October 1998 Issue


An IRS report of examination division practices in 12 district offices has drawn the attention of Finance Committee Chairman Roth who called the report a "stunning confession." The IRS noted that, in all 12 district offices, the examination division has continued its use of enforcement statistics, such as no-change rate, criminal and civil fraud referrals, and dollars recommended per hour per return, to set production goals and conduct evaluations. The report was part of a continuing internal evaluation by the IRS of its own practices.

"While the citing of statistics and goals in evaluations at these management levels is not necessarily prohibited by [Policy Statement] P-1-20, this leads to an environment at the group level where enforcement results are inappropriately emphasized," the report noted. P-1-20 prohibits IRS managers from using tax enforcement statistics to either evaluate enforcement officers or impose production quotas or goals. Of the group manager evaluations reviewed, 74% contained references to enforcement statistics; 4% of the 952 employee evaluations reviewed made similar references.

The report notes that part of this improper reliance on enforcement statistics resulted from reaction to a 1993 law called the Government Performance and Results Act, which required Federal agencies to strengthen their performance measurement criteria. The immediate result of the report will be the development of performance measurement criteria that are independent of enforcement statistics.

In a second report on collection activity, the IRS discovered that in 130 out of 467 seizure cases reviewed in 11 districts one or more recommended steps were not taken. Some of the omissions were as follows:

* Seizures were conducted despite information that indicated a potential hardship, demonstrated a lack of adequate concern for the taxpayer's financial or medical status, or countermanded previous IRS commitments (35 cases).

* The value of assets seized was not commensurate with the resources required to execute the seizure (30 cases).

* Reasonable attempts to contact the taxpayer or representative before seizure were not made (30 cases).

* Alternatives to seizure were either available and not pursued or were not investigated (37 cases).

* The collections personnel did not adhere to legal requirements in the exercise of their seizure authority (40 cases).

The report also noted that fully half of the legal contact and contact errors occurred in one, unnamed district and separate review is being taken in that district.

The CPA profession recommended that the IRS use peer reviews of each office by another to help change the corporate culture to one of customer service. While not strictly peer reviews, these reports clearly help to move the IRS in the right direction. *

Sources: "Examination Division's Use of Performance Measures and Statistics," Ref. No. 084303 (July 7, 1998) and "Use of Seizure Authority in the Collection Field Function," Ref. No. 084407 (July 7, 1998).

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