Full Text: IRS Restructuring Commission's Final Report (Part 2 of 2)

APPENDICES

A. Staff Members

APPENDIX A

Jeffery S. Trinca, Chief of Staff

APPENDIX B

Public Law 104-52, 109 Stat. 509, Nov. 19, 1995, as amended by Public

Sec. 637. National Commission on Restructuring the Internal Revenue

(a) FINDINGS. -- The Congress finds the following:

(1) While the budget for the Internal Revenue Service (hereafter referred to as the "IRS") has risen from $2.5 billion in fiscal year 1979 to $7.3 billion in fiscal year 1996, tax returns processing has not become significantly faster, tax collection rates have not significantly increased, and the accuracy and timeliness of taxpayer assistance has not significantly improved.

(2) To date, the Tax Systems Modernization (TSM) program has cost the taxpayers $2.5 billion, with an estimated cost of $8 billion. Despite this investment, modernization efforts were recently described by the GAO as "chaotic" and "ad hoc."

(3) While the IRS maintains that TSM will increase efficiency and thus revenues, Congress has had to appropriate additional funds in recent years for compliance initiatives in order to increase tax revenues.

(4) Because TSM has not been implemented, the IRS continues to rely on paper returns, processing a total of 14 billion pieces of paper every tax season. This results in an extremely inefficient system.

(5) This lack of efficiency reduces the level of customer service and impedes the ability of the IRS to collect revenue.

(6) The present status of the IRS shows the need for the establishment of a Commission which will examine the organization of IRS and recommend actions to expedite the implementation of TSM and improve service to taxpayers.

(b) COMPOSITION OF THE COMMISSION. --

(1) ESTABLISHMENT. -- To carry out the purposes of this section, there is established a National Commission on Restructuring the Internal Revenue Service (in this section referred to as the "Commission").

(2) COMPOSITION. -- The Commission shall be composed of seventeen members, as follows:

(A) Five members appointed by the President, two from the executive branch of the Government, two from private life, and one from an organization that represents a substantial number of Internal Revenue Service employees.

(B) Four members appointed by the Majority Leader of the Senate, one from Members of the Senate and three from private life.

(C) Two members appointed by the Minority Leader of the Senate, one from Members of the Senate and one from private life.

(D) Four members appointed by the Speaker of the House of Representatives, one from Members of the House and three from private life.

(E) Two members appointed by the Minority Leader of the House of Representatives, one from Members of the House and one from private life.

The Commissioner of the Internal Revenue Service shall be an ex

(3) CO-CHAIRS. -- The Commission shall elect Co-Chairs from among its members.

(4) MEETING; QUORUM; VACANCIES. -- After its initial meeting, the Commission shall meet upon the call of the Co-Chairs or a majority of its members. Nine members of the Commission shall constitute a quorum. Any vacancy in the Commission shall not affect its powers, but shall be filled in the same manner in which the original appointment was made.

(5) APPOINTMENT; INITIAL MEETING. --

(A) APPOINTMENT. -- It is the sense of the Congress that members of the Commission should be appointed not more than 60 days after the date of the enactment of this section.

(B) INITIAL MEETING. -- If, after 60 days from the date of the enactment of this section, seven or more members of the Commission have been appointed, members who have been appointed may meet and select Co-Chairs who thereafter shall have the authority to begin the operations of the Commission, including the hiring of staff.

(c) FUNCTIONS OF COMMISSION. --

(1) IN GENERAL. -- The functions of the Commission shall be --

(A) to conduct, for a period of not to exceed 15 months from the date of its first meeting, the review described in paragraph (2), and

(B) to submit to the Congress a final report of the results of the review, including recommendations for restructuring the IRS.

(2) REVIEW. -- The Commission shall review --

(A) the present practices of the IRS, especially with respect to --

(i) its organizational structure;

(ii) its paper processing and return processing activities;

(iii) its infrastructure; and

(iv) the collection process;

(B) requirements for improvement in the following areas:

(i) making returns processing "paperless";

(ii) modernizing IRS operations;

(iii) improving the collections process without major personnel increases or increased funding;

(iv) improving taxpayer accounts management;

(v) improving the accuracy of information requested by taxpayers in order to file their returns; and

(vi) changing the culture of the IRS to make the organization more efficient, productive, and customer-oriented;

(C) whether the IRS could be replaced with a quasi-governmental agency with tangible incentives and internally managing its programs and activities and for modernizing its activities, and

(D) whether the IRS could perform other collection, information, and financial service functions of the Federal Government.

(d) POWERS OF THE COMMISSION. --

(1) IN GENERAL. -- (A) The Commission or, on the authorization of the Commission, any subcommittee or member thereof, may, for the purpose of carrying out the provisions of this section --

(i) hold such hearings and sit and act at such times and places, take such testimony, receive such evidence, administer such oaths, and

(ii) require, by subpoena or otherwise, the attendance and testimony of such witnesses and the production of such books, records, correspondence, memoranda, papers, and documents, and the Commission or such designated subcommittee or designated member may deem advisable.

(B) Subpoenas issued under subparagraph (A)(ii) may be issued under the signature of the Co-Chairs of the Commission, the chairman of any designated subcommittee, or any designated member, and may be served by any person designated by such Co-Chairs, subcommittee chairman, or member. The provisions of sections 102 through 104 of the Revised Statutes of the United States (2 U.S.C. 192-194) shall apply in the case of any failure of any witness to comply with any subpoena or to testify when summoned under authority of this section.

(2) CONTRACTING. -- The Commission may, to such extent and in such amounts as are provided in appropriation Acts, enter into contracts to enable the Commission to discharge its duties under this section.

(3) INFORMATION FROM FEDERAL AGENCIES. -- The Commission is authorized to secure directly from any executive department, bureau, agency, board, commission, office, independent establishment, or instrumentality of the Government, information, suggestions, estimates, and statistics for the purposes of this section. Each such department, bureau, agency, board, commission, office, establishment, or instrumentality shall, to the extent authorized by law, furnish such information, suggestions, estimates, and statistics directly to the Commission, upon request made by the Co-Chairs.

(4) ASSISTANCE FROM FEDERAL AGENCIES. -- (A) The Secretary of the Treasury is authorized on a nonreimbursable basis to provide the Commission with administrative services, funds, facilities, staff, and other support services for the performance of the Commission's functions.

(B) The Administrator of General Services shall provide to the Commission on a nonreimbursable basis such administrative support services as the Commission may request.

(C) In addition to the assistance set forth in subparagraphs (A) and (B), departments and agencies of the United States are authorized to provide to the Commission such services, funds, facilities, staff, and other support services as they may deem advisable and as may be authorized by law.

(5) POSTAL SERVICES. -- The Commission may use the United States mails in the same manner and under the same conditions as departments and agencies of the United States.

(6) GIFTS. -- The Commission may accept, use, and dispose of gifts or donations of services or property in carrying out its duties under this section.

(e) STAFF OF THE COMMISSION. --

(1) IN GENERAL. -- The Co-Chairs, in accordance with rules agreed upon by the Commission, may appoint and fix the compensation of a staff director and such other personnel as may be necessary to enable the Commission to carry out its functions, without regard to the provisions of title 5, United States Code, governing appointments in the competitive service, and without regard to the provisions of chapter 51 and subchapter III or chapter 53 of such title relating to classification and General Schedule pay rates, except that no rate of pay fixed under this subsection may exceed the equivalent of that payable to a person occupying a position at level V of the Executive Schedule under section 5316 of title 5, United States Code. Any Federal Government employee may be detailed to the Commission without eimbursement from the Commission, and such detailee shall retain the rights, status, and privileges of his or her regular employment without interruption.

(2) CONSULTANT SERVICES. -- The Commission is authorized to procure the services of experts and consultants in accordance with section 3109 of title 5, United States Code, but at rates not to exceed the daily rate paid a person occupying a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code.

(f) COMPENSATION AND TRAVEL EXPENSES. --

(1) COMPENSATION. -- (A) Except as provided in subparagraph (B), each member of the Commission may be compensated at not to exceed the daily equivalent of the annual rate of basic pay in effect for a position at level IV of the Executive Schedule under section 5315 of title 5, United States Code, for each day during which that member is engaged in the actual performance of the duties of the Commission.

(B) Members of the Commission who are officers or employees of the United States or Members of Congress shall receive no additional pay on account of their service on the Commission.

(2) TRAVEL EXPENSES. -- While away from their homes or regular places of business in the performance of services for the Commission, members of the Commission may be allowed travel expenses, including per diem in lieu of subsistence, in the same manner as persons employed intermittently in the Government service are allowed expenses under section 5703(b) of title 5, United States Code.

(g) FINAL REPORT OF COMMISSION; TERMINATION. --

(1) FINAL REPORT. -- Not later than 15 months after the date of the first meeting of the Commission, the Commission shall submit to the Congress its final report, as described in subsection (c)(2).

(2) TERMINATION. -- (A) The Commission, and all the authorities of this section, shall terminate on the date which is 60 days after the date on which a final report is required to be transmitted under paragraph (1).

(B) The Commission may use the 60-day period referred to in subparagraph (A) for the purposes of concluding its activities, including providing testimony to committees of Congress concerning its final report and disseminating that report.

(h) AUTHORIZATION OF APPROPRIATIONS. -- Such sums as may be necessary are authorized to be appropriated for the activities of the Commission.

(i) APPROPRIATIONS. -- Notwithstanding any other provision of the Act, $1,000,000 shall be available from fiscal year 1996 funds appropriated to the Internal Revenue Service, "Information Systems" account, for the activities of the Commission, to remain available until expended.

APPENDIX C

Congress created the National Commission on Restructuring the IRS to review the present practices of the IRS, and recommend how to modernize and improve the efficiency and productivity of the IRS while improving taxpayer services. In addition, Congress asked the Commission to examine whether the IRS could be replaced with a quasi- governmental agency, and whether the IRS could perform other collection, information, and financial service functions for the federal government.

Given the scale of this task, the Commission outlined six core areas for its review. Over the past twelve months, the Commission reviewed: (1) taxpayer services, including quality programs, resource allocation, taxpayer inquiries and accounts management, and the role of the Taxpayer Advocate; (2) the management and governance structure of the IRS, including the role of the Commissioner and appropriate oversight structures; (3) the current hiring, training, and evaluation practices of the IRS, and steps that could be taken to ensure that a high caliber workforce is in place; (4) the IRS technology programs, including the use of technology to improve business operations, the systems development and oversight processes, potential methods for making return filing paperless, and safeguards to ensure taxpayer privacy; (5) financial management issues, including the annual audit and budget processes, as well as accounts receivable and the tax gap; and finally, (6) the effects on tax administration of complexity in the law and the constant changing of the Internal Revenue Code.

The Commission took a qualitative approach, spending the majority of its time listening to American taxpayers and experts on the IRS and the tax system. The Commission held twelve days of public hearings to take testimony from public and private sector experts, academia, and citizens' groups. In addition, the Commission held three town meetings outside of Washington, in Cincinnati, Des Moines, and Omaha. The Commission also heard from thousands of individuals who accessed the Commission's internet site, and hundreds of others who corresponded with the staff.

In conducting its review, the Commission sought to involve all relevant stakeholders to develop a thorough understanding of the current state of the IRS. In particular, the Commission worked with the IRS and Treasury to ensure that its recommendations would be based on a full understanding of the organization. We held hundreds of hours of private task force meetings with experts and witnesses to review IRS operations, management, governance, and oversight. In addition, the Commission interviewed more than 500 individuals, including both current and former IRS employees and managers, congressional committee members and staff, executive branch officials, and public sector advisors.

As part of its work plan, the Commission interviewed many senior managers in the IRS today, and many who have recently left government service. The Commission hired a consultant who interviewed over 300 IRS field employees, from all levels and functions, in an effort to learn what barriers they face in trying to effectively perform their jobs and deliver on the mission of the IRS.

The Commission began its fact finding efforts by studying the history and organization of the IRS. It examined prior studies of the IRS, including the report of the 1924 Senate Select Committee on the Bureau of Internal Revenue, S. Rep. No. 27, 69th Cong., 1st Sess. (1926), and the 1953 report of the Ways and Means Committee's subcommittee on Administration of the Internal Revenue Laws, 83rd Cong., 1st Sess. (Subcommittee print). The former study led to the creation of the Joint Committee on Internal Revenue Taxation; the latter report was written contemporaneously with the IRS reorganization (which was commenced by the Truman administration in 1952), which attempted to decentralize and depoliticize the IRS.

In addition to studying prior reviews of the IRS, the Commission reviewed thousands of other reports and documents on various aspects of the IRS, many of which were prepared by the IRS and the GAO.

Following are listings of the Commission's hearings and witnesses who provided testimony, individuals who spoke with the Commission or staff, and groups and consultants who provided services and research on various issues. Copies of formal testimony and many other Commission documents are available on the Commission's internet site at http://www.house.gov/natcommirs/main.htm.

HEARINGS AND WITNESSES

July 29, 1996

History of the Internal Revenue Service

Review of Work Conducted by the General Accounting Office

September 10, 1996

Overview of the Internal Revenue Service

Quality Improvement programs at the IRS

November 7, 1996

Structure and Functions of the IRS

Management and Priority Setting at the IRS

Measurable Performance Objectives for the IRS

November 8, 1996

History and Operation of Section 6103

Tax Complexity, Compliance Burdens, and the Legislative Process

January 8, 1997

Non-Tax Functions

Taxpayer Inquiries for Technical Assistance and Account Management

Role of the Taxpayer Advocate and Problem Resolution Officers

January 9, 1997

Financial Accounting at the IRS

Geographic Allocation of IRS Resources and Personnel

The Tax Gap

January 30, 1997

Best Practices in Tax Administration and Modernization

Application of Technology to Returns Processing

Application of Technology to Improve Information Access

January 31, 1997

Technical Management of Technology

Current IRS Governance and Oversight Arrangements

February 26, 1997

Tax Simplification

Overview and Legislative Options for Taxpayers' Rights

Quality of Audits

Collection Actions

Taxpayers' Redress

Taxpayer Representatives

February 27, 1997

Century Date Change

Governance and Management

March 13, 1997

Information Security

Budget Process

Approaches to Compliance

National Archives and IRS Records Retention

April 17, 1997

Private Sector Task Forces

April 18, 1997

Outsourcing

Procurement and Acquisition

Written Submissions

Phil Brand, Former IRS Compliance Officer, Organizational

Internal Revenue Service Site Visits

Philadelphia Service Center, October 24, 1996

Individuals Who Met With The Commission

Donald C. Alexander, Former Commissioner of Internal Revenue

IRS National Office Personnel Who Met with the Commission

Thomas Andretta, National Director for Financial Analysis

Groups and Consultants Providing Services

Stakeholders

American Bankers Association

Consultants

APCO Associates Inc.

APPENDIX D

MANAGEMENT AND GOVERNANCE, WORKFORCE, OVERSIGHT, AND BUDGET

1. Activities of the Management, Governance, and Workforce Task Force

ACTIVITIES OF MANAGEMENT, GOVERNANCE, AND WORKFORCE TASK FORCE

December 6, 1996 -- Conference Call

o Task force organization

January 9, 1996 -- Meeting

o Staff presentation and discussion

January 31, 1997 -- Meeting

Discussion with witnesses:

February 27, 1997 -- Meeting

o Discussion of IRS governance models

March 14, 1997 -- Meeting

o Findings

April 7, 1997 -- Meeting

o Department of Treasury Proposal

April 18, 1997 -- Meeting

o IRS and Treasury Governance Model

NATIONAL COMMISSION ON RESTRUCTURING THE IRS

Issues to be reviewed and debated:

I. Governance:

II. Management:

o Commissioner: Term and qualifications

III. Budget Process

o Review of proposals to bring stability and efficiency to

IV. Strategic Plan and Organizational Performance Measures

o High level priorities and initiatives

OPTION SHEET FOR KEY GOVERNANCE DECISIONS

[chart omitted]

MANAGEMENT, GOVERNANCE & WORKFORCE TASKFORCE TIMELINE

[chart omitted]

RELATIONSHIPS AMONG IRS AND OVERSEERS

[chart omitted]

MANAGEMENT STRUCTURE

[chart omitted]

CONSULTING REPORTS PREPARED FOR THE COMMISSION

The Commission asked individuals and groups from the private sector

Public Strategies Group

The Public Strategies Group was charged with facilitating the development of consensus of a Measures Working Group, which included Commission members, IRS, Treasury, Congress and stakeholder groups, on a small number of customer service measures. The Public Strategies Group interviewed 11 designated representatives of stakeholder groups and 9 Commissioners on the Task Force to understand individual perspectives on IRS customer service issues. Meetings were held April 4 and 25, 1997. (See attached for summary.)

Towers Perrin

Towers Perrin was charged with reviewing middle management staffing levels at IRS district offices and service centers. The objective of the review was to develop a general estimate as to what kinds of staffing reduction and cost savings may be possible in the near term by streamlining deployment of managers at the 10 service centers and 33 district offices. Towers Perrin consultants visited four sites, reviewed IRS organizational charts, and analyzed an IRS database addressing management and non-management deployment throughout all sites. Without fundamental changes in work processes, the consultants believe that the IRS could eliminate a minimum of 400 positions resulting in savings of $27 million to $35 million dollars. This is a conservative estimate, because the consultants did not include analysis and secretarial staff. (See attached for summary.)

Field Interviews

Catherine Moriarty, an independent consultant, interviewed over 300 IRS employees. Employees from all levels and functions were interviewed in an effort to learn what barriers they face in trying to effectively perform their jobs and deliver on the mission of the IRS.

Report on IRS Approach to Addressing Noncompliance

This report, prepared by a graduate student (Adrienne Poulton) under the advisement of an international expert on compliance issues, assesses the IRS strategic approach to the problem of noncompliance. Specifically, it assesses two initiatives in the past decade- Compliance 2000 and the compliance research approach. The report analyzes each approach and offers recommendations to the IRS for ways to address noncompliance in the future.

Alternative Governance Models

This report reviewed alternative governance models for the Commission to consider. The models included Fannie Mae, the Postal Service, AMTRAK, Tennessee Valley Authority, Social Security Administration, and Federal Deposit Insurance Corporation.

SUMMARY OF TOWERS PERRIN REVIEW OF MANAGEMENT STAFFING AT IRS

May 20, 1997

o Towers Perrin, a management consulting firm, completed a high-level

o The objective of the review was to develop a general estimate of

o Although the consultants did not examine the operations of every

o The consultants estimate that a minimum of approximately 400

o In general, the greatest opportunities for streamlining were not at

o The consultants believe the 400 position and $27 million savings

Not included in the scope of the analysis were management

CUSTOMER SERVICE MEASURES

Executive Summary

The Public Strategies Group was charged by the National Commission on Restructuring the IRS with facilitating the development of consensus among stakeholders in the IRS on a small number of customer service measures. It interviewed 11 designated representatives of stakeholder groups and 9 Commissioners on the Management, Governance, and Workforce Task Force to understand individual perspectives on IRS customer service issues. A Measures Working Group (MWG) met on April 4 and 25, 1997.

There was general consensus among the MWG that:

o Customer service is a strategic element of the IRS;

o There were a few key descriptors or dimensions of customer

o Fairness

o Customers define quality; and

o Executive responsibilities included monitoring "high level"

The MWG Stakeholders also agreed that customer service was embedded in all functions of the IRS, and the service dimensions of "Accuracy," "Understandability," "Respect," and "Access" were of the highest priority to measure and track.

Specific indicators of customer service performance agreed upon (and measures and performance standards should be developed for) were:

o Number of taxpayers who contact the IRS that receive

o Understandability of all information, including notices,

o Customer perceptions of respectful treatment;

o Level of telephone access to citizens and tax professionals;

o Number of notices that are error-free.

IRS Customer Service Measures

Other indicators receiving significant support by the MWG

o Convenience and cost to taxpayers of filing and payment;

MEASURES WORKING GROUP PARTICIPANTS

Brian Caudill

Alan Einhorn

Donna Steele Flynn

Michelle Kaplan

John Murphy

Michael Murphy

Pam Olson, Esq.

Tammy Perrin

Betsy Phillips

Tom Roesser

Ron Watson

Andrew Weiss

Commission Members:

Fred T. Goldberg, Jr.

David Keating

Robert Tobias

INTERVIEWS WITH IRS EMPLOYEES AND MANAGERS

As a part of its work plan, the Commission hired a consultant to conduct a series of interviews with Internal Revenue Service employees in order to add to the Commission's understanding of the issues mentioned above and to identify areas of concern within the IRS. IRS employees from all levels and functions were interviewed in an effort to learn what barriers they are facing in trying to effectively perform their jobs and deliver on the mission of the IRS

Interview locations were selected in order to gain a broad understanding of the current barriers to achieving the mission and goals of the IRS and the specific issues outline by Congress. All four Regions were visited. Ten Districts were selected based on criteria such as population density of area served, recent organizational changes, and management challenges resulting from the recent IRS consolidation. The goal of this selection criterion was to gain an understanding of issues which may be specific to a location and those which effect the entire organization. In addition to the regions and districts, two Service Centers were visited. Interviewee selection criteria differed by job level. Most management interviewees were randomly selected, controlling for a spread of levels and functions. However, some interviews were specifically requested, such as those with Directors of Information Systems. Bargaining unit employees were selected by requesting volunteers from which specific personnel were chosen at random. The Commission was informed by IRS management that the need for requesting volunteers at the bargaining unit level was based on NTEU requirements. In total, 334 interviews were conducted. Of these 41 were with Regional personnel, 224 were with District employees, and 69 with Service Center employees. The following information breaks down interviewees by office, title, and function:

[charts omitted]

Given the existence of the Survey Action Feedback survey and other statistical studies of IRS employees, the decision was made to use an interview and interview guide method in this study. The reason for this decision was to avoid duplicating information which already exists and to gain a degree of flexibility in discussions with employees.

PRESIDENTS' BUDGET REQUESTS AND CONGRESSIONAL APPROPRIATIONS FOR THE

[table omitted]

APPENDIX E

IRS STRATEGIC OBJECTIVES: CUSTOMER SERVICE, COMPLIANCE, AND

Notices and correspondence

In fiscal year 1996, the IRS decreased the number of notices issued to taxpayers to 103 million. The 103 million consists of approximately 50 million computer-generated notices from taxpayer master files, 48 million collection notices, and 5 million examination, underreporter, and information return notices. Additionally, in fiscal year 1996 IRS employees created 14 million letters of correspondence.

The Commission believes that taxpayer burden and expense should not be increased because IRS lacks the ability to post timely taxpayer correspondence and track notices and correspondence. The IRS should develop a mechanism to track (e.g., inventory) taxpayer notices and correspondence using a system integrated into taxpayer account databases. Examples of policies to increase taxpayer satisfaction and confidence in the IRS include responding to correspondence within twenty-one business days and if additional time is needed, the IRS should contact the taxpayer to explain the reasons for the delay. Other examples include improving the tone of the notices to reflect the partnership between the IRS and the taxpayer to ensure accurate reporting, data collection, and payment.

Telephone assistance

The delivery of new technology and increased authority for personnel to resolve taxpayer problems would positively affect IRS ability to keep pace with private sector call centers.

From October 1, 1995 to September 28, 1996, the IRS received a total of 219 million call attempts for assistance. Within this population, 97 million call attempts (45%) were from individual callers, defined by the IRS as the number of unique telephone numbers from which the IRS received a call attempt during any one week period. The remainder of the call attempts (55%) are considered repeat callers who unable to reach an assistor with the first call. Thus, the IRS does not measure the concept of "repeat callers" directly.

GAO, however, measures all call attempts, not individual callers. The IRS, by eliminating repeat callers, measures individual taxpayers attempting to reach assistance, even if multiple calls were required by the same taxpayer. For the period noted above, IRS measured the level of access (46.2%) as the actual calls answered (callers served) divided by the unique number demand, (i.e., the number of individual phone numbers from which the IRS received calls during a one week period of time). GAO calculated the level of access (21%) by using the number of callers served divided by the total number of call attempts. Thus 21% of answered calls as measured by GAO equates to 46.2% of taxpayers receiving assistance as measured by the IRS.

The length of time to reach assistance also affects access. According to IRS, the best available estimates calculate the length of assistance at 12.4 minutes. This estimate is comprised of a 9 minute average time that callers wait before speaking to an assistor (i.e., for approximately 2 minutes callers listen to a menu/script and approximately 7 minutes of queue time before an assistor answers) and approximately 3.4 minutes for the assistor to help the taxpayer.

However, until the ability of taxpayers to reach an assistor more closely aligns with the actual number of taxpayers seeking assistance, the IRS and GAO differing access measures will continue to be misleading and confusing. As the level of access to IRS assistance increases, the number of repeat callers will decrease and the GAO and IRS methods of measuring telephone assistance will converge. Examples of policies to increase access, satisfaction and confidence in the IRS include allowing a taxpayer to leave a message with the assurance that their call will be returned within 24 hours.

Private Sector Benchmarks

In testimony before the Commission by Hobart Harris, Ph.D., Center For Technology Enablement, Ernst & Young, there are three basic customer service principles: Near-Immediate Access, One and Done, and Immediate Follow-Up.

1. Near-Immediate Access

Callers for private sector assistance should be able to get

2. One and Done

Callers for private sector assistance should have their

3. Immediate Follow-Up

Telephone assistors should be able to make customer record

Because of the diverse purposes and needs for taxpayer calls for assistance, assistors need an integrated system to provide timely and accurate assistance. According to Hobart Harris, call centers in quality organizations generally utilize the following components:

1. Assistors have rapid (i.e. computerized) access to

2. Artificial intelligence-based search engines, Frequently-

3. Every telephone assistor must be equipped with an intelligent

4. If callers can generally identify the nature of their

5. Expert routing directs calls to agents who have received

6. Assistors must be able to retrieve relevant portions of

Enhanced technology should provide IRS assistors with the ability to make automated adjustments, automated payment tracers, improved penalty and interest computations, online financial statement preparation and analysis for installment agreements, and allow call site representatives to take immediate action from a single workstation.

Taxpayer representation

With respect to represented taxpayers, practitioners have experienced continued frustration in their ability to work with the IRS to resolve a taxpayer account. The IRS should improve Power of Attorney (POA) procedures and administration. For example, POA procedures could be streamlined through the acceptance of facsimile and oral POA authorizations, inclusion of the POA authorization on the tax return (706 and 8453 already have this), and agency-wide access to POA data.

In 1993, the IRS began implementation of Corporate Education. Extraordinary, nationwide recruitment efforts were initiated to select executive-level leaders with extensive educational, organizational, and professional expertise for the director and dean positions. The IRS outlined a vision for IRS education based on the corporate university model and began implementation of initiatives leading to this vision. Unfortunately, the lack of decision making and strong management stalled implementation and created animosity and internal battles between Corporate Education and the remainder of the organization. Barriers include:

o Executive Autonomy - There is a strong history of executive

o Training is not valued - There exists a general lack of

o IRS Commitment to Redeployment - Another barrier is the

Efforts essential to improving IRS education that have proven difficult to implement include the following:

o Streamlining the IRS education process, improving

o Establishing an infrastructure for training delivery

o Establishing and staffing institutes to focus on specific

o Encouraging and promoting partnering with the private sector

o Linking training plans to the strategic planning and budget

o Increasing the authority of the Education Advisory Board; and

o Increasing use of education technology to develop and deliver

Achievement of success can be evaluated by the following benchmarks of successful education programs:

o Up-to-date training materials are provided when needed;

o Trained personnel report to new jobs/reassignments;

o Professional career/vocational counseling is available to all

o Career-long learning is the norm;

o Training staff operate within a connected community with

o Dedicated, professional training cadre is responsive to the

o Technology supports learning and job performance;

o Training staff operate in a quality achievement environment;

o In-depth measurement, evaluation and feedback document value-

o Budget formulation and execution are centralized.

Examination

Tax auditors and revenue agents do not receive adequate, consistent, and continuous training. Training resources for agents have been sacrificed to meet budget requirements. While reduced funding of training and education may meet short-term goals, such resource allocations result in long-term, irreparable damage to the tax administration system.

                 CPE HOURS PER TECHNICAL STAFF YEAR

                         1992   1993   1994   1995   1996   1997 Plan

Tax Auditors               25     27     26     11      9       39

Until recently, IRS interpreted Office of Personnel Management (OPM) requirements for accounting qualifications as college level accounting credits. Recently, however, OPM directed IRS to discontinue this interpretation. Thus, tax auditors went from a 6 hour accounting credit requirement to only a "substantive knowledge of accounting principles" requirement. OPM, however, did increase the accounting credit requirements for revenue agents from 24 to 30. Salary range for selected grades of tax auditor and revenue agent positions, using salaries effective January 1997 for the Washington- Baltimore locality, are as follows:

_____________________________________________________________________

                              Without Benefits     With Benefits

GS-9                          $31,680 - $41,185    $38,086 - $49,513

Currently, IRS must maintain two separate training and employee evaluation systems. A single occupation classification could be accompanied with an increase in the accounting credit requirements and attainment of increased qualifications could be phased in. For example, education criteria could include: a junior level examiner requires 15 accounting credits to qualify for the job with 40 credits of annual CPE, and a senior level examiner requires 30 accounting credits to qualify for the job with 40 credits of annual CPE.

Finally, the partnership between taxpayers, taxpayer representatives, and the IRS can be improved in examination through the sharing of third-party information, other than informant information, that the IRS has obtained (e.g., bank accounts, appraisals, loans) regarding the taxpayer.

APPENDIX F

MODERNIZATION SUPPLEMENTARY INFORMATION

CENTURY DATE CHANGE

The century date change is a high risk area for the IRS. The IRS estimates it has 19,000 Tier I applications that comprise approximately 62 million lines of code, as well as other Tier I, Tier II, and Tier III applications that may well comprise another 30,000 applications and 40 million lines of code. All Information Systems (IS) controlled applications were certified in inventory by April 21, 1997. All non-IS controlled applications, except Tier III, were certified in inventory by May 30, 1997. This comprises 98% of all applications. The remaining 2% are Tier III applications housed in the field. These applications are being reviewed by an executive-led task force that will decide which applications will be scheduled for conversion and which will be retired. Those selected for conversion will be certified in inventory by October 15, 1997. The Commission cannot determine if the IRS will be successful, but the enormity of the risk dictates that all possible caution be exercised now to avoid problems in the future.

GAO has developed readiness guidelines for use by any federal agency in establishing its century date change conversion programs. GAO has identified a structured five phase approach for effective conversion programs: awareness, assessment, renovation, validation, and implementation. The IRS program follows the GAO guidelines and is in the assessment phase. However, several risks were identified during testimony received by the Commission on February 27, 1997:

o The first risk is that the $129M budgeted in fiscal year 1997

o The magnitude of many of the Tier II and III programs is

o Data IRS receives from a number of outside sources may not be

In addition to computer program modifications, additional computing and storage resources may be required, and lead times for acquisition of additional hardware must be taken into account. Another risk is the need to make other changes, such as tax law modifications, simultaneously with century date change corrections. Changes of this type could add additional complexity to programming and testing efforts, and have the potential to delay the implementation of century date change corrections.

MANAGING TECHNOLOGY

Given the structural deficiencies the Commission found at the IRS, the technological deficiencies are not surprising. Past problems are well documented in numerous reports from oversight organizations, and the Commission is more concerned in planning for the future than criticizing IRS for past problems. However, understanding the reasons for IRS problems in managing technology is necessary if future information technology modernization projects are to be accomplished efficiently and effectively.

The IRS inability to manage technology adequately is an outgrowth of issues discussed in the management and governance findings. Senior management has not be able to purposefully establish a long-term vision for its business operations, which, in turn, has affected management's ability to manage technology programs.

The belief of the Commission with respect to the use of information technology (IT) is clear: the purpose of IT is to enable IRS to achieve its strategic objectives; IT should not drive IRS objectives. This premise necessitates a clear strategic vision to identify business requirements that provide IRS Information Systems organization the guidance it needs to develop and implement IT systems that support the business vision. While the findings discussed below indicate fundamental flaws in IRS ability to manage technology, the lack of overall strategic objectives results in a shaky foundation from which to develop modern IT systems.

The Commission did not have the time or the resources to conduct a complete technical evaluation of IRS ability to manage technology. Moreover, a number of oversight organizations have already conducted such reviews in great depth. The most comprehensive reviews of the Tax System Modernization program were conducted by the General Accounting Office (GAO) and the National Research Council (NRC). The NRC Final Report, Continued Review of the Tax Systems Modernization of the Internal Revenue Service, 1996, and GAO/AIMD-95-156, July 1995 both cited a number of important deficiencies that need correction.

Subsequent reports indicated that problems continued without appreciable corrections. The Commission has found these problems have, in the past, affected the ability of the IRS to produce successful IT systems. Examples of IT projects that did not meet expectations, as documented in GAO and IRS reports, include the following:

o The IRS contracted with a private sector contractor to develop

o The Cyberfile program was to allow taxpayers who prepared

o The Service Center Recognition/Image Processing System

o The Integrated Case Processing (ICP) program was to provide

The problems described above were caused by serious deficiencies that must be corrected before major new investments in technology can be justified. The intent of the Commission is not to criticize the IRS for past problems, but to ensure that the mechanisms exist to correct these problems, so that additional funds appropriated for technology development may be spent effectively and efficiently.

Best practices for developing IT systems

The Commission, during its investigations, emphasized identifying best practices by both industry and government in developing IT systems. Industry, academic, and government experts who provided testimony on IT best practices are listed in Appendix C. An analysis of best practices abstracted from these sources reveals that the following best practices are widely used by multiple organizations:

o Measurable, strategic objectives for IT to support is

o Business and IT owners must act in partnership;

o Business processes should be reengineered prior to

o Core capabilities must exist in customer IS organizations,

o An overall design and architecture is needed prior to

o Phased, evolutionary modular approaches to modernization work

The need for appropriate technical disciplines and processes, particularly for an overall system design and architecture prior to implementation of individual projects was universally emphasized, and the need for a security architecture was particularly emphasized by security experts.

USAA, Citibank, and ATO emphasized the need for evolutionary approach to modernization. Citibank uses a concept known as Building Permits. New development projects must obtain a Building Permit before being approved and funded. To obtain a Building Permit, a project must be cost-justified and conform to Citibank architecture and standards framework, and use selected vendors.

Another source for best practice information is the Software Capability Maturity Model (SW-CMM) and Software Acquisition Capability Maturity Model (SA-CMM). The former describes best practices for in-house development of software, and the latter applies to managing software acquisitions from contractors. The SA- CMM will grow in importance as IRS outsources most of its software development.

Core capabilities

A number of organizations have turned to outsourcing IT development. Research by Feeney and Willcocks of Oxford University, Configuring the Information Systems Function: A Core Capabilities Approach, indicates that organizations that outsource IT development must possess nine core capabilities to be successful:

o IS/IT governance(Integrating IT effort with business purpose

o Business systems thinking(Envisioning the business process

o Relationship building(Getting the business constructively

o Designing technical architecture(Creating the coherent

o Making technology work(Rapidly achieving technical progress-

o Informed buying(Managing IT sourcing strategy that meets the

o Contract facilitation(Ensuring the success of existing

o Contract monitoring(Protecting the business's contractual

o Vendor development(Identifying the potential added value of IT

The Commission believes these core capabilities are applicable to the IRS situation as it changes its IS organization from one that develops information systems in house to a manager of private sector development contractors. The Commission recommends that the core capabilities be used as guidelines in the organizational development of IRS Information System organization.

Information technology industry recommendations

The Information Technology Association of America (ITAA), an industry association whose member companies are marketplace leaders in systems integration, outsourcing, software, and telecommunications, conducted a study for the Commission describing its recommendations for improving IRS ability to manage technology. The ITAA report, Realizing Strategic Business Goals Through Process Reengineering and Systems Integration, contained the following recommendations for IRS:

o Clarify and communicate the vision of a modernized IRS;

o Ensure that business goals drive the tax system modernization;

To aid in the implementation of these recommendations, the ITAA further recommended that the IRS:

o Must be given the flexibility to hire, provide incentives,

o Make better use of the private sector skills, i.e., do not

o Integrate program management to enhance effectiveness of

Details of these recommendations can be found in Realizing Strategic Business Goals Through Process Reengineering and Systems Integration.

Recent IRS progress

During the past 12 months, IRS has succeeded in creating high- level technology management mechanisms that work. GAO endorsed the operations of the Modernization Management and Investment Review Boards. Both put Strategic Information Management practices in place at the highest levels of Treasury and IRS. These boards should be integrated into overall strategic planning efforts at IRS.

Another IRS achievement was to hire a Chief Information Officer (CIO) from outside the organization. The new CIO has inherited major problems: century date change corrections that threaten the ability of IRS to function; stovepipe legacy systems that create operational and maintenance problems; a history of failed projects; lack of a business strategic plan; insufficient experienced personnel, and a decentralized IS organization with a proliferation of non-standard IS systems in the field.

The CIO has instituted positive change by establishing a project team to correct century date change problems, stopped a number of questionable projects, is developing architecture, program, and acquisition plans to modernize; and began to recruit outside personnel. The CIO testified that he has implemented a rigorous systems development methodology and is creating a systems architecture, business requirements, and sequencing plan, all of which are needed prior to implementation of IT systems. These documents were delivered to Congress and released to the public on May 15, 1997. Development of these documents is consistent with best practice guidance the Commission has received from industry. In addition, IRS is progressing toward outsourcing of submissions processing, but cannot evaluate a pilot program before 2001. While these time tables seem long, the Commission recognizes significant analysis of returns processing efficiency must be conducted prior to outsourcing.

Taxpayer Records

The Commission believes that IRS efforts to improve customer service and streamline compliance can never be realized fully until its employees have the tools needed to easily access taxpayer data. The capability for IRS employees to respond quickly and correctly to taxpayer inquiries is of major concern to the Commission. Providing correct information to taxpayers requires that Customer Service Representatives (CSRs) have easy access to accurate, timely taxpayer account data. Presently, taxpayer account and related data is stored in a number of large data bases frequently referred to as stovepipe systems since they are not integrated. This structure hinders Customer Service Representatives from easy access to data needed to satisfy taxpayer requests in a single call. Data bases that Customer Service Representatives must frequently access include the Integrated Data Retrieval System (IDRS), Automated Collection System (ACS), Corporate Files On-Line (CFOL), Service-wide Electronic Research Project (SERP), and Centralized Inventory Distribution System (CIDS).

Legacy system problems

IRS provided information to the Commission staff describing 59 separate data bases that support various tax processing functions. The size of many of the data bases was in the gigabyte range. For many of these data bases, there is no central data dictionary. Neither is there a central data management plan that addresses data management issues across the organization.

These data bases are hosted on a variety of hardware systems. IRS reported that it currently has 49 operational mainframe systems in the two Computing Centers and ten Service Centers, with a total processor power of 1,542 millions of instructions/second (MIPS) for IBM/IBM-plug compatible machine (PCM) systems and 495 MIPS for UNISYS, as well as a total storage capacity of 10,790 gigabytes deployed. For non-mainframe systems, known as Tier II and III systems, IRS currently has 349 mini-computer based and 536 micro- based servers. IRS also has an estimated total of 6,998 gigabytes of on-line data and 180,000 gigabytes of near-line and off-line data stored on magnetic tapes.

IRS Master Files were designed in the 1960s, and are based on a one-week posting cycle. Data are accumulated during the five business days of each week and posted to the Master File data bases through a series of computer operations, commencing on Saturday and extending over several days. Thus, data captured at the Service Centers may not be available on the Master Files for as long as 10 days from the date the information is transmitted to the Martinsburg Computing Center. Computer on-line access to these data and the ability to update the information are further delayed by the need to transmit the updated master file date to each Service Center. In turn, the Service Center updates the on-line IDRS, the primary system used to resolve taxpayer account issues.

The IRS has been characterized as a stovepipe organization in which functional units such as exam, collection, and appeals set and implement their own priorities and objectives. Each functional unit is often disconnected from the other units and the organization as a whole. The design of IRS data bases reflects this type of organization. The consequences of such a design can hinder customer service. For example, IRS testified that separate tax assessments for the same taxpayer could be found on systems such as ACS, AUR, Automated Substitute for Return System (ASFR), the Audit Information Management System (AIMS), the Integrated Collection System (ICS), and the Totally Integrated Examination System (TIES). Thus, a CSR may need to research a variety of systems to obtain a comprehensive view of all data required to resolve a taxpayer's account issues.

IRS testified that it has experienced increasing difficulties synchronizing disparate standalone data bases and expended significant funds to develop and operate standalone systems with duplicative functionality, infrastructures, and telecommunications. Minimal progress has been made in replacing the core Master File systems, thereby requiring even greater expenditures for the interfaces between the standalone systems and the Master File systems. The stovepipe systems, with standalone databases that provide fragments of customer service functionality, are unable to directly update the Master files. Further, the IDRS, designed as an end user system, is employed inappropriately as a "hub" system, between the Master Files and the stovepipe systems, and many of the stovepipe systems were developed due to a lack of success in replacing the Master Files and the need to work around the limited capabilities of IDRS.

The IRS capability to access taxpayer account data in an integrated manner is an issue that is at the core of the its ability to provide good customer service, as well as achieve high levels of compliance. GAO addressed this issue in report GAO/AIMD/GGD-96-152, September 1996:

Making it easier for taxpayers to reach IRS by telephone is of

Another major goal of IRS' vision is to increase compliance.

GAO report GAO/GGD/AIMD-97-37, January 1997, describes the problems encountered by Customer Service Representatives in servicing customer inquiries. Generally, the Customer Service Representative must access each of the different systems independently. For example, an IRS employee using IDRS will know that a taxpayer was sent a notice of underreported income but would not have access to the actual notice, which is contained it the Automated Underreporter (AUR) System. AUR would provide additional information, such as the amount of unreported income and information from the tax return that may indicate, for example, the amount of dividend or interest reported by financial institutions but not by the taxpayer.

The public has grown to expect that banks, insurance, and mail order companies will manage individual account information in a way that will enable good customer service. The Commission heard testimony from two outstanding customer-service oriented organizations during public hearings: USAA and Citibank. Both of these organizations learned to manage customers' account data using integrated data bases that are easily accessed by employees responding to customer inquiries.

Information technology industry recommendations

The ITAA report, Realizing Strategic Business Goals Through Process Reengineering and Systems Integration, contained the following observations on IRS improve its ability to access data:

By coupling the latest technology with a new way of looking at

o Reduced repetition of information

Further, when these efficiencies are combined with

But the transformation goes beyond the Customer Service

o Reduced operation costs of staffing, network and

ITAA recommended that IRS work in partnership, sharing risks and rewards, with a skilled business partner. It made three recommendations that would help IRS improve its ability to access data:

o establish a Data Officer;

Details of these recommendations can be found in Realizing Strategic Business Goals Through Process Reengineering and Systems Integration.

APPENDIX G

The Commission believes that the IRS must develop and implement a strategic and marketing plan to make paperless filing the preferred and most convenient means of filing for the vast majority of taxpayers. This vision can be achieved over a ten-year period by using existing infrastructure such as tax practitioners, financial institutions, and the Internet as intermediaries for submitting tax returns to the IRS. The obstacles to achieving this vision are not necessarily the cost of developing information technology systems, but entering into a partnership with practitioners and financial institutions that would provide burden reductions and incentives for filing tax returns electronically.

Processing workload

Table G-1 illustrates IRS tax return processing workload for 1995. IRS estimates that 120 million individual tax returns will be filed in Tax Year 1996, of which approximately half, or 60 million, will be prepared by paid tax preparers. Virtually all of these 60 million returns are prepared using tax preparation software. Another 10 million or more tax returns are filed by self preparers who use consumer-oriented tax preparation software products.

      TABLE G-1. RETURN TYPES RECEIVED BY IRS FOR TAX YEAR 1995

Individual income

Supplemental        1040X, 1120X, 2688,      11,936,542             0

Costs

IRS estimates the average cost of processing all paper returns at $2.65 a return, but acknowledges that this figure did not include all costs. Similarly, the costs of processing electronic returns was estimated at $1.15, including the processing of paper signature documents. The IRS is conducting a cost study to determine the actual costs. The Commission received an estimate from the Private Sector Council that a project by a Fortune 100 company to automate paper processing experienced a six to one cost differential of paper to electronic processing costs. This represents a significant cost savings for the IRS if the number of electronic returns can be increased significantly.

In addition to labor, overhead, and management costs to operate the returns processing pipeline, there are other cost reductions that could be realized with an increase in electronic filing, such as the following:

o Heavy dependence on manual labor creates additional

o Facility and physical handling equipment associated with paper

o After the data is manually entered into the data base, the

To save processing costs, the IRS currently only captures in electronic form 40% of the information submitted on paper returns. All paper data submitted by taxpayers is archived, however. After a return is posted to the Master File, IRS uses automated algorithms to detect conditions that may warrant an examination. For those returns selected for further evaluation, the paper return must be retrieved from archives, and examined manually. With electronic returns, 100% of data submitted are captured and archived electronically. This situation provides the opportunity for the IRS to enhance its detection algorithms to use an expanded set of data, while also reducing the need for retrieval of suspicious paper returns. Since this type of examination occurs without any taxpayer contact, it is the least intrusive type of examination.

Reasons for failure of existing electronic filing program

The Commission believes that the failure of electronic returns to increase at rates originally projected by the IRS does not represent a technical failure by the IRS, rather a failure to plan and market electronic filing in an organized, thoughtful manner. As early as July 1995, GAO reported that IRS had no comprehensive business strategy for promoting the benefits of electronic filing to all taxpayers. Rather, its strategy was aimed only at taxpayers desiring a quick refund. Without a comprehensive strategic plan, GAO believed that IRS would not achieve its stated goal of 80 million electronic returns by 2001. The Commission believes this situation is still true today. No comprehensive strategy has been made available to the Commission, although a high level issue paper was released by IRS in February, 1997.

Mr. Peter Simpson, Second Commissioner for the Australian Taxation Office (ATO), testified to the Commission that the technology costs for electronic filing were low, but the real keys to success were marketing the service properly and letting the private sector develop products in the marketplace. The Commission received testimony and input from the practitioner community that would confirm ATO's experience.

Information returns and document matching

Electronic filing of both tax and information returns aids earlier document matching. With today's filing profile and legacy systems, IRS delays the identification of underreporter cases for over a year until all the documents are ready to be matched. Receipt by taxpayers of underreporter notices 18 months after filing increases the likelihood of missing taxpayer records and builds taxpayer resentment against the IRS due to the accumulation of interest and penalties.

Although it is not currently possible to perform document matching before a refund is issued, electronic filing of information returns could allow IRS to perform document matching in the same calendar year during which a tax return was submitted. Underreporter cases could then be pursued in a more timely manner. The IRS should perform income reporting verifications through matching of 100% of submitted information documents. IRS also should include the Schedules K-1 as part of the document matching process.

PLAN FOR MAKING ELECTRONIC FILING MORE ATTRACTIVE TO TAXPAYERS AND

The Commission's comprehensive plan for increasing electronic filing is summarized in Table G-2. The Commission believes only a comprehensive plan that appeals to all segments of the taxpayer and practitioner population can make electronic filing the preferred and most convenient method of filing for the vast majority of Americans. Features of the plan are described in the following paragraphs. While this plan focuses on individual tax returns because they constitute the bulk of the IRS processing workload, the Commission emphasizes that plans should be established to encourage all returns types, such as payroll, corporate, and partnership returns, to be filed electronically.

Partnering with stakeholders

IRS needs an improved sense of partnership with tax practitioners, other organizations that supply data, and state tax administrators. We recommend IRS establish an Electronic Commerce Advisory Group (ECAG) to address issues of mutual concern to IRS, the practitioner community, other stakeholders, and state tax administrators. The Commission's intent in recommending establishment of this group is to establish an ongoing forum for discussing future electronic commerce issues.

The Commission envisions that the ECAG would address issues to help further electronic commerce among the member organizations, such as the removal of additional barriers faced by practitioners, simplification of the application to be an Electronic Return Originator (ERO), and plans to achieve complete participation by all states in the Federal/state electronic filing program. Additionally, as the IRS moves to more paperless tax administration, the ECAG is envisioned to be a forum where IRS and practitioners can mutually facilitate the ability of tax practitioners to move to more paperless business systems, such as paperless records retention systems.

Additional changes to improving partnering between IRS and preparers involve treating practitioners as valued suppliers of information to IRS. The Commission recommends such changes as elimination of filing requirements for signature documents and associated W-2s by having taxpayers retain signed 1040s and W-2s on file, regulation of all paper and electronic preparers under IRS Circular 230 to ensure standard procedures for treatment of all tax preparers, inclusion of a checkoff box on the electronic tax return that allows taxpayers to authorize their preparer to discuss aspects of the return with IRS Customer Service Representatives, accepting of the transmitter's date/time stamp as a postmark, and development of a white field in the electronic return for tax preparers to include supplementary notes.

TABLE G-2. ELECTRONIC FILING PLAN FOR INDIVIDUAL TAX RETURNS

[table omitted]

Elimination of Form 8453

The filing of Form 8453, the signature form for electronic returns, has been identified by practitioners as a major impediment to the efficient filing of electronic tax returns. IRS also reported to the Commission that the handling of these forms is the largest cost element associated with the processing of electronic returns. The Commission believes the filing of this form is unnecessary. Several models exist where organizations accept electronic tax returns without signature documents, including Canada, Australia, and the state of California. In addition, the Securities and Exchange Commission accepts electronic financial reports such as 10-Ks without signatures. In each of the above cases, the only requirement is for the originator to maintain the signed copy on file. While the Commission believes that electronic authentication technology will make electronic signatures viable on a national basis, the infrastructure does not yet exist to support such a program. The elimination of the Form 8453 should not wait until this technology is in place. A change to allow taxpayers to maintain the original signed copy of their returns will require legislative action, since current Treasury interpretation of existing law is that a signature is required.

Acceptance of all forms

Another significant barrier brought to the attention of the Commission by practitioner groups is that IRS does not accept electronically every form or schedule that can be attached to the 1040. As an incentive for IRS to modify its systems to accept all attached schedules, the Commission recommends that IRS, starting in 1998, accept all 1040s electronically. If certain attached schedules cannot be received electronically by IRS, the taxpayer should simply be required to maintain these forms in their records, much like a worksheet is treated today.

Regulation of preparers

Regulation of all preparers under Circular 230 is important to the development of an improved relationship between preparers and IRS, since it applies enforceable rules of conduct to all return preparers. Our recommendation is to amend 31 U.S.C. 330 to require all persons engaged in the business of preparing returns or otherwise accepting compensation for advising in the preparation of returns to comply with the standards of conduct set forth in Circular 230 as enforced by the Office of the Director of Practice which is established under Treasury. By holding all paid preparers to the same levels of due diligence, the proposal seeks to ensure that taxpayers are not misled by their representatives. Return preparers that violate the rules of conduct are subject to disbarment from return preparation or representation of taxpayers before the IRS. The ability of the Director of Practice to administer and enforce actions based on allegations of professional misconduct should not be compromised by the organizational placement of the Director.

Uniform requirements will increase professionalism, encourage continuing education, improve ethics, and better enable the IRS to prevent unscrupulous tax preparers from operating. Regulation under Circular 230 promotes the integrity of our tax system, places all return preparers on a level playing field, promotes voluntary compliance and standardizes the procedures for all preparers for electronic filing and other compliance procedures. Currently, commercial return preparers are allowed to represent taxpayers before the IRS at the examination level and only for returns which they prepared. Higher education and qualification criteria should continue to be enforced for representation at all levels before the IRS. The Commission does not envision complex and cumbersome registration procedures or requirements, simply a system to capture preparer information already provided on the tax forms for a database of preparers.

Realignment of due dates

The complete schedule for revised due dates is shown in Table G- 3 and G-4. The Commission believes these changes better support same year document matching and possible future implementation of simpler return filing processes, such as return free filing.

Expansion of TeleFile pool

TeleFile is considered by IRS and the Commission to be a successful program. The number of taxpayers using TeleFile increased approximately 50% in 1996 to close to 5 million filers. To encourage even more taxpayers to use this method of filing taxes, we recommend that IRS consider expanding the TeleFile pool in two ways. The first method is to expand the TeleFile pool by including more taxpayers now filing 1040A returns. This expansion currently is being evaluated by IRS and if IRS assessments indicate favorable benefits, the expansion should be accomplished. A second approach is to expand the number of 1040EZ filers by changing the limiting conditions so that additional taxpayers could use the simpler form and thus be eligible for TeleFile.

Paperless payment

The Commission also recommends that paperless payment methods be made available to taxpayers. This option could be as simple as using the existing direct deposit blocks in reverse to authorize an electronic transfer of funds to the IRS. Other options include the use of debit and credit cards. Some municipalities and states have already started allowing the use of credit cards for payment of taxes. Typically, the taxpayer must absorb the cost of any merchant fee when using credit cards to make tax payments. Receipt of tax payments also could be privatized through electronic funds transfer or submission of paper payment to a financial institution or other third party processor for electronic transfer to IRS.

Incentives

A major incentive for tax practitioners is a combined incentive and required electronic filing plan to encourage practitioners to file electronically, and requiring practitioners not to charge taxpayers extra for electronic filing if they accept the incentive payments. The Commission recommends that IRS pay transmitters an incentive for submitting electronic returns until 2004. Transmitters would be expected to share the payment with originators based on market competition. The recommended payment schedule is shown on Table G-2. A second incentive, one geared to taxpayers, is faster refund cycles.

The Commission believes that this plan offers several benefits. The incentives provide a short term benefit to transmitters and originators and provide taxpayers with free electronic filing services. Surveys indicate that the cost of electronic filing is a major reason taxpayers do not file electronically. Incentives, combined with other changes to make electronic filing more attractive, are expected to increase volume and encourage market dynamics to react with competitive products in sufficient numbers to provide taxpayers with a range of choices. Based on briefings the Commission received from industry, there are already signs that this marketplace development is beginning. The Commission recommends that regulations concerning electronic filing should be examined to ensure they do not impede the development of products in the marketplace that facilitate electronic filing.

   TABLE G-3. INFORMATION RETURN PREPARATION AND PROCESSING DATES

Information Returns /1/         Paper        Electronic     Current

Information returns due to

Information returns due to

Automatic Extension of

Additional Extension of

Additional Extension of

       TABLE G-4. TAX RETURN PREPARATION AND PROCESSING DATES

Income Tax Returns and

Corporate (domestic)          March 15       April 15     March 15

Additional Extension of

S-Corp                        March 15       April 15     March 15

Additional Extension of

Partnership (domestic)        March 15       April 15     April 15

Automatic Extension of

Additional Extension of

Trusts                        March 15       April 15     April 15

Automatic Extension of

Additional Extension of

Estates /4/                   April 15       May 15       April 15

Additional Extension of

Form 990                      April 15       May 15        May 15

Additional Extension of

Form 990C (cooperatives)      Sept. 15       Oct. 15       Sept. 15

Automatic Extension of

Form 990T (corporation)       April 15       May 15        May 15

Automatic Extension of

Form 990T (401(a) trust)      April 15       May 15        April 15

Additional Extension

Form 990T (other trusts)      April 15       May 15         May 15

Additional Extension of

Individuals                   May 15         June 15        April 15

Automatic Extension of

Additional Extension of

                         FOOTNOTES TO TABLE

     /1/ Information returns and transmittal documents include Forms

     /2/ IRS receives 1099s and 1098s and SSA would be required to

     /3/ For 1994 tax return year; 5,306,301 Partnership and S-

     /4/ For those estates electing a calendar year.

                          END OF FOOTNOTES

First quarter individual estimated payment continues to be due April

In 2004 incentives will terminate and all practitioners will be required to file electronically. The Commission believes this requirement also encourages the market to develop products, while at the same time providing more than adequate time for practitioners to prepare for the requirement. Many practitioner groups have told the Commission that they support this requirement as a means to get the industry to adopt electronic filing as common practice.

Home filing

As more Americans have personal computers (PCs) in their homes, filing tax returns from home should have more appeal to taxpayers. The Commission envisions that the marketplace will develop systems that will allow taxpayers to file directly from their home PCs, and using appropriate security and privacy safeguards, independent of any IRS action. Should this situation not occur, we recommend that IRS develop systems to allow taxpayers to transmit tax returns directly to IRS using home computers. One example of a market development that could occur is for banks and other financial institutions to incorporate options for electronic filing as part of home PC banking services, offering competitive tax filing services as part of an overall package of products available to customers. Other organizations could offer the same or similar services.

Secure access to taxpayer records

The Commission recommends that IRS allow taxpayers and their authorized practitioners who file electronic returns be provided secure access to their own account information by 2006. We recognize that this capability cannot be achieved until IRS first integrates its data bases, but we believe this capability should be planned for and developed as part of modernization, and not added as an additional requirement in the next century. Banks currently offer this feature to customers who participate in home banking services. As the number of consumers participating in home banking grows, this feature becomes another capability taxpayers will expect for their IRS account as well.

Changes to IRS systems and procedures

IRS changes to complement the above actions would include less restrictions on advertising to improve taxpayer understanding of the benefits of electronic filing, acceptance of all form types and addition of a white field for supplementary notes, more frequent payment cycles for electronic returns, and expansion of IRS infrastructure to accept more than 100M returns.

Filing of Form W-2

The Commission recommends that the current threshold for magnetic/electronic reporting to the Social Security Administration (SSA) be lowered. The current procedures require submitters of more than 250 W-2s to file using magnetic or electronic format. The Commission recommends this threshold be lowered to 100 W-2s, and that the threshold be applied in the aggregate to third party preparers. The immediate goal is to reduce the 53 million paper W-2s, with the long range goal of using incentives to transition to electronic filing.

We also recommend a single point of filing of Forms W-2 and W-3 by having SSA capture all form information, including state and local information. Electronic submission of the majority of Forms W-2 and W-3 will reduce SSA's data capture burden. SSA should then transmit the captured data to the appropriate governmental agency. IRS must revise Form W-2 to add state and local information.

APPENDIX H

LEGISLATIVE PROCESS

In order to achieve a more rational tax code, the tax legislative process should be methodical, thoughtful, and include sufficient time for thorough contemplation of the likely impact of proposed legislation. A model tax legislative process should approach tax law changes with sufficient time for public debate, deliberations, and input from taxpayers and the IRS.

When Congress considers legislation early in the legislative process, and allows ample opportunity for public comment, it can better understand the policy, economic, and administrative effects of proposals. Congress should seek to ensure that all interested parties have a forum to discuss the impact of these proposals. In particular, Treasury should be invited to provide its comments on the policy and economic impact of the proposals, and the IRS should be invited to discuss the administrability of the legislation. While Treasury speaks for the Administration on tax policy issues, the IRS should be the voice of tax administration. As such, Congress must hear from the tax administrator so that it can consider potential implementation problems prior to enactment of tax legislation.

As the voice of tax administration, the IRS should be able to submit legislative recommendations to improve tax administration directly to Congress. In addition, the IRS should work with the tax writing committees to ensure that they have sufficient information to prepare a Tax Complexity Analysis for each legislative proposal. In this regard, the IRS should explain the impact of proposals on forms, instructions, publications, and regulatory guidance. Moreover, the IRS should share its knowledge as to the impact on taxpayer record keeping and compliance burdens, as well as how it will integrate the proposals with its existing examination and collection activities. The IRS also should identify any other foreseeable administrative problems and technology and resource needs resulting from proposed legislation. Finally, the IRS should develop procedures (e.g., a database of its expert employees) to ensure that the right people are involved in the legislative process. While personnel from the National Office may be helpful, a revenue agent from the field may be more appropriate.

Because Congress must consider the impact of its actions on taxpayers, the private sector must have a role in the tax legislative process. The tax writing committees should actively encourage participation of taxpayers and their representatives through hearings and public comment periods. A mechanism enabling the private sector to volunteer its comments to the tax writing committees or the Joint Committee on Taxation should be established whereby the list of the private sector comments is included as part of the committee and conference reports and a listing of such submissions should be distributed to each member of the tax writing committees. The staff of the tax writing committees should make the private sector comments available to any member of Congress. Private sector comments should be available to all Members of Congress, as well as the public.

TAX COMPLEXITY ANALYSIS

The Tax Complexity Analysis increases the prominence of tax complexity early in the drafting process, when its consideration is more likely to affect the substance of legislation. Ideally, a Tax Complexity Analysis should be prepared by the sponsor of the legislation. When the President submits legislative recommendations to the Congress, these recommendations also should be accompanied by a Tax Complexity Analysis. The analysis should be prepared before proposals are scored for revenue and distributional impact so as to help guide the estimators as they make assumptions as to the impact of proposals on economic behavior.

COMPLIANCE BURDEN ESTIMATES

The Tax Complexity Analysis should focus on a formal process to be established for informing Congress of the potential magnitude of taxpayer and IRS compliance burdens resulting from proposed legislation. When a House, Senate or conference committee reports any bill that includes a revenue provision, the report could include the compliance cost estimates. Similarly, any amendment to a revenue bill could be subject to a point of order unless a compliance cost estimate was provided at the time of its consideration and compliance estimates should be required for conference reports or floor amendments.

Burden estimates, for example, might require specific cost estimates for each tax provision that is estimated to either increase or decrease federal revenues by $100 million. The $100 million threshold could be indexed for subsequent inflation. A qualitative assessment of compliance costs could also be presented when the estimated Federal revenue effect of a provision is less than $100 million in any fiscal year. The analysis should contemplate including cost estimates for such provisions where costs are disproportionate to the change in revenues. For example, offsetting revenue effects within the same provision may result in a net revenue impact that is close to neutral. In this instance, the revenue effect of one part of the provision before netting could exceed $100 million for one class of taxpayers.

The information provided should allow Congress to better understand not only aggregate costs, but also the cost per taxpayer and the Federal costs per dollar of revenue raised. The presentation format could include fiscal year revenue effect, number of taxpayers affected, taxpayer compliance costs, and IRS administrative costs. The costs to be considered should be the direct costs that taxpayers or the IRS would spend to comply with the proposed changes. Any costs that the taxpayer is already bearing under the current system of taxation would not need to be counted again. Such estimates already apply to the IRS when new regulations are proposed or finalized, and the IRS already must estimate its own staffing requirements when implementing new legislation and provide estimates for tax forms showing the time required to maintain records, learn about the operation of the law, and complete the tax forms. While compliance estimating may require additional Joint Committee on Taxation staff and space, the Commission believes that this cost is inconsequential when compared with the enormous burden imposed upon taxpayers today.

FEDERAL-STATE COOPERATION

As technology has changed and the United States is able to transform to a more paperless society, the IRS must be given the tools to adapt through the ability to enter into cooperative agreements for tax administration. The ability of the IRS to enter into tax administration agreements with state taxing authorities would reduce the burden on the public as well as on tax agencies, improve the efficiency of tax administration at all levels by better utilizing available resources, and increase the collection of delinquent federal and state taxes. Also, the IRS could increase the availability of walk-in assistance through shared federal and state facilities. Significant improvement in the level of taxpayer service already has been seen in Idaho where shared state and federal facilities have been implemented.

SIMPLIFICATION PROPOSALS

The following list is a compendium of simplification proposals that have been advanced by various stakeholder groups and academics, including the American Bar Association, the American Institute of Certified Public Accountants, and the Tax Executives Institute. In addition, the list includes a number of proposals announced by Treasury on April 14, 1997, and April 23, 1997. All of these provisions will affect tax policy, progressivity, and revenues to varying degrees, but could be used by the tax writing committees so that the frustrations of millions of taxpayers can be ameliorated. Accordingly, these simplification proposals are forwarded, without endorsement, to the Committee on Ways and Means and the Committee on Finance.

General

Avoid hidden tax rates

One of the more perverse creations of the Tax Reform Act of 1986 was the phase-out. The "bubble," which was a phase-out of the fifteen percent rate bracket, subjected taxpayers with less taxable income to higher marginal rates than taxpayers with higher taxable income. The "bubble" was replaced in 1990 with phase-outs of itemized deductions and phase-outs of personal exemptions. While phase-outs are intended to increase progressivity by increasing the tax burden of higher income taxpayers, they create a range of marginal rates that can apply to taxpayers with identical economic income. Rather than using phase-outs, which can be complicated to apply and serve as disguised rate increases, Congress could establish rate schedules that reflect actual economics.

Harmonize definitions

In its quest to target benefits narrowly and prevent specific abuses, Congress often writes new definitions when existing definitions could be used instead. The resulting complexity caused by these overlapping definitions tends to generate additional taxpayer frustration. For example, the Internal Revenue Code currently defines "dependent" at least five different ways -- for purposes of determining filing status, calculating the "kiddie tax," qualifying for the earned income tax credit and dependent care credit, and determining personal exemptions. In addition, recent proposals for a nonrefundable child credit would establish yet another definition. While all of these programs have somewhat differing goals, Congress could provide significant simplification for most individuals and the IRS by harmonizing the definitions.

A second example of overlapping definitions can be found in the various versions of ownership attribution rules scattered throughout the Internal Revenue Code. In each instance, the purpose of the attribution rules is to identify whether ownership is deemed to exist due to the presumed relationship between the actual owner and the taxpayer. Congress could provide significant simplification for many businesses and the IRS by establishing one set of ownership attribution rules that would identify ownership based on family relationships, entity relationships, and ownership of options.

Standardize indexing

Many provisions, including standard deductions, personal exemptions, and income brackets, are indexed for inflation. However, these provisions are not adjusted consistently because the law requires different reference years and rounding conventions. Congress first enacted indexing because the failure to index for inflation results in tax increases each year. Nevertheless, more consistency will lead to less complexity.

Temporary provisions

A significant source of complexity and taxpayer frustration is the regular expiration (and sometimes, retroactive reenactment) of temporary provisions of the Internal Revenue Code. For example, the exclusion from gross income for certain employer provided educational assistance under section 127 of the Internal Revenue Code has been extended nine times since its enactment in 1978. When section 127 expired and then was extended retroactively in 1996, Congress narrowed the provision by eliminating the preference for graduate education; at the time of writing this report, the provision has expired yet again. Even though temporary provisions often are reenacted, their temporary nature creates unnecessary uncertainty and complexity for taxpayers and the IRS.

Return free filing

Congress should consider whether it is appropriate to continue to place the burden of calculating taxes each year on the American taxpayer, or whether it should shift this responsibility and burden to the government, which could be facilitated by offering a return free system. At least thirty-six countries maintain alternative filing systems, including several of the United States largest trading partners. Most of these countries employ a final withholding system, in which individuals do not file returns because their employers withhold the total amount due through the payroll system. Two countries, Denmark and Sweden, have gone further, establishing tax reconciliation systems in which the tax agency calculates individuals' tax returns on the basis of information reporting, and sends bills or refunds to taxpayers each year during the filing season.

In an October 1996 report, the GAO estimated that as many as 51 million individuals would not have to prepare any tax returns at all if the IRS were able to establish a tax reconciliation system. The basic concept is for the IRS to produce an account statement for individuals on the basis of income reported on information returns and information on filing status and dependents. The IRS would mail the account statements to taxpayers, indicating their balance. Taxpayers then would review their statements, notify the IRS if they agreed, or submit a return indicating corrections. The GAO estimated that this approach would save taxpayers at least 155 million hours annually preparing their returns, as well as millions of dollars of fees paid to tax return preparers, and would reduce IRS return processing and compliance costs. To implement such a system, however, the IRS would need to receive accurate information returns electronically and substantially improve its information technology capabilities. Moreover, to expand the pool of eligible individuals, Congress would have to take steps to simplify the tax code, particularly by harmonizing the overlapping definitions of "dependent."

Individual Tax Simplification

Establish a family allowance

The proposal would consolidate the present law standard deduction, personal exemption, dependent care credit, earned income tax credit, and the proposed child credit into one "family allowance," the amount of which generally would equal the sum of the benefits provided through programs that it would replace. The proposal would retain the additional standard deductions for elderly and blind taxpayers. The allowance, which would be indexed for inflation, would not be phased out. By consolidating five programs into one allowance, and by eliminating the phase-out thereof, this proposal could eliminate much of the complexity that most working individuals face each tax season. Instead of determining eligibility under various programs, taxpayers would determine the amount of their allowance from tables indicating amounts for single and married filers with and without dependents. Taxpayers electing to itemize their deductions would be entitled to a reduced family allowance. Finally, the proposal would simplify the definition of dependent to include a child (natural, adopted, or foster) or grandchild if under age 19 (or 24 if full-time students), if the child resides with the taxpayer for more than one half of the year, or as any other person currently qualifying as a dependent under the support test of section 151 of the Internal Revenue Code.

Simplify itemized deductions

The proposal would replace current itemized deductions with a reduced family allowance for individuals taking deductions for qualifying mortgage interest, charitable contributions, and state and local taxes. These three remaining deductions would be allowed on the Form 1040, thereby eliminating the Schedule A. Moreover, by extending the availability of the three remaining deductions to all individuals and eliminating the phase-out of certain itemized deductions, the proposal creates greater equity in the tax law.

Simplify the earned income tax credit

The earned income tax credit (EITC), which was established in 1975 as a means of incenting workforce participation by individuals below the poverty line, has been difficult to administer for the IRS. A recently released study of the EITC indicates that its high overpayment rate is due, in part, to the complexity of the credit. A number of proposals have been advanced to simplify the EITC and reduce its overpayment rate. For example, on April 23, 1997, Treasury announced a package of eight proposals to improve the operation of the EITC. In addition, the American Tax Policy Institute sponsored a study of the EITC in 1993, which suggested alternative designs for the program in addition to improvements in the current design. Congress and the President should work together to simplify the EITC, maintain its high participation rate, and reduce its overpayment rate to below ten percent.

Simplify the kiddie tax

The proposal would remove the linkage to parents' and siblings' taxable income for purposes of calculating the kiddie tax, and instead subject the unearned income of children under the age of fourteen to the fiduciary income tax rates. In addition, the proposal would expand the election for parents to include their children's income on their return, with appropriate changes to avoid problems that may be encountered when matching with information returns.

Relief for sale of principal residence

The proposal would establish an exclusion of up to $500,000 of gain from the sale of a principal residence in lieu of the current law rollover provision and one-time exclusion for taxpayers over the age of 55. By establishing a $500,000 exclusion, this proposal eliminates the necessity for most homeowners to maintain records on the basis of their principal residence and continues the legislative goal of encouraging home ownership.

De minimis exception to passive loss limitation

The proposal would permit individuals to deduct losses from passive activities to the extent that they do not exceed $1000. By eliminating unduly burdensome computational and record keeping requirements for individuals with de minimis amounts of passive losses, the proposal provides simplification for many individuals.

Optional self-employment tax contributions

The proposal would allow all individuals to elect to increase their self-employment income for purposes of obtaining Social Security Insurance coverage. By extending the availability of the current rule to taxpayers other than farmers, the proposal creates greater fairness in the tax law.

Simplify mileage allowances

The proposal would replace existing mileage allowances with a business and a nonbusiness mileage allowance schedule. By consolidating mileage allowances, this proposal would simplify tax calculations for many individuals.

Simplify interest expense deductibility

The proposal would replace the deductions for investment interest and home equity indebtedness interest with a deduction for personal interest on obligations up to an aggregate value of $100,000. By eliminating the tracing requirement currently imposed on investment interest, the proposal vastly simplifies the personal interest deduction.

Business Tax Simplification

Allow certain businesses to elect independent contractor

The proposal would allow certain businesses to elect to treat service providers as employees or independent contractors. Businesses electing independent contractor treatment would be required to withhold on payments to covered individuals. The Secretary would be required to establish tables for withholding, which would reflect amounts required for income and self-employment taxes. By providing an election, the proposal allows many businesses to avoid the uncertainty of the present law definition. Moreover, by establishing a withholding regime, the proposal could eliminate the need for many service providers to file estimated tax returns.

Establish straight-line depreciation

The proposal would require the use of the straight-line method for calculating depreciation, and would provide for shorter recovery periods. By eliminating the numerous methods permitted under current law, this proposal simplifies record keeping and tax preparation for millions of businesses. Moreover, use of the straight-line method broadens the tax base, eliminating many of the concerns underlying the present law alternative minimum tax.

Harmonize attribution rules

The proposal would replace all existing ownership attribution rules with one set of rules to cover family attribution, entity attribution, and option attribution. By eliminating the existing overlapping definitions, the proposal simplifies many calculations for millions of taxpayers.

Simplify hedging rules

The proposal would codify the existing hedging regulations and establish additional categories of ordinary assets to ensure that business property is treated as ordinary property. By eliminating the uncertainty created by the Supreme Court's decision in Arkansas Best, the proposal would modernize the hedging rules to reflect current business practices.

Repeal collapsible corporation rules

The proposal would repeal section 341 of the Internal Revenue Code, which recharacterizes the gain recognized upon the sale or liquidation of stock in a collapsible corporation as ordinary income. Because the statutory purpose of this statute was rendered obsolete by the complete repeal of the General Utilities doctrine in the Tax Reform Act of 1986, elimination of these complex rules will simplify tax planning for closely held businesses.

Simplify like-kind exchanges

The proposal would replace the existing like-kind exchange rules with an exclusion for gain on the disposition of business or investment property if the taxpayer uses the proceeds to obtain replacement property that is similar or related in service or use. By eliminating the necessity to locate a third party, the proposal provides taxpayers with greater flexibility and eliminates unnecessary complexity, uncertainty, and transactional costs.

Simplify personal holding company rules for consolidated groups

The proposal would repeal the requirement of section 542(b)(2) of the Internal Revenue Code that imposes separate company income testing on each member of a consolidated group. This proposal furthers general principles of consolidation and equalizes the tax treatment of all corporations subject to the personal holding company tax.

Modify look-back method for long-term contracts

The proposal would allow taxpayers to elect not to apply the look-back method with respect to long-term contracts if for each prior contract year, taxable income computed using estimates was within 10 percent of actual taxable income.

Index the accumulated earnings credit

The proposal would increase the accumulated earnings credit to reflect current dollars, and index the limit prospectively. By adjusting the limit for inflation, the proposal furthers equity and eliminates the potential for annual tax increases that do not reflect economic reality.

Estate and Gift Simplification

Gift return exclusion

The proposal would repeal the requirement of filing a gift tax return for charitable gifts that are deductible under section 2522 of the Internal Revenue Code. Because these gifts are deductible, no gift tax arises on covered transfers to charity. By eliminating the requirement of filing a gift tax return for transfers that do not give rise to the gift tax, the proposal simplifies the tax treatment of charitable giving.

Repeal of throwback rules for domestic trusts

The proposal would repeal the throwback rules applicable to domestic trusts. Changes made to the fiduciary income tax brackets by the Tax Reform Act of 1986 largely eliminated the potential abuses targeted by these rules. By eliminating the application of these obsolete provisions to domestic trusts, the proposal eliminates the complex tax calculations and record keeping burdens imposed on trust fiduciaries and beneficiaries.

Unified credit portability

The proposal would allow the surviving spouse to utilize the unused unified credit and generation skipping transfer exemption of the first-to-die spouse. By eliminating the necessity of using lifetime hedging gifts and trusts, this proposal ensures that married persons can utilize the maximum exemptions permitted by law without incurring extensive estate planning costs.

Repeal special rule applicable to charitable lead annuity trusts

The proposal would repeal section 2642(e) of the Internal Revenue Code, which imposes special rules on charitable lead annuity trusts for purposes of calculating the generation skipping transfer tax. By revoking a rule that rarely, if ever, applies, this proposal eliminates unnecessary complexity and simplifies the tax treatment of charitable giving.

Repeal use of Crummey powers

The proposal would amend Chapter 12 of the Internal Revenue Code to repeal the use of Crummey powers, which treat certain transfers in trust as completed gifts of present interests if the beneficiary is provided a period (typically 30 days) during which to demand outright possession of the property transferred in trust. By eliminating the use of complicated trusts and the application of a rule that rarely is used, the proposal would simplify tax planning for many individuals.

Repeal special rule for transfer of appreciated property in trust

The proposal would repeal section 644 of the Internal Revenue Code, which is intended to prevent the use of trusts to avoid tax on capital gain at high marginal rates. Changes made to the fiduciary income tax brackets by the Tax Reform Act of 1986 largely eliminated the potential abuses targeted by these rules. By eliminating this obsolete provision, this proposal simplifies the computation of fiduciary tax returns.

Simplify treatment of direct skips that are nontaxable gifts

The proposal would repeal section 2642(c) of the Internal Revenue Code, which disallows the $10,000 annual exclusion for generation skipping transfer tax purposes for certain transfers in trust. The current provision discourages direct skips in trust, but does not apply to direct skips of cash. By simplifying the treatment of these nontaxable gifts, this proposal eliminates unnecessary complexity and provides taxpayers with flexibility to provide the gifts outright or in trust.

Clarify treatment of certain disclaimers

The proposal would clarify that transfer-type disclaimers qualifying under section 2518(c)(3) of the Internal Revenue Code are treated the same as all other qualified disclaimers for income and gift tax purposes. Because current law is silent as to the treatment of these disclaimers, this proposal provides greater certainty to affected beneficiaries.

Simplify treatment of certain short-term OID obligations

The proposal would conform the treatment of short-term original issue discount obligations held by nonresident aliens for income and estate tax purposes. By exempting the income from these obligations from the estates of nonresident aliens, this proposal eliminates a trap for unwary investors who die while holding these obligations.

Pension Simplification

Emphasize compliance over penalties

This proposal would exempt employers who discover and correct inadvertent violations of plan qualification requirements from penalties for those violations, if the correction is not made in response to an IRS notice of examination. By encouraging employers to maintain and monitor qualified plans and eliminating penalties for employers that correct their own errors, this proposal facilitates greater compliance.

Facilitate communication with plan participants

The proposal would allow employers to deliver participant notices, other forms of plan communication, and plan transactions by electronic or other means, provided that any participant may obtain a paper copy upon request. The Secretary would be authorized to promulgate regulations to ensure privacy and security of such communications.

Simplify top-heavy rules

The proposal would amend section 416(c)(2) of the Internal Revenue Code to allow top-heavy plans to satisfy the minimum contribution requirement by providing a matching contribution in an amount equal to employee contributions, up to four percent of the participant's compensation.

Repeal prohibition on certain qualified plan loans

The proposal would allow sole proprietors, partners, and S corporation shareholders to take loans from a qualified plan subject to the same rules applicable to other plan participants. By providing parity among all plan participants, this proposal encourages individuals to save for retirement without fear of plan disqualification or imposition of the 10 percent excise tax on prohibited transactions.

Design-based safe harbor for minimum distributions

The proposal would establish a design-based safe harbor for minimum distributions, allowing taxpayers to elect to receive annual distributions equal to 10 percent of the account balance on the required beginning date. By simplifying the calculation of minimum distribution amounts, this proposal minimizes the possibility of incurring harsh penalties or plan disqualification.

Repeal application of nondiscrimination rules to governmental plans

The proposal would amend sections 401 and 403 of the Internal Revenue Code to repeal the application of various nondiscrimination rules to governmental plans. Since 1977 these rules have not been applied to governmental plans by the IRS because these plans have broad, almost universal coverage. Moreover, application of these rules to governmental plans could be unduly burdensome on state and local governments.

Simplify post death distributions

The proposal would eliminate the distinction between distributions that begin before or after the death of a participant in a qualified retirement plan. By repealing unnecessarily complex rules, this proposal provides a consistent and simplified approach to post death distributions, minimizing the potential for imposition of harsh penalties or plan disqualification.

Partnership Simplification

Partnership elections

The proposal would eliminate the prohibition of incorporated entities from partnership treatment and would allow subchapter S corporations to convert to partnership status without recognizing gain. An S corporation could convert without recognizing gain if it does not have accumulated C corporation earnings and profits or C corporation built-in gain, or if it elects to recognize gain on the conversion. By allowing corporations to elect partnership treatment, the proposal minimizes the impact of the tax law on choice of entity. Moreover, the election allows taxpayers to avail themselves of the more flexible partnership rules without paying the transaction costs of a conversion from subchapter S.

Partnership definitions

The proposal would define the terms "general partner" and "limited partner," using a material participation standard to distinguish between the two terms. By defining these terms, which are used to determine income and payroll tax liability, as well as passive loss limitations, the proposal provides certainty for taxpayers engaged in business through limited liability companies, limited liability partnerships, and other state law entities classified as partnerships for federal tax purposes whose owners are not denominated as general or limited partners under local law.

Simplified rules for electing large partnerships

The proposal would establish special rules for partnerships with more than 250 partners, or partnerships with more than 100 partners upon election by the partners, including simplified pass-through of partnership items, computations at the partnership level, and adjustment of items at the partnership level. In addition, the proposal would require large partnerships to furnish Schedules K-1 to their partners before the earlier of (1) three and one-half months following the close of the partnership's taxable year, or (2) two and one-half months following the close of the calendar year in which the partnership's taxable year ends.

Clarify the definition of liability

The proposal would codify the definition of "liability," as it was defined in temporary regulations issued in 1988. Because the term "liability" is central to many operative provisions of subchapter K, the proposal eliminates uncertainty for many partnerships.

Repeal excise tax on transfers to foreign partnerships

The proposal would repeal the excise tax imposed by section 1491 of the Internal Revenue Code and replace it with deemed royalty rules similar to section 367 of the Internal Revenue Code (which applies to transfers of appreciated property to foreign corporations). By replacing the excise tax with an income tax, the proposal eliminates the harshness of present law without compromising the flexibility of taxpayers to enter into cross-border transactions.

Simplify partnership allocation rules

The proposal would provide that allocations attributable to nonrecourse liabilities must be paid in accordance with the partners' interest in the partnership. By simplifying the partnership allocation rules, and ensuring that allocations of partnership items reflect the economic substance of the partnership relationship, the proposal eliminates unnecessary complexity for many partnerships.

Closing of partnership year with respect to deceased partner

The proposal would close the taxable year of the partnership with respect to a partner whose entire interest terminates, whether by death, liquidation, or otherwise. By aligning the treatment of deceased partners, the proposal provides uniform treatment for partners whose entire interest in a partnership terminates.

Simplification of partnership termination rules

The proposal would modify section 708(b)(1)(B) of the Internal

Simplification of partnership distribution rules

The proposal would modify the rules relating to distributions of partnership property to require adjustments to partnership basis in remaining partnership property following distributions of partnership property that reduce the partner's interest. In addition, the proposal would modify the rules relating to distributions of stock to a corporate partner, to require the corporation whose stock was distributed to reduce the basis of its assets if the corporate partner owns 80 percent by vote or value of the stock distributed.

Simplify foreign partnership reporting requirements

The proposal would clarify that a foreign partnership engage in a United States trade or business is required to file a return, require annual information reporting by United States partners of controlled foreign partnerships, and conform the reporting rules and penalties relating to changes in ownership and transfers to foreign partnerships to those applicable to foreign corporations. By rationalizing the reporting requirements of foreign partnerships and eliminating distinctions between requirements applicable to foreign corporations, these proposals simplify administration in this area.

Clarify partnership debt-equity rule

The proposal would clarify that a partnership realizes cancellation of indebtedness income upon the transfer by the partnership of a partnership interest to a creditor in satisfaction of a debt. By providing a rule that mirrors the treatment of corporate stock for debt exchanges, the proposal clarifies the law of partnerships in bankruptcy and provides greater parity among the tax treatment of business entities.

Clarify the statute of limitations for pass-through entities

The proposal would clarify that the individual's return, not the pass-through entity's return, starts the running of the statute of limitations. By codifying the rule established by the Supreme Court for S corporations in Bufferd, the proposal provides certainty for partnerships, S corporations, and certain trusts.

Financial Products Simplification

Life-nonlife consolidation

The proposal would repeal section 1504(b)(2) of the Internal Revenue Code, and related provisions, to allow life insurance companies maximum ability to file consolidated returns.

Safe harbor for captive insurance companies

The proposal would establish a safe harbor providing that insurance premiums paid to a wholly-owned subsidiary are deductible provided such premiums, combined with any other premiums paid by related parties, do not exceed 50 percent of the total premiums received by the captive insurer for the taxable year. By providing a safe harbor for determining the nature of captive insurers, this proposal provides much needed certainty and should eliminate costly litigation in this area.

Simplify application of policy interest rates

The proposal would modify section 808(d)(1)(B) of the Internal Revenue Code to require use of the greater of the prevailing State assumed rate or the applicable federal rate for purposes of calculating excess interest. By eliminating inconsistencies in the calculations of policy interest rates, the proposal simplifies taxpayers' recordkeeping requirements.

Safe harbor permitting RICs to avoid PFIC treatment

The proposal would establish a safe harbor under which regulated investment companies (RICs) would be relieved of the onerous burden of determining whether foreign investments are treated as passive foreign investment companies. If a RIC owns less than 10 percent of the outstanding stock of a foreign company and less than 5 percent of the RIC's assets are invested in the holding, a RIC would not be required to apply the PFIC rules. By providing this safe harbor, this proposal simplifies the tax treatment of RICs significantly.

International Simplification

Simplify exchange rates used in translating foreign taxes

The proposal would simplify the rules for translating foreign tax payments into dollar amounts by providing for translation using average exchange rates for the taxable year to which the taxes relate. By reducing the amount of time necessary to calculate deemed paid foreign tax credits, this proposal simplifies recordkeeping and administration of these rules.

Simplify foreign tax credit limitation for individuals

The proposal would allow taxpayers with no more than $300 ($600 in the case of joint returns) of creditable foreign taxes, and no foreign source income other than passive income, to claim their foreign tax credit directly on Form 1040 if the income is shown on a payee statement. By eliminating the necessity to complete the complex Form 1116, this proposal simplifies the treatment of passive foreign income that is subject to information reporting.

Simplify rules applicable to dispositions of interests in controlled

The proposal would simplify the treatment of income derived from the disposition of stock in a controlled foreign corporation, including deemed dividend treatment for gains on dispositions of lower-tier controlled foreign corporations, proportional reduction in the taxation of subpart F income in the year of disposition for acquiring United States shareholders, and repeal of the limitation on look-through treatment of certain dividends to United States shareholders out of earnings from periods during which the recipient was not a United States shareholder. By rationalizing these rules, these proposals greatly simplify the operation of controlled foreign corporations.

Tentative carryback adjustments for foreign tax credits

The proposal would extend the application of section 6411 of the Internal Revenue Code, which allows taxpayers to file an application for tentative carryback and refund adjustments, to foreign tax credit carrybacks.

Eliminate PFIC/CFC overlap

The proposal would eliminate the overlap of the passive foreign investment company (PFIC) and controlled foreign corporation (CFC) rules by treating a PFIC that is also a CFC as if it is not a PFIC with respect to its 10 percent United States shareholders. By eliminating the unnecessary and duplicative overlap of these rules, this proposal eliminates complex calculations for taxpayers already subject to the complexity of subpart F.

Simplify foreign tax credit limitation baskets

The proposal would merge all 10-50 corporation foreign tax credit limitation baskets into a single 10-50 basket, except those associated with passive foreign investment companies. By reducing the complexity and compliance burdens of taxpayers owning between 10 and 50 percent of a foreign corporation, this proposal reduces the bias against participation in foreign joint ventures by United States companies through affiliates that are not majority owned.

Repeal high-tax kick out rule

The proposal would repeal section 904(d)(2)(A)(iii)(III) of the Internal Revenue Code, which excludes any high-taxed income from the foreign source passive income basket used to calculate the foreign tax credit. By eliminating a significant source of complexity in the calculation of foreign tax credits, the proposal simplifies the treatment of passive foreign investments.

Regulatory authority for same country exception

The proposal would permit the Secretary to issue regulations under section 954(c)(3)(A) of the Internal Revenue Code, treating certain countries or possessions as a single country for purposes of the same country exception of subpart F. This authority would allow multinational companies to consolidate their operations in covered countries or possessions when such countries or possessions participate in common markets.

Mark-to-market election for PFIC shareholders

The proposal would allow shareholders of passive foreign investment companies with "marketable" stock to avoid application of the interest-charge method by electing to mark their PFIC shares to market annually. By allowing taxpayers who are unable to use the present law current inclusion method, this proposal provides greater flexibility to investors in passive foreign investment companies.

Elimination of uniform capitalization rules applicable to certain

The proposal would eliminate the application of the uniform capitalization rules of section 263A of the Internal Revenue Code to foreign corporations that do not conduct business in the United States. By eliminating the requirement of uniform capitalization inventory adjustments for these corporations, this proposal significantly simplifies the calculation of earnings and profits of foreign subsidiaries.

Repeal of sailing permit requirement

The proposal would repeal the requirement for aliens to obtain a certificate ("sailing permit") from the IRS district director prior to departure from the United States. By replacing a rule that often is ignored by taxpayers and the IRS with a requirement that aliens file a year-to-date tax return within 90 days of their permanent departure from the country, this proposal simplifies the tax treatment of departing aliens.

Simplify application of trading safe harbor

The proposal would repeal section 864(b)(2)(C), which prohibits the use of a principal office within the United States for purposes of qualifying for the securities and commodities safe harbors. Current law has the effect of shifting certain administrative jobs from the United States to foreign tax havens, and generally increases the cost of operating investment funds designed to attract foreign investors, but does not serve to prohibit any tax abuse.

Election to calculate earnings and profits using GAAP

The proposal would allow taxpayers to calculate the earnings and profits of foreign corporations using generally accepted accounting principles (GAAP). This election would allow taxpayers to avoid expensive and time consuming adjustments.

APPENDIX I

TAXPAYER RIGHTS PROPOSALS

Offers in compromise

The proposal would require the Commissioner to ensure that national and local expense allowances give taxpayers adequate means to provide for basic living expenses when considering an offer in compromise.

Eliminate interest differential.

The proposal would amend section 6621 of the Internal Revenue Code to eliminate the differential between interest rates applicable to overpayments and underpayments of tax. By eliminating the necessity for and complexity of interest netting, the proposal furthers the goal of fundamental fairness for taxpayers and generally simplifies tax administration.

Eliminate application of failure to pay penalty during period of

The proposal would amend section 6651 of the Internal Revenue Code to eliminate the application of the failure to pay penalty during periods when a taxpayer is in compliance with an installment agreement entered into pursuant to section 6159 of the Internal Revenue Code. Taxpayers who have entered into an agreement to pay their tax liabilities, including interest, should not continue to be penalized.

Taxpayers' right to installment agreement

The proposal would amend section 6159 of the Internal Revenue Code to require the IRS to enter into an installment agreement for amounts that do not exceed $10,000, upon request by the taxpayer, if the taxpayer has not been delinquent in filing returns or paying tax shown due thereon at any time during the prior five years, and has not qualified under this safe harbor previously.

Payment of taxes

The proposal would require tax payments to be made to the order of the Treasurer, United States of America. Because the IRS receives much of the backlash for policies and activities that are not within or completely within its control and this backlash is encouraged by writing checks payable to the order of the IRS. This change properly reflects the true recipient of tax dollars and promotes payment as our social responsibility for the funding of federal government operations and programs.

Seed money for clinics representing low-income taxpayers

The proposal would authorize the IRS to establish a program to support the creation of clinics representing low-income taxpayers. By establishing a program for awarding grants to endow such clinics, this proposal would help to ensure that low-income taxpayers involved in controversies with the IRS could obtain representation. This program also will conduct outreach and education to populations that do not speak English as a first language.

Clarify and expand the jurisdiction of Tax Court

The proposal would clarify that a Tax Court order of refund is appealable, but the Tax Court does not have jurisdiction to review refund offsets. The proposal also would expand the jurisdiction of the Tax Court to issue declaratory judgments regarding an estate's initial or continuing eligibility for an extension of time for payment of estate tax pursuant to section 6166 of the Internal Revenue Code. Finally, the proposal would increase the jurisdictional limit of section 7463 to $25,000, and index that amount prospectively, to provide streamlined procedures for taxpayers to appeal IRS determinations in informal proceedings.

Centralize cataloging and review of complaints and Board oversight

The proposal would require the IRS to centralize the cataloging and review of taxpayer complaints of IRS misconduct on an individual employee basis. The proposal also would require the Commissioner and Taxpayer Advocate to establish guidelines for internal review and discipline of IRS employees, and the Board of Directors to ensure independent oversight of IRS internal review. This function would be similar to that performed by citizen's police boards that monitor internal police reviews. The proposal also would require the IRS to establish a toll-free number for taxpayers to register complaints, to be included in Publication 1.

Require IRS employees to explain taxpayers their rights

The proposal would amend section 7521 of the Internal Revenue Code to require IRS employees to notify taxpayers of their rights prior to commencing any interview or examination, to inquire whether the taxpayer understands these rights, and to inquire whether the taxpayer is represented by an attorney, accountant, or enrolled agent, in which case the interview or examination should be terminated until such time as the taxpayer's representative is present. Taxpayer should be informed of their right to have the examination take place in a reasonable place and that the place does not have to be the taxpayers' home. In addition, taxpayers should be required to be notified of the reasons for selection of their return for examination upon notification of the examination. Finally, the proposal would require the IRS to provide taxpayers with a written explanation of the applicable burdens of proof on taxpayers and the IRS.

Joint and several liability

The proposal would require the IRS to clearly alert taxpayers of their joint and several liabilities on tax forms. A discussion of the possible consequences of joint and several liability should be included in the instructions to the various tax forms and publications.

Procedures relating to extensions of statute of limitations

The proposal would amend section 6501(c)(4) of the Internal Revenue Code to require IRS employees to notify taxpayers of their right to refuse to extend the applicable statute of limitations, or to limit such extension to particular issues.

Penalty administration

The proposal would require the Taxpayer Advocate to prepare a study and provide an independent report to Congress by July 30, 1998 reviewing IRS penalty administration and the implementation of penalty reform recommendations made by Congress in the Omnibus Budget Reconciliation Act of 1989, including legislative and administrative recommendations to simplify penalty administration and reduce taxpayer burden.

Individual/joint tax treatment

The proposal would require the Secretary to prepare a study on the feasibility of treating each individual separately for tax purposes, including recommendations for eliminating the marriage penalty, addressing community property issues, and reducing burden for divorced and separated taxpayers.

Burden of proof

The proposal would require the General Accounting Office to prepare a report on the burdens of proof for the taxpayer and the IRS in a dispute. This report should highlight the current differences between criminal (IRS and non-IRS) and civil burdens of proof. In addition, the report should examine the differences between the burdens of proof for individuals in civil IRS disputes versus other civil disputes with the federal government, and should comment on the impact of changing these burdens on tax administration and taxpayer rights.

Protection of taxpayer information

The proposal would require the Joint Committee on Taxation to evaluate whether the Congress should encourage the IRS to accept the recommendation of the American Institute of Certified Public Accountants to provide administrative forbearance of requests by the IRS to obtain tax advice or planning memoranda from the files of taxpayers' advisors, except in cases referred for criminal investigation.

ADDITIONAL DISCUSSION OF TAXPAYER RIGHTS PROPOSALS

Taxpayers' redress

The Commission recommends a significant expansion in providing taxpayers' redress for IRS malfeasance. The purpose of this expansion is twofold: first, to compensate the taxpayer for the damages he has suffered from IRS misconduct; and, second, to reinforce for IRS management the importance of improving the performance of IRS personnel.

There historically has been a concern that expanding taxpayer rights to redress would be disruptive to collection efforts. Setting aside the issue of whether it is appropriate that taxpayers should be provided rights only to the extent that it does not disrupt collection efforts, the Commission found no evidence that the rights to redress and collection of representation fees provided to the taxpayer under the Omnibus Taxpayer Bill of Rights and Taxpayer Bill of Rights 2 have caused disruption to IRS collection efforts. In addition, the costs of expanding taxpayers' redress have been vastly overestimated. For example, the costs of reimbursing representation fees was originally estimated to be over $100 million per year. The actual cost has been approximately $5 million per year.

Penalties, interest payments and installment agreements.

The Commission heard from a number of sources that because of high interest payments and penalties it is very difficult for many taxpayers to resolve their tax disputes with the IRS. These high penalties and interest payments are created to raise revenue, not to act as a deterrence to taxpayers. The penalties and interest payments are often at a level where they actually are a significant disincentive for many taxpayers to reach an agreement with the IRS. In addition, the penalties and interest payments (coupled at times with unreasonably low living allowances) are so heavy a burden that taxpayers will enter an agreement only to find later that they cannot meet the terms.

In addition to high penalties and interest payments, the Commission also heard from many sources that it is sometimes difficult for taxpayers to obtain installment agreements or offers in compromise. The Commission heard testimony that there is wide geographic variance in taxpayers getting installment agreements or offers in compromise. The Commission believes that installment agreements and offers in compromise can be useful in resolving tax disputes and should not be discouraged.

The Commission believes that the recommendations on penalties, interest payments and installment agreements will help relieve the unnecessary burdens placed on taxpayers to come into compliance and pay their taxes. The recommendations will benefit taxpayers, should increase revenues in the long term, and improve voluntary compliance.

Tax clinics

The purpose of the tax clinics is twofold: to provide representation for low-income taxpayers and perform outreach to certain populations. The IRS does not aggressively conduct outreach to taxpayers who that do not speak English as a first language.

The Commission believes the work of the clinics will benefit the IRS. By providing representation and counseling, the clinics will eliminate many frivolous cases. The clinics will also help ensure that actions brought are only for meritorious issues and are done in a professional manner -- thereby minimizing the burden for the courts and the IRS.

The tax clinics will be required as part of their work to perform outreach and education to populations that do not speak English as a first language. This effort will encourage greater voluntary compliance. The Commission intends that the funds only provide seed money and that the tax clinics should be self-supporting within five years.

Use of surveys to obtain taxpayer feedback

The Commission found that several states, foreign countries and some parts of the IRS use surveys to get customer feedback. Surveys give taxpayers an opportunity to share their opinion on the services provided and also assist management in improving services.

Examples of surveys are included below. The first is a survey provided by the State of Florida to taxpayers who have been audited by independent contractors hired by the state to perform audits of businesses. The second is a "Customer Satisfaction Survey" developed by the IRS Office of Appeals, which will be distributed to taxpayers starting in July 1997.

                      STATE OF FLORIDA SURVEY:

1. Did your Notification of Audit advise you of the taxes to be

2. Did the auditor make an appointment with the appropriate person at

3. Was the auditor usually on time for appointments?

4. During the pre-audit interview, or shortly thereafter, did the

     a. Explain the areas of your business to be examined?

1. Did the auditor usually try to minimize the disruption to your

2. Did the auditor conduct the audit in a professional, courteous

3. Did the auditor offer assistance that would help you comply with

4. Before or during the exit interview, did the auditor:

     a. Provide the audit workpapers and adjustments?

1. Did the auditor educate you and your staff in the correct method

2. Have you undergone an audit by any other governmental agency?

     a. If yes by whom?

Office of Appeals Survey:

Taxpayer Name:

Field Exam____   Office Exam____   Service Center____   Collection____

How did you learn about the IRS Office of Appeals?

IRS employee____     IRS publication____ Previous knowledge____

At the IRS Appeals conference were you the:

Taxpayer____      Taxpayer's representative____

At the conclusion of the Appeals process, did you reach:

Agreement on all of the issues____

Please rate your level of satisfaction with each of the following

1. The time it took to hear from Appeals after you notified the IRS

     Completely satisfied____

2. The time it took for the Office of Appeals to schedule you initial

     Completely satisfied____

3. The time it took to get you case through the Office of Appeals

     Completely satisfied____

4. The IRS explanation of the Appeals process before you went to

     Completely satisfied____

5. The Appeals officer's explanation of the appeals process:

     Completely satisfied____

6. Appeals correctly applied the law to the facts in your case:

     Completely satisfied____

7. Appeals was fair in resolving your case:

     Completely satisfied____

8. Appeals was impartial in resolving your case:

     Completely satisfied____

9. Your overall experience with the Appeals process:

     Completely satisfied____

Did the Appeals officer inform you of the following:

a. How much you owed?     Yes____     No____

b. How the amount you owed was computed? (if you asked)

c. About your payment options.

Would you use Appeals again?

Yes ____     No____     Not Sure ____

Is there anything the IRS could do to improve the Appeals process?

Don't Know ____     No ____

Yes (please explain)

Quality review

The improvement in quality of examination will mean that many taxpayers no longer will be subject to groundless assessments by the IRS. However, it also means that many taxpayers may face additional assessments. Reviews by the GAO and Internal Audit have found that poor quality of audit has often translated into the IRS not making proper assessments against a taxpayer.

The tables below provide an historical review of the sustension and recovery rates for the IRS in Appeals and the Tax Court. Table I- 1 shows the recovery rates in appeals since fiscal year 1992. Table I-2 provides details by case size for the recovery rates for "S" cases (under $10,000, no appeal allowed and informal rules of evidence) and regular docketed cases in Tax Court. Table I-3 shows the closures and recovery rates for "S" and regular docketed tax cases closed between fiscal year 1992 and fiscal year 1996.

[tables omitted]

APPENDIX J

The Commission held three field hearings outside Washington, D.C. in the following cities:

o Cincinnati: March 21, 1997

The turnout at the field hearings was high. Although held during the workday, over 100 people of all ages and backgrounds attended each hearing to listen or participate. (A list of speakers and their affiliations is attached.) The speakers included ordinary taxpayers, accountants, enrolled agents, current and former IRS employees, and tax return preparers. Although focusing on different issues, most expressed unhappiness with either the current tax system or the way it is being administered. Many of the same concerns were raised at all of the field hearings.

Tax complexity. There was virtually unanimous agreement that the tax code is too complex and needs to be simplified. There was broad agreement that many of the things that the IRS is blamed for can be laid at the feet of Congress. Not a great deal of thought is given to the administration of provisions that are being considered by Congress or its interplay with other provisions of the tax code. The assumption is that once a provision is enacted, it can be made to work by the IRS, and that any failings in this area are the fault or problem of the IRS.

Administration of the tax system. There was widespread sentiment that the quality of interactions with the IRS has deteriorated. Although many blame the recent IRS budget cuts, it is unclear that funding is the sole answer.

Notices

Many taxpayers and practitioners complained that notices are either indecipherable or not very helpful in explaining the issue being raised.

Taxpayer response

The mechanism for taxpayers to respond to IRS notices is not working. Many taxpayers have difficulty contacting the IRS -- either by telephone or through face to face contacts. When contact occurs, the results are often unsatisfactory. Many times the IRS cannot adequately explain the problem. This is a result of an inability to access relevant data through IRS computers or a lack of understanding of the issue. Often, it is difficult to reach the right IRS person. Depending on the nature of the action, the taxpayer must either deal with a service center, a district office, or some other location. There is no centralized or one-stop service point.

When taxpayers are required to make multiple contacts, the process often starts all over again. It is nearly impossible to reach the same IRS person twice. Often, the second person is unaware of the problem raised and has no indication what action, if any, has been taken to deal with the problem. This is very frustrating for taxpayers. Often, practitioners advise that if small dollar amounts are at stake, the taxpayer should just pay the money demanded even if the IRS is wrong. This does not encourage respect for the IRS or the tax system.

IRS response

Even when the taxpayer responds timely to an IRS notice -- through a letter or a telephone contact -- there is no certainty that the IRS is aware of the contact. Often, a second notice or other action is taken by the IRS independent of the taxpayer action. Unlike the private sector and other government agencies, there is no one caseworker assigned to most IRS notices. When names and telephone numbers of IRS personnel are given, the person often cannot be reached. This further frustrates and angers taxpayers.

Many taxpayers resent the serious penalties for failing to respond to an IRS notice promptly and correctly while the IRS often takes its time in responding to taxpayers. Usually, there is no certainty that the IRS has received and acted on a taxpayer communication.

Taxpayer service. Taxpayers testified that the quality of service being provided by the IRS has been decreasing noticeably over the past few years. As discussed above, taxpayers using the telephone often have trouble getting through. The number of IRS offices and the available hours are decreasing. As part of its plan to reorganize operations, the IRS has been closing or reducing the functions of many local offices. In places like Omaha and Des Moines this means either no access or a long drive to the nearest IRS office.

A taxpayer who needs an IRS form or publication often has to resort to the IRS toll-free number to order such items. Even if a taxpayer gets through, the response time is slow. A number of practitioners and taxpayers complain that it takes four to six weeks to get the forms.

Training and quality. There is almost universal agreement that the IRS has cut back significantly on training. This has continued to increase the knowledge gap between practitioners and IRS employees. In addition to providing incomplete or incorrect information to taxpayers, many practitioners resent having to provide training to an auditor who is examining their client's return. It is also unclear that the IRS is providing its examiners with the tools needed to research tax questions and keep up with changes.

IRS personnel. Although many witnesses complemented IRS personnel on doing a difficult job, a significant number were concerned that the IRS does not properly oversee its personnel. Some witnesses testified that they had encountered rude, abusive, or unhelpful IRS personnel, but had no sense that management was willing to do anything about it. Some IRS employees noted that supervisors are unwilling to take corrective action because of the difficulty of firing poor performers. Overall, taxpayers believe there is no striving for excellence. Trust and respect of the IRS is decreasing. Although many view the IRS as doing a difficult job, a number of individuals were concerned that the IRS retaliates against those who criticize it.

Electronic filing. Although the IRS is encouraging practitioners to file electronically, it has not done enough to increase its appeal. The two most common complaints include the need to file paper signature documents (Form 8453), and that some forms cannot be filed electronically -- such as the AMT and fuels credit tax forms.

Earned income tax credit. From an administration standpoint, everybody who mentioned the earned income tax credit (EITC) raised concerns, including: 1) it is a social welfare program that the IRS is not equipped to administer; 2) the large number of persons with questionable eligibility applying for it; 3) the frustration of practitioners that certain individuals are improperly taking it; 4) the difficulty in applying it; and 5) resentment that practitioners are being asked to police the credit. The Commission did not hear from any recipients of EITC, however.

Cycle time. The time it takes to interact with the IRS to resolve a problem is taking longer and longer, according to practitioners. Some of this is due to the reorganization and some to the slowness of the IRS. The bottom line is that it costs more to deal with the IRS. Although the IRS speaks of doing a quality job, there is no sense that this is taken seriously.

IRS management. Although the IRS describes itself as a financial services organization, the feedback from the hearing indicates the IRS does not have much appreciation for modern business management practices, customer service, or financial services. One former executive noted that the IRS sometimes takes actions to solve a problem before it has the facts on what the problem actually is and what the solution should be. Moreover, some IRS employees believe that their input is routinely ignored by Washington. Seeking input is a formality. Practitioners also fault the IRS for ignoring their input.

Witnesses

                 Cincinnati Hearing, March 21, 1997

     Richard E. Ayres              Accountant

                    Omaha Hearing, April 4, 1997

     Elayne Goldstein              IRS Problem Resolution

                  Des Moines Hearing, May 12, 1997

     Diana Baberol                 IRS Problem Resolution

APPENDIX K

GENERAL ACCOUNTING OFFICE REPORTS

Earned Income Credit: Noncompliance and Potential Eligibility

Earned Income Credit: IRS' 1995 Controls Stopped Some Noncompliance,

Earned Income Credit: Profile of Tax Year 1994 Credit Recipients.

Executive Guide: Improving Mission Performance Through Strategic

Financial Audit: Actions Needed to Improve IRS Financial Management.

Financial Audit: Examination of IRS' Fiscal Year 1994 Financial

Financial Audit: Examination of IRS' Fiscal Year 1995 Financial

Government Contractors: Measuring Costs of Service Contractors Versus

Improving Mission Performance Through Strategic Information

Internal Revenue Service: Business Operations Need Continued

Internal Revenue Service: Changes Needed in the Role of Regional

Internal Revenue Service: Results of Nonfiler Strategy and

IRS' 1996 Tax Filing Season: Performance Goals Generally Met: Efforts

IRS Financial Audits: Status of Efforts to Resolve Financial

IRS High-Risk Issues: Modernization of Processes and Systems

IRS Operations: Critical Need to Continue Improving Core Business

IRS Operations: Significant Challenges in Financial Management and

Managing IRS: Action Needed to Assure Quality Service In the Future.

Managing IRS: IRS Needs to Continue Improving Operations and Service.

Regulatory Burden: Measurement Challenges and Concerns Raised By

Retention Allowances: Usage and Compliance Vary Among Federal

Social Security: Leadership Structure for an Independent Social

Status of Tax Systems Modernization, Tax Delinquencies, and the

Strategic Information Management (SIM) Self-Assessment Tool-kit

Summary of Selected GAO Reports (1991 - 1996).

Tax Administration: Accessibility, Timeliness, and Accuracy of IRS'

Tax Administration: Alternative Filing Systems. GGD-97-6.

Tax Administration: Alternative Strategies to Obtain Compliance Data.

Tax Administration: Audit Trends and Results for Individual

Tax Administration: Audit Trends and Taxes Assessed on Large

Tax Administration: Better Measures Needed to Assess Progress of IRS'

Tax Administration: Compliance 2000 - A Worthy Idea that Needs

Tax Administration: Continuing Problems Affect Otherwise Successful

Tax Administration: Electronic Filing Falling Short of Expectations.

Tax Administration: Employment Taxes and Small Business. T-GGD-97-21.

Tax Administration: FedState Efforts Offer Opportunities But Program

Tax Administration: How Precise are IRS Estimates of Taxpayers

Tax Administration: Income Tax Treatment of Married and Single

Tax Administration: Information on IRS' Taxpayer Compliance

Tax Administration: IRS Can Improve Information Reporting For

Tax Administration: IRS Faces Challenges in Reorganizing For Customer

Tax Administration: IRS' Fiscal Year 1996 and 1997 Budget Issues and

Tax Administration: IRS' Fiscal Year 1996 and 1997 Budget Issues and

Tax Administration: IRS Is Improving Its Controls For Ensuring That

Tax Administration: IRS Tax Debt Collection Practices. T-GGD-96-112.

Tax Administration: IRS' Fiscal Year 1996 and 1997 Budget Issues and

Tax Administration: Issues in Classifying Workers as Employees or

Tax Administration: Lessons Learned From IRS' Initial Experience in

Tax Administration: Making IRS' Telephone Systems Easier to Use

Tax Administration: Monitoring the Accuracy and Administration of

Tax Administration: Tax Compliance of Nonwage Earners. GGD-96-165.

Tax Policy and Administration: 1995 Annual Report on GAO's Tax-

Tax Policy and Administration: Review of Studies of the Effectiveness

Tax Research: IRS Has Made Progress but Major Challenges Remain. GGD-

Tax System Burden: Tax Compliance Burden Faced By Business Taxpayers.

Tax System: Issues in Tax Compliance Burden. Statement of Natwar M.

Tax System: Issues in Tax Compliance Burden. T-GGD-96-100.

Tax Systems Modernization: Actions Underway But IRS Has Not Yet

Tax Systems Modernization: Actions Underway But Management and

Tax Systems Modernization: Cyberfile Project Was Poorly Planned and

Tax Systems Modernization: Imaging System's Performance Improving But

Tax Systems Modernization: IRS Needs to Resolve Certain Issues With

Tax Systems Modernization: Management and Technical Weaknesses Must

Tax Systems Modernization: Progress in Achieving IRS' Business

Taxpayer Compliance: Analyzing the Nature of the Income Tax Gap. T-

Telephone Assistance: Adopting Practices Used by Others Would Help

The 1995 Tax Filing Season: IRS Performance Indicators Provide

The Public Service: Issues Confronting the Federal Civilian

Transforming the Civil Service: Building the Workforce of the Future.

Year 2000 Computing Crisis: An Assessment Guide. AIMD-10.1.14.

BRIEFING MATERIAL

A Date with Disaster on Jan. 1, 2000? (October 25, 1996). The

Accountability Structure and Reporting Relationship Between IRS and

American Institute of Certified Public Accountants and National

American Institute of Certified Public Accountants Survey of

American Institute of Certified Public Accountants: Federal Taxation

American Institute of Certified Public Accountants. Blue Print For

Annual Report - Most Services Problem Encountered by Taxpayers. Memo

Arthur D. Little, Inc. Opinion Research Corporation. (June 1988).

Banking in Cyberspace: An Investment In Itself. (February 1997).

Birch, Coleen. Contract Auditing: The Florida Experience. Florida

Burnham, David & Long, Susan B. (March 5, 1991). The Numbers Game:

Burnham, David & Long, Susan B. (August 6, 1990). Solving the

Chief Financial Officers Act of 1990.

Computer Challenge Dateline: 1/01/00. (April 16, 1997). Testimony by

Continued Review of the Tax Systems Modernization of the Internal

Davis, Kenneth Culp. (1969). Discretionary Justice: A Preliminary

Department of the Treasury. (April 11, 1996). Memo to Assistant

Department of the Treasury. (March 1, 1997). Financial Management

Department of the Treasury. (August 30, 1996). An Agreement to Merge

Dobrovir, William A. & Meadows Peter J. (October 14, 1996). Who

Duffy, Robert T. (Summer 1995). Awards of Costs to Taxpayers: A

Ely, Mark H., Feit, Alvin M., Martin, Linda & Marutzky, William F.

Executive Office of the President; Office of Management and Budget.

Farbenblum, Marcus. The IRS and The Freedom of Information and

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Feeney, D. and Willcocks, L. Configuring the Information Systems

Gore, Al, Vice President. (September 10, 1993). Creating A Government

Gross, Arthur. (July 1995). Outsourcing Tax Processing: New York's

Guttman, George. (January 17, 1994). Compromise Offer Acceptance Vary

Guttman, George. (June 3, 1996). IRS Abuse of FOIA - Continued. Tax

Guttman, George. (May 13, 1996). IRS FOIA Follies Continued. Tax

Guttman, George. (May 20, 1996). Using Refund Offsets and the IRS to

Guttman, George. (October 11, 1993). IRS Averages: Winning Little,

Guttman, George. (September 4, 1995). Tax Analysts Files FOIA Request

Hammond, Steven H. Contract Auditing: The Florida Experience.

Hasseldine, John & Sandford, Cedric. (1992). The Compliance Costs of

Hussey, Ward M. & Lubick, Donald C. Basic World Tax Code and

Inland Revenue: Market Testing the Information Technology Office.

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Internal Revenue Service. (1996). Guide to the IRS: For Congressional

Internal Revenue Service. (April 1990 (February 1995 Reprint)).

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Internal Revenue Service. (August 23, 1996). Internal Revenue Service

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Internal Revenue Service. Fiscal Year 1995 Summary of Costs.

Internal Revenue Service. IRS Business Master Plan Fiscal Year 1995-

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Internal Revenue Service: Chief Financial Officer. (February 19,

Internal Revenue Service: Research Division. (March 1988). Income Tax

Internal Revenue Service: Research Division. (October 1993). Federal

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IRS Computer System Threatens Chaos in 2000. (October 15, 1996). Los

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Ministry of Finance, Government of Japan. An Outline of Japanese

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OMB Memorandum M-97-2. (1996). Funding Information Systems

Paperwork Burden: Final Report to the Department of the Treasury -

Payne, James L. (1993). Costly Returns: The Burdens of the U.S. Tax

Phelan, Marilyn. (1990). A Summary of the Extensive Collection Powers

Plumley, Alan H. (November 1996). The Determinants of Individual

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Princeton Economic Research, Inc. (November 1994). Managing Diversity

Principles of Budgeting For Capital Asset Acquisitions: Budget of the

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Reducing the Tax Gap: Results of a GAO-Sponsored Symposium. (June

Saltzman, Michael I. IRS Practice and Procedure.

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Shapiro, Bernard M. (January 11-12, 1990). Complexity In the Tax

Smith, William J. & Wilson, Oliver H. (December 1984). Access to Tax

Social Security Administration (SSA). Undated. The Year 2000 Problem.

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Spragens, Janet. (October 21, 1996). Welfare Reform & Tax Counseling:

Statement of Anthony Musick, Chief Financial Officer, Internal

Statement of Lee Monks, Taxpayer Advocate. Statements of IRS District

Statement of Margaret Milner Richardson, Commissioner of Internal

Storey, James R. (February 15, 1996). The Earned Income Tax Credit:

Stratton, Sheryl. (February 3, 1997). How Regulations Are Made; A

Summary of the President's Budget: Department of the Treasury;

Tax Compliance Through Education. Federation of Tax Administrators.

Taxpayer Compliance Measurement Program. Hearing Before the

Taylor, Jack. (1987). Know Your Government Series: The Internal

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The Budget of the United States Government For Fiscal Year 1997:

The Privacy Problem. (December 1995). Spectrum.

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Willcocks, L. and Currie, W. Contracting Out Information Technology

Year 2000 Computer Software Conversion: Summary of Oversight Findings

OTHER REFERENCE MATERIAL

Abramson, Mark A. (May 1996). First Teams. Government Executive.

Adam, John A. (December 1995). The Privacy Problem. IEE Spectrum.

Administrative Conference of the United States, Recommendations of

AICPA letter to Members of the Committee on Government Reform and

Alm, James, Jackson, Betty & McKee, Michael. (September 1992).

Alm, James. (March 1988). Uncertain Tax Policies, Individual

Alstott, Ann L. (January 1995). The Earned Income Tax Credit and the

American Management Systems' (AMS) Financial Audit Documentation of

Andersen Consulting. Global Revenue Practice.

Anderson, Donald T. & Arlinghaus, Barry P. (Summer 1986). The

Barr, Stephan. Fore Reconsiders Project to Reinvent Government. The

Best Practices: Integrating Strategic Planning, Budgeting, Investment

Brown, Warren. (January 31, 1993). Managing the March of Change.

Burnham, David. (1989). A Law Unto Itself: The IRS and the Abuse of

Business Review. (October 24, 1996).

Byrne, John A. (November 25, 1996). The Best and Worst Boards.

Causey, Mike. (April 3, 1996). Upside, Downside. The Washington Post,

Clark, Timothy B. (November 1995). The Innovators. Government

Computer Science and Telecommunications Board and National Research

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Congressional Research Service Report: Government Performance and

Copeland, Phyllis V., Harmelink, Philip J. & Spreyer, Janet F.

Database Search on Employee Performance Measurement.

American Bar Association, Section of Science of Technology. (August

Director Professionalism. (November 1996).

Dobrzynski, Judith H. (November 17, 1996). When Directors Play

Evaluating Information Technology Investments: A Practical Guide,

Forman, Jonathan Barry. (1996). Simplification For Low-Income

Forman, Jonathon Barry, Mazur, Mark J., Scholz, John Karl & Yin,

Gleick, James. Big Brother Is Us.

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Guttman, George. (Various articles published between November 22,

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Hall, Arthur P. (November 7, 1994). The Cost of Unstable Tax Laws.

Hasseldine, John & Sandford, Cedric. (1992). The Compliance Costs of

Internal Revenue Investigation, Report to Ways and Means by the

Jefferson, Regina T. (Spring 1995). The Earned Income Tax Credit:

Kaiser, Frederick M. (Summer 1984). Congressional Control of

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Lipton, Martin. (November 1992). A Modest Proposal for Improved

Loomis, Carol J. (January 11, 1993). King John Wears an Uneasy Crown.

Malcolm Baldridge National Quality Award:1996 Award Criteria.

Managing the Public's Business: Federal Government Corporations.

National Science Foundation: Information Regarding the Board and

Office of Management and Budget Summary of Taxpayer Burden Estimates.

Osborne, David. What Works: The Service Secret. The Washington Post

Parnell, Archie. Congressional Interference In Agency Enforcement:

PBO Personnel Template - Part I Governmental Interests. (March 1996).

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Performance Evaluation of Chief Executive Officers, Boards, and

Performance of Management and Budget, OMB Circular No. A-76.

Preliminary Digest of Suggestions For Internal Revenue Revision

Price Waterhouse. (May 1996). Case Study on the Strategic Management

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Simplified Tax and Wage Reporting System (STAWRS) Annual Report.

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Slemrod, Joel B. (March 5, 1997). Measuring Taxpayer Burden and

Slemrod, Joel B. & Bakija, Jon. Taxing Ourselves: A Citizen's Guild

Slemrod, Joel B. & Blumenthal, Marsha. (1995). The Compliance Cost of

Slemrod, Joel B. & Blumenthal, Marsha. (December 1994). Recent Tax

Slemrod, Joel B. & Blumenthal, Marsha. (November 8, 1993). The

Slemrod, Joel B. & Blumenthal, Marsha. The Compliance Cost of the

Slemrod, Joel B. & Blumenthal, Marsha. (July 1993). The Income Tax

Soled, Jay A. (October 28, 1996). Complexity, Computers, and the

Sparrow, Malcolm K. (1994). Imposing Duties: A Government's Changing

Sprouls, R. Tracy. (1993). Civil Remedies For Abusive Practices By

Stewart, Thomas A. (January 11, 1993). The King is Dead. Fortune

Template of Personnel Flexibilities For Use by Agencies Selected For

Testimony: FTA Survey of the State Practices Involving the Use of

The Federal Aviation Administration Personnel Management System.

Transforming Organizational Structures. (September 1993).

Treasury Board of Canada, Secretariat. (January 1996). Reducing Paper

Vickrey, William. (November 11, 1996). Simplification, Progression,

Wetzler, James W. (April/May 1995). Models for Government.

DOCUMENTS SUPPLIED BY THE INTERNAL REVENUE SERVICE

Department of the Treasury. (May 6, 1996). Treasury TSM Reports.

Internal Revenue Service Memorandum to Senior Staff from the Deputy

Internal Revenue Service. (July 16, 1996). Business Case on

Internal Revenue Service. (October 1, 1996). Report -

Internal Revenue Service. (1989, 1990, 1991, 1992, 1993,1994). The

Internal Revenue Service. (1991-1996). Minutes of Executive Meetings.

Internal Revenue Service. (1993 &1995). Census Survey of Employees.

Internal Revenue Service. (August 30, 1996). The Customer Service

Internal Revenue Service. (February 10, 1997). Critical Issues For

Internal Revenue Service. (February 1991). Currently Not Collectible

Internal Revenue Service. (January 13, 1997). Study of the

Internal Revenue Service. (January 1996). Handbook For Processing

Internal Revenue Service. (March 1996). Current and Potential Markets

Internal Revenue Service. (March 28, 1997). The FY 1997 CID Budget.

Internal Revenue Service. (May 16, 1996). Report - Recommendation For

Internal Revenue Service. (May 31, 1996). Tax Settlement

Internal Revenue Service. (October 1987). The Current Feasibility of

Internal Revenue Service. (September 1, 1995). Tax Systems

Internal Revenue Service. 1040 Telefile, 1040EZ, 1040A and 1040

Internal Revenue Service. 1977 Telefile Projections with 1040EZ,

Internal Revenue Service. 1995 Data Book.

Internal Revenue Service. 1995 Survey Feedback Action: Aggregate IRS

Internal Revenue Service. 1996 Package X.

Internal Revenue Service. Accounting Branch Report For Week Ending

Internal Revenue Service. Accuracy Rates For Notices From Fiscal Year

Internal Revenue Service. Adjustment Correspondence Inventory &

Internal Revenue Service. Allocation of Dollars For Revenue Agent

Internal Revenue Service. Annual Report of Inspection Activities For

Internal Revenue Service. Attrition Rates on Seasonal Employees:

Internal Revenue Service. Background Material on PBO's.

Internal Revenue Service. Breakdown of Debt Collections by Type of

Internal Revenue Service. (June 14, 1986). Business Case For All TSM

Internal Revenue Service. (July 16, 1996). Business Case: Automated

Internal Revenue Service. Business Case: Compliance Research

Internal Revenue Service. Business Master Plan 1996 Preliminary

Internal Revenue Service. Business Master Plan 1996 Supplement.

Internal Revenue Service. Business Master Plan: Fiscal Years 1995-

Internal Revenue Service. Calendar Year Return Projections For the

Internal Revenue Service. Calendar Year Return Projections For the

Internal Revenue Service. Compliance Probes Final Project Report:

Internal Revenue Service. (October 1994). Core Business System:

Internal Revenue Service. Core Business Systems Nonfiler Report.

Internal Revenue Service. Cost Estimate Reference For Service Center

Internal Revenue Service. Counsel Opinion on Paid Versus Public

Internal Revenue Service. Criminal Investigation 1995 and 1996 Filing

Internal Revenue Service. Current Status of the Notice

Internal Revenue Service. Domain Report For Week Ending 10/18/96.

Internal Revenue Service. EITC Study For Tax Year 1993.

Internal Revenue Service. Enforcement Revenue Information System.

Internal Revenue Service. Entry Level Pay Rates.

Internal Revenue Service. Examination Workpapers - Form 4318.

Internal Revenue Service. Executive/Managerial Performance Plan -

Internal Revenue Service. Explanation of Action 61 Guidelines and

Internal Revenue Service. Explanation of Correspondex System.

Internal Revenue Service. Explanation of Debt Process.

Internal Revenue Service. (December 1993). Fact Sheet Re: Customer

Internal Revenue Service. Field Office Performance Index For 1996 and

Internal Revenue Service. Final Recommendations of the District

Internal Revenue Service. (January 1993 -- Amended April 1993). Final

Internal Revenue Service. Final Recommendations of the Service Center

Internal Revenue Service. (November 1992 -- Amended April 1993).

Internal Revenue Service. Financial Status Report For 1996 Up Through

Internal Revenue Service. Fiscal Year 1995 Compliance Initiative

Internal Revenue Service (August 1996). Fiscal Year 1997: Operational

Internal Revenue Service. Form 1040EZ, 1991 Filing Season Test.

Internal Revenue Service. Form 11040EZ, 1992 Filing Season Test.

Internal Revenue Service. FY 1996 Service Center Index and

Internal Revenue Service. FY 1996 Support Services Performance Index

Internal Revenue Service. Handbook For Electronic Filers of

Internal Revenue Service. Handbook For Examination Group Managers.

Internal Revenue Service. Hiring Requirements For Exam and Collection

Internal Revenue Service. Impact of Staggered Filing of Individual

Internal Revenue Service. Information/Reports on Core Business System

Internal Revenue Service. Internal Revenue Manual.

Internal Revenue Service. (November 13, 1991). Internal Revenue

Internal Revenue Service. (May 1995). IRS & Business Process

Internal Revenue Service. (August/September 1996). IRS Managers'

Internal Revenue Service. IRS User Fees and Monies Collected: List of

Internal Revenue Service. Jacksonville's DORA Analysis of Duplicate

Internal Revenue Service. Job Analysis Record: Description of Job

Internal Revenue Service. Key External Factors: 1991-1996.

Internal Revenue Service. List of All Notices That Have Been

Internal Revenue Service. List of All Types of Correspondence From

Internal Revenue Service. List of Improvements Made to Notices.

Internal Revenue Service. List of Management Consultant Contractors

Internal Revenue Service. Listings of Both Open and Closed

Internal Revenue Service. Management Cost Accounting Studies.

Internal Revenue Service. Master Blueprint For IRS Education.

Internal Revenue Service. MCC Workload Characterization, Forecast,

Internal Revenue Service. Notice Volumes For Fiscal Year 1994 Through

Internal Revenue Service. (September 1996). Organizational Chart of a

Internal Revenue Service. Organizational Charts.

Internal Revenue Service. Policy Statement P-4-7: Impartial

Internal Revenue Service. (Fall 1996). Process Maps and Explanations

Internal Revenue Service. Projections: Calendar Year Return

Internal Revenue Service. Proposal For a Tax Systems Capitalist Fund

Internal Revenue Service. PSC Examination Branch: Table 38 Comparison

Internal Revenue Service. PSC Performance and Cost Report For Week

Internal Revenue Service. Publication 1194 - A Multi-Volume

Internal Revenue Service. Publication 1345 - Handbook For Electronic

Internal Revenue Service. Publication 1345A - Supplement to

Internal Revenue Service. Publication 1346 - Electronic Return File

Internal Revenue Service. Publication 1436 - Test Package For

Internal Revenue Service. Publication 17.

Internal Revenue Service. Publication 1796 - Federal Tax Forms Tax

Internal Revenue Service. Publication 334.

Internal Revenue Service. Publication 596 - Earned Income Tax Credit.

Internal Revenue Service. Publication 776 - Overseas Filers of 1040

Internal Revenue Service. Reason(s) Why All Issues Can Not Be

Internal Revenue Service. (August 1992). Repeat Delinquency Taxpayers

Internal Revenue Service. (March 27, 1997). Report on the Internal

Internal Revenue Service. Revenue Agent Critical Elements and

Internal Revenue Service. Revenue Officer/Revenue Agent and Tax

Internal Revenue Service. (November 1996). Service Center Operations

Internal Revenue Service. Solicitation IRS-96-0014: Collection

Internal Revenue Service. Southwest (now Midstates) Regional Form,

Internal Revenue Service. Span of Control Information.

Internal Revenue Service. Standards For Job Elements - Form 6236.

Internal Revenue Service. Statistics of Income Bulletin: Publication

Internal Revenue Service. Statistics of Income Bulletin: Publication

Internal Revenue Service. Statistics of Income Bulletin: Publication

Internal Revenue Service. Statistics of Income Bulletin: Publication

Internal Revenue Service. Statistics of Income Bulletin: Publication

Internal Revenue Service. Strategic Management Process: Integrating

Internal Revenue Service. Strategic Plan and Budget: Fiscal Year

Internal Revenue Service. Strategic Plan For Implementation of the

Internal Revenue Service. Summary of IRS' Reengineering Evaluation.

Internal Revenue Service. Tax Auditor Job Elements - Form 6237.

Internal Revenue Service. Tax Help 1995.

Internal Revenue Service. Tax Year 1996: Telefile Profile.

Internal Revenue Service. (May 1989). TCMP Handbook.

Internal Revenue Service. Telephone Staffing Plan.

Internal Revenue Service. The Field Office Performance Index For

Internal Revenue Service. The IRS Performance Management Guide:

Internal Revenue Service. The IRS' Study of EITC Filers For Tax Year

Internal Revenue Service. Trends In Improperly Claimed Exemptions.

Internal Revenue Service: Compliance Issues Subgroup. (June 20,

Internal Revenue Service: Internal Audit. (July 20, 1995). Employment

Internal Revenue Service: Internal Audit. (April 19, 1996). Ensuring

Internal Revenue Service: Internal Audit. (September 21, 1995).

Internal Revenue Service: Internal Audit. (February 9, 1996). On-Line

Internal Revenue Service: Internal Audit. (April 30, 1996). Parent

Internal Revenue Service: Internal Audit. (April 18, 1996). Review of

Internal Revenue Service: Internal Audit. (August 24, 1996). Review

Internal Revenue Service: Internal Audit. (April 30, 1995). Review of

Internal Revenue Service: Internal Audit. (February 16, 1996). Review

Internal Revenue Service: Internal Audit. (March 22, 1996). Review of

Internal Revenue Service: Internal Audit. (October 25, 1995). The

Internal Revenue Service: National Office of Appeals. (August 29,

Internal Revenue Service: Office of the Modernization Executive.

National Agreement Between Internal Revenue Service and the National

Office of the President. (September 11, 1993). Presidential Memo to