developing a "case weighting" methodology in support of this effort. To implement case weighting, TAS will adapt the methodology (described above) used to develop a case advocacy efficiency measure, i.e., estimating the amount of Case Advocate direct time that each case requires, based on information about the case complexity and taxpayer issues involved.

The new workload distribution system will use these direct time estimates,²⁹⁴ along with a measure of the elapsed time spent working a case, to estimate the time each Case Advocate will need to work his or her existing inventory. TAS expects this information to improve the case assignment process and the efficiency of our Case Advocates, minimize case processing costs, and increase taxpayer satisfaction. TAS plans to test the direct time estimates it develops in FY 2012.

 

FIGURE VII.1, TAS STAFFING FROM FY 2007 THROUGH FY 2011

 

THROUGH JUNE 4²⁹⁵

 

 

 

TAS recognizes that it has limited resources available to it and cannot hire significantly more Case Advocates (CAs) to address rising receipts. Thus, TAS has focused on achieving the right mix of staffing within its case advocacy function to free up CA time for working directly on cases. For example, TAS created two new case advocacy positions to work with the existing Case Advocates -- the Intake Advocate (IA) and the Lead Case Advocate (LCA). Intake Advocates expedite the handling of initial receipts by performing a variety of upfront activities to relieve CAs of these duties, e.g., answering general telephone calls, determining if a taxpayer's inquiry meets the criteria for accepting the case into TAS, inputting new cases into TA MIS, building cases by pulling case-related information and supporting research from other systems, and resolving some inquiries where the issues are limited. LCAs conduct non-evaluative reviews of the Case Advocates' work to identify trends and provide guidance. LCAs also provide one-on-one coaching and instruction to Case Advocates, helping them resolve complex cases more quickly and efficiently. Although they do not carry a full complement of cases, LCAs are assigned the most complex and sensitive cases to resolve. Figure VI.2 below shows how TAS has incorporated these new positions into the Case Advocacy mix since FY 2007.

 

FIGURE VII.2, TAS CASE ADVOCACY STAFFING, FY 2007 THROUGH FY 2011

 

THROUGH JUNE 4²⁹⁷

 

 

 

Over 90 percent of TAS's resources are devoted to staffing.²⁹⁸ Most of the remaining resources are for the Low Income Taxpayer Clinic program, leaving a relatively small amount for non-labor expenses such as program travel and critical technical training. In FY 2011, TAS was funded at 2010 levels minus a 0.2 percent rescission. To absorb this reduction, TAS reduced non-labor spending (training, travel, supplies, and services) by 40 percent. Any significant reduction in TAS's FY 2012 budget could critically impact our ability to maintain an adequate number of Case Advocates. In FY 2012, TAS will continue to work within its budget limitations to meet critical staffing needs by maintaining the current number of critical front-line employees handling casework.

A. With Budgetary Challenges, TAS Looks to Alternative Methods for Providing the Annual All-Employee Training Symposium

TAS has held an annual, all-employee Training Symposium for nine years because of the many benefits our employees and organization realize from this event, including:

• Quality technical and professional training for the entire workforce;

• Direct communication of key organizational messages from TAS executives to the entire workforce;

• Team meetings with Area and Headquarter Directors to discuss operational issues and to promote advocacy and team work;

• Informal discussions where employees from across the country share and discuss experiences and practices that help improve customer service;

• Opportunities for IRS employees to network with TAS employees, attend workshops to gain a better understanding of advocacy, and educate TAS employees on IRS processes and procedures; and

• Expanded training opportunities for employees to view taped Symposium training sessions for courses they did not attend.

During the FY 2010 Symposium, TAS developed 60 workshops for Case Advocates, Intake Advocates, Analysts, Support Staff, and Managers.³⁰⁰ TAS offered most of these workshops multiple times because more than 1,875 employees attended the Symposium over a two-week span. In all, TAS delivered 380 sessions during the Symposium.³⁰¹

Because of the budget situation impacting all federal agencies, TAS cancelled the Symposium for FY 2011. However, TAS has resolved to develop as many as 74 workshops that would have been held face-to-face at Symposium and deliver this training through virtual methods.

TAS will face a new set of challenges using virtual training, including time zone differences, planned and unplanned employee absences, workload balancing issues, and distractions in an office setting. To overcome these challenges, TAS will:

• Extend the training window from the standard approach of holding two consecutive one-week sessions, with half of TAS employees attending each week, to a period of six months to maintain a balance between training and workload needs;

• Revise the guidelines for those who develop the workshops to reflect the differences between writing virtual and classroom training material; and

• Conduct formal virtual instructor training sessions to provide instructors with the right skills to deliver virtual training.

Current TAS and IRS systems, designed and developed as stand-alones, share little if any information electronically. TAS employees must manually cut and paste or re-type information from one system to another. Intake Advocates, who take initial case-building actions, must painstakingly research information from several different systems to develop a clear and accurate picture of the issues or problems taxpayers are facing. Case Advocates, who are responsible for resolving taxpayer issues and problems, continually monitor multiple IRS systems to prevent additional problems, such as duplicate refunds or erroneous notices.

TASIS will allow TAS employees to obtain automated information from IRS systems, sparing them laborious hours of research, updating, and monitoring taxpayer accounts and records. This automation of work processes will free Case Advocates and Intake Advocates to focus on aspects of the work they are truly passionate about and where their skills truly lie -- direct interaction with taxpayers and resolution of taxpayer issues, thereby increasing employee engagement while satisfying customers.

TASIS will integrate the features of TAS's current system applications with new features to enhance the overall experience of TAS employees and the service provided to taxpayers. The linking of all TAS applications within a single integrated system has been a part of TAS's plans for a decade. Now, advancing technology and the obsolescence of TAS's primary system for tracking cases makes system integration a necessity.

For the first time, one system will record the wide range of TAS activities that resolve or prevent problems for taxpayers. Tracking these activities in a single, integrated system will improve TAS's ability to apply consistent labels across all advocacy efforts, providing a new level of information for analysis, and identifying the pattern of a problem more quickly. For example, solutions employed in one part of the country may provide insight to help taxpayers in another part of the country. A single-system approach also means that employees will have one TAS system to learn and maintain, with associated cost savings.

Performance measures are fundamental to TASIS development. TAS turned to system users for their ideas on what aspects of TASIS should be included to promote employee and customer satisfaction and efficiency improvements. TAS asked all of its employees to Integrated TAS Technology identify system features that would contribute to the quality and efficiency of their work, as well as aspects of the current system that frustrate and hinder performance. Several hundred insights were collected. Additionally, nearly 100 TAS employees accepted the challenge and described how they need to interact with the system, how TASIS might use data from other IRS systems to reduce repetitive research and transcription, and how reminders and prompts could help them manage customer commitments and provide quality service.

A. TASIS Will Enhance Online Document Collaboration and Storage

In recommending an integrated design, systems analysts emphasized electronic document management, i.e., storage within the system for case files, communications, and research findings. Paper records pose efficiency and reliability problems, including time-consuming file retrieval, opportunity for loss, and limited ability to share information between offices. Reliance on paper files and documents requires storage and handling of 50 to 60 documents per case, totaling approximately 12.5 million documents each year.³⁰² Some records are stored on local hard drives, and TAS incurs repeated copying and shipping costs for transfers, work reviews, and collaboration. The use of virtual documents will almost eliminate paper document handling and storage, allow immediate access for collaboration, and improve TAS's ability to reference the products or conduct research.

Moving toward a paperless environment, TASIS will offer document collaboration tools to gather and track edits, reviews, and approvals from remotely located users. It will also manage supporting documentation and reference materials associated with documents, and access to earlier reports and research. Finally, TASIS will provide tools to map project delivery documents so that participants and oversight users can see upcoming deadlines, assignments, and progress on the delivery of a finished product. Document collaboration and a centralized document repository will make content searchable and improve its usefulness.

B. TASIS Will Improve Submission, Acceptance, and Assignment of Work

With the implementation of TASIS, taxpayers will have both new and improved avenues for seeking assistance from TAS. Taxpayers will continue to have the traditional options of contacting TAS by phone, correspondence, and walk-in, with the added option of submitting issues electronically via the Internet. For the growing population of taxpayers who prefer to conduct business electronically, this option will allow for an initial interaction, through a series of prompts, that will help taxpayers identify issues, find options for self-help when appropriate, access contact information for IRS operating division assistance, and request TAS assistance.

TAS is developing a pilot program in which taxpayers who seek help through the NTA toll-free line will find an improved direct transfer to a TAS Intake Advocate, as opposed to the current paper referral process and subsequent callback once the taxpayer's issue is assigned to a Case Advocate. Intake Advocates will conduct a comprehensive interview with the taxpayer to identify underlying issues, share options for resolution, describe what to expect from the TAS experience, build the case, and in some instances, resolve the issues while talking with the taxpayer. TASIS will provide the tools Intake Advocates will use to conduct research, document the contact, and efficiently build the case during these initial interviews with taxpayers.

Once a case is built, TASIS will quickly match the taxpayer with a Case Advocate based on where the taxpayer lives (taxpayers will predominantly be matched with Case Advocates in their home state), and the availability, skill, and workload of the advocate. The advocate's inventory, or number of assigned cases, will no longer be the focus of casework assignments. Instead, new work assignments will consider complexity as well as the time and steps needed to resolve similar case issues. TASIS will replace the existing manual assignment process that often involves intra-office transfers of cases.

C. TASIS Will Enhance Case Advocacy

TASIS will improve case handling by downloading data already available in IRS systems, thereby eliminating manual data entry, automating research and other actions, and creating templates to resolve common issues. With an improved inventory display, TASIS will allow caseworkers to map actions needed, use calendar tools to schedule their workload, and view scheduled tasks or appointments at a glance.

TASIS will assist Case Advocates in identifying issues requiring attention or factoring into case resolution, including an IRC § 7811 Significant Hardship Determination.³⁰³ Where possible, TASIS will perform routine research of account transactions for more consistent and prompt discovery of case details. TASIS will also identify other IRS functions involved with a case.

TASIS will offer new communication features that will document initial, subsequent, and closing taxpayer communications. These features will support new standards for protecting taxpayer privacy such as allowing TAS employees to identify phone numbers where TAS can leave confidential messages for a taxpayer. Clear identification of customer communication needs will limit disconnects due to language or physical ability. TASIS will also provide online updates and interaction tools to break down communication barriers posed by work schedules or time zone.

D. TASIS Will Provide New Case Resolution Tools

When TAS lacks the statutory or delegated authority to directly resolve a taxpayer's problem, TAS interacts with the responsible IRS operating division or function to resolve the issue via the Operations Assistance Request process.³⁰⁴ In FY 2010, Case Advocates submitted more than 275,000 OARs.³⁰⁵ Currently, TAS resolves issues by emailing (encrypted), mailing, and faxing information to the IRS, all of which take time. TASIS will reduce resolution time by electronically routing OAR s to the IRS, delivering the TAS recommendation and request for action, along with records and documentation supporting advocacy resolution. Similarly, TASIS will implement an electronic routing process for Taxpayer Assistance Orders to replace the current manual system. Finally, TASIS will support secure self-service features using the IRS internet site so that taxpayers can view case updates and obtain contact information for the advocate assigned to their cases.

E. TASIS Will Enhance TAS's Technical Assistance Process

TAS employs a network of technical advisors to assist Case Advocates assigned complex technical issues. TASIS will allow Case Advocates to research written guidance on technical topics using Technical Advice Training Initiatives (TATI). TATI will house briefing documents containing information, resources, and links to additional research on various case-related topics, Chief Counsel opinions, job aids, Internal Revenue Manuals (IRMs), and several online tools to assist in resolving complex taxpayer issues. This information will provide Case Advocates a point of reference for initial case discussions, prompting quicker case resolution.

When Case Advocates require detailed technical advice, they will be able to initiate a case referral to a technical advisor or an Attorney Advisor using TASIS. The system will provide referral resources to capture the question and route it to an advisor based on the advisor's skills and availability, with the option to indicate when the case requires expeditious assistance. The advisor will have access to the case file and appropriate reference material. The advisor will communicate directly with the Case Advocate and, if necessary, the taxpayer or representative. Improved recording of both questions and responses will support analysis for training opportunities or solutions that might benefit a broader group of customers and require a more sustained systemic advocacy effort.

F. TASIS Will Support Systemic Advocacy Efforts

Part of the TAS mission involves solving systemic problems with IRS processes or practices that have a negative impact on multiple taxpayers. Currently, employees who identify these systemic problems manually enter a description of the issue into a separate system, the Systemic Advocacy Management System. With TASIS, employees will identify systemic problems within open cases, saving time for Case Advocates and providing TAS analysts with case examples. TASIS will also allow for real-time analysis of trends in the types of cases coming to TAS to help identify systemic problems.

G. TASIS Will Use Key Words to Facilitate Accurate Electronic Research

As part of the development of TASIS, TAS has begun a major initiative to develop Information Architecture -- a method of organizing and labeling our digital information. This planning is critical to ensure the effective delivery and access of information to our employees.

TAS is establishing standards, guidelines, and parameters for metadata for both Case Advocacy and Systemic Advocacy. Metadata is "data about the data," i.e., structured keywords that make information easier to find, use, and manage. Metadata will help organize TAS's electronic resources, bring similar resources together, and support the preservation of key internal documents.

As TAS posts documents to internal and external websites, we are beginning to tag the documents with keywords that describe the document's content. The use of keywords will facilitate more accurate text-based language searches to locate information within TASIS. The primary benefit is that TAS will perform more effective case and systemic advocacy by having ready access to related materials and being able to see relevant material from all areas of TAS activity, breaking down the current "stovepipes" of information.

TAS began its efforts to standardize its metadata and identify keywords in FY 2011. Systemic Advocacy was the first department in TAS to begin tagging the documents it uses on its internal website with key words. In FY 2012, all of TAS will begin identifying and using key words as TAS transitions to TASIS and related information storage systems.

In FY 2011, the LITC program awarded nearly $10 million in matching grants to 165 nonprofit organizations and accredited academic institutions in all 50 states, the District of Columbia, and Puerto Rico. In awarding grants for FY 2012, TAS will continue to work toward the following goals:

• Ensuring that each state (plus the District of Columbia and Puerto Rico) continues to be served by at least one clinic; and

• Ensuring grant recipients demonstrate that they are serving geographic areas that have sizable populations eligible for and requiring LITC services.

Through outreach activities and educational workshops targeted to ESL taxpayers, clinics provide tax information directly to taxpayers and generate awareness of the clinic program among taxpayers who may be in need of tax assistance. In grant year 2010, clinics conducted over 11,200 outreach and education events.³⁰⁷ Additionally, clinics provided one-on-one consultations with more than 23,000 ESL taxpayers.

In conjunction with the National Taxpayer Advocate, the LITC Program Office, in the past year, created a mission statement that focuses on ensuring the fairness and integrity of the tax system by:

• Educating low income taxpayers about their rights and responsibilities;

• Providing pro bono representation to taxpayers in controversies with the IRS;

• Conducting outreach and education to taxpayers who speak English as a second language; and

• Identifying and advocating for issues that impact low income taxpayers.

During the upcoming fiscal year, the LITC Program Office will integrate the performance measures throughout the grant application, selection, review, and reporting processes. Publication 3319, Grant Application Package and Guidelines, is being updated in 2012 to reorganize and streamline the grant application and reporting processes. Standardized financial reporting forms and revised program reporting forms will be introduced to capture baseline performance information that can be aggregated and analyzed by the LITC Program Office.

In order to accomplish its mission, the LITC Program Office was restructured, and has hired and trained additional staff to provide greater assistance to and oversight of grantees. Site assistance visit procedures are being redesigned to include orientation visits and operational review visits. All new clinics will receive orientation visits within the first 120 days of their initial funding year to familiarize them with LITC Program requirements and to measure the progress of their start-up activities. Established clinics will receive operational review visits to observe and evaluate a clinic's internal and administrative controls, program activities, and services. In addition, the LITC Program Office will continue to foster the relationship between each clinic and the Local Taxpayer Advocate's office in the clinic's geographic area by having the LTA visit the clinic at least annually.

The LITC Program Office also intends to employ new technologies to provide grantees with guidance on both grant administration and technical tax issues. A new LITC program website is scheduled to debut during FY 2012, which will allow the LITC Program Office to provide guidance about program policies, and to share ideas, resources, and tools for providing innovative and quality services to taxpayers. Also, the LITC Program Office plans to expand its use of conference calls and webinars for training purposes. This past February, the LITC Program Office conducted its first training webinar on the topic of financial reporting by grantees and is developing a schedule of future training topics.

The National Taxpayer Advocate is concerned that TAP is reaching outside its original charter with its efforts, moving into compliance, collection, enforcement, and appeals issues, rather than focusing on improving IRS service and customer satisfaction. In addition, the volume of TAP issues is creating a burden for the IRS, which is required to respond to each issue.³⁰⁹ The combination of a heavy TAP workload and a perception that TAP has overstepped its bounds caused the National Taxpayer Advocate to initiate a change to the way the TAP operates.

The TAP will develop the details of the change in procedures in FY 2011 and implement them in 2012. The proposed refocus will look as follows:

• TAP Area Committees will remain focused on identifying grassroots issues but will no longer develop proposed solutions or recommendations;

• TAP members will review the issues to try to identify common themes and group issues that reflect a larger systemic concern; and

• TAP leaders will prioritize the systemic issues and present them to the IRS as possible TAP Project Committee topics for the upcoming year.

The TAP will also work with TAS to identify low- or no-cost ways to conduct meetings remotely to reduce travel expenses, while ensuring that TAP fulfills its original mission of advising the IRS on taxpayer service.

In 1996, Taxpayer Bill of Rights 2 (TBOR 2) amended IRC § 7802 (the predecessor to IRC § 7803), replacing the Office of the Taxpayer Ombudsman with the Office of the Taxpayer Advocate.³¹² The Joint Committee on Taxation set forth the following reasons for change:

• To assist taxpayers in resolving problems with the IRS;

• To identify areas in which taxpayers have problems in dealings with the IRS;

• To the extent possible, propose changes in the administrative practices of the IRS to mitigate those identified problems; and

• To identify potential legislative changes which may be appropriate to mitigate such problems.³¹⁴

TBOR 2 also replaced the joint Assistant Commissioner/Taxpayer Advocate Report to Congress with two annual reports to Congress issued directly and independently by the Taxpayer Advocate. The first report is to contain the objectives of the Taxpayer Advocate for the fiscal year beginning in that calendar year. This report is to provide full and substantive analysis in addition to statistical information and is due no later than June 30 of each calendar year. The second report is on the activities of the Taxpayer Advocate during the fiscal year ending during that calendar year. The report must identify the initiatives the Taxpayer Advocate has taken to improve taxpayer services and IRS responsiveness, contain recommendations received from individuals who have the authority to issue a TAO , describe in detail the progress made in implementing these recommendations, contain a summary of at least 20 of the Most Serious Problems (MSPs) which taxpayers have in dealing with the IRS, include recommendations for such administrative and legislative action as may be appropriate to resolve such problems, describe the extent to which regional PROs participate in the selection and evaluation of local PROs, and include other such information as the Taxpayer Advocate may deem advisable. The stated objective of these reports is "for Congress to receive an unfiltered and candid report of the problems taxpayers are experiencing and what can be done to address them. The reports by the Taxpayer Advocate are not official legislative recommendations of the Administration; providing official legislative recommendations remains the responsibility of the Department of Treasury."³¹⁶

Finally, TBOR 2 amended IRC § 7811, extending the scope of the TAO by providing the Taxpayer Advocate with broader authority "to affirmatively take any action as permitted by law with respect to taxpayers who would otherwise suffer a significant hardship as a result of the manner in which the IRS is administering the tax laws."³¹⁷ For the first time, the TAO could specify a time period within which the IRS must act on the order. The statute also provided that only the Taxpayer Advocate, the IRS Commissioner, or the Deputy Commissioner could modify or rescind a TAO , and that any official who so modifies or rescinds a TAO must respond in writing to the Taxpayer Advocate with his or her reasons for such action.

In 1997, the National Commission on Restructuring the Internal Revenue Service called the Taxpayer Advocate the "voice of the taxpayer." In its discussion of the Office of the Taxpayer Advocate, the Commission noted:

RRA 98 provided for Local Taxpayer Advocates to be located in each state, and mandated a reporting structure for Local Taxpayer Advocates to report directly to the National Taxpayer Advocate. As indicated in IRC § 7803(c)(4)(B), each Local Taxpayer Advocate must have a phone, fax, electronic communication, and mailing address separate from those of the IRS.

The Local Taxpayer Advocate must advise taxpayers at their first meeting of the fact that "the taxpayer advocate offices operate independently of any other Internal Revenue Service office and report directly to Congress through the National Taxpayer Advocate."³²⁰

Congress also granted the Local Taxpayer Advocates discretion to not disclose the fact that the taxpayer contacted the Office of the Taxpayer Advocate or any information provided by the taxpayer to that office.³²¹

The definition of "significant hardship" in IRC § 7811 was expanded in 1998 to include four specific circumstances: (1) an immediate threat of adverse action; (2) a delay of more than 30 days in resolving the taxpayer's account problems; (3) the taxpayer's incurring of significant costs (including fees for professional representation) if relief is not granted; and (4) the taxpayer will suffer irreparable injury or a long-term adverse impact if relief is not granted. The committee reports make clear that this list is a non-exclusive list of what constitutes significant hardship.³²²

Treasury Regulation § 301.7811-1 had not been updated since it was first published in 1992. Consequently, the regulation contained a definition of "significant hardship" that did not take into account the expansion of the definition that occurred in 1998. In April 2011, the IRS published final regulations under IRC § 7811 so that the regulations now contain a definition of significant hardship consistent with existing law and practice.³²³

Economic Burden

•  

  Collaborate with SB/SE Collection Policy, SB/SE Employment Tax Policy, and Chief Counsel to:

• Address the effects of misappropriation of employment taxes by third-party payers;

• Improve IRS work processes to allow early interventions and notice to taxpayers about outstanding liabilities; and

• Issue guidance on case resolution, collection alternatives, and relief available to victims of third-party payer failures.

•  

  The group is studying, reviewing, researching, and implementing solutions to address undelivered mail.³²⁵ This includes, but is not limited to:

• Implementing a Full Service Intelligent Mail Bar Code (FSIMB) for IRS outgoing mail;

• Studying undelivered mail and address perfection problems;

• Designating one enterprise-level organization to provide policy, procedures, protection, and maintenance of taxpayer addresses; and o Applying the existing address research (ADR) system to all undelivered mail returned to the IRS.

•  

  The team proposed strategies for achieving savings by redirecting customers to existing outlets and through new technological investments. The team considered the impact to taxpayers, and many offices in the IRS, including TAS; Stakeholders, Partnerships, Education, and Communication (SPEC); Field Assistance; and Customer Account Services, continue to look for ways to ensure taxpayers receive the products and services they need. TAS is currently advocating for:

• Policy for consistent penalty application when a taxpayer indicates an inability to reasonably obtain paper tax forms through alternative means; and

• Development of an online Tax Forms Decision Tree allowing taxpayers to self-identify which forms and schedules they require.

•  

  Recent activities include:

• Proposed text changes notifying taxpayers that their representatives will not be receiving inserts were submitted for the Form 2848 and Form 8821, Tax Information Authorization.

• A "What's Hot" topic is ready for posting to IRS.gov, where representatives look for important changes to tax products. The team also provided the National Distribution Center (NDC) a listing of the inserts representatives and taxpayers can request. Representatives and taxpayers can also obtain the inserts on irs.gov.

•  

  TAS is collaborating with the IRS Campus Compliance operations (SB/SE and W&I) to develop an ACS/TAS training video. The video is intended to address and highlight key areas of concern that routinely surface in ACS and TAS casework, focusing on:

• Liens and collection cases involving financially distressed taxpayers, providing discussion points for a variety of collection issues, such as factors to consider in lien determinations, lien withdrawals, release of levies in hardship situations, reporting accounts as uncollectible in situations with unfiled returns; and

• Payments alternatives, such as offers in compromise.

•  

  Return Review Program (RRP) will replace the ElectronicFraud Detection System (EFDS) and provide new capabilities to:

• Detect additional fraudulent return claims;

• Integrate legacy systems;

• Automate manual processes;

• Provide flexibility to support changing business needs;

• Enable treatment stream selection based on available resources;

• Enable use of additional treatment streams to effect pre-refund compliance;

• Provide support of analysis and case processing needs of both civil and criminal investigation employees; and

• Reduce the percentage of non-fraudulent refund claims frozen by the IRS.

• The team has focused its efforts on investigating the causes and cures of refund fraud. The team has narrowed its focus to look at a small segment of the tax return preparer community that defraud taxpayers and the IRS by inflating deductions and credits, and then directing refunds to the preparers' bank accounts without the taxpayer's knowledge. There are many variations on this scenario.

  The team is also looking into the increase in the instances of stolen identities and the fraudulent tax returns filed claiming a fraudulent refund. Many of these fraudulent refunds are subsequently electronically direct deposited into bank accounts; the team is looking at gaps in IRS procedures and discrepancies in the treatment of stolen paper refunds vs. stolen direct deposit refunds.

If you are a low income taxpayer who needs assistance in resolving tax disputes with the IRS and you cannot afford representation, or if you speak English as a second language and need help understanding your taxpayer rights and responsibilities, you may qualify for help from an LITC that provides free or nominal cost assistance. Using poverty guidelines published annually by the Department of Health and Human Services (HHS), each clinic decides if you meet the income eligibility guidelines and other criteria before it agrees to represent you.³²⁸

Although LITCs receive partial funding from the IRS, LITCs, their employees, and their volunteers are completely independent of the federal government. Clinics receiving federal funding for the 2011 calendar year are listed below. These clinics are operated by nonprofit organizations or academic institutions.

In lieu of an LITC, low income taxpayers may be able to receive assistance from a referral system operated by a state bar association, a state or local society of accountants or enrolled agents, or another nonprofit tax professional organization.

This publication is not a recommendation by the IRS that you retain a Low Income Taxpayer Clinic or other similar organization to represent you before the IRS. Contact information for clinics may change, so please check for the most recent information at http://www.irs.gov/pub/irs-pdf/p4134.pdf

AK

• Resolve taxpayer problems accurately and timely;

• Protect taxpayer rights and reduce taxpayer burden; and

• Become a known taxpayer advocacy organization.

• Enhance TAS infrastructure to improve taxpayer interaction; and

• Sustain and support a fully-engaged and diverse workforce.

Resolve Taxpayer Problems Accurately and Timely

IRC § 7803(c)(2)(A)(i)

In general, It shall be the function of the Office of Taxpayer Advocate to --

The National Taxpayer Advocate shall --

•  

  (ii) develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to local offices of taxpayer advocates.

• Operational Priority 2012-1 -- In collaboration with the IRS, implement revised Operations Assistance Request (OAR ) procedures in keeping with the Phase II OAR Study.

• Operational Priority 2012-2 -- Define and develop alternative approaches to casework acceptance and assignment, including assignment of systemic burden cases to allow the IRS the opportunity to resolve issues first, so long as taxpayers are not harmed by the process.

• Operational Priority 2012-3- Implement a multi-modal Case Advocacy Customer Feedback System to allow for more robust and timely customer feedback and the sharing of best practices.

• Operational Priority 2012-4 -- Provide new or updated advocacy tools and guidance to address emerging issues, e.g., First-Time Homebuyer Credit, Adoption Credit, etc.

• Operational Priority 2012-5 -- Develop, implement, and communicate TAS engagement protocols which establish what customers can expect from TAS and what TAS expects from its customers when addressing tax issues with the IRS.

IRC § 7803(c)(2)(A)(ii)-(iv))

In general, It shall be the function of the Office of Taxpayer Advocate to --

•  

  (ii) identify areas in which taxpayers have problems in dealings with the Internal Revenue Service;

  (iii) to the extent possible, propose changes in the administrative practices of the Internal Revenue Service to mitigate problems identified under clause (ii); and

  (iv) identify potential legislative changes which may be appropriate to mitigate such problems.

• Operational Priority 2012-6 -- Proactively identify issues that may negatively impact taxpayer rights or burden; then using a tiered research approach, develop alternative advocacy approaches to address the external and internal impact of these issues (e.g., research studies, advocacy projects, updated processing guidelines, etc.).

• Operational Priority 2012-7 -- Strengthen taxpayers' understanding of their rights through the revision of Publication 1.

IRC § 7803(c)(2)(C)(ii) and (iii):

The National Taxpayer Advocate shall --

•  

  (ii) develop guidance to be distributed to all Internal Revenue Service officers and employees outlining the criteria for referral of taxpayer inquiries to local offices of taxpayer advocates;

  (iii) ensure that the local telephone number for each local office of the taxpayer advocate is published and available to taxpayers served by the office.

• Operational Priority 2012-8 -- Develop new tools and use new technology to conduct outreach, education, and research with the goal of expanding awareness of TAS services, with special emphasis on emerging issues and TA S's underserved population.

IRC § 7803(c)(4)(B)

Maintenance of independent communications. Each local office of the taxpayer advocate shall maintain a separate phone, facsimile, and other electronic communication access, and a separate post office address.

IRC § 7803(c)(4)(A)(IV)

In general, Each local taxpayer advocate --

•  

  (iv) may, at the taxpayer advocate's discretion, not disclose to the Internal Revenue Service contact with or information provided by such taxpayer.

• Operational Priority 2012-9 -- In collaboration with MITS and outside vendors, develop the requirements and security features for Taxpayer Advocate Service Integrated System (TA SIS), an efficient and integrated information technology system.

• Operational Priority 2012-10 -- Establish TAS protocol and archival procedures for TAS projects, task forces, and studies, including the establishment of a naming convention hierarchy for an organizational keyword database.

IRC § 7803(c)(2)(C)(i) and (iv)

The National Taxpayer Advocate shall --

•  

  (i) monitor the coverage and geographic allocation of local offices of taxpayer advocates;

  (iv) in conjunction with the Commissioner, develop career paths for local taxpayer advocates choosing to make a career in the Office of the Taxpayer Advocate.

• Operational Priority 2012-11 -- Establish a succession plan for TAS that leverages diversity and adequately meets the HR component of TA S's workload demands.

• Operational Priority 2012-12 -- Develop and test a multi-year strategic training plan that allows the organization to forecast training needs and provides an opportunity for employees to reach their full potential.

• Operational Priority 2012-13 -- Analyze the results of the 2011 all employee survey to identify areas and implement solutions where TAS can improve the quality of its employees' worklife.

• Operational Priority 2012-14 -- Define, develop, and test organizational measures or diagnostics for Systemic Advocacy, Case Advocacy, LITC, and TAP.

Each year, Case Advocacy undertakes Issue Reviews to identify trends in casework that may help offices improve their advocacy on different issues. For several reasons, TAS leadership determined in FY 2010 to focus the Issue Review on ways to improve advocacy in TAS Earned Income Tax Credit (EITC) cases. First, there has been a relatively low relief rate of 47 percent in TAS EITC cases, compared with 73 percent in TAS cases overall.³⁴⁰ Second, in 2004, the National Taxpayer Advocate conducted a study in cooperation with the IRS to study the impact of determining whether additional contacts and interaction with the taxpayer improved the chances of taxpayers receiving the EITC during audit reconsideration.³⁴¹ The study had numerous important findings about approaches the IRS could use to increase the likelihood of taxpayers receiving the EITC to which they are entitled, including:

• Increased telephone usage to engage taxpayers;

• Providing taxpayers assistance in securing documentation; and

• Improving communication with taxpayers during the initial audit.³⁴²

Based on the relatively high percentage of TA S-EITC No Relief cases closed as "No Relief/ No Response," TAS leadership focused its efforts on those cases in which TAS closed its case for failure of the taxpayer to respond.³⁴³ In FY 2009, 79 percent of the EITC cases closed as "No Relief" were closed as "No Relief/No Response."³⁴⁴

A team consisting of TAS Research, TAS Technical Advisors, Area and Local Analysts, the EITC Portfolio Advisor, and members from the EDCA staff performed the EITC Case Review. Working with TAS Research, a statistically valid sample of 400 closed TA S-EITC No Relief/No Response cases were identified for the review.³⁴⁵ With the assistance of TAS Research, the team established a data collection instrument (DCI) to collect certain information about the cases, such as:

• What part of the EITC requirements under the law were at issue in the cases?

• Was phone or in-person contact established with the taxpayer? If so, on how many occasions?

• Did the Case Advocate use all of the information internal to the IRS which was available, i.e., did the Case Advocate use the RGS system?

• What was the primary issue in the case?

• Did the IRS or TAS ask for information from the taxpayer which was not needed, i.e., not necessary to resolve the case or already in possession of the IRS?

• Did TAS effectively advocate for the taxpayer and were the case closure actions correct?

• Do TAS EITC training materials adequately address advocating for EITC taxpayers? For additional information on the methodology of this Case Advocacy Issue Review, please see Attachment A.

A summary of the key findings upon review and analysis of the TA S-EITC No Relief/No Response cases is below:

• In 90 percent of the cases reviewed, the primary issue raised by the IRS involved either the Relationship Test or the Residency Test under the uniform definition of a "qualifying child."³⁴⁶

• In 70 percent of the cases with a qualifying relationship (where the relationship is known), the relationship was other than just the taxpayers' children; rather, it was another relationship, such as niece, nephew, etc.

• In only eight percent of the cases where the Relationship Test was at issue, the relationship failed the definition of a Qualifying Child.

• In 38 percent of the cases, TAS had no direct phone contact with the taxpayer. In an additional 37 percent of the cases, there was only one direct phone contact. In other words, in over 75 percent of these cases, there was either no telephone contact or only one contact with the taxpayer.

• Although the Case Advocate attempted to make the initial contact by phone in 79 percent of the cases, phone contact was only successful in 45 percent of the cases.

• In 24 percent of the cases, there was no indication that the Case Advocate secured Reports Generation System (RGS) prints to determine IRS actions. In 14 percent of the cases where RGS was secured, TAS did not request the correct documentation or requested unnecessary information.

• In ten percent of the cases, there was information available in the case file with which the CA could have attempted to advocate for the taxpayer.

• In six percent of the cases, the EITC was actually allowed after the case was closed in TA S.

• In 98 percent of the cases, the TAS office that handled the case was in a TAS Campus operation, as opposed to a local TAS office.

In FY 2010, TAS leadership commissioned a team to review EITC cases closed in TAS as No Relief/No Response closures. The purpose of the review was to identify trends in casework that may help TAS offices improve their advocacy on EITC cases.

As reflected in Table 1 below, TAS relief rates for EITC cases are below the TAS average relief rate of 73 percent and are lower than the relief rates of any of the other high frequency issues within TA S. Table 1 reflects that EITC relief rates were 46 percent for FY 2009, whereas the next lowest relief rate was 63 percent for levies and 67 percent for Criminal Investigation cases.

     TABLE 1, RELIEF RATES TOP ISSUES FOR TAS RECEIPTS IN FY 2009

              TABLE 2, BREAKDOWN OF NO RELIEF CODES (RC)

           TABLE 3, FY 2009 TOP FIVE REOPEN ISSUES BY VOLUME

RESULTS OF EITC ISSUE REVIEW

Using the background information outlined above, the team attempted to address the following issues:

• What are the characteristics of the No Relief/No Response EITC case?

• Does TAS use internal Information to advocate for the taxpayer?

• What are TAS's efforts to communicate with the taxpayer?

• Did TAS effectively advocate for the taxpayer, and were the case closure actions correct?

• Do TAS EITC training materials adequately address advocating for EITC taxpayers?

Analysis of the information from a sample of TAS EITC No Relief/No Response Cases provided the information below.

TAS Campuses Perform Most of the EITC Work

TAS campus sites worked 98 percent of the sample cases, as reflected in Table 4 below.

          TABLE 4 -- LOCATION OF TAS OFFICE THAT WORKED CASE

As Table 5 demonstrates below, a majority of the cases meet hardship criteria.

                        TABLE 5, CRITERIA CODE

Of the cases reviewed, 73 percent of the cases involved the Relationship Test, while 81 percent of the cases involved the Residency Test. Thus, there was considerable overlap between cases that involved both.

Of those cases where a relationship was identified:³⁵¹

• 24 percent of the relationships included the child of the taxpayer only;

• Eight percent of the relationships did not include a relationship that would qualify for EITC, i.e., girlfriend's children, boyfriend's children; and

• 70 percent of the cases included the following qualifying relationships (where the relationship is known):

• • brother/sister;

  • niece/nephew;

  • grandchildren;

  • stepdaughter/stepson; or

  • foster children.

TAS Can Improve Use of IRS Internal Information (RGS/CEAS)

TAS Case Advocates have various tools available to gather information to effectively advocate for taxpayers who are or were involved in an EITC Exam. The Reports Generation System provides a history of the actions taken when the case involves a Field Office audit.

The Correspondence Examination Automated Report System (CEAS) provides a history of the actions taken during the campus EITC audit. This Issue Review captured the use of these systems.³⁵²

In 47 percent of the cases reviewed, the Compliance office received correspondence, and in 83 percent of these cases, the examination process considered the correspondence. This information can help determine any additional documentation required and advocate for the taxpayer when correspondence submitted was not considered. In addition, the Case Advocate can request the paper Examination papers to also determine the actions by the Compliance function.

In 24 percent of the cases, the Case Advocate failed to research RGS/CEAS.³⁵³ When the RGS print was secured, the information was sufficient to determine the actions taken during the audit. In 14 percent of the cases in which the Case Advocate secured the RGS print, the Case Advocate did not request the correct documentation or requested unnecessary information.

The reviewers participating in this review determined that the administrative file was only needed in 11 percent of the cases and was requested in over 60 percent of the cases where it was appropriate. Again, the greatest opportunity for improvement is in the appropriate use of RGS/CEAS information.

TAS Can Improve Telephone Contact Procedures

The review also captured TAS's attempt to contact the taxpayer.³⁵⁴ Review results indicate that a telephone number was available in 97 percent of the cases. Review results indicate that the Case Advocates attempted to make the initial contact by telephone in 79 percent of the cases. Case Advocates made actual telephone contact on the initial contact attempt with 45 percent of the taxpayers. In the remaining cases, the initial contact occurred by letter.

There was no indication of undelivered mail in 95 percent of the cases. The number of TAS cases with undelivered mail is consistent with the number of these cases closed with DC 13 (undelivered mail) during the Examination process. Examination used the DC 13 closing code in five and one-half percent of the sample cases closed.

The review also focused on the total number of direct telephone contacts on each case. The results are reflected in the table below:

           TABLE 6, TOTAL NUMBER OF PHONE CONTACTS PER CASE

In 34 percent of the cases in which the initial contact occurred by telephone, the Case Advocate also sent a follow-up letter to the taxpayer summarizing the telephone conversation.

TAS Can Improve Quality of EITC Correspondence

In 93 percent of the initial contact letters, the Case Advocate included a description of documentation needed. The quality of these letters varied. It was noted that Case Advocates often prepare a cover letter and attach a version of Form 866-H, advising the taxpayer to submit the documentation specified on this form. The team concluded that there is opportunity for improvement in the quality of TAS written communications on EITC cases.

Since the majority of communications in the cases reviewed occurred through correspondence, it is critical that correspondence is accurate and maintains the tone of an advocacy organization.

There were several general observations that include:

• TAS employees often attach a version of the Form 866-H (Explanation of Items Needed) to a cover letter and advise the taxpayer to provide documentation as outlined on Form 866-H. This is the same form letter that the taxpayer receives during a compliance audit. The TAS letter should be written from an advocacy approach rather than using the same language as Compliance. In cases in which the Case Advocate did not attach the actual form, he or she used the wording from Form 866-H in the TAS letter.

• Letters are not personalized to include information available in the file. For example, if birth certificates are needed and the name of the qualifying child was available, the letter did not acknowledge the name of the child, the relationship, or the birth certificates needed to show the relationship.

• The tone in some letters was not appropriate for an advocacy organization.

                    TABLE 7, NUMBER OF LETTERS SENT

TAS Median Amount of Time for Taxpayers to Substantiate Claim Is Between 14-15 Days

The review also focused on the number of calendar days TAS allows the taxpayer to provide documentation. The following table illustrates the average number of days for the first, second, and third letters and also shows the percentage of letters in which the taxpayer received less than 14 days to respond:

     TABLE 8, MEDIAN NUMBER OF DAYS ALLOWED FOR TAXPAYER RESPONSE

In Ten Percent of Cases, Information Was Available in the Case File for Case Advocates to Successfully Advocate for the Taxpayer

Another purpose of this review was to determine if TAS fully advocated for the taxpayers.³⁵⁶

            TABLE 9, REASONS WHY CASE CLOSED AS NO RESPONSE

TAS Training Material Can Be Infused with Advocacy Training, Case Examples Can Be More Detailed, OARs Should Reflect Advocacy, Technical Advisors Should Be Consulted, and Training on EITC Disallowance Should Be Provided

The team reviewed the following TAS training materials that address EITC cases:

• Case Advocate Training, Phase I Case Processing for Case Advocates Student Guide 20219-102 (2-09);

• Case Advocate Training, Phase I Examination Issue for Case Advocates 21000-102 (2-2010);

• Taxpayer Advocate Service Case Advocate Training Phase I, Accounts Issues for Case Advocate Student Guide 20999-102 (4-09);

• Taxpayer Advocate Service -- Case Advocate Training, Phase I -- Collection Issues for Case Advocate Student Guide 21001-102 (3-10); and

• TAS FY 2008 Symposium Workshop Material on Intermediate Earned Income Tax Credit and Individual Filing Requirements.

Case Examples Can Be More Detailed

The case examples are all basic examples of a taxpayer trying to substantiate the EITC after it has been disallowed. Case examples that are more detailed and reflect the more diverse types of EITC cases that the Case Advocates see in TAS would assist Case Advocates in advocating for these taxpayers. For instance, there should be examples about a grandmother or other relative trying to substantiate the EITC for the children living with them or about a taxpayer who cannot get all the documentation to support the EITC and how the Case Advocate can explore different alternatives to assist the taxpayer in substantiating the EITC.

Contact with Taxpayers Needs to Be Stressed

There are no sections in the training material that stress the importance of telephone contact with EITC taxpayers. For example, in the Case Advocate Training, Phase I Case Processing for Case Advocates Student Guide 20219-102 (2-09), guidance states that "if you do not hear back from the taxpayer or receive the information requested by the date given, to send TP a letter giving the TP 12 days to provide the information." This example leads the Case Advocate to believe that he or she should make the second contact by letter and does not encourage the Case Advocate to attempt another telephone call.

Emphasize Researching Case Using IRS Information

The discussion of "identifying EITC issues" talks about using IDRS to determine what the EITC issue is and also states that the taxpayer should be asked to furnish a copy of the examination report. Only if the taxpayer cannot furnish the examination report does the lesson state that the TAS employee should secure RGS information. While IDRS will indicate whether there is an open Exam, the taxpayer needs audit reconsideration, or the issue is recertification, IDRS will not indicate "why" EITC was disallowed. Securing RGS/ CEAS information first and looking at the actual work papers (not just the explanation of items that is part of the audit report) should give a clear understanding of what was previously provided, why the information was insufficient, and what is still needed. The Case Advocate can then discuss this information with the taxpayer and provide suggestions at the very beginning of the case concerning alternate sources of documentation.

Technical Advisors and EITC Disallowance

Additionally, if the Case Advocate is unsure of what the taxpayer should provide or whether the taxpayer qualifies for the EITC, the training material should encourage the Case Advocate to seek assistance from a Technical Advisor. None of the training material explains how to work a case involving a Form 8862, Information to Claim Earned Income Credit After Disallowance.

OARs for EITC

The training material did not provide a good explanation or example of how the Case Advocate should write an OAR to effectively advocate for the taxpayer on an EITC issue. One example stated the following:

Overall, the team concluded that TAS should enhance its training material to address advocating for a taxpayer with an EITC issue. Also, the training should include case studies providing examples of the types of EITC issues worked in TAS.

Results of Focus Group Interview with Reviewers

At the completion of the review, the Director of Field Systemic Advocacy conducted a focus group discussion on issues identified during the review that may not have been covered in the completion of the DCI. A summary of the group's observations is as follows:

• It is not enough that the Case Advocates have access to the RGS/CEAS systems. They need to know how to use the information to advocate for the taxpayer. Case Advocates are requesting information from the taxpayer by sending the Form 886-H without analyzing the information on RGS/CEAS to focus the request on the specific documentation needed to substantiate the EITC. Use of CEAS at the Campus office is extremely important because it is the primary way of knowing what actions Campus Examiners have taken on the case.

• Reviewers commented that a trend identified was an initial unsuccessful telephone contact attempt, followed by two consecutive letters and then the case closure. They also noted an inconsistency in the time allowed for taxpayers to respond.

• Letters are not tailored to the specific taxpayer circumstances and do not address the unique role of TAS in advocating for the taxpayer.

• Additional training is needed on the qualifications for EITC, Head of Household filing status, and the dependent exemption. Additional training is also needed in explaining Appeal Rights.

• There was minimal Technical Advisor involvement in these cases.

The FY 2010 EITC Case Review demonstrates that there are opportunities for TAS to improve its advocacy for EITC claimants. The National Taxpayer Advocate's 2004 EITC Audit Reconsideration Study highlighted the importance of additional phone or in-person contacts to ensure that taxpayers receive the EITC benefits to which they are entitled. In TAS, most EITC No Relief cases involve closures due to No Response. However, with the median time given to these taxpayers to substantiate their claims being 14 days, it is not clear that TAS provides taxpayers enough time to prove the complex matters at issue. This is particularly so when a strong majority of the cases (70 percent) involve non-traditional relationships, i.e., relationships other than a child of the taxpayer. Given the importance of personal contact with taxpayers, the fact that in 75 percent of the cases there was only one or no phone contact with the taxpayer, TAS leadership should consider specifically emphasizing phone contact with EITC taxpayers through guidance. Given the high percentage of correspondence contacts, TAS should work on improving correspondence guidance to EITC claimants. TAS should also consider guidance that requires TAS to use RGS and other internal IRS information systems in these cases.

The recommendations below are designed to achieve these ends.

Recommendations

1. Require a minimum number of telephone call attempts on EITC cases and increase the number of days allowed for taxpayers to provide the documentation. Generally, Case Advocates are following IRM 13 guidelines on the number of contacts required on a TAS case. Two attempted contacts with a five-day waiting period constitute the minimum number of contacts and waiting period before TAS advocates are permitted to close a case.

2. Test for use of Information Systems in EDCA and Area Operational Reviews. Use of systems such as RGS can identify information the IRS already has from the taxpayer so that we do not needlessly burden the taxpayer with unnecessary document requests.

3. TAS training material should be infused with advocacy training, case examples should be more detailed, OAR s should reflect advocacy, and use of technical advisors should be emphasized. In light of the fact that the review also detected that 98 percent of TAS EITC cases are worked at TAS campus sites, extra emphasis on training should take place at the campus sites.

4. Establish a cross-function TAS group to develop templates to use in TAS-generated letters that provide a clear explanation on the documentation needed to support the EITC credit and communicate the role of TAS in advocating for the taxpayer.

5. Conduct a second phase of this study to include the review of "relief" and "partial relief" EITC cases for comparison purposes and to identify any best practices that resulted in a positive outcome for the EITC taxpayer.

Attachment A

METHODOLOGY

TAS Research provided assistance to the Issue Review Team in identifying and selecting a statistically valid sample size of 400 cases for the review. Three hundred eighty-four case files of the 400 cases identified for the review were located and forwarded to the review site in the Baltimore office.

Prior to the review, each case file was reviewed to ensure that all necessary information was in the file. This included RGS prints, administrative files, and IDRS prints. If the information was not in the file, the information was requested prior to the review so the review team would have comprehensive information on the case.

The case review team developed a data collection instrument (DCI). The DCI was tested using a subset of the same cases and perfected prior to the actual case review by nine members of the review team. Prior to the review, a meeting was conducted to go over the DCI and definitions to ensure consistency. At the completion of the case reviews, the DCIs were forwarded to TAS Research for consolidation and analysis. A focus group interview was conducted with the reviewers at the completion of the review, and their observations are included in this report. TAS Research consolidated the review results and provided frequencies and other summary statistics.

The first question on the DCI asked whether the case was properly coded as EITC. The reviewers determined that ten percent of cases were not true EITC cases, and they were excluded from the rest of the case review. This reduced the final number of cases to 344.³⁵⁷

In developing these measures, there are several key stages of activity that, when properly measured, will let the National Taxpayer Advocate and other TAS executives know whether TAS is doing a good job in systemic advocacy and help us identify areas for performance improvement. Although each of these is discussed in greater detail below, they are:

• Issue Identification: Are we identifying the correct issues? Is TAS conducting the appropriate outreach to employees, taxpayers, and other stakeholders, as well as self-directed research? Do we have an appropriate tracking and ranking system once issues are identified, and are we using the correct factors to select the most significant issues (however defined) for review? What is the review process for issue selection, and does it include a diversity of skills and perspectives? Finally, do we have an adequate method of tracking issues so that we are able to manipulate and perform research on the issue database itself? That is, are our systems and work processes designed to enable us to recognize patterns that indicate a systemic problem?

• Issue Analysis: Once we have identified an issue and are satisfied that it is of sufficient significance to warrant additional investigation and analysis, are we ensuring that the issue is assigned to the correct TAS function and that the appropriate personnel are conducting the analysis? Are we utilizing all of the internal and external resources TAS has available to it? Do our investigations have sufficient levels of analysis and review, so that there are various points in the process for management and others to determine whether the issue is, in fact, as significant as we first thought? In our projects and teams, have we articulated the outcome we want to achieve? Do we have a system for tracking, recording, and archiving all of the activity on an issue, by all levels of TAS personnel?

• Issue Recommendations and Advocacy: After conducting a thorough analysis of the issue and identifying desired outcomes, has TAS made specific, actionable, administrable, and reasonable recommendations of actions necessary to mitigate or resolve the issue? Have we identified ways of measuring -- on an issue by issue and even recommendation by recommendation basis -- whether the recommendation, if implemented, actually achieves the outcome we desire? What behavior or procedure do we want to change? What must TAS do to effect those changes? Systemic advocacy does not stop once we have made our recommendations. TAS must do more than merely "monitor" or "track" our recommendations -- we must advocate for them! So: what must we do to get and sustain the attention necessary to effect change? If we are not getting attention to this issue, do we have a process for re-evaluating the issue, to determine whether it is still a problem, or whether our analysis or recommendations are still valid or need to be revised? Are the issue and recommendations so significant and substantial that TAS needs a multi-year strategy for advocating for attention and change?

Second, each stage requires that TAS utilize all the resources that are available to it. That is, TAS is composed of many different parts, each possessing different knowledge, skills, and perspective. TAS will only be successful in advocating for systemic change if it involves those different entities throughout the systemic advocacy process. Thus, it is imperative that not only SA and FSA are involved in this process, but other TAS functions, including TAS attorney advisors, TAS Research, the Executive Director of Systemic Advocacy (EDCA), Local Taxpayer Advocates (LTAs), TAS Technical Advisors, Taxpayer Accounts and Guidance (TAG), Vision and Strategy (V&S), Communications and Liaison (C&L), the Low Income Taxpayer Clinic Program Office, the Taxpayer Advocacy Panel.

Finally, each stage requires TAS personnel to recognize the appropriate points when an issue should be elevated not only to immediate supervisors but also the National Taxpayer Advocate or other TAS executives. There are times when issues get bogged down at lower levels. TAS will only work effectively if its employees can raise significant areas of concerns with TAS leadership, for their information and action. On a daily basis, TAS leadership meets with other IRS officials and each such meeting presents an opportunity to discuss, educate, and reach agreement about systemic problems. Thus, an educated and informed TAS leadership furthers TAS's efforts at systemic advocacy.

The following discussion elaborates on some of the points identified above.

Issue Identification: Outreach and SAMS submissions

Analysis of TAS's effectiveness at issue identification raises several questions. Are we making ourselves available to getting information about issues and problems experienced by taxpayers? Once we are out there, are we actually seeing the issues? And once we see the issues, are we actually elevating them? Each of these questions lends itself to specific performance measures or diagnostic measures.

TAS achieves issue identification in several ways, including:

Once we have the issues coming in, we need to ensure that we are selecting the right ones to work. This requires a two-part analysis: first, are we using the appropriate criteria to analyze the urgency and importance of the issue; and second, do we have the right personnel, with the right skills, making that analysis? There is also a third consideration: when does that analysis occur -- at the beginning intake, or when assigned to an analyst, or a combination of the two?

Once we have sought out issues, identified them, elevated them, reviewed them, and analyzed them, we need to measure our resolution of the issue. This measure has several components -- including accuracy. But the main components here are, what are the outcomes we want to achieve and how will our recommendations help achieve those outcomes? Thus, we need an outcome measure. However, that outcome measure must be specific to each project.

What I am proposing is that we require each analyst, working with his or her manager, to identify the desired outcome of any project established on SAMS (or an immediate intervention). We can develop a few standard outcomes, but I emphasize that outcomes should be specific to the project and not cookie-cutter. For example, if the problem is that there are too many accidental forest fires, and the recommendation is to conduct a public information campaign to increase awareness of the problem and thus change campers' behavior (i.e., being more careful), the outcome measure must in some way measure whether accidental forest fires have decreased.

This can be similar to the way Case Advocates work specific cases: in a levy case they want several outcomes: to release the levy and perhaps return levy proceeds, but also to achieve full compliance for the taxpayer (put them in an IA or OIC or even CNC), and finally to educate the taxpayer so the situation doesn't happen again. We are tracking these components in case advocacy in various ways. For example, with TASIS we should be able to see a box checked "Levy released" or "OIC accepted" or something like that. We also have a more global "relief/partial relief/law prevents relief etc." measure. Finally, we have case quality attributes addressing whether the Case Advocate educated the taxpayer about how to avoid the problem in the future. How would we do this on the systemic advocacy side? I don't know how we roll this up into an overall effectiveness measure -- except to say that in "x" percent of our projects, once implemented, our recommendations achieved their desired outcomes. Note the language, "once implemented." If the IRS refuses to make the changes, or Congress doesn't pass recommended legislation, then we can't measure whether our recommendations achieved their outcomes.

As an intermediate step to achieving final outcome, we should also keep our existing measure of whether the IRS or Congress took action on our recommendations. That at least shows, in a rough sort of way, that we have hit on something that is of some import, that resonates with folks. The same rationale exists for tracking the level and nature of media coverage -- if our analysis resonates with the public, then that is an affirmation that we have identified an issue that the taxpaying public perceives as a problem. I get emails and letters about our ARC all the time. I could forward them to systemic advocacy and they could be associated with the project (in TASIS, we can digitize paper documents and make them part of the electronic project file!).

If you think about it, between the outreach, identification, elevation, analysis, "acted on" and the "outcome" measures, we have made visible -- and are measuring -- our effectiveness with each step of advocacy. There are certainly subsidiary attributes we can develop for each of these stages. And each of these stages has components of shared responsibility. For example, if we are looking at the "acted on" measure, we should be aligning the outreach that LTAs do with their congressional offices at the CAP conference with the related projects or MSPs. Thus, when they give us the information on which issue is of interest to which congressional office, we can align that information with the underlying issue. We also need to capture at a high level the work that the NTA and the Senior Advisor to the NTA do with congressional offices and the Department of Treasury. And SAMS should have a check box where the issue has been highlighted in congressional testimony, or if there has been legislation introduced. If the checkbox is marked, a drop down text box appears, so the analyst can link to the testimony or legislation. (This approach requires that we have a consistent keyword and typology system in place.)

This latter approach, of course, implies that we are actively advocating for and tracking what is happening with these issues. Right now, I doubt that SAMS (or the related analysts) picks up all the activity that occurs on these projects or even MSPs. Do we have the ability to track whether a Taxpayer Advocate Directive was issued on the subject, or a Taxpayer Rights Impact Statement? Did we submit changes to an IRM? That would be an outcome measure -- we want the IRM changed. If it is changed, has the problem been mitigated? Did we establish a team in which we collaborated with the Operating Divisions to develop a resolution to an issue? Is that the outcome or is it the recommendations of the team? That is, were the recommendations implemented, and if so, did they have the desired effect on mitigating the issue. We clearly need to track these activities (and related records) on TASIS, if not SAMS.

Conclusion

As noted earlier, the development of performance measures of TAS's effectiveness at systemic advocacy is inherently difficult. However, the approach outlined above provides a basis for establishing meaningful measures. Some of these measures are not technologically feasible now and will be built into TASIS -- but we can identify them now and develop the business requirements for TASIS. Still others can be implemented immediately (the tiers of review, the incorporation of "impact analysis" into early intervention reviews, the identification of outcomes, and the development of a consistent set of keywords and classification.)

In closing, I note that no matter how precise we try to be in developing factors for ranking the impact of issues or measuring the impact of our recommendations, any evaluation will ultimately be very subjective. It is possible that the National Taxpayer Advocate will determine that a particular issue is a violation of taxpayer rights of such magnitude that it warrants immediate and sustained attention despite the fact that it impacts relatively few taxpayers. It is also possible that TAS will make recommendations that require a paradigm shift for the IRS (e.g., revising the IRS mission statement to explicitly acknowledge the IRS role in delivering social benefits or developing a system for regulation and testing of unenrolled return preparers). Progress on such recommendations could take years if not a decade. Our measures must be flexible enough to recognize and in some way account for the value of these important advocacy issues and recommendations.

                          Glossary of Acronyms

² IRC § 7803(c)(2)(B)(iii).

³See 2002 National Taxpayer Advocate Annual Report to Congress 69-74 (Most Serious Problem: IRS Oversight of EITC Return Preparers Can Be Improved); 2004 Annual Report to Congress 67-88 (Most Serious Problem: Oversight of Unenrolled Return Preparers); 2006 National Taxpayer Advocate Annual Report to Congress 197-221 (Most Serious Problem: Oversight of Unenrolled Return Preparers); 2009 National Taxpayer Advocate Annual Report to Congress 41-69 (Most Serious Problem: IRS Lacks a Servicewide Return Preparer Strategy); 2011 National Taxpayer Advocate Objectives Report to Congress 24-26 (As the IRS Implements the New Return Preparer Initiative, TAS Will Continue to Monitor Its Scope As Well As Advocate for Several Statutory Changes).

⁴See IRS response to TAS information request (email from SB/SE Campus Compliance Services Program Manager), July 21, 2011 (providing the 66 percent test acceptance rate); IRS, Collection Activity Report, NO- 5000-108, Monthly Report of Offer in Compromise Activity (Oct. 5, 2010) (providing FY 2010 acceptance rate) and June 2, 2011 (providing acceptance rate for first eight months of FY 2011). See also 2001 National Taxpayer Advocate Annual Report to Congress 52-55 (Most Serious Problem: Processing Offer in Compromise (OIC) Applications); 2002 National Taxpayer Advocate Annual Report to Congress 15-24 (Most Serious Problem: Processing OIC Cases); 2003 National Taxpayer Advocate Annual Report to Congress 99-112 (Most Serious Problem: OIC); 2004 National Taxpayer Advocate Annual Report to Congress 311-341 (Most Serious Problem: Offers In Compromise); 2007 National Taxpayer Advocate Annual Report to Congress 374-387 (Most Serious Problem: Offers In Compromise); 2008 National Taxpayer Advocate Annual Report to Congress 15-38 (Most Serious Problem: The IRS Needs to More Fully Consider the Impact of Collection Enforcement Actions on Taxpayers Experiencing Economic Difficulties); 2009 National Taxpayer Advocate Annual Report to Congress 196-216 (Most Serious Problem: The Steady Decline of the IRS Offer In Compromise Program Is Leading to Lost Opportunities for Taxpayers and IRS Alike); 2010 National Taxpayer Advocate Annual Report to Congress 311-318 (Status Update: The IRS Offer-In-Compromise Program Continues to be Underutilized); FY 2011 National Taxpayer Advocate Objectives Report to Congress 20-22 (IRS Initiatives to Improve the Offer In Compromise Program Have Not Yet Achieved Tangible Results).

⁵ Pub. L. No. 112-9, 125 Stat. 36 (Apr. 14, 2011). See FY 2011 National Taxpayer Advocate Objectives Report to Congress 9-13 (TAS Will Examine the Administrative Challenges Presented by New Information Reporting Requirements).

⁶ For FY 2007 through FY 2009, the IRS agreed to address 208 of 366 TAS recommendations. In addition, TAS made 698 suggestions to the IRS on Internal Management Documents/Single Point of Contact (IMD/SPOC) documents. Of those suggestions, 68 percent -- 474 suggestions -- were accepted. Data obtained from the Systemic Advocacy Management System (SAMS). See Advocating through the National Taxpayer Advocate's Annual Report to Congress, infra.

⁷See National Taxpayer Advocate 2009 Annual Report to Congress 17-40 (Most Serious Problem: One-Size-Fits-All Lien Filing Policies Circumvent the Spirit of the Law, Fail to Promote Future Tax Compliance, and Unnecessarily Harm Taxpayers), 357-364 (Legislative Recommendation: Strengthen Taxpayer Protections in the Filing and Reporting of Federal Tax Liens); 2010 National Taxpayer Advocate 2010 Annual Report to Congress 302-310 (Status Update: The IRS Has Been Slow to Address the Adverse Impact of Its Lien-Filing Policies on Taxpayers and Future Tax Compliance); National Taxpayer Advocate FY 2011 Objectives Report to Congress 13-18 (The National Taxpayer Advocate Remains Concerned About IRS Collection Practices that Do Not Promote Future Voluntary Compliance and Can Unnecessarily Harm Taxpayers).

⁸ In Vinatieri v. Commissioner, the United States Tax Court held that if, during a Collection Due Process (CDP) hearing, the taxpayer establishes that the proposed levy will create an economic hardship (within the meaning of Internal Revenue Code (IRC) § 6343(a)(1)(D)), the IRS cannot proceed with the proposed levy action as a matter of law, even if the taxpayer did not file all required tax returns. Vinatieri v. Comm'r, 133 T.C. 392 (2009). See National Taxpayer Advocate 2010 Annual Report to Congress 85-97 (Most Serious Problem: IRS Collection Policies and Procedures Fail to Adequately Protect Taxpayers Suffering an Economic Hardship); National Taxpayer Advocate FY 2011 Objectives Report to Congress 18-19 (The IRS's Delay in Incorporating the Tax Court's Decision in Vinatieri v. Commissioner into the Internal Revenue Manual (IRM) and Other Guidance Unnecessarily Harms Taxpayers Who Are Experiencing Economic Hardship).

⁹ Data obtained from TAMIS.

¹⁰See e.g., IRM 5.16.1.2.9(9) (Apr. 29, 2011); IRM 8.22.2.4.2(4) (Dec. 14, 2010).

¹¹See IRM 5.19.4.4.10(4)(j) (Mar. 8, 2010).

¹² SB/SE Interim Guidance Memorandum, Control No. SB/SE-05-0611-037 (June 10, 2011).

¹³See National Office Program Manager Technical Advice, PMTA-2009-158 (Oct. 9, 2009). In that advice, the IRS Office of Chief Counsel reevaluated its prior legal conclusion that NFTLs could not be withdrawn after the underlying liens were released that was reflected in IRM 5.12.3.37 (Sept. 7, 2006). See also IRM 5.12.3.35 (June 13, 2005); IRM 5.12.3.26.1 (July 15, 2003).

¹⁴See National Office Program Manager Technical Advice, PMTA- 2009-158 (Oct. 9, 2009).

¹⁵ Through May 31, TAS issued 16 lien withdrawal TAOs in FY 2011, of which the IRS complied with nine and seven remain open. In FY 2010, TAS issued 22 lien withdrawal TAOs, of which the IRS complied with 18, TAS rescinded one, and three remain open. Data obtained from TAMIS.

¹⁶See Targeted Tax Lien Act, H.R. 6439 (111th Cong.); Taxpayer Bill of Rights Act, S. 3215 (111th Cong.); Taxpayer Bill of Rights Act, H.R. 5047 (111th Cong.).

¹⁷See TAS's Continued Advocacy Efforts to Improve the EITC Program; Improving Advocacy in TAS's Earned Income Tax Credit Cases; and Appendix VIII: Earned Income Tax Credit Case Review Report, infra. See also Hearing on Improper Payments in the Administration of Refundable Tax Credits, Before the Subcomm. on Oversight, H. Comm. on Ways and Means, 112th Cong. (statement of Nina E. Olson, National Taxpayer Advocate) (May 25, 2011).

¹⁸See The IRS Needs to Improve Its Identity Theft Victim Assistance Strategy, infra. See also Hearing on The Spread of Tax Fraud by Identity Theft: A Threat to Taxpayers, A Drain on the Public Treasury, Before the Subcomm. on Fiscal Responsibility and Economic Growth, S. Comm. on Finance, 112th Cong. (statement of Nina E. Olson, National Taxpayer Advocate) (May 25, 2011).

¹⁹See TAS Will Continue to Focus on the IRS's Ability to Collect Taxes and Meet Taxpayer Needs as Its Responsibilities Have Expanded and Its Funding Has Been Reduced, infra.

²⁰ The IRS must continue to place priority emphasis on protecting confidential taxpayer return information from disclosure, but that does not mean it should not enter the Internet age. Banks, credit card companies, and other financial institutions also place a priority on customer privacy, yet they have been making account information and transaction options available to customers for more than a decade. If the IRS tests using email and texting simply to provide reminders to taxpayers and does not embed confidential taxpayer return information in its messages, it can explore the benefits of electronic access and communication with minimal risk of disclosures.

²¹ We use the phrase "bright-line test" to apply to IRS programs or procedures that require the IRS employee to review the taxpayer's situation according to a limited set of yes/no questions. If the taxpayer meets these requirements, then the employee must take a specific, predetermined action. This action can either benefit or harm the taxpayer.

²² For tax year 2001, the voluntary filing compliance rate was 87.3 percent. IRS, Tax Gap Update (Feb. 2006).

²³ The $7,500 FTHBC allowed under the Housing and Economic Recovery Act of 2008 requires repayment of the credit over 15 years. Pub. L. No. 110-289, § 3011, 122 Stat. 2654, 2888 (July 30, 2008). See IRS Administration of the First-Time Homebuyer Credit Became a Debacle, infra.

²⁴ TAS received 1,515 comments from January 5 through June 18, 2011. See Tax Reform Suggestion Box at www.TaxpayerAdvocate.irs.gov.

²⁵ For example, some submitters said they wanted a "flat" tax and explained it as a system that would tax income at x% up to a certain income level, y% between that and a higher level, and z% above the higher level, essentially describing a graduated income tax system.

²⁶ IRS, FY 2011 Shutdown Contingency Plan (Rev. Apr. 7, 2011), available at http://www.whitehouse.gov/omb/contingency-plans (last visited June 6, 2011).

²⁷ 31 U.S.C. §§ 1341 - 1342, prohibits agencies from obligating funds exceeding, or in advance of, appropriations and from employing personnel during a lapse in appropriations except for emergencies involving the safety of human life or the protection of property.

²⁸ IRS, FY 2011 Shutdown Contingency Plan (Rev. Apr. 7, 2011), available at http://www.whitehouse.gov/omb/contingency-plans (last visited June 6, 2011).

²⁹Id.

³⁰Id. at 38-39.

³¹ IRS, FY 2011 Enterprise Snapshot Reports (Week Ending Apr. 16, 2011). IRS assistors answered nearly 1.5 million calls during the week ending April 16, 2011. It is unknown how many of these callers were seeking assistance with tax filing questions; however, all callers would have experienced the impact of reduced staffing.

³² IRS, FY 2011 Enterprise Customer Contact Reports (Week Ending Apr. 16, 2011).

³³ IRS, Accounts Management Reports: AMIR Summary (Week Ending Apr. 16, 2011).

³⁴ For a discussion of the characteristics of programs that the IRS is able to administer effectively, see National Taxpayer Advocate 2009 Annual Report to Congress, vol. 2, 75-104 (Running Social Programs Through the Tax System).

³⁵See IRS News Release, IR-2011-16, IRS Begins Processing Tax Forms Affected by Late Tax Changes; Taxpayers Can e-File Immediately (Feb. 15, 2011).

³⁶See IRS Filing Season Statistics (as of May 13, 2011), at http://www.irs.gov/newsroom/article/0,,id=239536,00.html.

³⁷ Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112 10, § 1119, 1125 Stat. 38, 107 (2011).

³⁸See Department of the Treasury, FY 2012 Budget in Brief (showing FY 2010 enacted levels), at http://www.treasury.gov/about/budget-performance/budget-in-brief/Documents/FY2012_IRS_508.pdf.

³⁹See Fiscal Year 2012 Financial Services and General Government Appropriations Act (as approved by the House Appropriations Committee on June 23, 2011).

⁴⁰See IRS FY 2010 Enforcement Results, available at http://www.irs.gov/pub/irs-utl/2010_enforcement_results.pdf.

⁴¹Compare IRS, Joint Operations Center, Weekly Enterprise Adjustments Inventory Report (week ending Sept. 25, 2010) with IRS, Joint Operations Center, Weekly Enterprise Adjustments Inventory Report (week ending Sept. 25, 2004).

⁴² The IRS's most recent estimate of the tax gap is for Tax Year 2001. See IRS News Release, IR-2006-28, IRS Updates Tax Gap Estimates (Feb. 14, 2006). While the results are somewhat dated, they represent the most reliable estimate available.

⁴³See IRS Fact Sheet, FS-2011-09, IRS FY 2012 Budget Proposal Summary (Feb. 2011), available at http://www.irs.gov/newsroom/article/0,,id=235959,00.html.

⁴⁴ Department of the Treasury, FY 2012 Budget in Brief (showing FY 2010 enacted levels).

⁴⁵ Government Accountability Office, GAO-11-142, Financial Audit: IRS's Fiscal Years 2010 and 2009 Financial Statements at 59 (Nov. 2010).

⁴⁶ In evaluating the likely revenue benefits of additional funding, the average return on investment (ROI) of 194:1 is less important than the marginal ROI that can be achieved for each additional dollar spent. While the marginal ROI is considerably less than 194:1 and will differ by program, studies generally show that, within reasonable limits, each additional dollar appropriated to the IRS generates substantially more than an additional dollar in federal revenue, assuming the funding is wisely spent.

⁴⁷ Where a taxpayer disagrees with an IRS liability determination or collection action, the taxpayer generally may seek redress before the Office of Appeals or the United States Tax Court. However, a taxpayer requires considerable knowledge or professional assistance to utilize the Appeals or Tax Court processes, and most taxpayers do not take their cases that far.

⁴⁸ IRC § 7803(c)(2)(D)(i)(I).

⁴⁹ From FY 2004 to FY 2010, levies rose from 2,029,613 to 3,606,818, liens rose from 534,392 to 1,096,376, and seizures rose from 440 to 605. See IRS FY 2010 Enforcement Results, available at http://www.irs.gov/pub/irs-utl/2010_enforcement_results.pdf.

⁵⁰ One important current project is the development and deployment of a new, fully integrated system for TAS, which will automate many manual operations and integrate case advocacy, systemic advocacy, and all other TAS activities. This system, known as the Taxpayer Advocate Service Integrated System, or TASIS, will replace more than ten stand-alone systems and databases and improve efficiency by enabling employees to work across IRS systems, maintain and search case files electronically, and handle the intake, screening, and distribution of work electronically. TASIS will also enable management to ensure a more even distribution of workload because it will provide information not merely on the number of cases per Case Advocate but also on case complexity, required skills, and anticipated time required for case completion. Assuming the funding committed to the project is not cut or deferred, we anticipate that much of TASIS will be operational in 2013.

⁵¹ TAS determines relief rates based upon whether TAS is able to provide full or partial relief or assistance on the issue initially identified by the taxpayer. Because TAS frequently provides relief on issues that differ from the ones the taxpayer initially identified, the relief rate, as calculated, is understated.

⁵²See National Taxpayer Advocate 2010 Annual Report to Congress vol. 2, 101-119 (Research Study: Evaluate the Administration of Tax Expenditures); 2009 Annual Report to Congress vol. 2, 75-104 (Research Study: Running Social Programs Through the Tax System).

⁵³See generally National Taxpayer Advocate 2010 Annual Report to Congress 3-14 (Most Serious Problem: The Time for Tax Reform Is Now).

⁵⁴See National Taxpayer Advocate 2010 Annual Report to Congress xi (Preface).

⁵⁵ TAS had received 1,515 suggestions as of June 18, 2011. See Tax Reform Suggestion Box at www.TaxpayerAdvocate.irs.gov.

⁵⁶See National Taxpayer Advocate 2009 Annual Report to Congress vol. 2, 81 (Research Study: Running Social Programs Through the Tax System).

⁵⁷See Robert Kidder & Craig McEwen, Taxpaying Behavior in Social Context: A Tentative Typology of Tax Compliance and Noncompliance, 2 Taxpayer Compliance (1989); Leslie Book, The Poor and Tax Compliance: One Size Does Not Fit All, 51 Kans. L. Rev. 1145 (2003), available at http://works.bepress.com/leslie_book/8 (last visited June 6, 2011).

⁵⁸See National Taxpayer Advocate 2010 Annual Report to Congress vol. 2, 87 (Research Study: Researching the Causes of Noncompliance: An Overview of Upcoming Studies).

⁵⁹ Leslie Book, Preventing the Hybrid from Backfiring: Delivery of Benefits to the Working Poor Through the Tax System, 2006 Wisc. L. Rev. 1103, 1114.

⁶⁰See National Taxpayer Advocate 2004 Annual Report to Congress vol. 2 (EITC Audit Reconsideration Study).

⁶¹See Hearing on Improper Payments in the Administration of Refundable Tax Credits, Before the Subcomm. on Oversight, H. Comm. on Ways and Means, 112th Cong. (statement of Nina E. Olson, National Taxpayer Advocate) (May 25, 2011).

⁶²See Improving Advocacy in TAS Earned Income Tax Credit Cases, infra; Appendix VIII: Earned Income Tax Credit Case Review Team Report, infra.

⁶³See GAO, GAO-11-575T, Improper Payments: Recent Efforts to Address Improper Payments and Remaining Challenges 4 (Apr. 15, 2011) (reporting $16.9 billion in improper EITC payments); Improper Payments Information Act of 2002, Pub. L. No. 107-300, 116 Stat. 2350 (2002) (governing payments over $10 million "derived from Federal funds"); OMB Circ. A-123, Appdx. C, M-11-16, Pt. I at 5 (Apr. 14, 2011) (imposing threshold of 2.5 percent of program outlays); Garrett Hatch & Virginia A. McMurtry, Improper Payments Information Act of 2002: Background, Implementation, and Assessment, Cong. Res. Serv. (CRS) No. RL34164 (Oct. 4, 2010); Hearing on Improper Payments in the Administration of Refundable Tax Credits, Before the Subcomm. on Oversight, H. Comm. on Ways and Means, 112th Cong. (statement of Nina E. Olson, National Taxpayer Advocate) (May 25, 2011).

⁶⁴ Dept. of the Treasury, Performance and Accountability Rept. FY 2010 (Nov. 15, 2010) 280.

⁶⁵ Treasury Inspector General for Tax Administration (TIGTA), Ref. No. 2009-40-024, The Earned Income Tax Credit Program Has Made Advances; However, Alternatives to Traditional Compliance Methods Are Needed to Stop Billions of Dollars in Erroneous Payments 13-14 (Dec. 31, 2008), referenced in Ref. No. 2011-40-023, Reduction Targets and Strategies Have Not Been Established to Reduce the Billions of Dollars in Improper Earned Income Tax Credit Payments Each Year 9 (Feb. 7, 2011) (hereinafter Reduction Targets). 66 National Taxpayer Advocate 2002 Annual Report to Congress 196 (Legislative Recommendation: Math Error Authority).

⁶⁷See National Taxpayer Advocate 2007 Annual Report to Congress vol. 2, 94-116 (Research Study: IRS Earned Income Credit Audits).

⁶⁸ Pub. L. No. 107-300, 116 Stat. 2350 (2002), cited in Reduction Targets 1.

⁶⁹See generally Lawrence Zelenak, Tax or Welfare? The Administration of the Earned Income Tax Credit, 52 UCLA L. REV. 1867, 1896-98 (2005).

⁷⁰ See, e.g., Steven Mufson, Paper Industry Pushed Further into the Black by 'Black Liquor' Tax Credits, Washington Post (Apr. 26, 2011) (identifying large business taxpayers benefiting from multi-million dollar cellulosic biofuel credits as well as a refundable provision); Office of Management & Budget, Budget of the U.S. Govt. FY 2011, Analytical Perspectives at 177 (explaining that "byproducts derived from the processing of paper or pulp (known as black liquor when derived from the kraft process) . . . would qualify as cellulosic biofuel and, to the extent so qualifying, could result in substantial revenue losses and a windfall to the paper industry"); Union Carbide v. Comm'r, T.C. Memo. 2009-50 (describing multi-million dollar research credits); Eustace v. Comm'r, T.C. Memo. 2001-66 (describing the use of amended returns to claim refunds of research credit), aff'd 312 F.3d 905 (7th Cir. 2002).

⁷¹ TIGTA, Ref. No. 2008-40-131, While Progress Has Been Made, Limits on the Number of Examinations Reduce the Effectiveness of the Earned Income Tax Credit Recertification Program (July 3, 2008), referenced in Reduction Targets 9.

⁷² Elsewhere this report discusses an ongoing IRS pilot program to test certain improvements to the audit process and taxpayer service suggested by previous TAS research.

⁷³See Improving Advocacy in TAS Earned Income Tax Credit Cases, infra.

⁷⁴ Over 26 million filers claimed EITC in tax year (TY) 2009. Internal Returns Transaction File for tax year 2009 from the Compliance Data Warehouse (Mar. 17, 2010).

⁷⁵ IRS Pub. 55, Data Book, 2006 - 2010, Table 9; IRS EITC Program Office response to TAS information request (May 18, 2011) (473,999 returns were selected for audit on the basis of EITC out of 1,581,394 individual returns audited in FY 2010).

⁷⁶ IRS, Compliance Estimates for Earned Income Tax Credit Claimed on 1999 Return 13 (Feb. 28, 2002).

⁷⁷See National Taxpayer Advocate 2002 Annual Report to Congress 50-52 (Most Serious Problem: EITC Eligibility Determinations Can Be Made Less Burdensome); National Taxpayer Advocate 2003 Annual Report to Congress 30 (Most Serious Problem: Earned Income Tax Credit Compliance Strategy); National Taxpayer Advocate 2004 Annual Report to Congress vol. 2, 41 (Research Study: EITC Audit Reconsideration Study); National Taxpayer Advocate 2005 Annual Report to Congress 106-108, 114, 119 (Most Serious Problem: Earned Income Tax Credit Exam Issues); National Taxpayer Advocate 2006 Annual Report to Congress 297-298, 308-309 (Most Serious Problem: Correspondence Examination); National Taxpayer Advocate 2007 Annual Report to Congress 230, 236, 240 (Most Serious Problem: EITC Examinations and the Impact of Taxpayer Representation); National Taxpayer Advocate 2007 Annual Report to Congress vol. 2, 96, 115 (Research Study: IRS Earned Income Credit Audits -- A Challenge to Taxpayers); National Taxpayer Advocate 2009 Annual Report to Congress 125, 129 (Most Serious Problem: Beyond EITC: The Needs of Low Income Taxpayers Are Not Being Adequately Met); National Taxpayer Advocate 2009 Annual Report to Congress vol. 2, at 97-98 (Research Study: Running Social Programs Through the Tax System).

⁷⁸See IRS, Earned Income Tax Credit Initiatives: Report on Qualifying Child Residency Certification, Filing Status, and Automated Underreporter Tests 14 (2008).

⁷⁹See National Taxpayer Advocate 2003 Annual Report to Congress 28 (Most Serious Problem: Earned Income Tax Credit Compliance Strategy); National Taxpayer Advocate 2004 Annual Report to Congress vol. 2, 43 (Research Study: EITC Audit Reconsideration Study); National Taxpayer Advocate 2005 Annual Report to Congress 17 (Most Serious Problem: Trends in Taxpayer Service); National Taxpayer Advocate 2005 Annual Report to Congress 113-114 (Most Serious Problem: Earned Income Tax Credit Exam Issues); National Taxpayer Advocate 2006 Annual Report to Congress 293-295 (Most Serious Problem: Correspondence Examination); National Taxpayer Advocate 2007 Annual Report to Congress 234, 238 (Most Serious Problem: EITC Examinations and the Impact of Taxpayer Representation); National Taxpayer Advocate 2007 Annual Report to Congress vol. 2, 96, 107, 116 (Research Study: IRS Earned Income Credit Audits -- A Challenge to Taxpayers); National Taxpayer Advocate 2009 Annual Report to Congress 118-119, 129 (Most Serious Problem: Beyond EITC: The Needs of Low Income Taxpayers Are Not Being Adequately Met).

⁸⁰ National Taxpayer Advocate 2010 Annual Report to Congress 302-310; National Taxpayer Advocate 2009 Annual Report to Congress 17-40; National Taxpayer Advocate 2009 Annual Report to Congress vol. 2, 1-18. See also National Taxpayer Advocate 2009 Annual Report to Congress 357-364; Taxpayer Advocate Directive (TAD) 2010-1, Immediately discontinue automatic lien filing on Currently Not Collectible (CNC) hardship accounts with an unpaid balance of $5,000 of more, require employees to make meaningful notice of federal tax lien (NFTL) filing determinations, and require managerial approval for filings of an NFTL in all cases where the taxpayer has no assets (Jan. 20, 2010); TAD 2010-2, Withdrawal of a notice of federal tax lien (NFTL) where the statutory withdrawal criteria are satisfied, even if the underlying lien has been released (Jan. 20, 2010). For copies of the TADs see National Taxpayer Advocate Fiscal Year 2011 Objectives Report to Congress, Appendix VIII, available at http://www.irs.gov/pub/irs-utl/nta2011objectivesfinal.pdf. The TADs are still open and may be elevated to the Commissioner of Internal Revenue pending IRS action on National Taxpayer Advocate recommendations.

⁸¹ IRS, Media Relations Office, IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes to Lien Process, IR-2011-20 (Feb. 24, 2011).

⁸² The IRS Collection Process Study (CPS), commenced in response to TADs 2010-1 and 2010-2 (Jan. 20, 2010), recommended increasing the threshold from $5,000 to $50,000, which in the IRS's own estimates would reduce the IRS's 1.1 million liens filed in calendar year (CY) 2010 by only 40,000 to 41,000, or about four percent. IRS, Collection Process Study (CPS) 121 (Sept. 30, 2010). Therefore, an increase of the threshold to $10,000 may have little impact on the number of liens filed.

⁸³ National Office Program Manager Technical Advice, PMTA-2009-158 (Oct. 9, 2009).

⁸⁴ SB/SE, Interim Guidance Memorandum, Control No. SB/SE-05-0611-037 (Jun. 10, 2011). See also National Taxpayer Advocate 2010 Annual Report to Congress 302-310; National Taxpayer Advocate 2009 Annual Report to Congress 17-40; National Taxpayer Advocate 2009 Annual Report to Congress vol. 2, 1-18; TAD 2010-2 (Jan. 20, 2010).

⁸⁵ IRS, Collection Activity Report NO-5000-23, Collection Workload Indicators (Mar. 22, 2011).

⁸⁶ The IRS filed liens against nearly 1.1 million taxpayers in calendar year (CY) 2010. IRS, Fiscal Year 2010 Enforcement Results, available at http://www.irs.gov/pub/irs-utl/2010_enforcement_results.pdf. The total number of taxpayers harmed by IRS lien-filing policies is much greater than 1.1 million because over five million liens filed in recent years continue to negatively affect taxpayers' credit for at least seven years from the date they pay off their debts, or up to indefinitely when unpaid tax debts become legally unenforceable due to expiration of the statutory period for collection. See National Taxpayer Advocate 2010 Annual Report to Congress 302-310; National Taxpayer Advocate 2009 Annual Report to Congress 17-40.

⁸⁷ The objectives of the study are: 1) to determine whether any amounts of payments are likely attributable to the NFTL; 2) to determine the effect of the NFTL on future payment compliance; 3) to determine the effect of the NFTL on future filing compliance; and 4) to determine whether the NFTL is associated with a decline in future income. For a more detailed discussion of the design of this study, see National Taxpayer Advocate 2010 Annual Report to Congress vol. 2, 89-100 (TAS Research and Related Studies: Estimating the Impact of Liens on Taxpayer Compliance Behavior: An Ongoing Research Initiative).

⁸⁸See IRC § 7811(a). In FY 2010, the National Taxpayer Advocate, TAS Area Directors, and Local Taxpayer Advocates issued 26 Taxpayer Assistance Orders (TAOs) which involved lien issues. From October 1, 2010, to May 31 2011, TAS issued 15 additional TAOs.

⁸⁹See Memorandum of Understanding Between the National Taxpayer Advocate and the Commissioner, Wage & Investment to Transition TAS Criteria 5-7 Identity Theft Cases to Wage & Investment Identity Protection Specialized Unit (IPSU) (Mar. 31, 2010). The following are examples of when TAS would continue to advocate for identity theft victims: (1) the taxpayer declines referral to the IPSU; (2) the IPSU has already tried to provide relief in the past, and has failed; (3) systemic burden cases that require advocacy which might lead to the issuance of a TAO on behalf of the taxpayer; (4) taxpayer cases added to the Taxpayer Advocate Management Information System (TAMIS) will remain in TAS and be resolved through the Operations Assistance Request (OAR) process; (5) taxpayers not satisfied with the assistance provided through the IPSU; (6) taxpayers being assisted by the IPSU, who subsequently face economic burden while the IPSU is processing their request, will come to TAS for assistance, when the IPSU cannot provide relief within 24 hours; (7) congressional cases; and (8) any cases previously open in TAS. See National Taxpayer Advocate, Interim Guidance on Referring Identity Theft Criteria 5-7 Cases to the Identity Protection Specialized Unit (IPSU) (May 17, 2010).

⁹⁰ IRS, IPSU Identity Theft Report (Oct. 2, 2010); IRS, IPSU Identity Theft Report (May 21, 2011).

⁹¹ At the initial stage of the case, the Case Advocate verifies the identity of the taxpayer (i.e., that he or she is the owner of the Social Security number on the tax return). IRM 10.5.3.2.1 (Dec. 10, 2010).

⁹² The Case Advocate must then analyze the taxpayer's account and assess which information is legitimate and which information belongs to the fraudulent filer. IRM 21.6.2.4.3.1 (Apr. 2, 2010).

⁹³ The next step is to advocate for the immediate release of any legitimate refunds due to the innocent taxpayers (i.e., any amounts that were held in abeyance by the IRS).

⁹⁴ The Case Advocate then must request that the IRS make the appropriate account adjustments so that the illegitimate information is removed. See IRM 21.6.2.4.3.2 (Mar. 8, 2010); IRM 21.6.2.4.3.3 (Mar. 8, 2010). The IRS marks the accounts of identity theft victims to protect them from tax-related identity theft actions. This marker puts IRS employees on notice that the individual owning this SSN has been or may be the victim of identity theft and allows the IRS to track the number of affected taxpayer accounts, protect federal revenue threatened by identity theft, and reduce taxpayer burden. IRM 10.5.3.2.2 (Dec. 10, 2010).

⁹⁵ The Case Advocate then must analyze the taxpayer's accounts for other issues which may be related to the identity theft but that are unknown to the taxpayer and correct those issues. IRM 13.1.21.1.3.13 (Feb. 1, 2011).

⁹⁶ Through May, the average identity theft case takes approximately 114 days to resolve in FY 2011, while the average TAS case takes approximately 84 days for the same period. Data obtained from TAMIS.

⁹⁷See IRS Office of Privacy, Information Protection, and Data Security (PIPDS) Incident Tracking Statistics Reports for calendar years ending 2009 and 2010 and for the period of January 1, 2011, through March 31, 2011. The IRS Deputy Commissioner for Operations Support reported that the IRS tracked more than 470,000 incidents of identity theft affecting more than 390,000 taxpayers. See The Spread of Tax Fraud by Identity Theft: A Threat to Taxpayers, a Drain on the Public Treasury, Hearing Before the Subcommittee on Fiscal Responsibility and Economic Growth, S. Comm. on Finance (May 25, 2011) (statement of Beth Tucker, IRS Deputy Commissioner for Operations Support). The significant majority of the difference is attributable to one or more mass schemes blocked by IRS filters.

⁹⁸ Data obtained from TAMIS. TAOs issued through May 31, 2011. See Importance of the Taxpayer Assistance Order, infra. An Operations Assistance Request (Form 12412) is the form that TAS employees use when requesting that the IRS complete an action on a TAS case when TAS lacks the authority to take that action.

⁹⁹ In 1980, the Social Security Administration created a Death Master File as a result of a consent judgment reached in a Freedom of Information Act lawsuit brought by a private citizen. Deceased taxpayers' SSNs and related information are now regularly obtained and used by government agencies, credit reporting agencies, financial firms, and genealogists. Unfortunately, it is also used by identity thieves to commit tax fraud.

¹⁰⁰ IRS Publication 1346, Electronic Return File Specifications and Record Layouts for Individual Income Tax Returns, available at http://core.publish.no.irs.gov/pubs/pdf/64403j10.pdf (last visited June 6, 2011).

¹⁰¹ TAS notes from IRS Decedent Schemes conference call (Apr. 25, 2011).

¹⁰² TAS notes from IRS Decedent Schemes conference call (May 12, 2011, and Apr. 21, 2011).

¹⁰³ TAS notes from IRS Decedent Schemes conference call (May 12, 2011).

¹⁰⁴ Lack of real-time processing of information returns from third parties (Forms W-2, Forms 1099, etc.) exacerbates the problem.

¹⁰⁵ TAS is increasing awareness of the need for greater advocacy for victims of identity theft. Through May, TAS issued 90 TAOs with identity theft as the underlying cause of the taxpayer's problem in FY 2011.

¹⁰⁶ Married taxpayers who file a joint return are jointly and severally liable for the tax with respect to the return, regardless of who was responsible for the income (or omission). IRC § 6013(d)(3).

¹⁰⁷ Taxpayers in community property states who do not file joint returns are generally required to report half of the community property on their returns. Poe v. Seaborn, 282 U.S. 101 (1930).

¹⁰⁸ Pub. L. No. 105-206, § 3201, 112 Stat. 685, 734 (1998).

¹⁰⁹ Treas. Reg. § 1.6015-5(b)(1), 67 Fed. Reg. 47278 (July 18, 2002), imposes a two-year time limit that commences with the first IRS collection activity with respect to liability arising from a joint return. Additional IRS guidance imposes the same deadline for claims for equitable relief from the operation of community property rules under IRC § 66. Rev. Proc. 2000-15, §§ 4.01(3) and 5, 2000-1 C.B. 447 at 448, 449, superseded by Rev. Proc. 2003-61, §§ 4.01(3) and 5, 2003-2 C.B. 296 at 297, 299.

¹¹⁰Lantz v. Comm'r, 132 T.C. 131 (2009), rev'd and remanded by 607 F.3d 479 (7th Cir. 2010).

¹¹¹Mannella v. Comm'r, 132 T.C. 196 (2009), rev'd and remanded by 631 F.3d 115 (3d Cir. 2011).

¹¹²Young v. Comm'r, T.C. Docket No. 12718-09 (May 12, 2011); Pullins v. Comm'r, 136 T.C. No. 20 (2011); Stephenson v. Comm'r, T.C. Memo. 2011-16; Hall v. Comm'r, 135 T.C. No. 19 (2010), appeal docketed, No. 10-2628 (6th Cir. Dec. 14, 2010); Buckner v. Comm'r, T.C. Docket No. 12153-09, appeal docketed, No. 10-2056 (6th Cir. Aug. 18, 2010); Carlile v. Comm'r, T.C. Docket No. 11567-09; Payne v. Comm'r, T.C. Docket No. 10768-09, appeal docketed, No. 10-72855 (9th Cir. Sept. 17, 2010); Coulter v. Comm'r, T.C. Docket No. 1003-09, appeal docketed, No. 10-680 (2d Cir. Feb. 24, 2010); Jones v. Comm'r, T.C. Docket No. 17359-08, appeal docketed, No. 10-1985 (4th Cir. Aug. 30, 2010); Mannella v. Comm'r, 132 T.C. 196 (2009), rev'd and remanded by 631 F.3d. 115 (3d Cir. 2011); Lantz v. Comm'r, 132 T.C. 131 (2009), rev'd and remanded by 607 F.3d 479 (7th Cir. 2010).

¹¹³Jones v. Comm'r, T.C. Docket No. 17359-08, rev'd and remanded by 2011 WL 2307644 (4th Cir., June 13, 2011).

¹¹⁴Mannella v. Comm'r, 631 F.3d. 115 (3d Cir. 2011), rev'g and remanding 132 T.C. 196 (2009); Lantz v. Comm'r, 607 F.3d 479 (7th Cir. 2010), rev'g and remanding 132 T.C. 131 (2009).

¹¹⁵Jones v. Comm'r, 2011 WL 2307644 (4th Cir., June 13, 2011) rev'g and remanding T.C. Docket No. 17359-08.

¹¹⁶ Adhering to the rule in Golsen v. Comm'r, 54 T.C. 742, 757 (1970), aff'd 445 F.2d 985 (10th Cir. 1971), that the Tax Court will defer to a Court of Appeals decision which is squarely in point where appeal from the Tax Court decision lies to that Court of Appeal, the Tax Court continues to hold the regulation invalid in cases appealable to other courts. See, e.g., Hall v. Comm'r, 135 T.C. No. 19 (2010), appeal docketed, No. 10-2628 (6th Cir. Dec. 14, 2010); Buckner v. Comm'r, T.C. Docket No. 12153-09, appeal docketed, No. 10-2056 (6th Cir. Aug. 18, 2010); Payne v. Comm'r, T.C. Docket No. 10768-09, appeal docketed, No. 10-72855 (9th Cir. Sept. 17, 2010); Coulter v. Comm'r, T.C. Docket No. 1003-09, appeal docketed, No. 10-680 (2d Cir. Feb. 24, 2010.

¹¹⁷ National Taxpayer Advocate 2006 Annual Report to Congress 540-541 (Legislative Recommendation: Eliminate the Two-Year Limitation Period for Taxpayers Seeking Equitable Relief under IRC §§ 6015 or 66).

¹¹⁸ National Taxpayer Advocate 2010 Annual Report to Congress 377-382.

¹¹⁹See e.g., taxpayers' statements of supplemental authorities filed on Jan. 6, 2011, at Coulter v. Comm'r, docket No. 10-680 (2d Cir.); on Jan. 7, 2011, at Jones v. Comm'r, docket No. 10-1985 (4th Cir.); and on Mar. 3, 2011, at Buckner v. Comm'r, docket No. 10-2056 (6th Cir.). Rule 28(j), Federal Rules of Appellate Procedure, permits a party to advise the court of "pertinent and significant" authorities that come to the party's attention after the party's brief has been filed, or after oral argument but before decision.

¹²⁰See H.R. Conf. Rept. No. 105-599, 105th Cong., 2d Sess. 249-51(1998), reflecting Sen. Baucus' committee membership. In an April 18, 2011, letter to the Commissioner of the IRS, Sen. Baucus as Senate Finance Committee Chair, Sen. Tom Harkin, and Sen. Sherrod Brown explained that the "two-year rule has been running counter to the spirit of the equitable relief provision as a 'safety-valve' for innocent spouses that takes into account all the facts and circumstances of each case." In a separate letter to the Commissioner on the same date, 49 House members expressed their view that the two-year rule "violated the spirit of the original law." The letters are available at 2011 TNT 75-27 and 2011 TNT 75-28 (Apr. 18, 2011).

¹²¹ Letter from Comm'r Shulman to the Hon. Jim McDermott, U.S. House of Representatives (Apr. 29, 2011), available at 2011 TNT 86-34 .

¹²²See Notice CC-2010-5 (Mar. 12, 2010) designating for litigation the issue of the two year rule with respect to IRC § 6015(f) claims. IRM 25.15.7.8.7 (Feb. 25, 2011). The IRS conceded that taxpayers would be entitled to relief but for the two-year rule in the regulation in the Hall, Buckner, Carlile, Payne, Coulter, Jones, Mannella, and Lantz cases cited above.

¹²³Thomassen v. Comm'r, T.C. Memo. 2011-88; Stephenson v. Comm'r, T.C. Memo. 2011-16.

¹²⁴ For example: TAS provided training at the 2011 National Community Tax Coalition Annual Conference reaching approximately 50 representatives serving low income communities across the country.

¹²⁵ For more detailed information regarding Small Business Health Care Tax Credit, including eligibility rules and IRS guidance, see http://www.irs.gov/newsroom/article/0,,id=223666,00.html (last visited June 2, 2011).

¹²⁶ Implementation of the health care law requires the IRS to work closely with the Department of Health and Human Service and the Department of Labor.

¹²⁷See Pub. L. No. 109-280 § 1223, 120 Stat. 780, 1090 (2006). Generally, new IRC § 6033(j)(1) revokes the exempt status of an organization that fails to fulfill its filing requirement -- under either pre-existing subsection (a)(1) or new subsection (i) of IRC § 6033 -- for three years in a row. Prior to passage of the Pension Protection Act of 2006, exempt organizations with annual gross receipts normally of $25,000 or less did not have a filing requirement. See Rev. Proc. 83-23, 1983-1 C.B. 687, modified and superseded by Rev. Proc. 2011-15, 2011-3 I.R.B. 322.

¹²⁸See IRS Exempt Organizations, Ann'l Rep't FY 2010, 8 ("The IRS posted a list of the names and last-known addresses of more than 300,000 at-risk organizations with filing due dates from May 17 through October 15, 2010, and no record of having filed a required annual return or notice for 2007, 2008 or 2009.") at http://www.irs.gov/pub/irs-tege/fy2011_eo_workplan.pdf (last visited on June 6, 2011); Amy Blackwood & Katie L. Roeger, Here Today, Gone Tomorrow: A Look at Organizations that May Have Their Tax-Exempt Status Revoked 1, Nat'l Ctr. for Charitable Statistics, Urban Inst. (July 8, 2010) ("Over 292,000 nonprofit organizations may lose their tax-exempt status in the coming months for failing to file a tax return with the Internal Revenue Service (IRS)."). In 2010, the IRS had posted an online list of so-called at-risk organizations (i.e., organizations that had failed to file returns for two consecutive years). The number of organizations on the list on July 14, 2010, was 321,091.

¹²⁹See IRS News Release: IRS Identifies Organizations that Have Lost Tax-Exempt Status; Announces Special Steps to Help Revoked Organizations, IR-2011-63 (June 8, 2011); IRS Pub. 4839-B, One-Time Filing Relief for Tax-Exempt Organizations (Aug. 2010).

¹³⁰See IRS News Release: IRS Identifies Organizations that Have Lost Tax-Exempt Status; Announces Special Steps to Help Revoked Organizations, IR-2011-63 (June 8, 2011).

¹³¹See IRS Exempt Organizations, Ann'l Rep't FY 2010, 3 (charting volume of annual determinations of applications for tax exemption) as 89,448, 85,927, 83,835, 89,703, 90,812, 84,225, 77,309, and 65,590 in 2003-2010).

¹³²See IRC § 7428 (providing that an organization can request a declaratory judgment regarding qualification for tax-exempt status from the United States Tax Court, the United States Court of Federal Claims, or the district court of the United States for the District of Columbia 270 days after applying for tax-exempt status).

¹³³See Rev. Proc. 95-48, 1995-2 C.B. 418 (waiving requirement to file for certain governmental units and affiliates).

¹³⁴See IRS Pub. 4839, Annual Form 990 Filing Requirements for Tax-Exempt Organizations Forms 990, 990-EZ, 990-PF and 990-N (e-Postcard) (indicating that a revoked organization must reapply for exempt status).

¹³⁵ Notice 2011-43 (posted June 8, 2011) at http://www.irs.gov/pub/irs-drop/n-11-43.pdf.

¹³⁶See IRS, Voluntary Disclosure: Questions and Answers, http://www.irs.gov/newsroom/article/0,,id=210027,00.html (last visited June 6, 2011) (Feb. 9, 2011) (first posted May 6, 2009) (hereinafter OVDP "FAQ"). According to FAQ #10 ("Taxpayers are strongly encouraged to come forward under the Voluntary Disclosure Practice. Those taxpayers making "quiet" disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years. The IRS will be closely reviewing these returns to determine whether enforcement action is appropriate.").

¹³⁷ OVDP FAQ #12.

¹³⁸ OVDP FAQ #35 (stating "[V]oluntary disclosure examiners do not have discretion to settle cases for amounts less than what is properly due and owing. These examiners will compare the 20 percent offshore penalty to the total penalties that would otherwise apply to a particular taxpayer. Under no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes.") (Emphasis added.).

¹³⁹ Memorandum from Director, SB/SE Examination, and Director, International Individual Compliance, for all OVDI Examiners, Use of Discretion on 2009 OVDP Cases (Mar. 1, 2011). This reversal was not properly disclosed to the public as required by the Freedom of Information Act. See 5 U.S.C. § 552. IRS revenue agents had to deliver the bad news to practitioners one at a time. This must have been particularly uncomfortable for agents who had agreed to settle on the previously more favorable terms with the practitioners' other clients just the week before.

¹⁴⁰ In our view this contradicted the portion of FAQ #35, which stated "[T]hese examiners [the OVDP examiners] will compare the 20 percent offshore penalty to the total penalties that would otherwise apply to a particular taxpayer."

¹⁴¹ Policy Statement 4-7; IRM 1.2.13.1.5 (Feb. 23, 1960).

¹⁴²See, e.g., Pedram Ben-Cohen, IRS's Offshore Bait and Switch: The Case for FAQ 35, 46 DTR J-1 (Mar. 9, 2011).

¹⁴³ We note that President Barack Obama recently signed the Plain Writing Act of 2010 (H.R. 946), Pub. L. 111-274, Oct. 13, 2010, 124 Stat. 2861 (5 U.S.C. 301 note), to "improve the effectiveness and accountability of Federal agencies to the public by promoting clear Government communication that the public can understand and use." Id. It defines "plain writing" as writing that is "clear, concise, well-organized, and follows other best practices appropriate to the subject or field and intended audience." Id.

¹⁴⁴ IRS, Taxpayer Communications Taskgroup (TACT) Charter 5 (Nov. 20, 2008).

¹⁴⁵ IRS, Publication 4701, Progress on the Implementation of the Taxpayer Assistance Blueprint 21 (Oct. 2009).

¹⁴⁶ Siegel + Gale, Summary Report: Key Findings, The IRS' Correspondence System 1 (Dec. 16, 2008).

¹⁴⁷Id. at 2, 3, 4, 7, 8, 9.

¹⁴⁸Id. at 7.

¹⁴⁹Id. at 8.

¹⁵⁰ IRS, TACT: Taxpayer Communications Taskgroup Presentation 11 (Aug. 10, 2009) (presented to the National Association of Enrolled Agents). See http://www.irs.gov/taxpros/article/0,,id=218038,00.html (last visited May 17, 2011).

¹⁵¹Id. at 7. See IRS, Simplicity Laboratory Evaluation of Original and Revised IRS Forms CP521, L-1058, and CP2000 (Feb. 2009).

¹⁵² IRS, TACT: Taxpayer Communications Taskgroup Final Meeting Presentation 7 (Sept. 29, 2009). See also National Taxpayer Advocate 2006 Annual Report to Congress 222-248 (Most Serious Problem: Correspondence Delays).

¹⁵³ Gadi Dechter, Analysis: IRS aims for letter-perfect language at http://www.govexec.com/story_page_pf.cfm?articleid=47794&printerfriendlyvers=1 (last visited June 6, 2011). See also http://www.irs.gov/newsroom/article/0,,id=218133,00.html (last visited May 17, 2011).

¹⁵⁴See http://www.irs.gov/taxpros/article/0,,id=218038,00.html (last visited May 18, 2011). The webpage includes links to each notice with further explanations and links to other areas of the website to assist taxpayers. The CP 08 informs taxpayers that they may qualify for the additional child tax credit. The CP 53 explains, "Your refund check will be sent by mail," because the IRS cannot honor direct deposits of prior year refunds. The IRS issues CP 120 when a taxpayer has filed a return claiming tax-exempt status; the revised form explains how to obtain tax-exempt status if an IRS letter granting it is not available. The CP 139 allows taxpayers to stop filing Form 941, Employer's Quarterly Federal Tax Return, and Form 940, Employer's Annual Federal Unemployment Tax Return, if they have filed a Form 941 for four quarters with no tax due, and it provides guidance on when a taxpayer should file the forms in the future.

¹⁵⁵ Gadi Dechter, Analysis: IRS aims for letter-perfect language, http://www.govexec.com/story_page_pf.cfm?articleid=47794&printerfriendlyvers=1 (last visited June 6, 2011)

¹⁵⁶ Emails from Office of Taxpayer Correspondence Chief of Staff Program Manager (May 12, 2011, and May 17, 2011). Gadi Dechter, Analysis: IRS aims for letter-perfect language, http://www.govexec.com/story_page_pf.cfm?articleid=47794&printerfriendlyvers=1 (last visited June 6, 2011).

¹⁵⁷ National Taxpayer Advocate 2010 Annual Report to Congress 221-234 (Most Serious Problem: The IRS Has Not Studied or Addressed the Impact of the Large Volume of Undelivered Mail on Taxpayers); 235-249 (Most Serious Problem: The IRS Does Not Process Vital Taxpayer Responses Timely).

¹⁵⁸ "Address hygiene" pertains to a process where every notice address is compared to a third party's address database and corrected if necessary before the notice is sent. For example, the IRS has software that will check the addresses on some notices against a United States Postal Service database before it finalizes the batch of notices sent to printing.

¹⁵⁹ IRS, Office of Taxpayer Correspondence (OTC), Undelivered Mail Core Team Highlights (Apr. 13, 2011).

¹⁶⁰ The $7,500 FTHBC allowed under the Housing and Economic Recovery Act of 2008 requires repayment of the credit over 15 years. Pub. L. No. 110-289, § 3011, 122 Stat. 2654, 2888 (July 30, 2008). The FTHBC allowed under the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, § 1006. 123 Stat. 115, 316 (Feb. 17, 2009)) and continued under the Worker, Homeownership, and Business Assistance Act of 2009 (Pub. L. No. 111-92, § 11, 123 Stat. 2984, 2989 (Nov. 6, 2009)), increased the credit to $8,000 and eliminated the repayment requirement.

¹⁶¹ IRS Newsroom, Forms Affected By the Extender Provisions, http://www.irs.gov/newsroom/article/0,,id=232773,00.html, (last visited Mar. 30, 2011).

¹⁶² Facebook, 2011 Tax Refund Delays, http://www.facebook.com/2011TaxRefundDelays (last visited June 3, 2011, at which time 3,415 people "liked" the page).

¹⁶³See Housing and Economic Recovery Act of 2008, Pub. L. No. 110-289, § 3011, 122 Stat. 2654, 2888 (July 30, 2008) as revised by the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, § 1006. 123 Stat. 115, 316 (Feb. 17, 2009))

¹⁶⁴ In late 2010, the IRS issued 1.5 million Notices CP03a, Repaying Your First-Time Homebuyer Credit, to taxpayers identified as FTHBC recipients in tax year 2008.

¹⁶⁵ TAS uses a variety of sources to identify systemic problems, including TAS employees, other IRS employees, tax practitioners, members of Congress, Low Income Taxpayer Clinics, the Taxpayer Advocacy Panel, and the public. These stakeholders submit systemic issues to TAS through a variety of channels, including the Systemic Advocacy Management System (SAMS) on the IRS employee intranet and the TAS site on IRS.gov (http://www.irs.gov/advocate).

¹⁶⁶ IRS Newsroom, Forms Affected By the Extender Provisions, http://www.irs.gov/newsroom/article/0,,id=232773,00.html (last visited Mar. 30, 2011).

¹⁶⁷ IRS, Wage and Investment Operating Division data received Mar. 25, 2011.

¹⁶⁸ IRS Quick Alerts for Tax Professionals, IMF-1040 e-file (Legacy) -- Form 5405, Mar. 18, 2011.

¹⁶⁹ IRS Update on First Time Homebuyer Credit and Tax Refund, http://www.irs.gov/newsroom/article/0,,id=237695,00.html (last visited June 4, 2011).

¹⁷⁰ TAMIS data from a Business Objects report run on May 5, 2011, comparing fiscal year 2010 to 2011 through April 30.

¹⁷¹ TAMIS data from a Business Objects report run on May 5, 2011.

¹⁷² TAS Intake Advocates serve as the first point of contact for taxpayers who call TAS for assistance, and they determine if TAS can help. Case Advocates work with taxpayers to solve tax problems, and advocate for the taxpayer to the IRS.

¹⁷³ IRM 21.4.1.3, Refund Inquiry Response Procedures (May 10, 2010), indicates the expected date for receiving a refund from a paper return is six to eight weeks, three weeks from an electronically-filed return, and 8-12 weeks from an amended return. IRM 21.4.1.3.1.2.4, Error Resolution System (ERS) Status Codes (June 29, 2010), indicates a four-week timeframe for resolution, and IRM 21.5.4.1, General Math Error Procedures Overview (Oct. 1, 2010), provides a 60-day timeframe to receive a response from the taxpayer to a math error notice. There is no standard timeframe for completion of an audit, and taxpayers may come to TAS during different times in the audit process.

¹⁷⁴ TAS timeframes obtained from TAMIS Business Objects Report run on May 16, 2011, that identified average days to close a Criteria 5-7 case closed between Oct. 1, 2010, and Apr. 30, 2011, involving FTHBC and a math error, unpostable/rejected return, or an audit of an original or amended return claiming FTHBC.

¹⁷⁵ TAS Reject/Unpostable cases involving FTHBC received in 2011 and still open as of June 2, 2011. Data is from a Business Object -- TAMIS report run on June 2, 2011.

¹⁷⁶ The American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, § 1006. 123 Stat. 115, 316 (Feb. 17, 2009)) eliminated the repayment requirement for qualifying homes purchased after 2008.

¹⁷⁷ TIGTA recommended that the IRS seek greater math error authority to disallow refundable credits under certain conditions as a way to streamline credit reviews. See TIGTA, Ref. No. 2011-41-035, Administration of the First-Time Homebuyer Credit Indicates a Need for Improved Controls Over Refundable Credits 6 (Mar. 31, 2011).

¹⁷⁸ Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. L. No. 111-312, 124 Stat. 3296 (Dec. 17, 2010).

¹⁷⁹ IRS News Release IR-2011-1 (Jan. 4, 2011), http://www.irs.gov/newsroom/article/0,,id=233910,00.html.

¹⁸⁰ TIGTA, Ref. No. 2011-40-032, Interim Results of the 2011 Filing Season (Mar. 31, 2011).

¹⁸¹ National Taxpayer Advocate Fiscal Year 2011 Objectives Report to Congress 44-46.

¹⁸²See IRM 3.11.3.14.10, Signature (Jan. 1, 2011); IRM 3.11.3.6.2.1, Correspondence When Sending Returns Back to the Taxpayer (Jan. 1, 2011).

¹⁸³ IRM 3.11.3.5.2, Determining the Received Date (Jan. 1, 2011).

¹⁸⁴ Wage and Investment Division, Filing Season Weekly Report (Mar. 14, 2011).

¹⁸⁵ National Taxpayer Advocate 2008 Annual Report to Congress 554-556.

¹⁸⁶ As of May 19, 2011, the IRS had rejected 23.6 million e-filed returns during FY 2011 and 23 million e-filed returns during FY 2010. The top ten reasons for reject included data entry issues and mismatches of key eligibility data, including Social Security numbers, name controls, and dates of birth. Daily Error Reject Codes, http://efile.enterprise.irs.gov/DailyError.asp.

¹⁸⁷ Pub. L. No. 111-148, § 10,909, 124 Stat. 119, 1021 (Mar. 23, 2010).

¹⁸⁸ IRS, 2011 Adoption Credit Selected Returns by BOD and Cycle (through cycle 16).

¹⁸⁹ IRM 21.5.10.4.1.2, Examination Refund Hold Projects, (Oct. 1, 2010).

¹⁹⁰ IRS, 2011 Adoption Credit Selected Returns by BOD and Cycle (through cycle 16).

¹⁹¹ IRS, Adoptive Parents: Don't Delay Your Adoption Credit Refund, available at http://www.irs.gov/newsroom/article/0,,id=236883,00.html (last visited May 27, 2011).

¹⁹²See Appendix I: Evolution of the Office of the Taxpayer Advocate, infra.

¹⁹³See National Taxpayer Advocate 2007 Annual Report to Congress 448-458 (Status Update: Questionable Refund Program); National Taxpayer Advocate 2006 Annual Report to Congress 408-421 (Status Update: Major Improvements in the Questionable Refund Program and Some Continuing Concerns); National Taxpayer Advocate 2005 Annual Report to Congress 25-54 (Most Serious Problem: Criminal Investigation Refund Freezes); National Taxpayer Advocate 2003 Annual Report to Congress 175-181 (Most Serious Problem: Criminal Investigation Freezes).

¹⁹⁴ To reach its goal of revenue protection, the Accounts Management Taxpayer Assurance Program selects questionable returns for verification prior to releasing refunds. AMTAP screens these returns through the Electronic Fraud Detection System (EFDS) to verify the accuracy of taxpayers' wages and withholding. If income documents are not initially verifiable, AMTAP begins a manual process to verify wages and withholding by contacting the employers. See IRM 21..9.1.7 (Oct. 1, 2010).

¹⁹⁵ See Appendix II for a list of the criteria TAS uses when deciding which taxpayers are eligible for TAS assistance in these four categories.

¹⁹⁶ TAS determines relief rates based upon whether TAS is able to provide full or partial relief or assistance on the issue initially identified by the taxpayer. Because TAS frequently provides relief on issues that differ from the ones the taxpayer initially identified, the relief rate, as calculated, is understated. Data obtained from TAMIS. TAS uses TAMIS to record, control, and process taxpayer cases, as well as to analyze the issues that bring taxpayers to TAS.

¹⁹⁷ Data obtained from TAMIS. TAS tracks resolution of taxpayer issues through codes entered at the time of closing on TAMIS and requires Case Advocates to indicate the type of relief or assistance they provided to the taxpayer. See IRM 13.1.21.1.2.1.2 (Feb. 1, 2011). The codes reflect full relief, partial relief, or assistance provided. The relief rate is determined by dividing the total number of cases closed with full relief, partial relief, or assistance by the total number of closures.

¹⁹⁸ IRM 13.1.18.2(1) (Feb. 1, 2011).

¹⁹⁹ Data obtained from TAMIS.

²⁰⁰ Data obtained from TAMIS.

²⁰¹ Bureau of Labor Statistics (BLS), Labor Force Statistics from the Current Population Survey, Unemployment Rate (data extracted on June 2, 2011). The unemployment rate was 9.0 percent in January 2011, 8.9 in February 2011, 8.8 in March 2011, and 9.0 in April 2011.

²⁰² Trulia and RealtyTrac Staff, Trulia and RealtyTrac Survey Reveals 54 Percent of American Adults Now Believe Housing Recovery Remains Unlikely Until 2014 or Later (May 18, 2011), available at http://www.realtytrac.com/content/press-releases/trulia-and-realtytrac-survey-reveals-54-percent-ofamerican-adults-now-believe-housing-recovery-remains-unlikely-until-2014-or-later-6581.

²⁰³ Data obtained from TAMIS.

²⁰⁴ The Federal Payment Levy Program (FPLP) is a systemic collection enforcement tool authorized by IRC § 6331(h). It allows the IRS to levy on federal payments disbursed by the Treasury's Financial Management Service (FMS) to delinquent taxpayers. Each week, the IRS creates a file of certain balance due accounts and transmits the file to FMS's Treasury Offset Program. FMS transmits a weekly file back to the IRS listing those that matched. FPLP will subsequently transmit levies on matching accounts.

²⁰⁵ Each account transaction, including tax return processing, is subjected to a series of validity checks before posting to the IRS Master File. A transaction is termed unpostable when it fails to pass any of the checks and is returned to the campus (Rejects Function) for follow-up action(s). IRM 21.5.5.2 (Oct. 1, 2007). See Filing Season Review, supra.

²⁰⁶ Data obtained from TAMIS.

²⁰⁷See The Spread of Tax Fraud by Identity Theft: A Threat to Taxpayers, A Drain on the Public Treasury Hearing Before the S. Comm. on Fiscal Responsibility and Economic Growth on S. Comm. on Finance, 112th Cong. (May 25, 2011) (statement of Nina E. Olson, National Taxpayer Advocate).

²⁰⁸ For a more detailed discussion of identity theft, see The IRS Needs to Improve Its Identity Theft Victim Assistance, supra.

²⁰⁹ TAS also asks its employees to submit systemic issues they find in TAS cases to the Systemic Advocacy Management System (SAMS). SAMS allows TAS to record and manage advocacy activities that benefit groups of taxpayers. See Systemic Advocacy, infra.

²¹⁰ Data obtained from TAMIS.

²¹¹See Filing Season Review, supra.

²¹² Audit reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed. IRM 21.5.10.4.3 (Oct. 1, 2010).

²¹³ IRC § 6020(b) allows the IRS to prepare a return on behalf of the taxpayer based on available information, and assess the tax after providing a statutory notice of deficiency to the taxpayer.

²¹⁴ TAS began capturing data for the Pre-Refund Wage Verification Hold issue in March 2010. Since the date for FY 2010 represents only the last six months of the fiscal year, a percentage change could not be accurately computed.

²¹⁵ TAS determines relief based upon whether TAS is able to provide full or partial relief or assistance on the issue initially identified by the taxpayer. Data obtained from TAMIS.

²¹⁶ This includes contacting the taxpayer's employer or if directed by the employer, the payroll processing firm to verify wages and withholding. AMTAP employees will also perform research to ensure they have the employer's current address.

²¹⁷ It takes the IRS two weeks to screen the cases and 11 weeks to verify the wages and withholding. TAS Notes from TAS-AMTAP OAR Backlog Conference Call (May 2, 2011). See also IRM 21.9.1.2.3(1) (Oct.1, 2010).

²¹⁸ In FY 2011, TAS issued more than 8,700 OARs to AMTAP through May 2011 (data obtained on June 8, 2011).

²¹⁹ Data obtained from TAMIS. See Importance of the Taxpayer Assistance Order, infra.

²²⁰ The role of an advocate is complex, requiring communication skills, technical skills, and determination to ensure that taxpayers receive the relief to which they are entitled. Advocacy involves numerous steps and approaches, including: listening compassionately to taxpayer concerns; exploring whether the claimed relief is permissible under the tax laws and regulations; if the relief is permissible, acting timely to ensure that the IRS provides the relief using the full set of statutory and procedural tools; and if the relief is not permissible, explaining with patience and compassion why the relief is not available. The TAS philosophy of advocacy is described in IRM 13.1.1.2 (Apr. 1, 2003).

²²¹ Treas. Reg. § 301.7811-1(a), 76 Fed. Reg. 18,059 (Apr. 1, 2011). See also IRC § 7811(a)(1); IRM 13.1.20.1 (Dec. 15, 2007).

²²² Treas. Reg. § 301.7811-1(c), 76 Fed. Reg. 18,059 (Apr. 1, 2011); IRM 13.1.20.3 (Dec. 15, 2007).

²²³ IRC § 7811(b)(1).

²²⁴ Treas. Reg. § 301.7811-1(c), 76 Fed. Reg. 18,059 (Apr. 1, 2011); IRM 13.1.20.3 (Dec. 15, 2007).

²²⁵ IRM 13.1.20.2(5) (Feb. 1, 2011).

²²⁶ The monthly sessions are termed TAO Cafés, and these discussions, equipped with moderators and a detailed agenda, allow LTAs the ability to ask questions about TAO authority under different scenarios.

²²⁷ Data obtained from TAMIS.

²²⁸ The EITC is a refundable credit for low to moderate income working taxpayers and is the nation's largest need-based anti-poverty program. National Taxpayer Advocate 2005 Annual Report to Congress 520; IRS, Earned Income Tax Credit Initiative: Final Report to Congress, October 2005 1-2 (Oct. 2005). See Appendix VIII, infra, to view the entire TAS EITC Case Review Team Report.

²²⁹ On average, TAS obtains relief for taxpayers claiming the Earned Income Taxpayer Credit (EITC) in 47 percent of cases compared with the overall relief rate of TAS cases (73 percent). TAMIS Data, FY 2008, FY 2009, and FY 2010.

²³⁰See National Taxpayer Advocate 2004 Annual Report to Congress, vol. 2, 10 (EITC Audit Reconsideration Study) ("Seventy percent of the EITC audit reconsideration cases came to TAS for assistance because the taxpayers stated they had not heard from Examination concerning their original audit or the audit reconsideration request.")

²³¹See National Taxpayer Advocate 2004 Annual Report to Congress, vol. 2, 11 (EITC Audit Reconsideration Study) ("The IRS should revisit all states of the audit process to see if additional telephone contacts with taxpayers can resolve the disputed EITC.").

²³² The team focused on cases closed "No Relief/No Response" because approximately 80 percent of all TAS EITC cases closed as no relief were closed due to the taxpayers not responding to TAS within the timeframe given by the Case Advocate.

²³³ Under IRC § 152(c)(2), the relationship test requires that the child be the taxpayer's child (including an adopted child, stepchild or eligible foster child) or descendant of any of them (e.g., a grandchild) or a child who is a sibling, step sibling or half-sibling, or a descendant of one of these relatives (e.g., a nephew or grandnephew).

²³⁴See National Taxpayer Advocate 2007 Annual Report to Congress vol. 2, 106-107 (IRS Earned Income Credit Audits -- A Challenge to Taxpayers) ("Perhaps of most concern is that more than 70 percent of respondents prefer to communicate with the IRS in a manner other than correspondence, with 46 percent of respondents preferring to communicate about their audit with IRS by telephone, and another 23 percent preferring to communicate in person.").

²³⁵See TAS's Continued Advocacy Efforts to Improve the EITC Program, supra.

²³⁶ The IRS is required by law to establish performance plans and annually reports progress towards meeting those targets. 31 U.S.C. § 1115; see National Taxpayer Advocate 2010 Annual Report to Congress 29; see TAS Efficiency Measure, infra.

²³⁷ IRM 13.5.1.3 (Oct. 1, 2001).

²³⁸ National Taxpayer Advocate 2010 Annual Report to Congress 28 (Most Serious Problem: IRS Performance Measures Provide Incentives that May Undermine the IRS Mission).

²³⁹ GAO, GAO-07-156, Taxpayer Advocate Service, Case Load Has Grown and Taxpayers Report Being Satisfied, but Additional Measures of Efficiency and Effectiveness Are Needed 26 (Feb. 2007).

²⁴⁰ For an explanation of quality standards, see GAO, GAO-07-156, Taxpayer Advocate Service, Case Load Has Grown and Taxpayers Report Being Satisfied, but Additional Measures of Efficiency and Effectiveness Are Needed 23 (Feb. 2007).

²⁴¹ Data obtained from TAMIS.

²⁴² Employees raised the issue that quality attributes on issues such as Timely Follow-Up on Subsequent Actions were "pass-fail" meaning only one missed action could cause failure of the attribute even though the employee was timely on dozens of other contacts. Now the attribute is tested "per opportunity," to present a more complete picture of performance on the case.

²⁴³ TAS, 2010 Taxpayer Advocate Service (TAS) Customer Satisfaction Survey National Report -- Q4 Results (Nov. 24, 2010).

²⁴⁴ Data obtained from the Business Performance Measurement System (BPMS).

²⁴⁵ This review will enable TAS to capture more data, such as demographic information, to provide additional insight regarding needs of certain segments of taxpayers that come to TAS.

²⁴⁶ The two critical survey questions identified by the vendor that drive overall customer satisfaction are: "Did the Case Advocate do their best to solve your problem?" and "Did the Case Advocate take responsibility for getting your problem solved?"

²⁴⁷ Memorandum from the National Taxpayer Advocate, Systemic Advocacy Measures (Mar. 22, 2011). See Appendix IX for a copy of this memorandum, infra.

²⁴⁸ Three of the four statutory functions of the Office of the Taxpayer Advocate involve identifying areas in which taxpayers have problems in dealing with the IRS, and recommending administrative or legislative changes to mitigate the problems. See IRC§ 7803(c)(2)(A).

²⁴⁹ In addition to the Office of Systemic Advocacy, TAS has a Field Systemic Advocacy (FSA) organization embedded within Case Advocacy. Field Systemic Advocacy analysts work to resolve systemic problems, in a similar role to that of Systemic Advocacy Analysts. Systemic Advocacy works very closely with FSA in its efforts.

²⁵⁰ TAS uses SAMS to identify, evaluate, and resolve systemic tax law or tax administration problems that increase taxpayer burden, detract from taxpayer equity, or undermine the observance of taxpayer rights. SAMS offers a platform for taxpayers, stakeholders, and IRS employees to raise problems affecting multiple taxpayers.

²⁵¹ While SAMS is one of the major sources of TAS's systemic advocacy issues, issues are also elevated through informal channels, such as meetings, task force work, etc.

²⁵² For the period of April 1, 2009, through March 31, 2010, TAS received 867 SAMS submissions. Data obtained from SAMS.

²⁵³ A detailed breakdown of the sources of external SAMS submitters can be found at: http://www.taxpayeradvocate.irs.gov/userfiles/file/2012-Objectives-Open-Advocacy.pdf. Data obtained from SAMS.

²⁵⁴ Data obtained from SAMS.

²⁵⁵ Although taxpayers should not submit case issues through SAMS, the Local Taxpayer Advocate in Washington, DC reviews the individual issues we do receive to determine whether they meet TAS case acceptance criteria.

²⁵⁶ Data obtained from SAMS.

²⁵⁷ For a detailed discussion of an Advocacy Project or Immediate Intervention, see Systemic Advocacy, infra.

²⁵⁸ A copy of the ranking criteria and their explanations is included in the Appendix.

²⁵⁹ The new ranking criteria include:

• Impact on Taxpayer Rights;

• Number of Taxpayers Affected (including the extent of the impact, geographic scope of impact, and issue frequency);

• Interest/Visibility/Sensitivity (including whether there has been interest in the issue from the National Taxpayer Advocate, Congress, the media, and other external stakeholders);

• Taxpayer Burden (including time and financial burden as well as fairness);

• Ability to Effect Change; and

• TAS Data (including TAMIS and SAMS data).

²⁶⁰ Both Systemic Advocacy analysts and the Field Systemic Advocacy analysts within the Case Advocacy organization work Advocacy Projects.

²⁶¹ Data obtained from SAMS. A more detailed listing of all open and closed advocacy projects and immediate interventions can be found at: http://www.taxpayeradvocate.irs.gov/userfiles/file/2012-Objectives-Open-Advocacy.pdf and http://www.taxpayeradvocate.irs.gov/userfiles/file/2012-Objectives-Closed-Advocacy.pdf.

²⁶² Includes open projects as of April 1, 2010, and all new projects created through March 31, 2011.

²⁶³ See Appendix VII for a list of advocacy portfolios, infra.

²⁶⁴ See Appendix III for a listing of collaborative efforts between TAS and the IRS, infra.

²⁶⁵ SERP contains materials such as IRMs and updates, alerts, tax forms and publications, job aids and performance support tools, and many other IRS documents.

²⁶⁶ Data obtained from SAMS.

²⁶⁷Id.

²⁶⁸ See Appendix III for a listing of collaborative efforts between TAS and the IRS, infra.

²⁶⁹ Systemic Advocacy has three senior technical liaisons who are experts on specific functional areas -- campus, collection, and examination. The technical liaisons keep the National Taxpayer Advocate informed of emerging issues and provide technical expertise and support to National Office, Systemic Advocacy, Field Systemic Advocacy, and others.

²⁷⁰ Case Advocacy has a number of technical advisors, including Revenue Agent Technical Advisors (RATAs), Revenue Officer Technical Advisors (ROTAs), and Campus Technical Advisors (CTAs). These Technical Advisors are responsible for resolving the most technically or procedurally complex or sensitive issues (including case issues) using effective research, communication, coordination, and negotiating skills.

²⁷¹ IRM 13.2.1.6.1.2(4), (5) (July 16, 2009).

²⁷² IRM 1.2.50.4 (Jan. 17, 2001).

²⁷³ The NTA will summarize TAD activity, including Proposed TADs or Advocacy Memoranda, in the National Taxpayer Advocate's Fiscal Year Objectives Report to Congress. See IRM 13.2.1.6 (July 16, 2009).

²⁷⁴ Both documents must go directly to the committees without prior comment or review from the IRS Commissioner, the Secretary of the Treasury, the Oversight Board, any other Treasury officer or employee, or the Office of Management and Budget (OMB). See IRC § 7803(c)(2)(B)(iii).

²⁷⁵ Annual Reports can be found at http://www.irs.gov/advocate/article/0,,id=171153,00.html.

²⁷⁶ The 2007 Annual Report to Congress had one MSP recommendation that was closed because the recommendation was legislative.

²⁷⁷ The 2008 Annual Report to Congress included one closed MSP recommendation that was closed because the recommendation was legislative and one MSP with no recommendations.

²⁷⁸ The 2010 Annual Report to Congress data will be posted to www.irs.gov when available.

²⁷⁹ A PCA is a situation where the IRS has identified a specific action it will take to respond to a TAS recommendation.

²⁸⁰ See Appendix III for a listing of collaborative efforts between TAS and the IRS, infra.

²⁸¹ For a detailed discussion of these studies, see TAS's Continued Efforts to Improve the EITC Program, supra.

²⁸² See Low Income Taxpayer Clinic Grant Program, infra, for a discussion of the federally-funded LITC Program.

²⁸³ GAO, GAO-10-91,Selected Agencies Can Improve Services to Limited English Proficient Persons 38 (Apr. 26, 2010).

²⁸⁴ Many LITCs provide education and outreach to individuals for whom English is a second language (ESL). While ESL and LEP are not necessarily the same, the clinics should find the analysis helpful in identifying opportunities to provide services to ESL taxpayers.

²⁸⁵ The IRS selects some returns for examination using the Discriminant Index Function (DIF) computer scoring system. IRM 4.1.3.2 (Oct. 24, 2006). It develops DIF score algorithms based on information obtained and periodically updated from National Research Program (NRP) examinations. Returns with high DIF scores generally have a higher probability of being adjusted on audit than other returns of the same type. IRM Exhibit 4.1.7-1(12) (May 19, 1999).

²⁸⁶ The Paperwork Reduction Act (44 U.S.C. Chapter 35) requires that federal agencies receive OMB approval before collecting certain information from the public.

²⁸⁷See IRC § 6502(a).

²⁸⁸ IRM 5.14.2.1.3 (Mar. 11, 2011). When taxpayers have some ability to pay, but cannot pay their tax liabilities in full before the CSED expires, the IRS may allow them to enter in partial payment installment agreements (PPIAs). IRM 5.14.2.1 (Mar. 11, 2011).

²⁸⁹See National Taxpayer Advocate 2004 Annual Report to Congress 180-192 (Most Serious Problem: Erroneous and Miscalculated Collection Statute Expiration Dates); National Taxpayer Advocate 2006 Annual Report to Congress 520-526 (Legislative Recommendation: Elimination of Lengthy Collection Statute of Limitations Extensions); National Taxpayer Advocate 2009 Annual Report to Congress 217-227 (Most Serious Problem: IRS Policies and Procedures for Collection Statute Expiration Dates Adversely Affect Taxpayers).

²⁹⁰ GAO, GAO-07-156, Caseload Has Grown and Taxpayers Report Being Satisfied, but Additional Measures of Efficiency and Effectiveness Are Needed 3 (Feb. 22, 2007).

²⁹¹Id.

²⁹² GAO, GAO-07-156, Taxpayer Advocate Service, Case Load Has Grown and Taxpayers Report Being Satisfied, but Additional Measures of Efficiency and Effectiveness Are Needed 26 (Feb. 2007).

²⁹³See Integrated TAS Technology: TASIS, infra.

²⁹⁴See TASIS Will Improve Submission, Acceptance and Assignment of Work, infra.

²⁹⁵ Data obtained from the IRS Human Resources Reporting Center as of June 4, 2011. The increase in support staffing for FY 2011 is due largely to the hiring, on a temporary basis, of additional quality reviewers to implement TAS's new quality review system. See New Quality Standards Emphasize TAS Advocacy Mission, supra.

²⁹⁶ Data obtained from the Human Resources Reporting Center as of June 4, 2011.

²⁹⁷ Data obtained from the IRS Human Resources Reporting Center as of June 4, 2011.

²⁹⁸ Data obtained from the IRS Integrated Financial System.

²⁹⁹ Employees gave an 88.25 rating in week one and a 90.25 rating in week two in the Overall Training category on the Level 1 evaluations completed in the closing plenary held each week.

³⁰⁰ Data obtained from training registration database on May 11, 2011.

³⁰¹Id.

³⁰² IRS, Enterprise Content Management Analysis for Taxpayer Advocate Service, NGIT-T30708-CBS-EA-C-4 11 (May 29, 2007).

³⁰³ IRC § 7811(a)(2). A significant hardship includes an immediate threat of adverse action; a delay of more than 30 days in resolving taxpayer account problems; the incurring by the taxpayer of significant costs (including fees for professional representation) if relief is not granted; or irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted. See also IRM 13.1.18.7 (Feb. 1, 2011).

³⁰⁴See Importance of the Taxpayer Assistance Order, infra. An OAR (Form 12412) is the form that TAS employees use when requesting that the IRS complete an action on a TAS case when TAS lacks the authority to take that action.

³⁰⁵ Data obtained from TAMIS.

³⁰⁶ All statistical data on LITC services presented here were obtained from the LITC Program Office database, 2010 Year-End Reports and include information compiled from 160 LITCs as of June 6, 2011.

³⁰⁷ This number includes over 3,600 outreach activities conducted by controversy programs.

³⁰⁸ The Federal Advisory Committee Act (5 U.S.C. Appendix) prescribes standards for establishing advisory committees when those committees will furnish advice, ideas, and opinions to the federal government. See also 41 C.F.R Part 102-3.

³⁰⁹ In 2010, the TAP submitted 101 Area Committee recommendations to the IRS and completed 34 projects. In the current TAP calendar year through June 1, 2011, the TAP Area Committees submitted 23 recommendations, and the TAP Project Committees have completed six projects.

³¹⁰ TAMRA, Pub. L. No. 100-647, Title VI, Sec. 6230, 102 Stat. 3342, 3733 (Nov. 10, 1988).

³¹¹Id. at 3737.

³¹² Pub. L. No. 104-168, Sec. 101, 110 Stat. 1452, 1453 (July 30, 1996).

³¹³ Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 104th Congress, JCS-12-96, 20 (Dec. 18, 1996).

³¹⁴ Pub. L. No. 104-168, Sec. 101, 110 Stat. 1452, 1453 (July 30, 1996).

³¹⁵ Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 104th Congress, JCS-12-96, 21 (Dec. 18, 1996).

³¹⁶Id.

³¹⁷Id. at 22

³¹⁸ Report of the National Commission on Restructuring the Internal Revenue Service: A Vision for a New IRS 48 (June 25, 1997).

³¹⁹ Pub. L. No. 105-206, Sec. 1102, 112 Stat. 685, 699 (July 22, 1998).

³²⁰ IRC § 7803(c)(4)(A)(iii).

³²¹ IRC § 7803(c)(4)(A)(iv).

³²²See, e.g., H.R. Conf. Rep. No. 105-599, at 215 (1998).

³²³ See 76 FR 18,059 (Apr. 1, 2011).

³²⁴ IRC § 7803(c)(2)(A)(i).

³²⁵See National Taxpayer Advocate 2010 Annual Report to Congress 221-234 (Most Serious Problem: The IRS Has Not Studied or Addressed the Impact of the Large Volume of Undelivered Mail on Taxpayers).

³²⁶See IRS News Release IR-2011-20, IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process (Feb. 24, 2011).

³²⁷See IRS News Release IR-2011-20, IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process (Feb. 24, 2011).

³²⁸ For the 2011 calendar year, the income ceilings for low income representation are as follows:

                                    Income Ceiling

³³⁰ Measure is computed manually from data contained in the Quality Review Database (QRDB).

³³¹ The second quarter FY 2011 survey results are not available. The total percentage of Customers Satisfied and Customers Dissatisfied will not add up to 100 percent since customers may indicate that they are neither satisfied nor dissatisfied.

³³²Id.

³³³ The second quarter FY 2011 survey results are not available.

³³⁴ Relief Determinations are made on those cases where the IRC § 7811 determinations are "Yes" or an assistance code is provided (TAMIS Relief Codes 60, 61, 70, and 71, with TAMIS Assistance Codes 97 and 98).

³³⁵ This indicator does not currently include the number of days of the small number of reopened cases. We are reviewing alternative computations that may permit inclusion of these cases.

³³⁶ Tracking and reporting on the timeliness of key actions and deliverables for the 2010 ARC will commence during the first quarter FY 2011 and extend through the end of the first quarter FY 2012.

³³⁷ TAS measures employee satisfaction annually based on the annual service-wide Employee Satisfaction Survey. Results for FY 2011 will not be available until August 2011.

³³⁸ TAS measures employee participation annually in the servicewide Employee Satisfaction Survey.

³³⁹ The results are for the FY 2010 TAS Annual CPE Symposium.

³⁴⁰ TAS EITC relief (including full relief and partial relief) has averaged 47 percent over FY 2008, FY 2009, and FY 2010 as compared with overall TAS relief rates of 73 percent over that same period. Data obtained from TAMIS.

³⁴¹ The study determined that: 45 percent of EITC claimants working with TAS recovered EITC benefits, whereas only 40 percent working with Exam obtained EITC benefits; the taxpayers working with TAS received 46 percent of the EITC dollars originally claimed on their returns, whereas those taxpayers working with Exam retained 38 percent of EITC benefits claimed; in 40 percent of cases, difficulties with IRS documentation requirements were identified as the reason taxpayers had to seek EITC audit reconsideration; 70 percent of the EITC audit reconsideration cases came to TAS for assistance because the taxpayers had not heard from Exam concerning their audit. National Taxpayer Advocate 2004 Annual Report to Congress vol. 2, 1-10 (EITC Audit Reconsideration Study).

³⁴² National Taxpayer Advocate 2004 Annual Report to Congress vol. 2, 10-11 (EITC Audit Reconsideration Study).

³⁴³ The TAS IRM permits closure when additional information from the taxpayer or representative is required because the information is not available through internal sources, and two attempts have been made (the second must be in writing) to obtain the information or documents. The second attempt letter must include a due date for receipt of the information allowing at least five workdays for receipt. If there is no response to the Case Advocate's second request within a reasonable amount of time, the case may be closed. IRM 13.1.21.1.3.19 (Feb. 1, 2011).

³⁴⁴ TAS Relief code 52 designates a case as No Relief/No Response when the taxpayer has not responded to the Case Advocate within designated time frame. The other codes are: 50 -- No Relief -- Relief appropriate but law prevents; 51 -- No Relief -- Hardship not substantiated; 52 -- No Relief -- No response; 53 -- No Relief -- BOD/Function already provided relief; 54 -- No Relief -- TP withdraws relief request; 55 -- No Relief -- No Internal Revenue Law Issue; and 56 -- No Relief -- Other.

³⁴⁵ TAS Research provided assistance to the Issue Review Team in identifying and selecting a statistically valid sample size of 400 cases for the review. Of the 400 cases, 16 cases files could not be located and were removed from the sample. TAS Research approved use of 384 cases as a sample. The files of the sample cases identified for the review were forwarded to the review site in the Baltimore office. 344 cases were actually reviewed because of miscoding. The 95 percent confidence interval has a margin of error of plus or minus 5.3 percent.

³⁴⁶ Pursuant to IRC § 152(c), the Relationship Test requires that the child be the taxpayer's child (including an adopted child, stepchild, or eligible foster child) or a descendant or the taxpayer's brother, sister, half brother, half sister, stepbrother, stepsister, or descendant of one of these relatives; and the Residency Test requires that the qualifying child must live with the taxpayer for more than half of the tax year. Exceptions apply for temporary absences for special circumstances such as illness, school attendance, vacation, and detention in a juvenile facility. There are also special rules for children who were born or died during the year, children of divorced or separated parents, and kidnapped children.

³⁴⁷ IRM 13.1.21.1.3.19 (Feb. 1, 2011).

³⁴⁸ Audit reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed. IRM 21.5.10.4.3 (Oct. 1, 2010).

³⁴⁹ IRC § 6020(b) allows the IRS to prepare a return on behalf of the taxpayer based on its own knowledge and other data.

³⁵⁰ Data obtained from TAMIS.

³⁵¹ The type of relationship was identified in 221 of the cases where the relationship was an issue. In 31 cases, where the relationship was an issue, the relationship was unknown.

³⁵² The DCI included the following questions:

• Was RGS/CEAS used by the Case Advocate?

• Based on the information in the case history, was RGS/CEAS sufficient to identify the audit issues?

• Using the available RGS/CEAS information, did the CA request the correct information from the taxpayer?

³⁵³ This percentage increases to 32 percent when including the "unable to determine" responses.

³⁵⁴ The DCI included the following questions:

• Was the initial contact attempt by telephone?

• How many times was the initial contact by telephone successful?

³⁵⁶ The DCI also included the following questions to measure whether TAS missed an opportunity to advocate for the taxpayer:

• Was there information available to advocate for the taxpayer?

• Should a TAO have been considered?