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> **Semiannual Report**
>
> **to Congress**
>
> *October 1, 2005 through March 31, 2006*

# 

# ![](media/image2.png){width="1.375in" height="1.375in"}

# Table of Contents

**Inspector General's Message to Congress** 1

**TIGTA's Profile** 3

Statutory Mandate 3

Organizational Structure 4

Authorities 4

**Promote the Economy, Efficiency, and Effectiveness of Tax
Administration** 5

Systems Modernization 5

Tax Compliance Initiatives 9

Security of the IRS 11

Providing Quality Customer Service Operations 15

Erroneous and Improper Payments 18

Taxpayer Protection and Rights 22

Processing Returns and Implementing Tax Law Changes 22

**Protect the Integrity of Tax Administration** 25

Employee Integrity 27

Employee and Infrastructure Security 31

External Attempts to Corrupt Tax Administration 33

**Awards and Special Achievements** 35

**Congressional Testimony** 37

**Audit Statistical Reports** 39

Reports with Questioned Costs 39

Reports with Recommendations That Funds Be Put to Better Use 40

Reports with Additional Quantifiable Impact on Tax Administration 41

**Investigations Statistical Reports** 43

Complaints/Allegations Received by TIGTA 43

Status of Complaints/Allegations Received by TIGTA 43

Investigations Opened and Closed 43

Financial Accomplishments 43

Status of Closed Criminal Investigations 44

Criminal Dispositions 44

Administrative Disposition on Closed TIGTA Investigations 44

**Appendices**

**Appendix I - Statistical Reports -- Other** 45

Audit Reports with Significant Unimplemented Corrective Actions 45

Other Statistical Reports 53

**Appendix II - Audit Products** 55

October 1, 2005 - March 31, 2006 55

**Appendix III -- TIGTA's Statutory Reporting Requirements** 59

**Appendix IV - Section 1203 Standards** 63

**Appendix V - Data Tables Provided by the IRS (Employee Misconduct
Reports)** 65

IRS Memorandum 65

Report of Employee Misconduct for the Period 10/01/05 - 3/31/06

Summary by Disposition Groups 66

Report of Employee Misconduct for the Period 10/01/05 - 3/31/06

National Summary 67

Summary of Substantiated §1203 Allegations Recorded in ALERTS

for the Period 10/01/05 - 3/31/06 68

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Our nation's government depends on a tax collection system that is
effective, efficient and fair. To maintain the integrity of this system,
American citizens must have faith that the tax dollars they pay are
fairly assessed and that tax laws are effectively enforced. The Treasury
Inspector General for Tax Administration (TIGTA) is charged with
ensuring that these responsibilities are met. Throughout my 17 months as
Inspector General, I have remained dedicated to upholding this important
mission upon which our government relies.

I am proud of our accomplishments and pleased to submit TIGTA's
Semiannual Report to Congress, which presents the highlights of our work
from October 1, 2005, through\
March 31, 2006. This report highlights some of our most notable audits
and investigations, and summarizes the statistical results of our work.
Over the last six months, TIGTA has completed 53 audits that have
identified more than \$18.8 million in total cost savings and \$157.8
million in increased or protected revenue.

The Internal Revenue Service (IRS) faces many management challenges. I
have identified my primary priorities for TIGTA, which relate to those
challenges. They include: overseeing the IRS' efforts to modernize
technology; enhancing TIGTA's ability to protect tax administration from
corruption; and monitoring the IRS' efforts to improve tax compliance,
including its use of private debt-collection agencies.

In addition to these priorities, other events influenced TIGTA's work
during this reporting period. Congressional concern over IRS plans to
reduce some taxpayer services resulted in legislation passed late last
year that requires TIGTA to examine the IRS proposals before
implementation. TIGTA's audits included examinations of plans to reduce
toll-free telephone service hours and close 68 Taxpayer Assistance
Centers.

Hurricanes Katrina, Rita and Wilma and their devastating aftermath also
affected the focus of our work during this period. TIGTA is
participating in the Inspectors General's coordinated oversight of the
government's multi-billion dollar hurricane relief efforts. As part of
this oversight, TIGTA is conducting a series of audits to evaluate the
performance of the IRS' relief efforts on behalf of taxpayers who were
affected by the hurricanes. TIGTA's work to date is included in this
report.

Protecting tax administration from corruption has always been one of
TIGTA's highest priorities. Over the last six months, we have opened
1,639 new investigations and closed 1,701 involving the unauthorized
access to or disclosure of confidential taxpayer information, bribery of
government officials, theft of government funds, bank fraud, and bomb
threats. In addition, our Office of Chief Counsel has reviewed 189
proposed regulations and legislative requests.

In our effort to enhance TIGTA's high standards, we have identified
opportunities to further our organization's success. TIGTA recently
established a pilot Inspection and Evaluation Unit, which we anticipate
will allow us to respond more quickly to requests for reviews of tax
administration programs or activities from Congress and other
stakeholders. Also, TIGTA expanded its authorized uses of certain
investigative data. This enhanced authority allows us to share the
results of investigations with victims and/or complainants and their
representatives. I believe that these initiatives will strengthen our
organization and our ability to fulfill our mission on behalf of
taxpayers.

Despite challenges that may lie ahead, TIGTA remains firmly committed to
carrying out its mission: To ensure the integrity, effectiveness, and
accountability of America's tax administration system.

Sincerely,

![](media/image4.png){width="1.5430555555555556in"
height="0.40347222222222223in"}

J. Russell George

Inspector General

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# ![](media/image2.png){width="1.375in" height="1.375in"}TIGTA\'s Profile 

The Treasury Inspector General for Tax Administration (TIGTA) provides
independent oversight of Treasury Department matters involving IRS
activities, the IRS Oversight Board, the National Taxpayer Advocate, and
the IRS Office of Chief Counsel. Although we are placed organizationally
in the Treasury Departmental Offices and report to the Secretary of the
Treasury and to Congress, we function independently from the
Departmental Offices and all other offices and bureaus within the
Department.

Our work is devoted to all aspects of activity related to the Federal
tax system as administered by the IRS. By identifying and addressing the
IRS' management challenges, implementing the *President's Management
Agenda* and the priorities of the Department of the Treasury, and
overseeing the IRS as it strives to achieve its strategic goals, we
protect the public's confidence in the tax system.

Our primary functional offices are the Office of Audit (OA) and the
Office of Investigations (OI). Our Offices of Chief Counsel, Information
Technology, and Management Services support OA and OI efforts. (See
organizational chart, next page.)

TIGTA conducts audits and investigations designed to:

• promote the economy, efficiency, and effectiveness of tax
administration; and

• protect the integrity of tax administration.

.

**TIGTA's Organizational Structure**

##  {#section-5 .Style-Style-Heading-2-+-(Latin)-Trebuchet-MS-14-pt-Auto-Expanded-by...}

**Authorities**

TIGTA has all the authorities granted under the Inspector General Act of
1978, as amended.[^1] TIGTA also has access to tax information in the
performance of its tax administration responsibilities and the
obligation to report potential criminal violations directly to the
Department of Justice. TIGTA and the Commissioner of Internal Revenue
have established policies and procedures delineating responsibilities to
investigate potential criminal offenses

under the internal revenue laws. In addition, the IRS Restructuring and
Reform Act of 1998 (RRA 98)[^2] amended the Inspector General Act of
1978 to give TIGTA statutory authority to carry firearms, execute and
serve search and arrest warrants, serve subpoenas and summonses, and
make arrests as set forth in Section 7608(b)(2) of the Internal Revenue
Code (I.R.C.).

# Promote the

# ![](media/image2.png){width="1.375in" height="1.375in"}Economy, Efficiency

# and Effectiveness

# of Tax Administration

#### 

#### TIGTA's Office of Audit strives to promote the economy, efficiency, and effectiveness of tax administration. TIGTA provides recommendations to improve IRS systems and operations, while ensuring fair and equitable treatment of taxpayers. Our comprehensive, independent performance and financial audits of IRS programs and operations focus on mandated reviews and high-risk challenges facing the IRS. 

The IRS' implementation of audit recommendations has resulted in cost
savings and increased or protected revenue; reduction of taxpayer
burden; and protection of taxpayer rights and entitlements, taxpayer
privacy and security, and IRS resources.

Each year, TIGTA identifies and addresses the major management
challenges facing the IRS. Audit emphasis is placed on statutory
coverage required by RRA 98, as well as on areas of concern to Congress,
the Secretary of the Treasury, the Commissioner of Internal Revenue, and
other key stakeholders. The challenge areas for Fiscal Year (FY) 2006
are outlined in the following chart:

######## 

######## 

######## The following audit summaries highlight significant audits completed during this six-month reporting period and fall into the IRS' Major Management Challenges categories. 

**Systems Modernization of the**

**Internal Revenue Service**

Modernization of the IRS includes both computer systems and business
structure (reorganization) modernization. Although both issues have
their own sets of challenges, they must both succeed to fully modernize
the IRS. Business Systems Modernization (BSM) involves integrating
thousands of hardware and software components over 15 years. The program
is in its 7^th^ year and has allocated approximately \$1.9 billion for
contractor and integrator activities. The IRS and its contractors have
deployed projects that provide value to taxpayers and have built
infrastructure needed to support these projects. However, since the
start of the modernization effort, the BSM Program has experienced cost
overruns and schedule delays in its project development and deployment.

***Excise Taxes Computer Systems***

The IRS estimates that taxpayer avoidance of motor fuel excise taxes
costs the Highway Trust Fund nearly \$1 billion in annual revenue.
However, despite receiving approximately \$59 million since 1999 for
enhanced program monitoring and data analysis, the IRS has not
effectively implemented either its Excise Files Information Retrieval
System (ExFIRS)[^3] or the Excise Summary Terminal Activity Reporting
System (ExSTARS)[^4] to identify potential tax compliance issues. The
IRS has worked with information document filers for several years to
improve the filers' reporting accuracy. As of October 2005, indications
were that the data perfection issue would continue to pose a significant
problem when mandated electronic filing became effective on January 1,
2006.

TIGTA's audit found that a lack of sufficient executive oversight and
project management documentation contributed to the ExFIRS experiencing
cost overruns and schedule delays. In addition, cost-plus-fixed-fee and
time and materials contracts awarded for the ExFIRS are generally not
appropriate once it is determined that the development of a system is
achievable and the duration and extent of work and anticipated costs can
be accurately estimated. TIGTA also found that a capacity study and
stress test to ensure that system capacity would be sufficient prior to
the electronic filing mandate had not been completed for the ExSTARS.

Overall, TIGTA found that performance standards and acceptable quality
levels were not consistently documented and measurable for the contract
statements of work, the acceptance criteria section defined requirements
for the deliverables in nonmeasurable terms, and the due dates were
generally not specific.

TIGTA made several recommendations to enhance the ExFIRS and ExSTARS.
For example, the IRS should develop a plan and schedule for initiating
an examination program based on identified discrepancies and clarify
ExSTARS objectives. The IRS should update appropriate project management
documents, conduct a stress test to ensure sufficient system capacity,
complete a transition plan for moving the project to operations and
maintenance status, and schedule a post-implementation review.

In addition, Federal Highway Administration representatives should be
involved with program management and executive oversight when the ExFIRS
moves from development to operations and maintenance status. Finally,
the ExFIRS should be elevated to a major information technology
investment.

IRS management agreed with most of TIGTA's recommendations and is taking
corrective action. However, the IRS did not specifically comment on the
recommendations to complete a transition plan, conduct a stress test, or
schedule a post-implementation review. TIGTA believes these actions are
needed to assure an effective transition to the Modernization and
Information Technology Services organization and to verify that the
ExFIRS is working properly.

**Report Reference No. 2006-20-001**

***BSM Contract Cost Estimation***

TIGTA determined that active and deployed IRS BSM projects under
PRIME[^5] contractor management varied from original cost estimates by
over \$480 million. While the BSM Office has made progress in
implementing cost and schedule estimation recommendations included in a
prior TIGTA report,[^6] additional actions are necessary. TIGTA
determined that:

-   estimate documentation did not explain the results of using a second
    cost and schedule estimation method;

-   the PRIME Estimation Guidebook did not clearly present the
    requirements to use a second cost and schedule estimation method;

-   cost and schedule estimate proposals submitted for review did not
    contain the required supporting documentation; and

-   issues identified during estimation activities were not input to the
    Item Tracking Reporting and Control System.

Although cost variances were generally trending downward, the trend was
not consistent. Active and deployed BSM projects have varied from
original schedule estimates by an average of\
18 months.

The IRS has recently taken steps to limit cost increases and schedule
delays. The IRS is establishing a Requirements Management Office to help
avoid recurring issues that have contributed to additional project costs
and delays.

In addition, IRS executives stated that they were concerned that the
prevailing variance computation methodology did not accurately depict
variances within the BSM Program and had begun discussions to revise the
methodology.

TIGTA recommended that the IRS ensure that:

-   all modernization systems development contractors provide consistent
    cost and schedule estimation data;

-   clear guidance be issued requiring the results of using multiple
    estimation methods; and

-   remaining issues from the IRS PRIME Validation Report that are
    relevant to the new environment be documented and tracked.

IRS management agreed with the recommendations and is taking corrective
action.

**Report Reference No. 2006-20-002**

***Cell Phone Cost Savings***

TIGTA followed up on its September 2004 recommendation to determine the
effectiveness of the IRS' corrective actions to establish a complete and
accurate cellular telephone inventory. When the IRS validated the
accuracy of its cellular telephone inventory, it resulted in cost
savings of approximately\
\$1.4 million annually. In September 2004, TIGTA recommended that the
IRS establish a complete and accurate inventory of its cellular
telephones and ensure that service is immediately discontinued for
unregistered cellular telephones. At the time that report was issued,
the IRS was unable to provide information identifying the total
inventory of cellular telephones, the approximate number of unregistered
cellular telephones, or total costs for services.

IRS management responded that service for unregistered cellular
telephones would be terminated as of December 31, 2004, and cellular
telephones would be validated annually. At the conclusion of the 2004
annual validation process, the IRS terminated service for 2,908
invalidated cellular telephone numbers.

On October 17, 2005, the IRS announced the 2005 annual validation of
cellular telephones. This validation process is to be conducted annually
to maintain a complete and accurate inventory and ensure the efficient
use of resources. TIGTA made no recommendations for this review.
However, IRS management agreed with the report and outcome measure.

**Report Reference No. 2006-20-025**

***Support for New System Control Benefits***

The Filing and Payment Compliance (FP&C) project is a multi-year effort
that was initiated in 2001.[^7] TIGTA found that the IRS does not have
support for more than \$16.1 billion of costs and benefits used to
justify the project. Since the passage of the American Jobs Creation Act
of 2004,[^8] the IRS has made strides to reactivate the F&PC project and
implement the first release. The IRS decided that the best solution for
the project was to purchase commercially available software. While the
information contained in the draft Exhibit 300[^9] supports the IRS'
decision, TIGTA could not verify the decision because documentation was
not always accurate, complete, and timely. Specifically, spreadsheets
detailing cost and benefit calculations for each of the three
alternatives contained several errors, and the cost and benefit
information used to prepare the draft Exhibit 300 could not be
supported. In total, spreadsheet errors understated the net present
value for one alternative by \$1.3 billion and overstated another
alternative by \$8 million. In July 2005, TIGTA reported this issue to
BSM officials, who agreed with the conclusion and revised the
spreadsheets. In its December 2005 review of the F&PC, TIGTA determined
that the documentation provided as support for 87 percent of the costs
and benefits reviewed (\$16.1 billion of\
\$18.5 billion) did not provide enough detail to verify the reliability
of the information in the draft Exhibit 300.

TIGTA recommended that the IRS revalidate the Alternatives
Analysis,[^10] a key component of the Exhibit 300; develop and maintain
adequate documentation to support its decision to purchase commercially
available software; and revise the Exhibit 300, if warranted. As part of
the revalidation process, TIGTA recommended that the IRS perform a
quality review of all supporting documentation for the Exhibit 300 to
ensure the reliability of the documentation. IRS management agreed with
the recommendations and stated that an outside contractor would perform
a revalidation of the Alternatives Analysis and a quality review of
supporting documentation.

**Report Reference No. 2006-20-026**

**Tax Compliance Initiatives**

The completion of the initial phases of the National Research Project
(NRP) allowed the IRS recently to release an updated estimate of the tax
gap. As a result of the NRP, the IRS now estimates that taxpayers with
self-employment income underreport between\
\$51 billion and \$56 billion in unemployment tax.

The IRS recently received authority and will begin testing the use of
contract staff to work some collection cases. It is too early to tell if
the contract resources will be able to resolve a significant number of
cases or whether they will remain unresolved.

During the last few years, the IRS has been implementing reengineering
suggestions aimed at increasing the effectiveness of enforcement
efforts. TIGTA has conducted several reviews of these initiatives;
however, it is too early to evaluate the full impact.

***Individual Non-Filer Tax Gap***

In March 2005, the IRS reported that individual non-filers accounted for
an estimated \$30 billion of the total tax gap[^11] for Fiscal Year (FY)
2001. Studies indicate that the tax gap for individual non-filers has
tripled from \$9.8 billion in Tax Year (TY) 1985 to over \$30 billion in
TY 2001.

**Tax Gap Amounts Attributable to Individual Non-filers**

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*Source: IRS Tax Gap Estimated Statistics for*

*Tax Years 1985-2001.*

The rate of growth accelerated from TY 1998 to TY 2001 as the individual
non-filer tax gap increased 33 percent over these three years. None of
these reported figures takes into account the amount of money owed by
the cash or underground economy.

Since FY 2001, each of the IRS' business divisions has independently
directed its own non-filer activities. Currently, the IRS does not have
a comprehensive, national non-filer strategy or an executive who is
charged with overseeing each business division's non-filer efforts.

TIGTA recommended that the IRS establish a Non-filer Program Office with
a position for a Non-filer Executive or a permanent multi-divisional
group with responsibilities for developing a strategy, implementing
management control systems, and providing accountability for all the IRS
non-filer efforts.

Each business division should develop measurable program goals to
determine the success of its non-filer efforts and create a decision
support system for aggregating data concerning the effectiveness of
non-filer programs to improve the voluntary compliance levels of
non-filers. Consideration should be given to the development of an
organization-wide tracking system to monitor the progress of each
business division's non-filer strategy action items.

IRS management agreed with the recommendations and is taking corrective
action.

**Report Reference No. 2006-30-006**

***Abusive Tax Shelters***

The IRS considers identifying and combating abusive tax shelters a high
priority. This was reflected in the emphasis given to the settlement
initiative for investors in a variety of Bond and Option Sales
Strategies, commonly referred to as the "Son of Boss" abusive tax
shelter.

Announced publicly in May 2004, the settlement initiative was closely
coordinated by IRS management at all levels to ensure its success. As of
March 16, 2005, IRS interim reports indicated that 1,039 participating
investors had settled their cases by paying or agreeing to pay more than
\$2.7 billion in taxes, interest, and penalties.

Despite the IRS' successful achievements in the settlement initiative,
much work remains to resolve the tax accounts of the investors who
declined or were ineligible to participate in the settlement initiative.

As of July 2005, IRS officials reported that they were continuing to
work on nonparticipating investor cases by ensuring that all related
flow-through entities were included in examinations, so that all tax
benefits from the "Son of Boss" abusive tax shelter could be disallowed.

In its March 2006 report, TIGTA made two observations that the IRS may
find useful in its efforts to curtail abusive tax shelters. First,
experience has demonstrated that the general three-year statutory
assessment period was insufficient for tax administrators to examine and
assess all identified participants in the "Son of Boss" abusive tax
shelter. At the Federal level, where the loss from abusive tax shelters
has been estimated at \$85 billion, a provision in the American Jobs
Creation Act of 2004 (AJCA) provided the IRS with up to an additional
year to assess taxes related to a "listed" transaction if it is not
properly disclosed on the return. However, TIGTA found that this
additional limitation did not accurately reflect the time needed to
complete the examination and assessment process. As a result, the
one-year limitation in the AJCA could prove overly restrictive to
realize intended benefits from the extended assessment period.

The second observation was that the IRS could plan for and conduct an
evaluation that captures the overall successes achieved and lessons
learned in resolving the "Son of Boss" abusive tax shelter. Such an
evaluation could provide an important tool for managers to use if faced
with a challenge of this magnitude in the future. It would also be
consistent with the Government Performance and Results Act[^12] and IRS
guidance for analyzing performance and identifying improvement options.

To curtail abusive tax shelters, TIGTA recommended that the IRS, in
conjunction with the Department of the Treasury's Office of Tax Policy,
determine whether the AJCA provision extending the statutory assessment
period is adequate to protect tax revenues and deter participation in
abusive tax shelters. If the determination shows the AJCA provision is
likely to be ineffective, a proposal should be prepared for Congress to
increase the one-year limitation under the AJCA provision.

TIGTA also recommended that the IRS designate a study group to evaluate
and document its overall performance in resolving the "Son of Boss"
abusive tax shelter.

IRS management agreed with one of the two recommendations and has
convened a study group to evaluate the overall performance in resolving
the "Son of Boss" abusive tax shelter. The study group's report is
expected by June 30, 2006.

The IRS did not agree to take action and determine whether the AJCA
provision extending the statutory assessment period is adequate for
protecting tax revenues and deterring participation in abusive tax
shelters.

**Report Reference No. 2006-30-065**

**Security of the Internal Revenue Service**

The IRS relies upon critical computer systems to account for more than
\$2 trillion in revenue annually. However, significant disaster recovery
program weaknesses continue to be unresolved. These recurring weaknesses
include: modernization systems being placed in production without a
disaster recovery capability; insufficient disaster recovery capacity;
roles and responsibilities not being assigned and employees not being
trained; and annual tests not being conducted or not being effective. In
addition, control weaknesses, such as failure to close user accounts
when employees leave the IRS, inadequate documentation of user access
authorizations, and insufficient documentation that employees have
acknowledged their security responsibilities continue to exist, even
with the implementation of a new automated system to authorize system
access.

These weaknesses continue to occur because managers and system
administrators have not adhered to system procedures.

***Federal Information Systems Management Act Compliance***

The Federal Information Security Management Act (FISMA)[^13] requires
each Federal agency to report annually to the Office of Management and
Budget (OMB) on the effectiveness of its security programs. In addition,
the FISMA requires that each agency shall have performed an annual
independent evaluation of the information security program and practices
of that agency. In compliance with the FISMA requirements, TIGTA
performs the annual independent evaluation of the security program and
practices of the Internal Revenue Service.

During FY 2005, the IRS made strides toward improving security. Most
significantly, the IRS developed a corporate approach to the FISMA by
elevating its processes and procedures into an enterprise-wide program.

A cross-organizational FISMA working group was created, reporting to an
Executive Steering Committee for the development and effective
coordination of FISMA activities. Executive position descriptions now
reflect security responsibilities. Additionally, a Security Program
Management Office was established within each business division to
provide guidance and consistency across IRS business divisions in
implementing FISMA requirements.

Recognizing that it will take time to achieve long-term improvements,
TIGTA found that the process changes taken by the IRS have not yet had a
positive effect on some measurements requested by OMB.

Specifically, TIGTA noted concerns with the IRS' system inventory
categorization, certification and accreditation, continuous monitoring,
tracking corrective actions, training employees with key security
responsibilities, contractor oversight, and security configuration
policies. As a result, TIGTA believes that sufficient attention is not
yet being given to the security of all sensitive systems and to
contractor activities.

The IRS continues to use a large number of systems containing sensitive
taxpayer data that have been ranked as low risk, most of which have not
been certified and accredited, and have not been adequately tested on an
annual basis.

**Report Reference No. 2006-20-071**

***Common Operating Environment Security***

The IRS developed the master Common Operating Environment (COE)
image[^14] with secure computer configurations and installed this image
on 95 percent of all employee computers as of January 2005. However,
once the COE was installed, security settings were not maintained
consistently.

TIGTA found 60 of 102 sampled computers with the COE installed complied
with less than 90 percent of the recommended computer settings
prescribed by the IRS, or contained at least one item of high-risk
vulnerability that could be exploited either to take control of the
computer or render it unusable.

The IRS also did not ensure that all new vulnerabilities on employee
computers were being addressed. TIGTA found 29 of the\
102 sampled computers did not have the latest COE update version. COE
updates contain the latest available security patches to address new
vulnerabilities.

The weak security settings and the lack of updated COE versions can be
attributed to system administrators since they are generally the only
persons authorized to change security settings or install software on
employee computers.

In addition, software licensing can be controlled more effectively on
COE computers. TIGTA determined that six COE software packages[^15]
should not be included in the COE baseline version because of their
costs and limited usage.

One of these software packages is the full version of Adobe^®^
Acrobat,^®^ which contains advanced features that employees are probably
either unaware of or rarely use. Although the IRS paid approximately
\$2.3 million for full versions of Adobe^®^ Acrobat,^®^ most IRS
employees need only the free Adobe^®^ Reader.

The IRS recommends that periodic configuration audits be performed on
the program hardware, software, and documentation to ensure that
products evolve properly with recorded traceability and meet program
needs. As of February 2006, TIGTA was not aware that any such software
configuration reviews were being conducted.

TIGTA recommended that the IRS hold system administrators accountable
for maintaining adequate security settings on computers after the COE
has been deployed. System administrators should be required to run the
IRS' configuration-checking program on a sample of workstations on a
periodic basis and follow up on workstations where the COE updates were
not successfully installed.

All computers without the COE image should be identified and actions
taken to either install the COE image, replace the computers, or
manually bring the computers into compliance with prescribed security
configurations.

TIGTA also recommended that the IRS use available tools to identify
possible unauthorized software installed on computers, consider
purchasing software metering tools, and assign responsibility for
monitoring software with significant license agreement costs. IRS
management agreed with most of the recommendations and is taking
corrective action.

**Report Reference No. 2006-20-031**

***Updating Security on Employees' Computers***

The Tivoli^®^[^16] applications provide the IRS with the ability to
systemically deliver the most current versions of software and updated
security patches to employees' computers and to scan the network to help
maintain accurate computer inventory records. Because the IRS has over
100,000 employees, these tasks, although very important, can be
daunting. Unsuccessful software distributions can lead to missing
patches on computers, which in turn, could expose the computers to
exploitation by hackers, disgruntled employees, and/or malicious
programs.

In addition, maintaining an accurate computer inventory is crucial for
the accuracy of the IRS' financial statements. The IRS has shown
significant progress in using Tivoli^®^ applications for distributing
software updates to computers.

Much of that progress can be attributed to the IRS' efforts to improve
Tivoli's^®^ ability to connect to more computers. While these
improvements are commendable, the IRS can take further actions to
improve its software distribution success rate, better use Tivoli^®^
data for inventory reconciliation and software license management, and
increase its overall ability to connect to computers.

To improve software distributions, TIGTA recommended that the IRS
develop procedures that provide formal guidance and standardization in
preparing the distributions. To improve the use of Tivoli^®^ software
inventory application data, TIGTA recommended that the IRS resolve
mismatches between Tivoli^®^ data and the Information Technology Asset
Management System (ITAMS) and ensure that all desktops, laptops, and
servers comply with the IRS' computer naming standards. In addition, the
IRS should ensure that software management policies and procedures are
provided and responsibility for software management is specified.

To improve Tivoli^®^ computer connectivity, TIGTA recommended that the
IRS notify all employees of the need for computers to remain online
whenever possible, provide that employees assigned Tivoli^®^
responsibilities have adequate access to computers, separately account
for Tivoli^®^ computers that are taken out of service for backup or
emergency purposes, and assign formal responsibility for incorporating
computers without the Tivoli^®^ client software into Tivoli.^®^

IRS management agreed with the recommendations and is taking corrective
actions.

**Report Reference No. 2006-20-021**

***Hurricanes Katrina and Rita***

Hurricane Katrina made landfall on the Central Gulf Coast of the United
States on\
August 29, 2005. It caused unprecedented damage to New Orleans,
Louisiana, as well as the coastal areas of Mississippi and Alabama, and
became the most destructive and costliest natural disaster in U.S.
history. Hurricane Rita followed less than one month later and further
damaged New Orleans and the Gulf Coast area of Texas.

The IRS had 25 offices affected by the hurricanes, many of which were
closed for short durations because of sustained power outages. Five
offices, however, received significant damage, which forced closure for
longer periods of time.

The IRS adequately prepared for Hurricanes Katrina and Rita. The IRS had
sufficiently updated both its Occupant Emergency Plans[^17] in May 2005
and Incident Management Plans[^18] in March 2004 for the offices
affected by the hurricanes and conducted training sessions for its
designated Incident Commanders.[^19] It also took action immediately
prior to the hurricanes to enhance post-hurricane employee
communications, ensure continued salary payments, and minimize computer
damage in its offices affected by the hurricanes.

After the hurricanes made landfall, the IRS expeditiously located all
employees and restored computer operations in affected offices.
Emergency Operations Command Centers were established in Nashville,
Tennessee, and Dallas, Texas, immediately after Hurricanes Katrina and
Rita, respectively.

The IRS focused primary attention on finding all employees in affected
offices. All\
517 employees in those offices were accounted for within 13 days after
Hurricane Katrina, and all 35 employees were accounted for within\
five days after Hurricane Rita.

As for its computer operations in the offices affected by the
hurricanes, the IRS restored system access to its Integrated Collection
System[^20] application from the five affected offices to the Atlanta,
Georgia, office within\
five workdays.

Personnel from the IRS' Modernization and Information Technology
Services organization[^21] also transferred employees' work files to
another network so that employees in affected offices could continue to
work. However, TIGTA was unable to definitively state that taxpayer data
were protected in the wake of Hurricanes Katrina and Rita because seven
computers from two offices affected by the hurricanes could not be
located.

TIGTA confirmed that none of the missing computers were used to access
the IRS computer network after the hurricanes, so any loss of data would
have been limited to the data on the missing computers.

TIGTA recommended that the IRS establish procedures to require a team of
employees or government entities to visit an office as soon as possible,
but no later than 72 hours after a major disaster, to evaluate the
security of the office's perimeter and, if necessary, to take
appropriate action either to secure the perimeter or implement measures
to prevent unauthorized access.

TIGTA also recommended that the IRS establish procedures to conduct an
inventory reconciliation of all computes at IRS facilities that suffer
extensive damage after a major disaster to identify possible loss or
theft of computers.

IRS management agreed with the recommendations and is taking corrective
action.

**Report Reference No. 2006-20-068**

**Providing Quality Taxpayer Service Operations**

Each year, millions of taxpayers contact the IRS seeking assistance in
understanding the tax law and in meeting their tax obligations by either
calling the various toll-free telephone assistance lines, accessing the
IRS Internet site or visiting an IRS Taxpayer Assistance Center (TAC).
Walk-in assistance has proved to be particularly helpful for
lower-income taxpayers and those with limited or no English language
proficiency.

The IRS discontinued its TeleFile Service, used by nearly 4 million
taxpayers, in August 2005. Earlier in 2005, the IRS stated that it
planned to close 68 TACs, to reduce costs and create efficiencies while
maintaining a commitment to taxpayer service. Currently, the IRS has
suspended this plan, pending further study.

***Assessment of TAC Closure Model***

One of the IRS' key strategic goals is to improve taxpayer service. To
achieve this goal, the IRS is continually working to improve service
options and quality, facilitate participation in the tax system, and
simplify the tax process. Helping people understand their tax
obligations and making it easier to participate in the tax system is the
first step toward improving voluntary compliance.

Taxpayers have several options from which to choose both to fulfill
their tax obligations and to obtain assistance from the IRS. Taxpayers
are able to file their tax returns either traditionally (on paper) or
electronically. When needing IRS assistance, taxpayers have several
options, including face-to-face service at the TACs, telephone service
through the toll-free telephone numbers, and Internet access through the
IRS Internet site, www.IRS.gov. The quality of each of these services
influences a taxpayer's ability and desire to voluntarily comply with
tax laws.

In May 2005, the IRS announced plans to close 68 of its 400 TACs
nationwide. Closing the 68 TACs was expected to yield staffing and
facilities cost savings of \$45 million to \$55 million. However, after
the IRS' announcement, a law was passed delaying the closure of any
TACs.[^22]

The new law, enacted in November 2005, requires the IRS to consult with
stakeholder organizations regarding any proposed or planned efforts to
terminate or reduce significantly any taxpayer service activity.

To determine which TACs to close, the IRS and an independent contractor
used an industry-standard software package and developed the TAC Closure
Model (the Model).

The Model, which is criteria-based and data-driven, ranked each of the
IRS' 400 TACs using five criteria: geography; employee costs; facilities
costs; workload; and demographics. Each criterion was assigned a
"weight," with more than two-thirds of the weighting focused on customer
considerations, including demographics, geography, and workload. The
remaining one-third focused on facilities and labor costs.

![](media/image6.png){width="3.125in" height="2.375in"}The five criteria
were further subdivided into\
51 subcomponents. The Model then ranked the TACs from highest to lowest
score. The higher the score, the higher the probability a TAC was
selected for closure.

To further refine the identification of TACs to be closed, the IRS
applied three business rules, ensuring: 1) that a significant office
presence would remain in the top 35 metropolitan areas; 2) that no state
would lose more than one-half of its TACs; and,\
3) that no TACs in Alaska and Hawaii would be closed.

TIGTA found that, although the structure of the Model was sound, not all
data used were accurate or the most current available, and that some of
the data were based on estimates and projections instead of actual data
currently available.

TIGTA's testing raised the possibility that some TACs had been
incorrectly identified to be closed or remain open. Results showed
sufficient discrepancies and raised concerns about using the Model
results to select which TACs to close.

In addition, data discrepancies affected the IRS' ability to accurately
determine cost savings. The IRS might have overselected or underselected
the number of TACs that needed to be closed to reach the targeted
savings of \$45 million to \$55 million.

TIGTA recommended that the IRS ensure that data used in the Model or any
decision-making tool be accurate and reliable and have been validated.
In addition, the Model or any decision‑making tool should include data
to identify customer characteristics and capture customer input to
effectively measure the impact any results might have on taxpayer
service and compliance.

IRS management agreed that data reliability is an issue that must be
addressed. Management also agreed in principle with the recommendations
and is taking corrective action. However, IRS management expressed
concern that measuring the effect of taxpayer services on compliance is
a difficult task that it has been unable to accomplish reliably since
the inception of taxpayer service programs in the 1940s.

**Report Reference No. 2006-40-061**

***Toll-Free Preparations for the 2006 Filing Season***

In addition to the November 2005 law, Congress further defined a
reduction of taxpayer service to include limiting available hours of
telephone taxpayer assistance below the levels in existence during the
month of October 2005.[^23] For the 2005 Filing Season, the IRS devoted
8,200 Full-Time Equivalents[^24] to answer the various Customer Account
Services function toll-free telephone lines. Taxpayers called these
lines approximately 41.8 million times during that time period. Of
these, 16.8 million were made to the toll-free telephone number (used
for tax law or account-related questions).

![](media/image7.jpeg){width="3.2in" height="2.452777777777778in"}The
Customer Account Services function appeared to have had an effective
planning process for the 2006 Filing Season, which, if properly
implemented, would help ensure that taxpayers calling for assistance
would receive effective customer service.

Nevertheless, the 2006 Filing Season could present unique challenges.
TIGTA believes more taxpayers than the IRS estimated could call the
Special Services Applications (used for disaster-related issues). In
addition, the IRS had planned to reduce toll-free telephone hours of
operation in FY 2006. However, as of the time of this review, the IRS
was still determining whether it would make this reduction and when the
new hours would take effect.

Although TIGTA made no recommendations as a result of this review, due
to the concerns expressed by Congress about the IRS reducing operating
hours for the toll-free telephone lines, TIGTA is continuing to evaluate
the IRS' plans to reduce these operating hours.

**Report Reference No. 2006-40-053**

**Erroneous and Improper Payments**

An improper payment is any payment that should not have been made or
that was made in an incorrect amount under a statutory, contractual,
administrative, or other legally applicable requirement.

For the IRS, improper and erroneous payments are generally associated
with erroneous refunds and filing fraud issues as well as vendor or
contractor payments. Some tax credits, such as the Earned Income Tax
Credit (EITC) provide opportunities for abuse in income tax claims.

In Tax Year (TY) 2003, the IRS reported that approximately 21.7 million
taxpayers received EITC totaling \$38.1 billion. The IRS estimated that
between 27 percent and 32 percent of the\
\$31 billion in EITC claimed on TY 1999 returns should not have been
paid.

***Multiple Uses of Taxpayer Identification Numbers***

When a taxpayer identification number is used more than once per year,
it creates the opportunity for taxpayers to receive tax benefits to
which they are not entitled. To determine whether the IRS has an
effective process to detect and deter multiple uses of taxpayer
identification numbers to obtain improper tax benefits, TIGTA analyzed
two types of cases on the Duplicate Taxpayer Identification Number Use
(DUPTIN) database. This database is used to determine the total number
of identification numbers that were used more than once in a given year,
the number of times each identification number was used, and how each
identification number was used.

While the IRS has implemented strong controls on electronically filed
tax returns to prevent taxpayers from receiving improper benefits, it
can improve its processes when dealing with paper tax returns.
Specifically, the IRS can capitalize on existing paper return processes
to prevent additional taxpayers who improperly use an identification
number from receiving tax benefits to which they are not entitled.

Expansion of some current programs will increase the IRS' opportunities
to educate taxpayers and tax preparers on the correct way to use an
identification number and to reduce the amount of improper tax benefits
received by taxpayers. The IRS can also improve the reliability of the
information in the DUPTIN database.

In its November 2005 audit, TIGTA recommended that the IRS lead a
collaborative effort to identify a workable solution to resolve cases of
multiple use of identification numbers and evaluate the IRS' education
strategy for taxpayers and tax preparers on the proper use of an
identification number.

TIGTA also recommended that the IRS re-emphasize procedures to remove
all invalid and incorrect identification numbers from the DUPTIN
database once they have been corrected. IRS management agreed with the
recommendations and is taking corrective action.

**Report Reference No. 2006-40-007 (Limited Official Use)**

***Contractor Billing***

Contract expenditures represent a significant outlay of IRS funds. As of
October 2005, the IRS was responsible for administering\
553 contracts with a total systems life value of \$28.2 billion. In an
effort to monitor IRS contracts for erroneous payments, TIGTA performs
reviews of select vendor invoices and has an arrangement with the
Defense Contract Audit Agency (DCAA) for additional audit support.
During this six-month period, TIGTA, with the assistance of the DCAA,
issued 19 contract-related audit reports that identified approximately\
\$11.8 million in questionable costs.

In one audit report, the DCAA questioned\
\$11.8 million in labor costs directly related to IRS contracts. The
DCAA reported that the contractor's consulting costs do not provide the
Federal Government with the labor rates provided to the contractor's
best customers.

The issue is continuing to be evaluated. However, until it is resolved,
the contractor's consulting labor costs will be questioned, per the
provisions of the Federal Acquisition Regulation.

**Report Reference No. 2006-1C-003**

In another report, TIGTA analyzed\
39 DCAA reports issued between September 2000 and January 2005, relating
to one systems modernization contractor, and identified 25 reports with
issues that affected (e.g., questionable costs) or could affect (e.g.,
accounting system deficiencies) the contractor's billing accuracy,
thereby increasing the IRS' risk of making improper payments.

The contractor's system deficiencies cited by the DCAA included the
potential for overstated and unsupported direct labor, indirect, and
other direct costs, and ineffective control over the accumulation,
allocation, and recording of costs incurred in the performance of
Federal Government contracts.

Recent DCAA reports indicate that the contractor is making progress in
addressing previously reported system inadequacies. However, despite
these recent results, TIGTA believes that significant risk still remains
for the IRS on this contract. As a result, TIGTA will continue to
conduct voucher audits of the contractor in an effort to substantiate
reported contract costs and ensure that the vouchers are accurate,
supported, and allowable. TIGTA believes that the IRS should continue to
participate and fund DCAA planned audit activities of the contractor to
ensure that system deficiencies are identified and corrected.

**Report Reference No. 2006-10-008 (Limited Official Use)**

TIGTA also issued two audit reports involving its analysis of invoices
related to time-and-materials contracts. In one instance, TIGTA reported
that the IRS' voucher verification process was incomplete due to the
lack of review of contractor-provided detailed support for labor hour
charges or travel and other direct costs.

TIGTA's review of a contractor that provided the IRS with support
services on a project to reduce taxpayer burden resulted in the
identification of possible questionable charges of \$1,937.61. This
amount included unallowable and unsupported travel charges of
\$1,256.36, and unsupported other direct costs of \$681.25.

IRS management agreed with the findings and, working with the
contractor, was able to identify adequate supporting documentation in
the amount of \$1,433.29. The contractor agreed to reimburse the Federal
Government the remaining balance of \$504.32.

**Report Reference Nos. 2006-10-027 and\
2006-10-060**

***Office of Professional Responsibility***

TIGTA estimated that 22,500 of the\
407,000 licensed tax practitioners eligible to practice before the IRS
were not compliant with their own tax obligations. In addition, 516
eligible practitioners had a revoked, disbarred, resigned, or
surrendered State license during Calendar Years (CY) 2002-2004.
Furthermore, TIGTA identified\
55 eligible practitioners who had been convicted of serious criminal
offenses, including income tax evasion, conspiracy to obstruct or
defraud the IRS, or preparation of fraudulent tax returns during CYs
2002-2004.

The IRS has an oversight role to ensure that licensed tax practitioners
who practice before the IRS adhere to standards of conduct and
professionalism.[^25] Although the IRS has increased its efforts by
enforcing\
320 disciplinary actions during FY 2005, there are still a significant
number of licensed tax practitioners eligible to practice before the IRS
whose conduct appears to warrant disciplinary action. Licensed tax
practitioners who engage in misconduct may not be well equipped to
provide tax advice and services to taxpayers and they could undermine
public confidence in these professionals.

In January 2001, TIGTA reported that the IRS lacked the necessary
information to assess or manage the resources used for the licensed tax
practitioner disciplinary program.[^26] TIGTA's March 2006 audit found
that these problems still exist.

In addition, TIGTA was not able to reconcile the information on the case
management system with source documents because the IRS does not account
for all case referrals received, does not maintain source documentation
for some case referrals, and does not have written procedures to ensure
consistent processing of case referrals.

To further complicate matters, some case referrals were inappropriately
destroyed in October 2004. As such, the IRS' ability to perform analyses
to identify potential areas for emphasis or improvement is very limited.

TIGTA recommended that the IRS develop a systematic method to identify
licensed tax practitioners who are eligible to practice but are not
compliant with their own tax obligations. In addition, the IRS should
work with other law enforcement agencies and State licensing authorities
to improve the exchange of information for possible IRS disciplinary
action.

Furthermore, the IRS should implement the recommendations of the prior
TIGTA review and obtain approval for any needed changes to its record
retention requirements, develop procedures to better define what cases
will be recorded on the case management system, and establish controls
and analytical procedures to increase the reliability of the system.

In general, IRS management agreed with the recommendations. However, IRS
management believes that it is doing all that can reasonably be done to
collect comprehensive conviction information from law enforcement
agencies, and it must rely on law enforcement agencies to identify these
cases.

The IRS also stated that it will not implement the recommendations from
TIGTA's prior report because it does not agree that annual workload and
staffing analysis is productive, given the size and maturity of the
practitioner disciplinary program.

TIGTA is elevating its disagreement related to these two recommendations
to the Department of the Treasury for resolution.

**Report Reference No. 2006-10-066**

***Convenience Check Program***

The IRS' Convenience Check Processing Guide requires Lien Imprest Fund
cashiers to reconcile their Citibank statements with their check
register on a monthly basis. The cashier is to submit the reconciliation
statement for review. However, the Guide does not require the submission
of any supporting source documentation with the monthly statement
reconciliation. TIGTA's November 2005 audit report found that the IRS
may more readily identify suspect checks if the cashier is required to
submit supporting source documentation. Requiring supporting
documentation may also deter dishonest employees from preparing
unauthorized checks.

TIGTA has recommended that the IRS revise the Convenience Check Program
procedures to require that Approving Officials receive and review
supporting source documentation during the monthly bank statement
reconciliations. IRS management agreed with this recommendation.

The success of another IRS program, the Volunteer Return Preparation
Program (VRPP), is dependent upon the reputation it creates in the
public forum. Taxpayer confidence in the program will decrease if
volunteer misdeeds are brought to light in the media.

As the IRS moves away from return preparation, it needs to take action
to ensure that VRPP participants are adequately cautioned about misusing
government computers and accepting payment for volunteer activities.
Current VRPP training materials provide minimal warnings on accepting
payment for volunteer activities, but do not adequately address the
misuse of government computers.

TIGTA has recommended that the IRS enhance training materials and
information provided to VRPP participants, reminding them that
government computers should not be used for personal business and that
payments should not be accepted for preparing tax returns. IRS
management agreed with this recommendation.

**Report Reference No. 2006-40-005 (Limited Official Use)**

**Taxpayer Protection and Rights**

The IRS continues to dedicate significant resources and attention to
implementing the taxpayer rights provisions of RRA 98.

***Failure to Pay Penalty Grace Period***

A provision of the Taxpayer Bill of Rights[^27] increased the period of
time that taxpayers are given to pay an additional tax assessment before
the IRS could assess the Failure to Pay (FTP) tax penalty. The law
allows taxpayers 21 calendar days from the date of a notice to pay
additional tax assessments of less than \$100,000, and 10 business days
from the date of a notice to pay additional tax assessments of \$100,000
or more, without incurring any penalty. In contrast, IRS computers are
programmed to use the total amount of tax, penalty, and interest the
taxpayer owes on their tax module to compute the grace period rather
than only the additional tax assessment amount.

In its March 2006 audit report, TIGTA recommended that the IRS request
an opinion from its Office of Chief Counsel regarding whether the length
of the grace period should be determined by the additional tax
assessment amount or the total tax module balance amount, and change
computer programming, if warranted.

IRS management agreed with the recommendation and will take corrective
action. However, to date, a formal opinion from the IRS' Office of Chief
Counsel regarding this issue has not been requested.

**Report Reference No. 2006-30-057**

**Processing Returns and Implementing Tax Law Changes During the Tax
Filing Season**

Overall, the IRS had a successful 2005 Filing Season.[^28] It completed
processing of returns on schedule and timely issued refunds within the
required 45 days of the April 15, 2005, due date. Through May 27, 2005,
the IRS had processed over 117.5 million individual income tax returns,
which included\
66.6 million returns processed electronically. This was an increase of
nearly 11 percent over the same time last year, and it was the first
year in which more than one-half of all taxpayers filed an electronic
return.

For the 2005 Filing Season, most of the key tax law changes were
correctly implemented. The IRS had also effectively implemented
recommendations to address conditions reported during TIGTA's 2004
Filing Season review. However, some tax law changes were not effectively
implemented during the 2005 Filing Season. Specifically:

-   The election to include nontaxable combat pay as earned income
    reduces the Earned Income Tax Credit for some military taxpayers;

-   The new sales tax deduction is not benefiting all eligible
    taxpayers;

-   Questionable large-dollar amounts on tax returns are causing
    erroneous credits and understatements of tax liabilities;

-   Some taxpayers are receiving erroneous education credits; and

-   Single taxpayers continue to claim a questionable dual benefit by
    taking both the tuition and fees deduction and the education credit.

TIGTA has recommended several actions to address these issues, including
changes to error correction procedures, implementation of a computer
check to identify questionable large-dollar entries, and various changes
to tax forms, instructions, and publications to assist taxpayers in
applying the tax law correctly and in a manner most beneficial to them.
IRS management agreed with the recommendations and is taking corrective
actions.

**Report Reference No. 2006-40-024**

# Protect the

# ![](media/image2.png){width="1.375in" height="1.375in"} Integrity of

#  Tax Administration

T

he Office of Investigations (OI) administers investigative programs that
protect the integrity of the IRS and detect and prevent fraud and other
misconduct within IRS programs, the IRS Oversight Board, and IRS Office
of Chief Counsel. OI's mission is completed through proactive and
reactive investigative programs. OI investigates allegations in three
core functional areas: employee integrity, external attempts to corrupt
tax administration, and employee and infrastructure security. OI's
performance model (see page 26) emphasizes\
high-quality investigations relative to these three areas. TIGTA's
statutory responsibility includes not only the detection of fraud,
waste, and abuse within the IRS, but also the protection of the
integrity of tax administration. OI ensures that the nation's tax
administration system operates with the highest standards of fairness
and trustworthiness.

OI operates a Complaint Management Team (CMT) that receives complaints
through a toll-free hotline, a central post office box, and an e-mail
address. CMT processes allegations of fraud, waste, abuse, and
misconduct involving IRS employees and programs. It is a centralized
clearinghouse for processing and tracking allegations of wrongdoing.

TIGTA's Special Inquiries and Intelligence Division (SIID) is
responsible for conducting sensitive investigations involving
allegations of misconduct by TIGTA personnel and senior IRS management
officials. Other SIID components include:

-   the procurement fraud investigative section, which has heightened
    activity as a result of IRS' increasing use of contractors in
    support of IRS programs; and

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-   a Criminal Intelligence Program (CIP), which protects the IRS from
    external threats by individuals, anti-government groups, and
    domestic terrorists.

**TIGTA Investigative Performance Model**

![](media/image10.wmf)

TIGTA's Office of Investigations bases its performance measures on three
primary areas of investigation: employee integrity, employee and
infrastructure security, and external attempts to corrupt tax
administration. Each of these three areas is divided into three
subcategories, all designed to support the agency's law enforcement
goals.

**Employee Integrity**

Misconduct by IRS employees and contractors weakens the public's trust
in the IRS and undermines the ability of the IRS to implement and
enforce tax laws. TIGTA promotes employee integrity by conducting
proactive and reactive investigations, and by administering an
Integrity/Fraud Awareness Program to IRS employees, the tax practitioner
community, and the general public. Employee conduct investigations
include:

-   unauthorized access (UNAX) to and disclosure of confidential
    taxpayer information;

-   bribery;

-   solicitation;

-   theft;

-   taxpayer abuse;

-   financial fraud; and

-   misuse of IRS computer systems.

In addition to TIGTA's mandate to investigate allegations of employee
misconduct, OI conducts proactive integrity initiatives designed to
detect fraud and to identify internal control weaknesses that may permit
fraud to go undetected or unreported. UNAX and disclosure of
confidential taxpayer information continue to make proactive integrity
initiatives necessary. See\
page 28 for detailed information about TIGTA's UNAX Program.

During the reporting period, TIGTA completed 942 employee integrity
investigations.

######## The following cases are examples of IRS employee integrity investigations conducted during this reporting period.

**Former IRS Employee Sentenced for Unauthorized Access of Taxpayer
Records**

A former IRS employee was sentenced in January 2006 for unauthorized
computer access. The former employee accessed private taxpayer
information for no legitimate business reason, knowing the access was
not permitted. The former employee was sentenced to 12 months probation,
75 hours of community service, and fined \$1,000.

**Former IRS Employee Sentenced for Unauthorized Inspection of Return
Information**

A former IRS employee was sentenced in December 2005 for unauthorized
inspection of return information. The IRS employee willfully inspected a
taxpayer's return information without authorization. She was sentenced
to two years probation and fined \$1,000.

**IRS Employee Charged with Unauthorized Computer Access for Commercial
Advantage and Private Gain**

An IRS employee was charged in October 2005 with intentionally accessing
an IRS computer without authorization and exceeding her authorized
access for commercial advantage and private financial gain. Allegedly
employed by a company that provides tax preparation services, she
accessed accounts on an IRS computer database of 21 taxpayers whose
returns were prepared by the company.

**Former IRS Employee Sentenced to Five Years Probation and Ordered to
Pay Restitution of More Than \$153,000**

In January 2006, an IRS employee was sentenced to five years probation,
the first year in home detention, and was ordered to pay restitution of
more than \$153,000 for theft of government funds. While working for the
IRS, the employee received approximately \$153,000 in Social Security
disability benefits to which he was not entitled. He falsely reported to
the Social Security Administration that he had not worked since becoming
disabled. Through its proactive work, TIGTA's Strategic Enforcement
Division identified the integrity breach.

**Individual Sentenced to Two Years in Prison for Bank Fraud Involving
IRS Employee**

An individual was sentenced in December 2005 to two years in prison,
five years supervised release, and ordered to pay more than \$34,000 in
restitution for bank fraud. The individual provided an IRS employee with
counterfeit checks and fraudulent identification to negotiate the
checks. At the individual's direction, the IRS employee negotiated or
attempted to negotiate checks totaling approximately \$42,250 at
different banks. After cashing the counterfeit checks, the employee
returned the money to the individual, who then divided it among the
participants in the scheme. TIGTA's Forensic Science Laboratory was
instrumental in the investigation, identifying the individual's
fingerprint on a check and providing expert testimony at his trial.

**Former IRS Manager Charged with Stealing More Than \$22,000 in
Treasury Refund Checks**

A former IRS manager was charged in December 2005 with theft of Federal
funds, unauthorized access of a government computer, and theft in
connection with health care. According to the indictment, while working
in the Refund Inquiry Unit, the individual allegedly stole seven
Treasury refund checks totaling more than \$22,000 and gave them to a
co-conspirator. She also allegedly made nine unauthorized accesses of
taxpayer information on an IRS computer system. Additionally, she
requested that her Federal Employees Health Benefits Program insurance
carrier add the co-conspirator as her spouse, when in fact he was not
her spouse.

**Individual Sentenced for Theft of Government Checks and Money Orders**

An individual was sentenced in February 2006 for receiving and
converting, for his own use, checks and money orders originally payable
to the IRS. The individual received the checks and money orders,
totaling approximately \$7,363, from an IRS employee and deposited them
into his bank account. The individual knew the checks and money orders
were stolen and that neither he nor the IRS employee was entitled to the
proceeds. He was sentenced to three years probation, three months home
detention, and was ordered to pay restitution of more than \$7,000 to
the IRS.

**IRS Employee Guilty of Filing False Claim for Hurricane Katrina
Disaster Assistance**

In February 2006, an IRS Revenue Officer pleaded guilty to filing a
false claim with the Federal Emergency Management Agency. The IRS
employee filed an application for Hurricane Katrina disaster assistance
benefits stating that his primary residence was in New Orleans when he
knew it was not. Based on his application, he received \$2,000 in
expedited disaster assistance.

**Employee and Infrastructure Security**

TIGTA's statutory responsibilities include investigating activities
involving threats to IRS personnel and facilities.

TIGTA's Criminal Intelligence Program (CIP) protects the IRS from
external threats that come from a variety of sources, including domestic
terrorists and anti-government groups. The CIP is designed to identify
and neutralize threats, assaults, and violent acts targeted against IRS
facilities, employees, and operations. TIGTA works with other Federal,
State, and local law enforcement agencies that have similar goals. For
example, TIGTA participates in the FBI Joint Terrorism Task Forces
throughout the country, and assists the IRS in developing and enhancing
its employee safety and infrastructure security programs.

During this reporting period, TIGTA completed 138 investigations of
threats and assaults directed at the IRS and its employees, and issued
274 advisories notifying IRS management of potential threats.

######## The following cases are examples of IRS employee and infrastructure security investigations conducted during this reporting period.

**Individual Sentenced for Assaulting IRS Employee**

An individual was sentenced in February 2006 for assaulting a Federal
officer, resulting in the infliction of bodily injury. The individual
used force to assault and interfere with the IRS employee while she was
engaged in the performance of her official duties. He was sentenced to\
12 months and one day incarceration, three years supervised release, 300
hours of community service, and fined \$4,000.

**Individual Sentenced for Threatening to Bomb Federal Building**

In October 2005, an individual was sentenced to four months
incarceration, three years supervised release, no more than four months
in a community corrections center, and fined \$2,000 for using the mail
to threaten and convey false information. The individual prepared and
mailed a letter to the U.S. Immigration Service that falsely claimed
three bombs were scheduled to explode, one of them at the Federal
building to which the letter was sent.

**Individual Arrested for Making Harassing and Threatening Telephone
Calls to IRS**

An individual was arrested in December 2005 for threatening
communications and harassing telephone calls. According to the criminal
complaint, the individual allegedly made more than 30 harassing and
threatening telephone calls to an IRS office. During one call, the
individual allegedly apologized for attempting to assassinate IRS
employees.

**Individual Sentenced for Making Threatening Telephone Calls to IRS**

An individual was sentenced in March 2006 for making threatening
interstate communications. The individual made\
772 telephone calls to the IRS, 111 of which were made on one day. The
calls and voice messages left by the individual were harassing and
threatening to the IRS employees who received them and caused serious
disruption of Federal Government business. The individual was sentenced
to 54 months in prison, three years supervised release, and was ordered
to participate in substance abuse and mental health treatment programs
as special conditions of his supervised release.

**External Attempts to Corrupt Tax Administration**

External attempts to corrupt tax administration inhibit the ability of
the IRS to collect revenue and undermine the public's confidence in fair
and effective tax administration. TIGTA is committed to investigating
external attempts to corrupt or interfere with the administration of
Internal Revenue laws. External efforts to impede these laws include:

-   impersonation of IRS officials;

-   fraud by tax preparers;

-   theft of IRS refunds;

-   bribery; and

-   other criminal activities.

During this reporting period, TIGTA conducted 77 investigations of
attempts to manipulate or corrupt IRS systems and\
252 investigations into fraud and other IRS-related criminal activities.

######## The following cases are examples of investigations of external attempts to corrupt tax administration conducted during this reporting period.

**Individual Sentenced for Embezzling More Than \$44,000 in Tax
Payments**

An individual was sentenced in December 2005 to 30 months in prison,
three years supervised release and was ordered to pay more than \$44,000
in restitution for mail fraud. As the majority owner of a tax service
business, the individual prepared tax deposit checks and IRS coupons for
a corporation. He forwarded the checks to the corporation for signature
and the corporation mailed the signed checks back to his business.
Instead of paying the IRS by depositing them into a United States trust
account, he defrauded the corporation of approximately \$44,246 by
depositing\
13 of the tax checks into his business bank account.

**Individual Sentenced to Five Years Probation for Impersonating IRS
Agent**

An individual was sentenced in January 2006 for false personation. The
individual was sentenced to five years probation with six months in a
community corrections facility, and was ordered to pay \$10,000 in
restitution. The individual had obtained approximately \$10,000 on
behalf of the United States by pretending to be an IRS agent.

**Individual Arrested for Attempting to Interfere with Administration of
Internal Revenue Laws**

In February 2006, an individual was arrested for fraud and false
statements, and attempting to interfere with the administration of
Internal Revenue laws. According to the indictment, the individual
allegedly filed 29 fraudulent Forms 8300 (Report of Cash Payments Over
\$10,000 Received in a Trade or Business) with the IRS. On the forms,
the individual allegedly claimed to have engaged in suspicious cash
transactions more than \$1 million with various individuals, including
public officials and others with whom she was involved in disputes or
litigation. She allegedly filed the false Forms 8300 to harass,
intimidate, and create legal problems for the individuals.

**Tax Practitioner Sentenced for Falsifying IRS Form 2848**

A tax practitioner was sentenced for false statements in January 2006.
The individual submitted a Form 2848 (Power of Attorney and Declaration
of Representative) to the IRS. He represented that he was a Certified
Public Accountant (CPA), which entitled him to represent taxpayers
before the IRS, when he knew that he was not a licensed CPA. He was
sentenced to two years probation with the conditions that he complete
one day per month of community service and provide his clients with a
form stating that he is unable to serve as a representative before the
IRS. He was also fined \$1,500.

**Individual Found Guilty of Submitting False IRS Forms**

In December 2005, an individual was found guilty of making false
statements on IRS forms, preparing and submitting false income tax
returns, and making false claims against the United States. The
individual submitted four Forms 2848 (Power of Attorney and Declaration
of Representative) to the IRS, falsely claiming to be an attorney and a
member in good standing of the New York State bar. The individual also
aided and assisted in the preparation of 11 false income tax returns and
made five false claims against the United States.

**Individual Sentenced for Impersonating IRS Employee to Obtain Personal
Information**

In October 2005, an individual was sentenced to five years probation,
was ordered to pay restitution of over\
\$2,000, and participate in substance abuse treatment and mental health
counseling programs. The individual falsely stated that she was an IRS
employee conducting a survey and fraudulently obtained the names and
dates of birth of other persons.

**Individual Indicted for Bribing IRS Employee**

An individual was indicted in March 2006 for bribery of a public
official. According to the indictment, the individual allegedly gave an
IRS employee \$1,500 for a "no change" letter concerning her sister's\
2002 individual income tax return.

![](media/image2.png){width="1.375in" height="1.375in"}

**Awards and Special Achievements**

**TIGTA Special Agent Receives Award from United States Attorney's
Office**

On December 1, 2005, TIGTA Special Agent Keith Caplan was recognized by
the United States Attorney's office, Eastern District of Pennsylvania,
for his dedication and investigative skills in a bank fraud case
involving an IRS employee.

![](media/image11.png){width="1.5625in" height="1.7291666666666667in"}

Special Agent Keith Caplan (center)

**Former IRS Revenue Officer Receives Accolades from TIGTA**

On March 6, 2006, former IRS Revenue Officer Larry E. Hassard received a
Letter of Commendation from TIGTA for his unselfish actions and hard
work in the successful prosecution of a taxpayer and co-conspirator in a
bribery investigation.

![](media/image12.png){width="1.5625in" height="1.71875in"}

Larry E. Hassard with bribe money

**TIGTA's Hoteling Program Receives Honorable Mention**

![](media/image13.png){width="3.8541666666666665in" height="2.175in"}

> **From left to right:** Steven Perry, GSA Administrator;\
> J Russell George, TIGTA IG; Jennifer Donnan, Assistant Director,
> Client Services; Donna Leach, HR Specialist; and\
> Stan Kaczmarczyk, GSA Deputy Associate Administrator for Real Property
> Management. Other TIGTA team members\
> (not pictured) include Nancy Nakamura, Emma Price,\
> Tom Hawkins, Troy Patterson and Jim O'Hara (Office of Audit); Tim
> Dobbs and Tom Black (Office of Information Technology); and Corinne
> O'Connor, retired Real Estate Specialist.

TIGTA's Hoteling program received Honorable Mention in the GSA 2005
Achievement Award for Real Property Innovation. Twelve Federal Agencies
submitted entries for the award recognizing ideas and methods of
improving asset management within the Federal Government. Inspector
General J. Russell George accepted the award for TIGTA.

# ![](media/image2.png){width="1.375in" height="1.375in"}Congressional

# Testimony

# 

On October 26, 2005, TIGTA's Inspector General, J. Russell George,
provided testimony before the Senate Homeland Security and Governmental
Affairs' Subcommittee on Federal Financial Management, Government
Information, and International Security for its hearing entitled,
"Uncollected Taxes: Can We Reduce the \$300 Billion Tax Gap?" Mr.
George's testimony included recommendations on the need to simplify the
tax code in order to help close the tax gap. In addition, he recommended
that the IRS work with Congress to develop legislation requiring
withholding on non-employee compensation, and that the IRS continue to
address the cost increases and schedule delays that have been incurred
as it seeks to modernize IRS computer systems.

On March 29, 2006, Inspector General George appeared before the House
Committee on Appropriations, Subcommittee on Transportation, Treasury,
and Housing and Urban Development, the Judiciary, District of Columbia,
and Independent Agencies. This hearing addressed the IRS' Fiscal Year
2007 Budget Request. Mr. George spoke about the major challenges facing
the IRS. He stated that maximizing compliance and taxpayer services with
finite resources is perhaps the most difficult challenge facing the IRS.
He also stated that the IRS faces challenges in meeting several taxpayer
service goals and expectations, as well as in determining and providing
taxpayers the levels and types of service they want or need.

> *"Providing quality customer service to the taxpayer is not only a
> primary goal of the IRS, but it is also one of its major management
> challenges. The Commissioner has frequently stated that service
> combined with enforcement will result in compliance. Quality taxpayer
> service includes helping the taxpaying public understand their tax
> obligations while making it easier to participate in the tax system."*
>
> *J. Russell George, March 29, 2006*

# ![](media/image2.png){width="1.375in" height="1.375in"}

# Audit

# Statistical Reports

# 

**Reports with Questioned Costs**

TIGTA issued two audit reports with questioned costs during this
semiannual reporting period.^1^ The phrase "questioned cost" means a
cost that is questioned because of:

-   an alleged violation of a provision of a law, regulation, contract,
    or other requirement governing the expenditure of funds;

-   a finding, at the time of the audit, that such cost is not supported
    by adequate documentation (an unsupported cost); or

-   a finding that expenditure of funds for the intended purpose is
    unnecessary or unreasonable.

The phrase "disallowed cost" means a questioned cost that management, in
a management decision, has sustained or agreed should not be charged to
the government.

+--------------------------------+------+--------------+--------------+
| Reports With Questioned Costs  |      |              |              |
+--------------------------------+------+--------------+--------------+
| Report Category                | Nu   | Questioned   | Unsupported  |
|                                | mber | Costs        | Costs        |
|                                |      |              |              |
|                                |      | (in          | (in          |
|                                |      | thousands)   | thousands)   |
+--------------------------------+------+--------------+--------------+
| 1\. Reports with no management | 7    | \$3,782      | \$3,280      |
| decision at the                |      |              |              |
|                                |      |              |              |
| beginning of the reporting     |      |              |              |
| period                         |      |              |              |
+--------------------------------+------+--------------+--------------+
| 2\. Reports issued during the  | 2    | \$11,839     | \$2          |
| reporting period               |      |              |              |
+--------------------------------+------+--------------+--------------+
| **3.** **Subtotals (Item 1     | *    | **\$15,621** | **\$3,282**  |
| plus Item 2)**                 | *9** |              |              |
+--------------------------------+------+--------------+--------------+
| 4\. Reports for which a        | 1    | \$1          | \$1          |
| management decision            |      |              |              |
|                                |      |              |              |
| was made during the reporting  |      |              |              |
| period^2^                      |      |              |              |
|                                |      |              |              |
| > a\. Value of disallowed      |      |              |              |
| > costs                        |      |              |              |
+--------------------------------+------+--------------+--------------+
| b\. Value of costs not         | 1    | \$1          | \$1          |
| disallowed                     |      |              |              |
+--------------------------------+------+--------------+--------------+
| **5.** **Reports with no       | *    | **\$15,619** | **\$3,280**  |
| management decision at the**   | *8** |              |              |
|                                |      |              |              |
| **end of the reporting period  |      |              |              |
| (Item 3 minus Item 4)**        |      |              |              |
+--------------------------------+------+--------------+--------------+
| 6\. Reports with no management | 7    | \$3,782      | \$3,280      |
| decision                       |      |              |              |
|                                |      |              |              |
| within 6 months of issuance    |      |              |              |
+--------------------------------+------+--------------+--------------+

^1^ See Appendix II for identification of audit reports involved.

^2^ Includes one report in which IRS management disallowed part of the
questioned cost.

**Reports with Recommendations That**

**Funds Be Put to Better Use**

[]{.mark}

TIGTA issued one report with recommendations that funds be put to better
use during this semiannual reporting period.^1^ The phrase
"recommendation that funds be put to better use" means a recommendation
that funds could be used more efficiently if management took actions to
implement and complete the recommendation, including:

-   reductions in outlays;

-   deobligations of funds from programs or operations;

-   costs not incurred by implementing recommended improvements related
    to operations;

-   avoidance of unnecessary expenditures noted in pre-award reviews of
    contract agreements;

-   preventing erroneous payment of the following refundable credits:
    Earned Income Tax Credit and Child Tax Credit; and

-   any other savings that are specifically identified.

The phrase "management decision" means the evaluation by management of
the findings and recommendations included in an audit report, and the
issuance of a final decision concerning its response to such findings
and recommendations, including actions concluded to be necessary.

+--------------------------------------------------+-------+-----------+
| Reports With Recommendations That Funds Be Put   |       |           |
| To Better Use                                    |       |           |
+--------------------------------------------------+-------+-----------+
| Report Category                                  | N     | Amount    |
|                                                  | umber |           |
|                                                  |       | (in       |
|                                                  |       | t         |
|                                                  |       | housands) |
+--------------------------------------------------+-------+-----------+
| 1\. Reports with no management decision at the   | 1     | \$42,100  |
| beginning of the reporting period                |       |           |
+--------------------------------------------------+-------+-----------+
| 2\. Reports issued during the reporting period   | 1     | \$6,979   |
+--------------------------------------------------+-------+-----------+
| **3. Subtotals (Item 1 plus Item 2)**            | **2** | **\       |
|                                                  |       | $49,079** |
+--------------------------------------------------+-------+-----------+
| 4\. Reports for which a management decision was  |       |           |
| made during the reporting period^2^              |       |           |
|                                                  |       |           |
| a\. Value of recommendations to which management |       |           |
| agreed                                           |       |           |
+--------------------------------------------------+-------+-----------+
| i\. Based on proposed management action          | 2     | \$13,934  |
+--------------------------------------------------+-------+-----------+
| ii\. Based on proposed legislative action        | 0     | \$0       |
+--------------------------------------------------+-------+-----------+
| b\. Value of recommendations to which management | 1     | \$35,145  |
| did not agree                                    |       |           |
+--------------------------------------------------+-------+-----------+
| **5. Reports with no management decision at end  | **0** | **\$0**   |
| of the**                                         |       |           |
|                                                  |       |           |
| **reporting period (Item 3 minus Item 4)**       |       |           |
+--------------------------------------------------+-------+-----------+
| 6\. Reports with no management decision within 6 | 0     | \$0       |
| months of issuance                               |       |           |
+--------------------------------------------------+-------+-----------+

^1^ See Appendix II for identification of audit reports involved.

^2^ Includes one report in which IRS management agreed to a portion of
the value of the recommendation.

**Reports with Additional Quantifiable Impact**

**on Tax Administration**

In addition to questioned costs and funds put to better use, the Office
of Audit has identified measures that demonstrate the value of audit
recommendations to tax administration and business operations. These
issues are of interest to IRS and Treasury executives, Congress, and the
taxpaying public, and are expressed in quantifiable terms to provide
further insight into the value and potential impact of the Office of
Audit's products and services. Including this information also promotes
adherence to the intent and spirit of the Government Performance and
Results Act (GPRA).

*Definitions of these additional measures are:*

**Increased Revenue:** Assessment or collection of additional taxes.

**Revenue Protection:** Proper denial of claims for refunds, including
recommendations that prevent erroneous refunds or efforts to defraud the
tax system.

**Reduction of Burden on Taxpayers:** Decreases by individuals or
businesses in the need for, frequency of, or time spent on contacts,
record keeping, preparation, or costs to comply with tax laws,
regulations, and IRS policies and procedures.

**Taxpayer Rights and Entitlements at Risk:** The protection of due
process rights granted to taxpayers by law, regulation, or IRS policies
and procedures. These rights most commonly arise when filing tax
returns, paying delinquent taxes, and examining the accuracy of tax
liabilities. The acceptance of claims for and issuance of refunds
(entitlements) are also included in this category, such as when
taxpayers legitimately assert that they overpaid their taxes.

**Taxpayer Privacy and Security:** Protection of taxpayer financial and
account information (privacy). Processes and programs that provide
protection of tax administration, account information, and
organizational assets (security).

**Inefficient Use of Resources:** Value of efficiencies gained from
recommendations to reduce cost while maintaining or improving the
effectiveness of specific programs; resources saved would be available
for other IRS programs. Also, the value of internal control weaknesses
that resulted in an unrecoverable expenditure of funds with no tangible
or useful benefit in return.

**Reliability of Management Information:** Ensuring the accuracy,
validity, relevance, and integrity of data, including the sources of
data and the applications and processing thereof, used by the
organization to plan, monitor, and report on its financial and
operational activities. This measure will often be expressed as an
absolute value (i.e., without regard to whether a number is positive or
negative) of overstatements or understatements of amounts recorded on
the organization's documents or systems.

**Protection of Resources:** Safeguarding human and capital assets, used
by or in the custody of the organization, from inadvertent or malicious
injury, theft, destruction, loss, misuse, overpayment, or degradation.

The number of taxpayer accounts and dollar values shown in the following
chart were derived from analyses of historical data, and are thus
considered potential barometers of the impact of audit recommendations.
Actual results will vary depending on the timing and extent of
management's implementation of the corresponding corrective actions, and
the number of accounts or subsequent business activities impacted from
the dates of implementation. Also, a report may have issues that impact
more than one outcome measure category.

.

+-----------------------------+---------+---------------+------------+
| Reports With Additional     |         |               |            |
| Quantifiable Impact On Tax  |         |               |            |
| Administration              |         |               |            |
+-----------------------------+---------+---------------+------------+
| Outcome Measure Category    | Number  | Number of     | Dollar     |
|                             | of      |               | Value      |
|                             | Rep     | Taxpayer      |            |
|                             | orts^1^ | Accounts      | (in        |
|                             |         |               | thousands) |
+-----------------------------+---------+---------------+------------+
| Increased Revenue           | 0       | 0             | \$0        |
+-----------------------------+---------+---------------+------------+
| Revenue Protection          | 2       | 19,103        | \$157,817  |
+-----------------------------+---------+---------------+------------+
| Reduction of Burden on      | 1       | 7,124         | \$0        |
| Taxpayers                   |         |               |            |
+-----------------------------+---------+---------------+------------+
| Taxpayer Rights and         | 1       | 467,844       | \$1,900    |
| Entitlements at Risk        |         |               |            |
+-----------------------------+---------+---------------+------------+
| Taxpayer Privacy and        | 0       | 0             | \$0        |
| Security                    |         |               |            |
+-----------------------------+---------+---------------+------------+
| Inefficient Use of          | 1       | 0             | \$311      |
| Resources                   |         |               |            |
+-----------------------------+---------+---------------+------------+
| Reliability of Management   | 3       | 8,185         | \$         |
| Information                 |         |               | 17,446,000 |
+-----------------------------+---------+---------------+------------+
| Protection of Resources     | 0       | 0             | \$0        |
+-----------------------------+---------+---------------+------------+

^1^ See Appendix II for identification of audit reports involved.

Management did not agree with the outcome measures in the following
reports:

-   Revenue Protection: Reference Number 2006-40-007.

-   Taxpayer Burden: Reference Numbers 2006-10-066.

The following reports contained quantifiable impacts in addition to the
number of taxpayer accounts, number of hours, and dollar value:

-   Taxpayer Burden: Reference Number 2006-10-066.

-   Reliability of Management Information: Reference Number 2006-40-022.

# ![](media/image2.png){width="1.375in" height="1.375in"}

# Investigations

# Statistical Reports

# 

+---------------------------------------------------------+------------+
| Significant Investigative Achievements                  |            |
|                                                         |            |
| October 1, 2005 -- March 31, 2006                       |            |
+---------------------------------------------------------+------------+
| **Complaints/Allegations Received by TIGTA**            |            |
+---------------------------------------------------------+------------+
| Complaints against IRS Employees                        | 2,173      |
+---------------------------------------------------------+------------+
| Complaints against Non-Employees                        | 2,250      |
+---------------------------------------------------------+------------+
| **Total Complaints/Allegations**                        | **4,423**  |
+---------------------------------------------------------+------------+
| **Status of Complaints/Allegations Received by TIGTA**  |            |
+---------------------------------------------------------+------------+
| Investigations Initiated                                | 1,701      |
+---------------------------------------------------------+------------+
| In Process within TIGTA^1^                              | 327        |
+---------------------------------------------------------+------------+
| Referred to IRS for Action                              | 401        |
+---------------------------------------------------------+------------+
| Referred to IRS for Information Only                    | 769        |
+---------------------------------------------------------+------------+
| Referred to a Non-IRS Entity^2^                         | 14         |
+---------------------------------------------------------+------------+
| Closed with No Referral                                 | 1,047      |
+---------------------------------------------------------+------------+
| Closed with All Actions Completed                       | 164        |
+---------------------------------------------------------+------------+
| **Total Complaints**                                    | **4,423**  |
+---------------------------------------------------------+------------+
| **Investigations Opened and Closed**                    |            |
+---------------------------------------------------------+------------+
| Total Investigations Opened                             | 1,639      |
+---------------------------------------------------------+------------+
| Total Investigations Closed                             | 1,701      |
+---------------------------------------------------------+------------+
| **Financial Accomplishments**                           |            |
+---------------------------------------------------------+------------+
| Embezzlement/Theft Funds Recovered                      | \$689,755  |
+---------------------------------------------------------+------------+
| Court Ordered Fines, Penalties and Restitution          | \$         |
|                                                         | 12,142,325 |
+---------------------------------------------------------+------------+
| Out-of-Court Settlements                                | 0          |
+---------------------------------------------------------+------------+
| **Total Financial Accomplishments**                     | **\$12     |
|                                                         | ,832,080** |
+---------------------------------------------------------+------------+

^1^ Complaints for which final determination had not been made at the
end of the reporting period.

^2^ A non-IRS entity includes other law enforcement entities or Federal
agencies.

Note: The IRS made 36 referrals to TIGTA that would more appropriately
be handled by the IRS, and therefore

were returned to the IRS. These are not included in the total
complaints/allegations shown above.

  --------------------------------- ------------ -------------- -----------
  Status of Closed Criminal                                     
  Investigations                                                

  Criminal Referrals^1^             Employee     Non-Employee   Total

  Referred -- Accepted for          26           60             **86**
  Prosecution                                                   

  Referred -- Declined for          311          203            **514**
  Prosecution                                                   

  Referred -- Pending Prosecutorial 28           56             **84**
  Decision                                                      

  Total Criminal Referrals          **365**      **319**        **684**

  **No Referral**                   451          434            **885**
  --------------------------------- ------------ -------------- -----------

^1^ Criminal referrals include both Federal and State dispositions.

  --------------------------------- ------------ -------------- -----------
  Criminal Dispositions^2^                                      

                                    Employee     Non-Employee   Total

  Guilty                            24           68             **92**

  Nolo Contendere (no contest)      1            2              **3**

  Pre-trial Diversion               0            7              **7**

  Deferred Prosecution^3^           0            0              **0**

  Not Guilty                        0            2              **2**

  Dismissed^4^                      4            7              **11**

  **Total Criminal Dispositions**   **29**       **86**         **115**
  --------------------------------- ------------ -------------- -----------

^2^ This chart includes statistics on final criminal dispositions during
the reporting period. This data may pertain to investigations referred

criminally in prior reporting periods and do not necessarily relate to
the investigations referred criminally in the Status of Closed Criminal

Investigations table above.

^3^ Generally in a deferred prosecution, the defendant accepts
responsibility for his/her actions, and complies with certain conditions
imposed by

the court. Upon defendant's completion of the conditions, the court
dismisses the case. If the defendant fails to fully comply, the court

reinstates prosecution of the charge.

^4^ Court dismissed charges.

  ----------------------------------------------------------- -----------
  Administrative Dispositions on Closed TIGTA                 
  Investigations^5^                                           

                                                              **Total**

  Removed, Terminated or Other                                241

  Suspended/Reduction in Grade                                61

  Oral or Written Reprimand/Admonishment                      92

  Closed -- No Action Taken                                   122

  Clearance Letter Issued                                     129

  Employee Resigned Prior to Adjudication                     106

  **Total Administrative Dispositions**                       **751**
  ----------------------------------------------------------- -----------

^5^ This chart includes statistics on final administrative dispositions
during the reporting period. This data may pertain to investigations

referred administratively in prior reporting periods and does not
necessarily relate to the investigations closed in the Investigations

Opened and Closed statistics on page 43.

#  {#section-14 .unnumbered}

# ![](media/image2.png){width="1.375in" height="1.375in"}Appendix I

# Statistical Reports -

# Other

**Audit Reports with Significant**

**Unimplemented Corrective Actions**

The Inspector General Act of 1978 requires identification of significant
recommendations described in previous semiannual reports for which
corrective actions have not been completed. The following list is based
on information from the IRS Office of Management Control's automated
tracking system maintained by Treasury management officials.

+--------+----------+------+---------+--------------------------------+
| Ref    | IRS      | Is   | Pr      | Report Title and               |
| erence | Ma       | sued | ojected | Recommendation Summary         |
| Number | nagement |      |         |                                |
|        | C        |      | Com     | *(F = Finding No., R =         |
|        | hallenge |      | pletion | Recommendation No.,*           |
|        | Area     |      |         |                                |
|        |          |      | Date    | *P = Plan No.)*                |
+========+==========+======+=========+================================+
| 2000-  | Tax      | M    | 0       | ***The Internal Revenue        |
| 30-059 | Co       | arch | 5/15/06 | Service Can Improve the Estate |
|        | mpliance | 2000 |         | Tax Collection Process***      |
|        | Ini      |      | 0       |                                |
|        | tiatives |      | 5/15/06 | [F-2, R-2, P-1]{.underline}.   |
|        |          |      |         | Develop procedures to          |
|        |          |      |         | periodically reconcile tax     |
|        |          |      |         | liens on the ALS with          |
|        |          |      |         | information shown on the       |
|        |          |      |         | taxpayer accounts.             |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-3, P-1]{.underline}.   |
|        |          |      |         | Clarify procedures to          |
|        |          |      |         | employees that all estate tax  |
|        |          |      |         | liens should be recorded on    |
|        |          |      |         | the ALS.                       |
+--------+----------+------+---------+--------------------------------+
| 2001-  | Tax      | M    | 0       | ***Program Improvements Are    |
| 30-052 | Co       | arch | 6/15/06 | Needed to Encourage Taxpayer   |
|        | mpliance | 2001 |         | Compliance in Reporting        |
|        | Ini      |      | 0       | Foreign Sourced Income***      |
|        | tiatives |      | 1/01/07 |                                |
|        |          |      |         | [F-2, R-1, P-1]{.underline}.   |
|        |          |      |         | Identify the highest risk      |
|        |          |      |         | foreign sourced income         |
|        |          |      |         | documents and use them to      |
|        |          |      |         | coordinate with tax treaty     |
|        |          |      |         | partners to positively         |
|        |          |      |         | identify the U.S. taxpayers    |
|        |          |      |         | involved.                      |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-1, P-1,                |
|        |          |      |         | P-2]{.underline}. Improve      |
|        |          |      |         | systems that process data the  |
|        |          |      |         | IRS receives on foreign        |
|        |          |      |         | sourced income.                |
+--------+----------+------+---------+--------------------------------+
| 2002-  | Tax      | S    | 0       | ***The Internal Revenue        |
| 30-156 | Co       | epte | 8/15/06 | Service Does Not Penalize      |
|        | mpliance | mber |         | Employers that File Wage and   |
|        | Ini      | 2002 |         | Tax Statements with Inaccurate |
|        | tiatives |      |         | Social Security Numbers***     |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1]{.underline}.   |
|        |          |      |         | Ensure that the IRS initiate,  |
|        |          |      |         | as proposed in its response to |
|        |          |      |         | our memorandum dated February  |
|        |          |      |         | 1, 2002, a regularly scheduled |
|        |          |      |         | program for proposing          |
|        |          |      |         | penalties for Forms W-2 with   |
|        |          |      |         | inaccurate name/SSN            |
|        |          |      |         | combinations.                  |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Security | Febr | 0       | ***Employee Background         |
| 20-049 | of the   | uary | 6/30/06 | Investigations Were Normally   |
|        | IRS      | 2003 |         | Completed; However, the        |
|        |          |      |         | Contractor Employee Background |
|        |          |      |         | Investigation Program Needs    |
|        |          |      |         | Improvement***                 |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-5, P-2]{.underline}.   |
|        |          |      |         | Ensure that personnel in the   |
|        |          |      |         | Real Estate and Facilities     |
|        |          |      |         | area of the Agency-wide Shared |
|        |          |      |         | Services are adequately        |
|        |          |      |         | trained regarding the          |
|        |          |      |         | requirements for issuing a     |
|        |          |      |         | contractor employee an IRS     |
|        |          |      |         | identification badge.          |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Using    | M    | 1       | ***The Internal Revenue        |
| 10-054 | Per      | arch | 0/01/07 | Service Needs to Establish an  |
|        | formance | 2003 |         | Effective Process to           |
|        | and      |      |         | Accurately Identify, Record,   |
|        | F        |      |         | and Report Unemployment Trust  |
|        | inancial |      |         | Fund Administrative            |
|        | Inf      |      |         | Expenses***                    |
|        | ormation |      |         |                                |
|        | for      |      |         | [F-1, R-3, P-1]{.underline}.   |
|        | Program  |      |         | Ensure that the ability to     |
|        | and      |      |         | record and report trust fund   |
|        | Budget   |      |         | administrative expenses, as    |
|        | D        |      |         | currently envisioned in the    |
|        | ecisions |      |         | IFS development plans, is      |
|        |          |      |         | properly implemented.          |
+--------+----------+------+---------+--------------------------------+
| 2003-  | E        | M    | 0       | ***Improvements Are Needed in  |
| 10-094 | rroneous | arch | 5/15/06 | the Monitoring of Criminal     |
|        | and      | 2003 |         | Investigation Controls Placed  |
|        | Improper |      |         | on Taxpayers' Accounts When    |
|        | Payments |      |         | Refund Fraud is Suspected***   |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1]{.underline}.   |
|        |          |      |         | Ensure that regular reviews of |
|        |          |      |         | the Questionable Refund        |
|        |          |      |         | Program are conducted to       |
|        |          |      |         | assess compliance with         |
|        |          |      |         | procedures and that feedback   |
|        |          |      |         | is provided regarding program  |
|        |          |      |         | effectiveness. Also, analyses  |
|        |          |      |         | of the FDCs' control listing   |
|        |          |      |         | data should be analyzed to     |
|        |          |      |         | ensure reviews are done and    |
|        |          |      |         | accounts are resolved.         |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Tax      | June | 0       | ***Opportunities Exist to      |
| 40-139 | Co       | 2003 | 9/30/06 | Improve the Administration of  |
|        | mpliance |      |         | the Earned Income Tax          |
|        | Ini      |      |         | Credit***                      |
|        | tiatives |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1]{.underline}.   |
|        |          |      |         | Establish a consistent method  |
|        |          |      |         | to measure progress toward the |
|        |          |      |         | EITC Program's long-term       |
|        |          |      |         | goals.                         |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Security | July | 0       | ***Security Over Computers     |
| 20-118 | of the   | 2003 | 1/15/08 | Used in Telecommuting Needs to |
|        | IRS      |      |         | Be Strengthened***             |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-6, P-1]{.underline}.   |
|        |          |      |         | Require front-line managers to |
|        |          |      |         | periodically check their       |
|        |          |      |         | employees' laptop computers to |
|        |          |      |         | ensure that sensitive data are |
|        |          |      |         | being stored and encrypted     |
|        |          |      |         | properly.                      |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Tax      | Au   | 0       | ***The Regulations for         |
| 30-162 | Co       | gust | 7/15/06 | Granting Extensions of Time to |
|        | mpliance | 2003 |         | File are Delaying the Receipt  |
|        | Ini      |      |         | of Billions of Tax Dollars and |
|        | tiatives |      |         | Creating Substantial Burden    |
|        |          |      |         | for Compliant Taxpayers***     |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Revise the tax regulations     |
|        |          |      |         | applicable to individual       |
|        |          |      |         | taxpayers.                     |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Tax      | Au   | 1       | ***Interest Paid to Large      |
| 30-176 | Co       | gust | 2/15/07 | Corporations Could             |
|        | mpliance | 2003 |         | Significantly Increase Under a |
|        | Ini      |      |         | Proposed New Revenue           |
|        | tiatives |      |         | Procedure***                   |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1]{.underline}.   |
|        |          |      |         | Gather pertinent information   |
|        |          |      |         | concerning the affected        |
|        |          |      |         | proposed procedure to reduce   |
|        |          |      |         | the length of examinations and |
|        |          |      |         | interest costs by conducting a |
|        |          |      |         | pilot program to demonstrate   |
|        |          |      |         | the actual benefits that could |
|        |          |      |         | be achieved.                   |
+--------+----------+------+---------+--------------------------------+
| 2003-  | Human    | S    | P-2,    | ***Information on Employee     |
| 10-212 | Capital  | epte | P-4:    | Training Is Not Adequate to    |
|        |          | mber | 1       | Determine Training Cost or     |
|        |          | 2003 | 0/01/07 | Effectiveness***               |
|        |          |      |         |                                |
|        |          |      | P-3:    | [F-3, R-2, P-2, P-3,           |
|        |          |      | 0       | P-4]{.underline}. Ensure that  |
|        |          |      | 1/30/07 | IRS training and financial     |
|        |          |      |         | systems can provide            |
|        |          |      |         | information needed for the IRS |
|        |          |      |         | to assess its own training     |
|        |          |      |         | efforts.                       |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Systems  | Oct  | 1       | ***Risks Are Mounting As the   |
| 20-001 | Moder    | ober | 2/31/10 | Integrated Financial System    |
|        | nization | 2003 |         | Project Team Strives to Meet   |
|        | of the   |      |         | An Aggressive Implementation   |
|        | IRS      |      |         | Date***                        |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Ensure the disaster recovery   |
|        |          |      |         | environment is completely      |
|        |          |      |         | built out and tested.          |
+--------+----------+------+---------+--------------------------------+
| 2004-  | P        | Nove | 0       | ***Improvements Are Needed in  |
| 40-013 | roviding | mber | 1/01/07 | the Screening and Monitoring   |
|        | Quality  | 2003 |         | of E-File Providers to Protect |
|        | Taxpayer |      |         | Against Filing Fraud***        |
|        | Service  |      |         |                                |
|        | Op       |      |         | [F-1, R-2, P-1.]{.underline}   |
|        | erations |      |         | Enhance the screening          |
|        |          |      |         | procedures for E-File          |
|        |          |      |         | providers to include sending   |
|        |          |      |         | scanned fingerprints to the    |
|        |          |      |         | FBI electronically.            |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Tax      | Jan  | 0       | ***Access to the Toll-Free     |
| 30-038 | Co       | uary | 1/15/07 | Telephone System Was           |
|        | mpliance | 2004 |         | Significantly Improved in      |
|        | Ini      |      |         | 2003, but Additional           |
|        | tiatives |      |         | Enhancements Are Needed***     |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-1, P-1.]{.underline}   |
|        |          |      |         | Develop an activity-based      |
|        |          |      |         | costing system that reliably   |
|        |          |      |         | captures and reports both the  |
|        |          |      |         | total cost and the             |
|        |          |      |         | cost-per-call of providing     |
|        |          |      |         | services on each toll-free     |
|        |          |      |         | product line.                  |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Tax      | M    | 0       | ***Additional Efforts Are      |
| 30-068 | Co       | arch | 2/15/06 | Needed to Improve the Bank     |
|        | mpliance | 2004 |         | Secrecy Act Compliance         |
|        | Ini      |      | 0       | Program***                     |
|        | tiatives |      | 4/15/06 |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Develop standard risk-based    |
|        |          |      |         | case selection criteria that   |
|        |          |      |         | would provide minimum          |
|        |          |      |         | requirements and parameters    |
|        |          |      |         | for case selection.            |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-2, P-1.]{.underline}   |
|        |          |      |         | Reinforce the importance of    |
|        |          |      |         | case documentation with        |
|        |          |      |         | specific instructions or case  |
|        |          |      |         | models and implement a         |
|        |          |      |         | centralized quality review     |
|        |          |      |         | process.                       |
+--------+----------+------+---------+--------------------------------+
| 2004-  | E        | May  | 0       | ***Better Use of the National  |
| 40-098 | rroneous | 2004 | 9/30/06 | Account Profile During Returns |
|        | and      |      |         | Processing Can Eliminate       |
|        | Improper |      |         | Erroneous Payments***          |
|        | Payments |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Conduct studies on the         |
|        |          |      |         | accuracy of EITC claims on tax |
|        |          |      |         | returns for individuals that   |
|        |          |      |         | have been claimed for EITC     |
|        |          |      |         | purposes that are 20 or more   |
|        |          |      |         | years older than the primary   |
|        |          |      |         | taxpayer, or are listed as     |
|        |          |      |         | children that are up to 19     |
|        |          |      |         | years older than the primary   |
|        |          |      |         | taxpayer.                      |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Tax      | Au   | 0       | ***The Return Delinquency      |
| 30-127 | Co       | gust | 1/15/07 | Notice Program Could Be Used   |
|        | mpliance | 2004 |         | More Effectively to Promote    |
|        | Ini      |      |         | Filing Compliance and Reduce   |
|        | tiatives |      |         | the Tax Gap***                 |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Reevaluate the administrative  |
|        |          |      |         | dollar tolerance for freezing  |
|        |          |      |         | refunds to determine if it can |
|        |          |      |         | be reset at a lower level.     |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Security | Au   | 0       | ***The Certification and       |
| 20-129 | of the   | gust | 9/15/06 | Accreditation of Computer      |
|        | IRS      | 2004 |         | Systems Should Remain in the   |
|        |          |      |         | Computer Security Material     |
|        |          |      |         | Weakness***                    |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-2.]{.underline}   |
|        |          |      |         | Keep the certification and     |
|        |          |      |         | accreditation of computer      |
|        |          |      |         | systems as part of the         |
|        |          |      |         | computer security material     |
|        |          |      |         | weakness until a sufficient    |
|        |          |      |         | number of systems have been    |
|        |          |      |         | certified and accredited.      |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Security | Au   | []      | ***The Audit Trail System for  |
| 20-135 | of the   | gust | {.mark} | Detecting Improper Activities  |
|        | IRS      | 2004 |         | on Modernized Systems Is Not   |
|        |          |      | []      | Functioning***                 |
|        |          |      | {.mark} |                                |
|        |          |      |         | []{.mark}                      |
|        |          |      | []      |                                |
|        |          |      | {.mark} | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Ensure that SAAS performance   |
|        |          |      | 0       | and functionality requirements |
|        |          |      | 4/01/06 | are adequately tested and      |
|        |          |      |         | implemented so that the IRS    |
|        |          |      | 0       | and TIGTA can perform queries  |
|        |          |      | 6/15/06 | and generate audit trail       |
|        |          |      |         | reports.                       |
|        |          |      | []      |                                |
|        |          |      | {.mark} | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Ensure that SAAS operating     |
|        |          |      | []      | procedures are fully developed |
|        |          |      | {.mark} | and finalized so that business |
|        |          |      |         | units can conduct effective    |
|        |          |      | []      | and efficient audit trail      |
|        |          |      | {.mark} | reviews of modernized          |
|        |          |      |         | applications.                  |
|        |          |      |         |                                |
|        |          |      |         | []{.mark}                      |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Security | S    | 1       | ***The Use of Audit Trails to  |
| 20-131 | of the   | epte | 1/01/06 | Monitor Key Networks and       |
|        | IRS      | mber |         | Systems Should Remain Part of  |
|        |          | 2004 |         | the Computer Security Material |
|        |          |      |         | Weakness***                    |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-4, P-1.]{.underline}   |
|        |          |      |         | Develop and implement a        |
|        |          |      |         | reasonable approach for        |
|        |          |      |         | reviewing audit trails over    |
|        |          |      |         | major applications.            |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Tax      | S    | 0       | ***The Controls for            |
| 30-133 | Co       | epte | 6/15/06 | Examination Processes for      |
|        | mpliance | mber |         | Industry Cases With            |
|        | Ini      | 2004 |         | International Transfer Pricing |
|        | tiatives |      |         | Issues Can Be Improved***      |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Reemphasize the Transfer       |
|        |          |      |         | Pricing Compliance Directive   |
|        |          |      |         | and incorporate it into the    |
|        |          |      |         | IRM.                           |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Security | S    | 0       | ***Computer Security Roles and |
| 20-155 | of the   | epte | 9/15/06 | Responsibilities and Training  |
|        | IRS      | mber |         | Should Remain Part of the      |
|        |          | 2004 | 1       | Computer Security Material     |
|        |          |      | 0/15/06 | Weakness***                    |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-2, P-1.]{.underline}   |
|        |          |      |         | Establish a process to         |
|        |          |      |         | identify employees with key    |
|        |          |      |         | security responsibilities,     |
|        |          |      |         | monitor their participation in |
|        |          |      |         | training courses, and follow   |
|        |          |      |         | up with managers, if           |
|        |          |      |         | necessary.                     |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-3, P-1.]{.underline}   |
|        |          |      |         | Ensure that employees with key |
|        |          |      |         | security responsibilities are  |
|        |          |      |         | adequately trained to perform  |
|        |          |      |         | security duties and tasks.     |
+--------+----------+------+---------+--------------------------------+
| 2004-  | Using    | S    | 1       | ***The Internal Revenue        |
| 10-182 | Per      | epte | 0/01/06 | Service Faces Significant      |
|        | formance | mber |         | Challenges to Reduce Underused |
|        | and      | 2004 | 1       | Office Space Costing \$84      |
|        | F        |      | 0/15/06 | Million Annually***            |
|        | inancial |      |         |                                |
|        | Inf      |      |         | [F-2, R-3, P-1.]{.underline}   |
|        | ormation |      |         | Consider allocating rent funds |
|        | for      |      |         | to the operating divisions to  |
|        | Program  |      |         | help ensure more efficient use |
|        | and      |      |         | of space and more              |
|        | Budget   |      |         | communication between the      |
|        | D        |      |         | facility managers and the      |
|        | ecisions |      |         | local operating divisions;     |
|        |          |      |         | consider incentives and        |
|        |          |      |         | consequences to ensure better  |
|        |          |      |         | cooperation.                   |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-1, P-1.]{.underline}   |
|        |          |      |         | Require facility managers to   |
|        |          |      |         | report vacancies based on      |
|        |          |      |         | division requirements for      |
|        |          |      |         | telecommuting employees.       |
+--------+----------+------+---------+--------------------------------+
| 2005-  | P        | Febr | P-2:    | ***Processes Used to Ensure    |
| 40-026 | roviding | uary | 1       | the Accuracy of Information    |
|        | Quality  | 2005 | 0/01/06 | for Individual Taxpayers on    |
|        | Taxpayer |      |         | IRS.GOV Need Improvement***    |
|        | Service  |      | P-4:    |                                |
|        | Op       |      | 1       | [F-1, R-1, P-2,                |
|        | erations |      | 2/31/10 | P-4]{.underline}. Develop a    |
|        |          |      |         | process to ensure that only    |
|        |          |      | P-1,    | authorized personnel have      |
|        |          |      | P-2:    | access to IRS.gov content.     |
|        |          |      | 1       |                                |
|        |          |      | 2/31/10 | [F-1, R-2, P-1,                |
|        |          |      |         | P-2.]{.underline} Enhance the  |
|        |          |      |         | IRS' content management        |
|        |          |      |         | software application to        |
|        |          |      |         | provide the ability to         |
|        |          |      |         | identify specific content      |
|        |          |      |         | accessed or revised by         |
|        |          |      |         | individual users.              |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Security | M    | 1       | ***The Disaster Recovery       |
| 20-024 | of the   | arch | 2/31/10 | Program Has Improved, But It   |
|        | IRS      | 2005 |         | Should Be Reported as a        |
|        |          |      |         | Material Weakness Due to       |
|        |          |      |         | Limited Resources and Control  |
|        |          |      |         | Weaknesses***                  |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1,                |
|        |          |      |         | P-5.]{.underline} Report a     |
|        |          |      |         | disaster recovery program      |
|        |          |      |         | material weakness to the       |
|        |          |      |         | Department of the Treasury as  |
|        |          |      |         | part of the IRS' Federal       |
|        |          |      |         | Managers' Financial Integrity  |
|        |          |      |         | Act of 1982 annual evaluation  |
|        |          |      |         | of controls and include any    |
|        |          |      |         | new or currently underway      |
|        |          |      |         | activities in the corrective   |
|        |          |      |         | action plan.                   |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Tax      | M    | 0       | ***Stronger Sanctions Are      |
| 30-048 | Co       | arch | 2/15/07 | Needed to Encourage Timely     |
|        | mpliance | 2005 |         | Filing of Pass Through Returns |
|        | Ini      |      | 0       | and Ensure Fairness in the Tax |
|        | tiatives |      | 2/15/07 | System***                      |
|        |          |      |         |                                |
|        |          |      | 0       | [F-1, R-3, P-1]{.underline}.   |
|        |          |      | 2/15/07 | Develop a legislative proposal |
|        |          |      |         | to be submitted to the         |
|        |          |      | 0       | Department of the Treasury     |
|        |          |      | 2/15/07 | that would amend I.R.C. § 6698 |
|        |          |      |         | to increase the penalty for    |
|        |          |      | 0       | late-filed partnership returns |
|        |          |      | 2/15/07 | from \$50 per partner per      |
|        |          |      |         | month to \$200 per partner per |
|        |          |      | 0       | month.                         |
|        |          |      | 2/15/07 |                                |
|        |          |      |         | [F-1, R-4, P-1.]{.underline}   |
|        |          |      |         | Develop a legislative proposal |
|        |          |      |         | to be submitted to the         |
|        |          |      |         | Department of the Treasury     |
|        |          |      |         | that would amend I.R.C. § 6698 |
|        |          |      |         | to remove the five-month       |
|        |          |      |         | limitation on the number of    |
|        |          |      |         | months of delinquency that the |
|        |          |      |         | late-filing penalty is         |
|        |          |      |         | assessed on partnership        |
|        |          |      |         | returns.                       |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-5, P-1.]{.underline}   |
|        |          |      |         | Develop a legislative proposal |
|        |          |      |         | to be submitted to the         |
|        |          |      |         | Department of the Treasury     |
|        |          |      |         | that would amend I.R.C. § 6698 |
|        |          |      |         | to make all requirements of    |
|        |          |      |         | the law applicable to S        |
|        |          |      |         | corporations as well as        |
|        |          |      |         | partnerships.                  |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-6, P-1.]{.underline}   |
|        |          |      |         | Develop a legislative proposal |
|        |          |      |         | to be submitted to the         |
|        |          |      |         | Department of the Treasury     |
|        |          |      |         | that would amend I.R.C. § 6721 |
|        |          |      |         | to require the assessment of a |
|        |          |      |         | \$200 penalty per Schedule K-1 |
|        |          |      |         | for the failure to timely      |
|        |          |      |         | provide Schedules K-1 to the   |
|        |          |      |         | IRS when a partnership or S    |
|        |          |      |         | corporation return is filed    |
|        |          |      |         | late.                          |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-7, P-1.]{.underline}   |
|        |          |      |         | Develop a legislative proposal |
|        |          |      |         | to be submitted to the         |
|        |          |      |         | Department of the Treasury     |
|        |          |      |         | that would amend I.R.C. § 6722 |
|        |          |      |         | to require the assessment of a |
|        |          |      |         | \$200 penalty per Schedule K-1 |
|        |          |      |         | for the failure to timely      |
|        |          |      |         | provide Schedules K-1 to       |
|        |          |      |         | payees when a partnership or S |
|        |          |      |         | corporation return is filed    |
|        |          |      |         | more than seven days beyond    |
|        |          |      |         | the return due date.           |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-8, P-1.]{.underline}   |
|        |          |      |         | Conduct a study to determine   |
|        |          |      |         | whether fixed-dollar penalties |
|        |          |      |         | set at a \$200 level in I.R.C. |
|        |          |      |         | § 6698, 6721, and 6722 will be |
|        |          |      |         | effective in ensuring future   |
|        |          |      |         | compliance or whether other    |
|        |          |      |         | penalty types and/or higher    |
|        |          |      |         | amounts would be more          |
|        |          |      |         | effective.                     |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Tax      | M    | 0       | ***Procedures Regarding the    |
| 30-052 | Co       | arch | 7/15/06 | Failure to Pay Tax Penalty     |
|        | mpliance | 2005 |         | Result in Inconsistent         |
|        | Ini      |      | 0       | Treatment of Taxpayers and     |
|        | tiatives |      | 7/15/06 | Hundreds of Millions of        |
|        |          |      |         | Dollars in Lost Revenue***     |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Request programming changes    |
|        |          |      |         | that would cause accrued FTP   |
|        |          |      |         | tax penalties to be assessed   |
|        |          |      |         | on a periodic basis.           |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-3, P-1.]{.underline}   |
|        |          |      |         | Ensure that notices containing |
|        |          |      |         | FTP tax penalty assessments    |
|        |          |      |         | include information informing  |
|        |          |      |         | taxpayers that interest is     |
|        |          |      |         | being charged on the FTP tax   |
|        |          |      |         | penalties until they are fully |
|        |          |      |         | paid.                          |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Tax      | M    | 0       | ***Opportunities Exist to      |
| 30-053 | Co       | arch | 6/15/06 | Improve the Effectiveness and  |
|        | mpliance | 2005 |         | Efficiency of the Automated    |
|        | Ini      |      | 0       | 6020(b) Program***             |
|        | tiatives |      | 6/15/06 |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Raise the dollar level of the  |
|        |          |      |         | risk-based criteria for        |
|        |          |      |         | stand-alone TDI cases as a     |
|        |          |      |         | means of increasing the        |
|        |          |      |         | workload coming into the       |
|        |          |      |         | Automated 6020(b) Program with |
|        |          |      |         | cases that would otherwise     |
|        |          |      |         | remain unworked in the Queue.  |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-2, P-1.]{.underline}   |
|        |          |      |         | Modify the programming to add  |
|        |          |      |         | TDIs involving excise tax      |
|        |          |      |         | returns to the Automated       |
|        |          |      |         | 6020(b) Program.               |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Human    | M    | 0       | ***The Human Resources         |
| 10-070 | Capital  | arch | 4/15/06 | Investment Fund is Not a       |
|        |          | 2005 |         | Cost-Effective Method of       |
|        |          |      |         | Providing Tuition              |
|        |          |      |         | Assistance***                  |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Consider eliminating the HRIF  |
|        |          |      |         | Program and provide tuition    |
|        |          |      |         | assistance through alternative |
|        |          |      |         | means such as the Individual   |
|        |          |      |         | Development Plan process and   |
|        |          |      |         | the Career Transition          |
|        |          |      |         | Assistance Program.            |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Systems  | A    | 0       | ***Business Cases for          |
| 20-074 | Moder    | pril | 5/01/06 | Information Technology         |
|        | nization | 2005 |         | Projects Need Improvement***   |
|        | of the   |      |         |                                |
|        | IRS      |      |         | [F-4, R-1, P-1.]{.underline}   |
|        |          |      |         | Project Managers of            |
|        |          |      |         | operational systems should     |
|        |          |      |         | document the results of        |
|        |          |      |         | E-Government reviews in the    |
|        |          |      |         | projects' business cases.      |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Pr       | A    | 0       | ***Taxpayers Identified as     |
| 40-077 | ocessing | pril | 5/15/06 | Serving in Combat Zones Were   |
|        | Returns  | 2005 |         | Properly Afforded Tax Benefits |
|        | and      |      |         | but Account Identification and |
|        | Impl     |      |         | Maintenance Processes Need     |
|        | ementing |      |         | Improvement***                 |
|        | Tax Law  |      |         |                                |
|        | Changes  |      |         | [F-1, R-2, P-2.]{.underline}   |
|        | during   |      |         | To ensure Combat Zone          |
|        | the Tax  |      |         | indicators are accurate,       |
|        | Filing   |      |         | develop a quality review       |
|        | Season   |      |         | program to review a sample of  |
|        |          |      |         | the accounts that are closed   |
|        |          |      |         | automatically using the new    |
|        |          |      |         | program to ensure the reversal |
|        |          |      |         | of the active Combat Zone      |
|        |          |      |         | indicator is correct. Also,    |
|        |          |      |         | include a sample review of the |
|        |          |      |         | remaining active accounts to   |
|        |          |      |         | verify the program is not      |
|        |          |      |         | missing any accounts that      |
|        |          |      |         | should be reversed.            |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Human    | July | 0       | ***Improved Policies and       |
| 10-107 | Capital  | 2005 | 7/15/06 | Guidance Are Needed for the    |
|        |          |      |         | Telework Program***            |
|        |          |      | 0       |                                |
|        |          |      | 7/15/06 | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Ensure an IRS-wide Flexiplace  |
|        |          |      | 0       | Program policy is developed    |
|        |          |      | 7/15/06 | and implemented that addresses |
|        |          |      |         | all the elements recommended   |
|        |          |      | 0       | by the OPM.                    |
|        |          |      | 7/15/06 |                                |
|        |          |      |         | [F-1, R-2, P-1.]{.underline}   |
|        |          |      | 0       | Take steps to implement the    |
|        |          |      | 7/15/06 | Flexiplace Program tracking    |
|        |          |      |         | system.                        |
|        |          |      | 0       |                                |
|        |          |      | 7/15/06 | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Implement guidelines to assist |
|        |          |      |         | managers in evaluating         |
|        |          |      |         | employees' abilities to        |
|        |          |      |         | participate in the Flexiplace  |
|        |          |      |         | Program without a loss in      |
|        |          |      |         | productivity.                  |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-2, P-1.]{.underline}   |
|        |          |      |         | Ensure Flexiplace Program      |
|        |          |      |         | training is provided as needed |
|        |          |      |         | to help address productivity   |
|        |          |      |         | concerns.                      |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-3, P-1.]{.underline}   |
|        |          |      |         | Assess the logistical support  |
|        |          |      |         | and equipment needs of         |
|        |          |      |         | Flexiplace Program             |
|        |          |      |         | participants to help ensure    |
|        |          |      |         | there is no loss in            |
|        |          |      |         | productivitiy.                 |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-1, P-1.]{.underline}   |
|        |          |      |         | Work with the OPM to develop   |
|        |          |      |         | appropriate policies and       |
|        |          |      |         | procedures related to official |
|        |          |      |         | duty station designations for  |
|        |          |      |         | employees who participate in   |
|        |          |      |         | the Flexiplace Program.        |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Security | July | 0       | ***More Management Attention   |
| 20-108 | of the   | 2005 | 4/15/06 | Is Needed to Protect Critical  |
|        | IRS      |      |         | Assets***                      |
|        |          |      | 1       |                                |
|        |          |      | 1/30/06 | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Coordinate with all business   |
|        |          |      |         | units to complete the process  |
|        |          |      |         | of identifying a current list  |
|        |          |      |         | of critical assets to comply   |
|        |          |      |         | with HSPD-7 and ensure the     |
|        |          |      |         | protection of those assets.    |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1.]{.underline}   |
|        |          |      |         | Coordinate with all business   |
|        |          |      |         | units at least annually to     |
|        |          |      |         | confirm the IRS' list of       |
|        |          |      |         | critical assets is accurate    |
|        |          |      |         | and complete.                  |
+--------+----------+------+---------+--------------------------------+
| 2005-  | P        | July | 1       | ***The Effectiveness of the    |
| 40-110 | roviding | 2005 | 0/15/07 | Taxpayer Assistance Center     |
|        | Quality  |      |         | Program Cannot Be Measured***  |
|        | Taxpayer |      | 1       |                                |
|        | Service  |      | 0/15/06 | [F-1, R-1, P-1.]{.underline}   |
|        | Op       |      |         | Enhance the management         |
|        | erations |      | 1       | information system to capture  |
|        |          |      | 0/15/06 | the number of taxpayers        |
|        |          |      |         | served, the numbers and types  |
|        |          |      |         | of services provided, and the  |
|        |          |      |         | related resources.             |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1.]{.underline}   |
|        |          |      |         | Develop a Service Delivery     |
|        |          |      |         | Plan for the short-term and    |
|        |          |      |         | long-term direction of the TAC |
|        |          |      |         | Program based on business      |
|        |          |      |         | cases and customer input.      |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-3, P-1.]{.underline}   |
|        |          |      |         | Develop a process that         |
|        |          |      |         | includes routine assessments   |
|        |          |      |         | of TAC operations to ensure    |
|        |          |      |         | the TACs are optimally located |
|        |          |      |         | and the services provided at   |
|        |          |      |         | the TACs are the most          |
|        |          |      |         | effective and cost efficient.  |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Tax      | Au   | 1       | ***Additional Work Is Needed   |
| 30-126 | Co       | gust | 0/15/06 | to Determine the Extent of     |
|        | mpliance | 2005 |         | Employment Tax                 |
|        | Ini      |      |         | Underreporting***              |
|        | tiatives |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Develop methodologies designed |
|        |          |      |         | to evaluate the extent of      |
|        |          |      |         | underreporting by employers.   |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Systems  | Au   | 0       | ***Security Controls Were Not  |
| 20-128 | Moder    | gust | 7/15/06 | Adequately Considered in the   |
|        | nization | 2005 |         | Development and Integration    |
|        | of the   |      |         | Phases of Modernization        |
|        | IRS      |      |         | Systems***                     |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1.]{.underline}   |
|        |          |      |         | Enhance the Security Test and  |
|        |          |      |         | Evaluation process to include  |
|        |          |      |         | the use of additional          |
|        |          |      |         | off-the-shelf security testing |
|        |          |      |         | tools to identify security     |
|        |          |      |         | vulnerabilities.               |
+--------+----------+------+---------+--------------------------------+
| 2005-  | E        | Au   | 0       | ***Administration of the       |
| 40-133 | rroneous | gust | 5/15/06 | Earned Income Tax Credit       |
|        | and      | 2005 |         | Program Has Improved, but      |
|        | Improper |      |         | Challenges Continue***         |
|        | Payments |      |         |                                |
|        |          |      |         | [F-1, R-1, P-1.]{.underline}   |
|        |          |      |         | Analyze the results of the SLA |
|        |          |      |         | currently in operation to      |
|        |          |      |         | ensure all functions are       |
|        |          |      |         | working within the agreements  |
|        |          |      |         | reached.                       |
+--------+----------+------+---------+--------------------------------+
| 2005-  | P        | S    | 0       | ***Progress Has Been Made, but |
| 10-129 | roviding | epte | 5/15/07 | Further Improvements Are       |
|        | Quality  | mber |         | Needed in the Administration   |
|        | Taxpayer | 2005 | 0       | of the Low Income Taxpayer     |
|        | Service  |      | 5/15/06 | Clinic Grant Program***        |
|        | Op       |      |         |                                |
|        | erations |      | 0       | [F-1, R-1, P-2.]{.underline}   |
|        |          |      | 5/15/06 | Establish goals and            |
|        |          |      |         | performance measures for the   |
|        |          |      | 0       | LITC program to assist the     |
|        |          |      | 4/15/06 | Congress and IRS in evaluating |
|        |          |      |         | the success of the program.    |
|        |          |      | 0       |                                |
|        |          |      | 6/15/06 | [F-2, R-2, P-3.]{.underline}   |
|        |          |      |         | Provide guidance in            |
|        |          |      | 0       | Publication 3319 to indicate   |
|        |          |      | 1/15/07 | whether a clinic may receive   |
|        |          |      |         | funding solely for making      |
|        |          |      |         | referrals to other clinics.    |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-3, P-2.]{.underline}   |
|        |          |      |         | Provide guidance in            |
|        |          |      |         | Publication 3319 as to the     |
|        |          |      |         | types of media broadcasts and  |
|        |          |      |         | articles that will qualify     |
|        |          |      |         | under the LITC program.        |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-2, P-1.]{.underline}   |
|        |          |      |         | Develop a method to obtain     |
|        |          |      |         | information necessary to       |
|        |          |      |         | verify clinics are following   |
|        |          |      |         | all LITC program requirements. |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-4, P-1.]{.underline}   |
|        |          |      |         | Develop a sampling methodology |
|        |          |      |         | that prioritizes clinics based |
|        |          |      |         | on indicators in clinics'      |
|        |          |      |         | applications and in their      |
|        |          |      |         | interim and final reports.     |
|        |          |      |         |                                |
|        |          |      |         | [F-4, R-1, P-4.]{.underline}   |
|        |          |      |         | Establish procedures to check  |
|        |          |      |         | for tax compliance before      |
|        |          |      |         | awarding LITC program grants   |
|        |          |      |         | and consider periodic tax      |
|        |          |      |         | compliance checks during the   |
|        |          |      |         | grant period.                  |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Tax      | S    | P-1:    | ***Improved IRS Coordination   |
| 30-140 | Co       | epte | 0       | Is Needed to Resolve Large     |
|        | mpliance | mber | 7/15/06 | Volumes of Fraudulent Schedule |
|        | Ini      | 2005 |         | C Refund Returns***            |
|        | tiatives |      | P-2,    |                                |
|        |          |      | P-3,    | [F-1, R-1, P-1, P-2, P-3,      |
|        |          |      | P-4:    | P-4.]{.underline} Develop an   |
|        |          |      | 0       | overall compliance strategy    |
|        |          |      | 4/15/06 | for Schedules C with           |
|        |          |      |         | fraudulent refunds, especially |
|        |          |      | P-1:    | when large volumes of returns  |
|        |          |      | 0       | are involved.                  |
|        |          |      | 7/15/06 |                                |
|        |          |      |         | [F-1, R-2, P-1, P-2, P-3,      |
|        |          |      | P-2,    | P-4.]{.underline} Identify     |
|        |          |      | P-3,    | potential computerized methods |
|        |          |      | P-4:    | incorporating possible math    |
|        |          |      | 0       | error authority to temporarily |
|        |          |      | 4/15/06 | stop refunds for cases meeting |
|        |          |      |         | the characteristics of those   |
|        |          |      |         | in this scheme or other large  |
|        |          |      |         | Schedule C refund schemes.     |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Human    | S    | 0       | ***The Internal Revenue        |
| 10-149 | Capital  | epte | 4/15/06 | Service Does Not Adequately    |
|        |          | mber |         | Assess the Effectiveness of    |
|        |          | 2005 | 1       | Its Training***                |
|        |          |      | 0/15/06 |                                |
|        |          |      |         | [F-1, R-1, P-1,                |
|        |          |      | 0       | P-2.]{.underline} Require all  |
|        |          |      | 4/15/06 | business units to follow the   |
|        |          |      |         | training assessment and        |
|        |          |      |         | develop requirements and       |
|        |          |      |         | properly document this         |
|        |          |      |         | process.                       |
|        |          |      |         |                                |
|        |          |      |         | [F-2, R-1, P-1,                |
|        |          |      |         | P-2.]{.underline} Ensure all   |
|        |          |      |         | IRS components follow          |
|        |          |      |         | established procedures to      |
|        |          |      |         | evaluate training in order for |
|        |          |      |         | the IRS to comply with the     |
|        |          |      |         | training assessment            |
|        |          |      |         | requirement of the Federal     |
|        |          |      |         | Workforce Flexibility Act of   |
|        |          |      |         | 2004.                          |
|        |          |      |         |                                |
|        |          |      |         | [F-3, R-1, P-1.]{.underline}   |
|        |          |      |         | Use the numerical scores from  |
|        |          |      |         | the Employee Satisfaction      |
|        |          |      |         | Survey training question in    |
|        |          |      |         | addition to narrative          |
|        |          |      |         | comments.                      |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Pr       | S    | P-1:    | ***The Clarity of Math Error   |
| 30-154 | ocessing | epte | 0       | Notices Has Been Improved, but |
|        | Returns  | mber | 4/15/07 | Further Changes Could Enhance  |
|        | and      | 2005 |         | Notice Clarity and Reduce      |
|        | Impl     |      | P-2:    | Unnecessary Notices***         |
|        | ementing |      | 1       |                                |
|        | Tax Law  |      | 2/15/06 | [F-1, R-2, P-1,                |
|        | Changes  |      |         | P-2.]{.underline} Revise tax   |
|        | During   |      | P-1:    | statement tables contained on  |
|        | the Tax  |      | 0       | notices to include specific    |
|        | Filing   |      | 4/15/07 | amounts from at least some     |
|        | Season   |      |         | line items on which taxpayers  |
|        |          |      | P-2:    | made errors on their tax       |
|        |          |      | 1       | returns.                       |
|        |          |      | 1/15/06 |                                |
|        |          |      |         | [F-1, R-3, P-1,                |
|        |          |      | 0       | P-2.]{.underline} Revise CP16  |
|        |          |      | 1/15/07 | to present information in a    |
|        |          |      |         | manner consistent with the     |
|        |          |      |         | other notices sent to          |
|        |          |      |         | individual taxpayers including |
|        |          |      |         | the location of the error      |
|        |          |      |         | explanation and tax statement, |
|        |          |      |         | and the wording of the         |
|        |          |      |         | taxpayers' rights to appeal    |
|        |          |      |         | with the math error            |
|        |          |      |         | adjustment..                   |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-5, P-1.]{.underline}   |
|        |          |      |         | Ensure employees perform       |
|        |          |      |         | research and suppress notices  |
|        |          |      |         | from going to taxpayers who    |
|        |          |      |         | paid the proper amounts.       |
+--------+----------+------+---------+--------------------------------+
| 2005-  | Does Not | S    | 0       | ***Information From States'    |
| 30-165 | Apply to | epte | 4/15/06 | Tax Amnesty Programs Could     |
|        | a        | mber |         | Bolster Compliance Efforts and |
|        | Ma       | 2005 | 0       | Ensure Federal Tax Obligations |
|        | nagement |      | 4/15/06 | Are Also Met***                |
|        | C        |      |         |                                |
|        | hallenge |      | 0       | [F-1, R-1, P-1.]{.underline}   |
|        | Area     |      | 9/15/06 | Analyze the current exchange   |
|        |          |      |         | programs to determine whether  |
|        |          |      |         | the state tax amnesty          |
|        |          |      |         | information will be obtained   |
|        |          |      |         | through the Reverse Filing     |
|        |          |      |         | Match, or any other current    |
|        |          |      |         | program.                       |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-2, P-1.]{.underline}   |
|        |          |      |         | Seek agreements with the       |
|        |          |      |         | States to separately obtain    |
|        |          |      |         | all State tax amnesty          |
|        |          |      |         | information.                   |
|        |          |      |         |                                |
|        |          |      |         | [F-1, R-3, P-1.]{.underline}   |
|        |          |      |         | Supplement IRS compliance      |
|        |          |      |         | information with that from     |
|        |          |      |         | State tax amnesty programs.    |
+--------+----------+------+---------+--------------------------------+

Other Statistical Reports

+--------------------------------------+-------------------------------+
| **The Inspector General Act of 1978  |                               |
| requires Inspectors General**        |                               |
|                                      |                               |
| **to address the following issues:** |                               |
+--------------------------------------+-------------------------------+
| > **Issue**                          | **Result for TIGTA**          |
+--------------------------------------+-------------------------------+
| > **Access to Information**          | As of March 31, 2006, there   |
| >                                    | were no instances in which    |
| > Report unreasonable refusals of    | information or assistance     |
| > information available to the       | requested by the Office of    |
| > agency that relate to programs and | Audit was refused.            |
| > operations for which the Inspector |                               |
| > General has responsibilities.      |                               |
+--------------------------------------+-------------------------------+
| > **Disputed Audit Recommendations** | As of March 31, 2006, one     |
| >                                    | report was issued in which    |
| > Provide information on significant | significant recommendations   |
| > management decisions in response   | were disputed: *The Office of |
| > to audit recommendations with      | Professional Responsibility   |
| > which the Inspector General        | Can Do More to Effectively    |
| > disagrees.                         | Identify and Act Against      |
|                                      | Incompetent and Disreputable  |
|                                      | Tax Practitioners*, Report    |
|                                      | Reference No. 2006-10-066.    |
+--------------------------------------+-------------------------------+
| > **Revised Management Decisions**   | As of March 31, 2006, no      |
| >                                    | significant management        |
| > Provide a description and          | decisions were revised.       |
| > explanation of the reasons for any |                               |
| > significant revised management     |                               |
| > decisions made during the          |                               |
| > reporting period.                  |                               |
+--------------------------------------+-------------------------------+
| > **Audit Reports Issued in the      | As of March 31, 2006, there   |
| > Prior Reporting Period With No     | were no prior reports for     |
| > Management Response**              | which management's response   |
| >                                    | was not received.             |
| > Provide a summary of each audit    |                               |
| > report issued before the beginning |                               |
| > of the current reporting period    |                               |
| > for which no management response   |                               |
| > has been received by the end of    |                               |
| > the current reporting period.      |                               |
+--------------------------------------+-------------------------------+
| > **Review of Legislation and        | TIGTA's Office of Chief       |
| > Regulations**                      | Counsel reviewed 189 proposed |
| >                                    | regulations and legislative   |
| > Review existing and proposed       | requests during this          |
| > legislation and regulations, and   | reporting period.             |
| > make recommendations concerning    |                               |
| > the impact of such legislation or  |                               |
| > regulations.                       |                               |
+--------------------------------------+-------------------------------+

#   {#section-15 .unnumbered}

# 

# ![](media/image2.png){width="1.375in" height="1.375in"}Appendix II

#  Audit Products

# 

**October 1, 2005 -- March 31, 2006**

+----------+-----------------------------------------------------------+
| I        |                                                           |
| nspector |                                                           |
| General  |                                                           |
| Congr    |                                                           |
| essional |                                                           |
| T        |                                                           |
| estimony |                                                           |
+----------+-----------------------------------------------------------+
| R        | Hearing Title                                             |
| eference |                                                           |
| Number   |                                                           |
+----------+-----------------------------------------------------------+
| >        |                                                           |
|  October |                                                           |
| > 2005   |                                                           |
+----------+-----------------------------------------------------------+
| > 200    | > Uncollected Taxes: Can We Reduce the \$300 Billion Tax  |
| 6-OT-083 | > Gap?                                                    |
+----------+-----------------------------------------------------------+
| > March  |                                                           |
| > 2006   |                                                           |
+----------+-----------------------------------------------------------+
| 2006     | Internal Revenue Service's Fiscal Year 2007 Budget        |
| -TO1-072 |                                                           |
+----------+-----------------------------------------------------------+

[]{.mark}

+----------+-----------------------------------------------------------+
| Audit    |                                                           |
| Products |                                                           |
+==========+===========================================================+
| R        | Report Title                                              |
| eference |                                                           |
| Number   |                                                           |
+----------+-----------------------------------------------------------+
| October  |                                                           |
| 2005     |                                                           |
+----------+-----------------------------------------------------------+
| 200      | > The Excise Files Information Retrieval System Has Not   |
| 6-20-001 | > Been Effectively Implemented                            |
+----------+-----------------------------------------------------------+
| 200      | > While Improvements Have Been Made, Business Systems     |
| 6-20-002 | > Modernization Cost and Schedule Estimation Processes    |
|          | > Have Not Always Been Followed and Major Changes Are     |
|          | > Planned                                                 |
+----------+-----------------------------------------------------------+
| November |                                                           |
| 2005     |                                                           |
+----------+-----------------------------------------------------------+
| 200      | > Enhancements Could Be Made to Minimize Internal Revenue |
| 6-40-005 | > Service Employee and Volunteer Return Preparation       |
|          | > Program Participant Integrity Issues                    |
+----------+-----------------------------------------------------------+
| 200      | > Significant Improvements Have Been Made in the          |
| 6-40-004 | > Oversight of the Volunteer Income Tax Assistance        |
|          | > Program, but Continued Effort Is Needed to Ensure the   |
|          | > Accuracy of Services Provided                           |
+----------+-----------------------------------------------------------+
| 200      | > Efforts to Prevent Improper Tax Benefits Resulting From |
| 6-40-007 | > Multiple Uses of Taxpayer Identification Numbers Can Be |
|          | > Improved (Revenue Protected: \$153,436,940; Reliability |
|          | > of Information: 8,185 taxpayer identification numbers   |
|          | > incorrectly shown as having been used more than once)   |
|          | > Note: monetary benefit projected over a five-year       |
|          | > period                                                  |
+----------+-----------------------------------------------------------+
| 200      | > Continued Monitoring of the PRIME Contractor Is Needed  |
| 6-10-008 | > to Ensure Proper Billing                                |
+----------+-----------------------------------------------------------+
| 200      | > The Business Systems Modernization Program Has Achieved |
| 6-20-003 | > Mixed Success in Addressing Weaknesses Identified in    |
|          | > Internal and External Studies                           |
+----------+-----------------------------------------------------------+
| 200      | > The Internal Revenue Service Needs a Coordinated        |
| 6-30-006 | > National Strategy to Better Address an Estimated\       |
|          | > \$30 Billion Tax Gap Due to Non-filers                  |
+----------+-----------------------------------------------------------+
| December |                                                           |
| 2005     |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Improved Internal Controls and Contact Recording Are      |
| 6-40-022 | Needed to Ensure the Accuracy and Reliability of the      |
|          | Taxpayer Assistance Centers Quality Measurement System    |
|          | (Reliability of Information: 623 assistors with missing   |
|          | or extra observations; 14,225 Data Collection Instruments |
|          | contained errors)                                         |
+----------+-----------------------------------------------------------+
| 200      | Instilling More Discipline to Business Rules Management   |
| 6-20-009 | Will Help the Modernization Program Succeed               |
+----------+-----------------------------------------------------------+
| 200      | Progress Has Been Made in Using the Tivoli Software       |
| 6-20-021 | Suite, Although Enhancements Are Needed to Better         |
|          | Distribute Software Updates and Reconcile Computer        |
|          | Inventories                                               |
+----------+-----------------------------------------------------------+
| 200      | Improved Cellular Telephone Inventory Controls Resulted   |
| 6-20-025 | in Significant Savings (Funds Put to Better Use:          |
|          | \$6,979,200) Note: monetary benefit projected over a      |
|          | five-year period.                                         |
+----------+-----------------------------------------------------------+
| 200      | The Alternatives for Designing and Developing the Filing  |
| 6-20-026 | and Payment Compliance Project Should Be Revalidated      |
|          | (Reliability of Information: \$17,446 billion in          |
|          | inaccurate or incomplete information used to support      |
|          | business decisions)                                       |
+----------+-----------------------------------------------------------+
| 200      | Report on Audit of Accounting System and Related Internal |
| 6-1C-010 | Controls                                                  |
+----------+-----------------------------------------------------------+
| 200      | Report on Audit of Cost Impact Statement                  |
| 6-1C-011 |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Incurred Cost Audit for Fiscal Year 2001                  |
| 6-1C-012 |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Incurred Cost Audit for the Period July 1, 2000, through  |
| 6-1C-013 | September 30, 2001                                        |
+----------+-----------------------------------------------------------+
| 200      | TIRNO-95-D-00061 and TIRNO-00-D-00013, Incurred Costs     |
| 6-1C-014 | Audit for Fiscal Year 2003                                |
+----------+-----------------------------------------------------------+
| 200      | The Wage and Investment Division Compliance Function      |
| 6-40-023 | Should Link Annual Performance to\                        |
|          | Long-Term Goals and Improve Data Collection               |
+----------+-----------------------------------------------------------+
| 200      | Individual Income Tax Returns Were Timely Processed in    |
| 6-40-024 | 2005; However, Implementation of Tax Law Changes Could Be |
|          | Improved (Revenue Protection: \$4,380,521 impacting       |
|          | 19,103 taxpayers; Taxpayer Rights and Entitlements: 2,749 |
|          | taxpayers understated their Earned Income Tax Credit by   |
|          | \$1.9 million because earned income included nontaxable   |
|          | combat pay. Also, 465,095 taxpayers may have overlooked   |
|          | the state sales tax deduction)                            |
+----------+-----------------------------------------------------------+
| 200      | Voucher Audit of the Federal Financial System Software    |
| 6-10-027 | Technical Support Services Contract --\                   |
|          | TIRNO-04-T-00116                                          |
+----------+-----------------------------------------------------------+
| 200      | The Custodial Detail Database Should Help Improve         |
| 6-10-029 | Accountability; However, Significant Financial Management |
|          | Issues Still Need to Be Addressed                         |
+----------+-----------------------------------------------------------+
| >        |                                                           |
|  January |                                                           |
| > 2006   |                                                           |
+----------+-----------------------------------------------------------+
| 200      | The Criminal Investigation Function Should Consider       |
| 6-10-028 | Changes to Its Custody of Original Tax Returns and        |
|          | Controls for Accessing Tax Information Electronically     |
+----------+-----------------------------------------------------------+
| 200      | TIRNO-95-D-00066, TIRNO-00-D-00020, and TIRNO-99-D-00001, |
| 6-1C-015 | Incurred Costs Audit for\                                 |
|          | Fiscal Year Ended June 30, 2003                           |
+----------+-----------------------------------------------------------+
| 200      | Preaward Survey of Prospective Contractor's Accounting    |
| 6-1C-017 | System                                                    |
+----------+-----------------------------------------------------------+
| 200      | Report on Audit of Purchasing System and Related Internal |
| 6-1C-018 | Controls                                                  |
+----------+-----------------------------------------------------------+
| 200      | Billing System Review                                     |
| 6-1C-019 |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Report on Audit of Contractor's Budget and Planning       |
| 6-1C-016 | System                                                    |
+----------+-----------------------------------------------------------+
| February |                                                           |
| 2006     |                                                           |
+----------+-----------------------------------------------------------+
| 200      | High-Risk Work Is Selected From the Unassigned Delinquent |
| 6-30-030 | Account Inventory, but Some Unassigned Accounts Need      |
|          | Management's Attention                                    |
+----------+-----------------------------------------------------------+
| 200      | Compensation System Audit                                 |
| 6-1C-020 |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Taxpayer Service Is Improving, but Challenges Continue in |
| 6-40-052 | Meeting Expectations                                      |
+----------+-----------------------------------------------------------+
| 200      | Secure Configurations Are Initially Established on        |
| 6-20-031 | Employee Computers, but Enhancements Could Ensure         |
|          | Security Is Strengthened After Implementation             |
+----------+-----------------------------------------------------------+
| 200      | Civil Group Fiscal Year 2006 Forward Pricing Indirect     |
| 6-1C-032 | Rates                                                     |
+----------+-----------------------------------------------------------+
| 200      | Report on Audit of Indirect and Other Direct Costs System |
| 6-1C-036 | and Related Internal Controls                             |
+----------+-----------------------------------------------------------+
| 200      | Civil Division Incurred Cost Audit for Fiscal Year 2001   |
| 6-1C-033 | (Questioned Costs: \$11,837,225)                          |
+----------+-----------------------------------------------------------+
| 200      | Incurred Cost Audit for Fiscal Year Ending September 30,  |
| 6-1C-035 | 2003, TIRNO-00-D-00025                                    |
+----------+-----------------------------------------------------------+
| 200      | Planning for the 2006 Filing Season Is on Course, but     |
| 6-40-053 | Challenges Exist for the Toll-Free Telephone Operations   |
+----------+-----------------------------------------------------------+
| **March  |                                                           |
| 2006**   |                                                           |
+----------+-----------------------------------------------------------+
| 200      | Actions Are Planned to Extend the Grace Period Before     |
| 6-30-057 | Assessing the Failure to Pay Tax Penalty; However,        |
|          | Computer Programming Needs to Be Corrected                |
+----------+-----------------------------------------------------------+
| 200      | Further Enhancements to the Guidance for Testing          |
| 6-20-051 | Practices Will Help Ensure the Quality of Modernization   |
|          | Projects                                                  |
+----------+-----------------------------------------------------------+
| 200      | Report on Agreed-Upon Procedures Evaluation -- Verify     |
| 6-1C-034 | Time-Charging and Personal Computer Allocation Costs      |
+----------+-----------------------------------------------------------+
| 200      | Invoice Audit of the Taxpayer Burden Simulation Models    |
| 6-10-060 | Contract -- TIRNO-03-D-00001 (Questioned Costs: \$1,938)  |
+----------+-----------------------------------------------------------+
| 200      | The Taxpayer Assistance Center Closure Plan Was Based on  |
| 6-40-061 | Inaccurate Data                                           |
+----------+-----------------------------------------------------------+
| 200      | The Administration of the Public Transportation Subsidy   |
| 6-10-062 | Program Can Be Improved                                   |
+----------+-----------------------------------------------------------+
| 200      | Trends in Compliance Activities Through Fiscal Year 2005  |
| 6-30-055 |                                                           |
+----------+-----------------------------------------------------------+
| 200      | The Internal Revenue Service's Federal Financial          |
| 6-10-069 | Management Improvement Act Remediation Plan As of         |
|          | December 31, 2005                                         |
+----------+-----------------------------------------------------------+
| 200      | Strengthened Management Processes Are Needed to Assure    |
| 6-20-063 | the Usefulness of Products and Services Received Through  |
|          | the Infrastructure Shared Services Task Order             |
|          | (Inefficient Use of Resources: \$310,863)                 |
+----------+-----------------------------------------------------------+
| 200      | The Internal Revenue Service Provided Interim Guidance    |
| 6-30-058 | and Plans to Take Additional Actions to Implement New Tax |
|          | Shelter Penalty Provisions                                |
+----------+-----------------------------------------------------------+
| 200      | The Internal Revenue Service Successfully Accounted for   |
| 6-20-068 | Employees and Restored Computer Operations After          |
|          | Hurricanes Katrina and Rita                               |
+----------+-----------------------------------------------------------+
| 200      | The Office of Professional Responsibility Can Do More to  |
| 6-10-066 | Effectively Identify and Act Against Incompetent and      |
|          | Disreputable Tax Practitioners (Taxpayer Burden: 7,124    |
|          | taxpayers represented by practitioners whose conduct      |
|          | warrants IRS disciplinary action; 22,500 practitioners    |
|          | are not complying with tax law)                           |
+----------+-----------------------------------------------------------+
| 200      | The Business Systems Development Organization Effectively |
| 6-20-059 | Managed Its Contractors and Related Costs                 |
+----------+-----------------------------------------------------------+
| 200      | The Settlement Initiative for Investors in a Variety of   |
| 6-30-065 | Bond and Option Sales Strategies Was Successful and       |
|          | Surfaced Possible Next Steps for Curtailing Abusive Tax   |
|          | Shelters                                                  |
+----------+-----------------------------------------------------------+
| 200      | The Field Assistance Office Has Taken Appropriate Actions |
| 6-40-067 | to Plan for the 2006 Filing Season, but Challenges Remain |
|          | for the Taxpayer Assistance Center Program                |
+----------+-----------------------------------------------------------+
| 200      | Federal Information Security Management Act Report for    |
| 6-20-071 | Fiscal Year 2005                                          |
+----------+-----------------------------------------------------------+

# 

# ![](media/image2.png){width="1.375in" height="1.375in"}Appendix III

#  TIGTA's Statutory

#  Reporting Requirements

TIGTA issued 11 audit reports required by statute dealing with the
adequacy and security of IRS technology during this reporting period. In
FY 2006, TIGTA completed its eighth round of statutory reviews that are
required annually by the Internal Revenue Service Restructuring and
Reform Act of 1998 (RRA 98). TIGTA also completed an annual review of
the Federal Financial Management Improvement Act of 1996 (FFMIA). The
following table reflects the status of the FY 2006 statutory reviews.

+-------------------+----------------+---------------------------------+
| Reference to      | Explanation of | Comments/TIGTA Audit Status     |
|                   | the Provision  |                                 |
| Statutory         |                |                                 |
| Coverage          |                |                                 |
+===================+================+=================================+
| **Enforcement     | Requires TIGTA | #### []{.mark}                  |
| Statistics**      | to evaluate    |                                 |
|                   | the IRS'       | Audit fieldwork in progress.    |
| Internal Revenue  | compliance     |                                 |
| Code (I.R.C.)     | with           |                                 |
|                   | restrictions   |                                 |
| §                 | under section  |                                 |
|  7803(d)(1)(A)(i) | 1204 of RRA 98 |                                 |
|                   | on the use of  |                                 |
|                   | enforcement    |                                 |
|                   | statistics to  |                                 |
|                   | evaluate IRS   |                                 |
|                   | employees.     |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | ###### []{.mark}                |
|                   | to evaluate    |                                 |
| **Restrictions on | the IRS'       | Audit in planning phase.        |
| Directly          | compliance     |                                 |
| Contacting        | with           |                                 |
| Taxpayers**       | restrictions   |                                 |
|                   | under I.R.C.   |                                 |
| I.R.C.            | § 7521 on      |                                 |
|                   | directly       |                                 |
| §                 | contacting     |                                 |
| 7803(d)(1)(A)(ii) | taxpayers who  |                                 |
|                   | have indicated |                                 |
|                   | they prefer    |                                 |
|                   | their          |                                 |
|                   | r              |                                 |
|                   | epresentatives |                                 |
|                   | be contacted.  |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to evaluate    |                                 |
| **Filing of a     | the IRS'       | Audit fieldwork in progress.    |
| Notice of Lien**  | compliance     |                                 |
|                   | with required  |                                 |
| I.R.C.            | procedures     |                                 |
|                   | under I.R.C.   |                                 |
| § 7               |                |                                 |
| 803(d)(1)(A)(iii) | § 6320 upon    |                                 |
|                   | the filing of  |                                 |
|                   | a notice of    |                                 |
|                   | lien.          |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to include     |                                 |
| **Extensions of   | information    | Audit fieldwork in progress.    |
| the Statute of    | regarding      |                                 |
| Limitations for   | extensions of  |                                 |
| Assessment of     | the statute of |                                 |
| Tax**             | limitations    |                                 |
|                   | for assessment |                                 |
| I.R.C.            | of tax under   |                                 |
|                   | I.R.C. § 6501  |                                 |
| § 7803(d)(1)(C)   | and the        |                                 |
|                   | provision of   |                                 |
| I.R.C.            | notice to      |                                 |
|                   | taxpayers      |                                 |
| § 6501(c)(4)(B)   | regarding the  |                                 |
|                   | right to       |                                 |
|                   | refuse or      |                                 |
|                   | limit the      |                                 |
|                   | extension to   |                                 |
|                   | particular     |                                 |
|                   | issues or a    |                                 |
|                   | particular     |                                 |
|                   | period of      |                                 |
|                   | time.          |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to evaluate    |                                 |
| **Levies**        | the IRS'       | Audit fieldwork in progress.    |
|                   | compliance     |                                 |
| I.R.C.            | with required  |                                 |
|                   | procedures     |                                 |
| §                 | under I.R.C.   |                                 |
| 7803(d)(1)(A)(iv) |                |                                 |
|                   | § 6330         |                                 |
|                   | regarding      |                                 |
|                   | levies.        |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | #### []{.mark}                  |
|                   | to evaluate    |                                 |
| **Collection Due  | the IRS'       | Audit fieldwork in progress.    |
| Process**         | compliance     |                                 |
|                   | with required  |                                 |
| I.R.C.            | procedures     |                                 |
|                   | under I.R.C.   |                                 |
| § 7               |                |                                 |
| 803(d)(1)(A)(iii) | §§ 6320 and    |                                 |
| and (iv)          | 6330 regarding |                                 |
|                   | the taxpayers' |                                 |
|                   | rights to      |                                 |
|                   | appeal lien or |                                 |
|                   | levy actions.  |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to evaluate    |                                 |
| **Seizures**      | the IRS'       | Audit fieldwork in progress.    |
|                   | compliance     |                                 |
| I.R.C.            | with required  |                                 |
|                   | procedures     |                                 |
| §                 | under I.R.C.   |                                 |
| 7803(d)(1)(A)(iv) |                |                                 |
|                   | §§ 6330        |                                 |
|                   | through 6344   |                                 |
|                   | when           |                                 |
|                   | conducting     |                                 |
|                   | seizures.      |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | An evaluation  | []{.mark}                       |
|                   | of IRS'        |                                 |
| **Taxpayer        | compliance     | Audit fieldwork in progress.    |
| Designations --   | with           |                                 |
| Illegal Tax       | restrictions   |                                 |
| Protester         | under          |                                 |
| Designation and   | section 3707   |                                 |
| Nonfiler          | of RRA 98 on   |                                 |
| Designation**     | designation of |                                 |
|                   | taxpayers.     |                                 |
| I.R.C.            |                |                                 |
|                   |                |                                 |
| §                 |                |                                 |
|  7803(d)(1)(A)(v) |                |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to review and  |                                 |
| **Disclosure of   | certify        | Audit in planning phase.        |
| Collection        | whether the    |                                 |
| Activities With   | IRS is         |                                 |
| Respect to Joint  | complying with |                                 |
| Returns**         | I.R.C.         |                                 |
|                   |                |                                 |
| I.R.C.            | § 6103(e)(8)   |                                 |
|                   | to disclose    |                                 |
| § 7803(d)(1)(B)   | information to |                                 |
|                   | an individual  |                                 |
| I.R.C.            | filing a joint |                                 |
|                   | return on      |                                 |
| § 6103(e)(8)      | collection     |                                 |
|                   | activity       |                                 |
|                   | involving the  |                                 |
|                   | other          |                                 |
|                   | individual     |                                 |
|                   | filing the     |                                 |
|                   | return.        |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to include in  |                                 |
| **Taxpayer        | each of its    | Statistical results on the      |
| Complaints**      | *Semiannual    | number of taxpayer              |
|                   | Reports to     |                                 |
| I.R.C.            | Congress* the  | complaints received are shown   |
|                   | number of      | on page 43.                     |
| § 7803(d)(2)(A)   | taxpayer       |                                 |
|                   | complaints     | []{.mark}                       |
|                   | received and   |                                 |
|                   | the number of  |                                 |
|                   | employee       |                                 |
|                   | misconduct and |                                 |
|                   | taxpayer abuse |                                 |
|                   | allegations    |                                 |
|                   | received by    |                                 |
|                   | IRS or TIGTA   |                                 |
|                   | from           |                                 |
|                   | taxpayers, IRS |                                 |
|                   | employees and  |                                 |
|                   | other sources. |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | Discussion draft audit report   |
|                   | to include     | issued to IRS management.       |
| **Administrative  | information    |                                 |
| or Civil Actions  | regarding any  |                                 |
| With Respect to   | administrative |                                 |
| the Fair Debt     | or civil       |                                 |
| Collection        | actions with   |                                 |
| Practices Act of  | respect to     |                                 |
| 1996**            | violations of  |                                 |
|                   | the fair debt  |                                 |
| I.R.C.            | collection     |                                 |
|                   | provision of   |                                 |
| § 7803(d)(1)(G)   | I.R.C. § 6304, |                                 |
|                   | including a    |                                 |
| I.R.C.            | summary of     |                                 |
|                   | such actions,  |                                 |
| § 6304\           | and any        |                                 |
| Section 3466 of   | resulting      |                                 |
| RRA 98            | judgments or   |                                 |
|                   | awards         |                                 |
|                   | granted.       |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | ###### []{.mark}                |
|                   | to include     |                                 |
| **Denial of       | information    | Audit fieldwork in progress.    |
| Requests for      | regarding      |                                 |
| Information**     | improper       | []{.mark}                       |
|                   | denial of      |                                 |
| I.R.C.            | requests for   |                                 |
|                   | information    |                                 |
| § 7803(d)(1)(F)   | from the IRS,  |                                 |
|                   | based on a     |                                 |
| I.R.C.            | statistically  |                                 |
|                   | valid sample   |                                 |
| § 7803(d)(3)(A)   | of the total   |                                 |
|                   | number of      |                                 |
|                   | determinations |                                 |
|                   | made by the    |                                 |
|                   | IRS to deny    |                                 |
|                   | written        |                                 |
|                   | requests to    |                                 |
|                   | disclose       |                                 |
|                   | information to |                                 |
|                   | taxpayers on   |                                 |
|                   | the basis of   |                                 |
|                   | I.R.C. § 6103  |                                 |
|                   | or\            |                                 |
|                   | 5 U.S.C.       |                                 |
|                   | § 552(b)(7).   |                                 |
+-------------------+----------------+---------------------------------+
| []{.mark}         | Requires TIGTA | []{.mark}                       |
|                   | to evaluate    |                                 |
| **Adequacy and    | the IRS'       | ***Information Technology       |
| Security of the   | adequacy and   | Reviews:***                     |
| Technology of the | security of    |                                 |
| IRS**             | its            | Reference Number 2006-20-001,   |
|                   | technology.    | October 2005                    |
| I.R.C.            |                |                                 |
|                   |                | Reference Number 2006-20-002,   |
| § 7803(d)(1)(D)   |                | October 2005                    |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-003,   |
|                   |                | November 2005                   |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-009,   |
|                   |                | December 2005                   |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-026,   |
|                   |                | December 2005                   |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-051,   |
|                   |                | March 2006                      |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-059,   |
|                   |                | March 2006                      |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-063,   |
|                   |                | March 2006                      |
|                   |                |                                 |
|                   |                | []{.mark}                       |
|                   |                |                                 |
|                   |                | ***Security Reviews:***         |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-021,   |
|                   |                | December 2005                   |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-031,   |
|                   |                | February 2006                   |
|                   |                |                                 |
|                   |                | Reference Number 2006-20-068,   |
|                   |                | March 2006                      |
+-------------------+----------------+---------------------------------+
| **Federal         | Requires TIGTA | ***Reference No. 2006-10-069,   |
| Financial         | to evaluate    | March 2006***                   |
| Management        | the financial  |                                 |
| Improvement Act   | management     | TIGTA determined that no        |
| of 1996**         | systems to     | intermediate target dates were  |
|                   | ensure         | missed on the 38 open remedial  |
| 31 U.S.C. § 3512  | compliance     | actions; however, 23 dates were |
|                   | with Federal   | extended. The IRS has           |
|                   | requirements,  | reasonable explanations for     |
|                   | or             | these extensions, and properly  |
|                   | establishment  | obtained concurrence from the   |
|                   | of a           | Office of Management and Budget |
|                   | remediation    | on corrective actions that      |
|                   | plan with      | extend beyond 3 years.          |
|                   | resources,     |                                 |
|                   | remedies, and  | The timely completion of up to  |
|                   | intermediate   | 25 open remedial actions is in  |
|                   | target dates   | jeopardy due to significant     |
|                   | to bring the   | funding shortfalls, including   |
|                   | IRS into       | resources needed to further     |
|                   | substantial    | develop the Custodial Detail    |
|                   | compliance.    | Data Base and the Integrated    |
|                   |                | Financial System, two key       |
|                   |                | financial management systems    |
|                   |                | that address longstanding       |
|                   |                | financial management            |
|                   |                | weaknesses.                     |
|                   |                |                                 |
|                   |                | These delays and funding        |
|                   |                | shortfalls could further hinder |
|                   |                | the IRS' ability to timely      |
|                   |                | resolve the issues that cause   |
|                   |                | its noncompliance with the      |
|                   |                | FFMIA.                          |
+-------------------+----------------+---------------------------------+

# ![](media/image2.png){width="1.375in" height="1.375in"}Appendix IV

#  Section 1203 Standards

# 

In general, the Commissioner of Internal Revenue shall terminate the
employment of any IRS employee if there is a final administrative or
judicial determination that, in the performance of official duties, such
employee committed any misconduct violations outlined below. Such
termination shall be a removal for cause on charges of misconduct.

Misconduct violations include:

-   Willfully failing to obtain the required approval signatures on
    documents authorizing the seizure of a taxpayer's home, personal
    belongings, or business assets;

-   Providing a false statement under oath with respect to a material
    matter involving a taxpayer or taxpayer representative;

-   Violating, with respect to a taxpayer, taxpayer representative, or
    other employee of the IRS, any right under the Constitution of the
    United States, or any civil right established under Title VI or VII
    of the Civil Rights Act of 1964; Title IX of the Education
    Amendments of 1972; Age Discrimination in Employment Act of 1967;
    Age Discrimination Act of 1975; Section 501 or 504 of the
    Rehabilitation Act of 1973; or Title I of the Americans with
    Disabilities Act of 1990;

-   Falsifying or destroying documents to conceal mistakes made by any
    employee with respect to a matter involving a taxpayer or taxpayer
    representative;

-   Committing assault or battery on a taxpayer, taxpayer
    representative, or other employee of the IRS, but only if there is a
    criminal conviction, or a final judgment by a court in a civil case,
    with respect to the assault or battery;

-   Violating the Internal Revenue Code of 1986, Treasury regulations,
    or policies of the IRS (including the Internal Revenue Manual) for
    the purpose of retaliating against, or harassing a taxpayer,
    taxpayer representative, or other employee of the IRS;

-   Willfully misusing provisions of Section 6103 of the Internal
    Revenue Code of 1986 for the purpose of concealing information from
    a Congressional inquiry;

-   Willfully failing to file any return of tax required under the
    Internal Revenue Code of 1986 on or before the date prescribed
    therefore (including any extensions), unless such failure is due to
    reasonable cause and not to willful neglect;

-   Willfully understating Federal tax liability, unless such
    understatement is due to reasonable cause and not to willful
    neglect; and

-   Threatening to audit a taxpayer for the purpose of extracting
    personal gain or benefit.

The Commissioner of Internal Revenue may mitigate the penalty of removal
for the misconduct violations outlined above. The exercise of this
authority shall be at the sole discretion of the Commissioner and may
not be delegated to any other officer. The Commissioner, in his/her sole
discretion,

may establish a procedure that will be used

to determine whether an individual should

be referred to the Commissioner for determination. Any mitigation
determination

by the Commissioner in these matters may

not be appealed in any administrative or

judicial proceeding.

# ![](media/image2.png){width="1.375in" height="1.375in"}Appendix V

#  Data Tables Provided

#  by the IRS

The memorandum copied below is the IRS transmittal to TIGTA. The tables
that follow the memorandum contain information exactly as provided by
the IRS to TIGTA and consist of IRS employee misconduct reports from the
IRS Automated Labor and Employee Relations Tracking System (ALERTS).
Also, data concerning substantiated I.R.C. § 1203 allegations are
included. IRS management conducted inquiries into the cases reflected in
these tables.

![](media/image14.jpeg){width="4.277777777777778in"
height="5.586111111111111in"}

**Report of Employee Misconduct for the Period**

**October 01, 2005 through March 31, 2006**

**Summary by Disposition Groups**

**(Table provided by the IRS)**

+----------------+-----------+-----------+---------+-----------+------+
| *              | **TIGTA** | **Adminis | **E     | **B       | *    |
| *Disposition** |           | trative** | mployee | ackground | *Tot |
|                | **Investi |           | Tax     | Investi   | al** |
|                | gations** | **Cases** | Matter  | gations** |      |
|                |           |           | Cases** |           |      |
+----------------+-----------+-----------+---------+-----------+------+
|                |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
|                |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
| Removal        | 37        | 136       | 29      | 1         | **2  |
|                |           |           |         |           | 03** |
+----------------+-----------+-----------+---------+-----------+------+
| Separation of  | 5         | 77        | 4       | 12        | **   |
| Probationary   |           |           |         |           | 98** |
| Employees      |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
| Separation of  | 1         | 7         |         | 3         | **   |
| Temporary      |           |           |         |           | 11** |
| Employees      |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
| Resignat       | 63        | 128       | 80      | 30        | **3  |
| ion/Retirement |           |           |         |           | 01** |
+----------------+-----------+-----------+---------+-----------+------+
| Suspensions    | 73        | 208       | 85      | 1         | **3  |
|                |           |           |         |           | 67** |
+----------------+-----------+-----------+---------+-----------+------+
| Reprimands     | 99        | 490       | 534     | 19        | *    |
|                |           |           |         |           | *1,1 |
|                |           |           |         |           | 42** |
+----------------+-----------+-----------+---------+-----------+------+
| Counseling     |           | 451       | 760     | 52        | *    |
|                |           |           |         |           | *1,2 |
|                |           |           |         |           | 63** |
+----------------+-----------+-----------+---------+-----------+------+
| Alternative    | 28        | 89        | 38      | 3         | **1  |
| Discipline     |           |           |         |           | 58** |
+----------------+-----------+-----------+---------+-----------+------+
| Clearance      | 136       | 148       | 9       |           | **2  |
|                |           |           |         |           | 93** |
+----------------+-----------+-----------+---------+-----------+------+
| Closed Without | 242       | 392       | 199     | 135       | **9  |
| Action         |           |           |         |           | 68** |
+----------------+-----------+-----------+---------+-----------+------+
| Closed Without | 151       | 119       | 134     | 82        | **4  |
| Action         |           |           |         |           | 86** |
| (Caution       |           |           |         |           |      |
| Statement)     |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
| Forwarded to   |           | 10        |         |           | **   |
| TIGTA          |           |           |         |           | 10** |
+----------------+-----------+-----------+---------+-----------+------+
| Suspended --   | 7         | 1         |         |           | *    |
| Waiting        |           |           |         |           | *8** |
| Supplemental   |           |           |         |           |      |
+----------------+-----------+-----------+---------+-----------+------+
| **Total**      | **842**   | **2,256** | **      | **338**   | **5, |
|                |           |           | 1,872** |           | 3    |
|                |           |           |         |           | 08** |
+----------------+-----------+-----------+---------+-----------+------+

**Source: Automated Labor and Employee Relations Tracking System
(ALERTS)**

This report is being produced in accordance with 26 USC § 7803(d)(2) and
§ 4(a)2 of Treasury Delegation Order 115-01,

January 14, 1999

Extract Date: Sunday, April 02, 2006 Report ID = T1R3a

**Report of Employee Misconduct for the Period**

**October 01, 2005 through March 31, 2006**

**National Summary**

**(Table provided by the IRS)**

+------------+-------+----------+----------+--------+-------+-------+
| **Case     | **Op  | *        | **Cases  |        |       | *     |
| Type**     | ening | *Conduct | Closed** |        |       | *Clos |
|            | I     | Cases**  |          |        |       | ing** |
|            | nvent |          |          |        |       |       |
|            | ory** | **Re     |          |        |       | **I   |
|            |       | ceived** |          |        |       | nvent |
|            |       |          |          |        |       | ory** |
+------------+-------+----------+----------+--------+-------+-------+
|            |       |          | *        | **     | **Non |       |
|            |       |          | *Conduct | Duplic | -Cond |       |
|            |       |          | Issues** | ates** | uct** |       |
|            |       |          |          |        |       |       |
|            |       |          |          |        | **Ca  |       |
|            |       |          |          |        | ses** |       |
+------------+-------+----------+----------+--------+-------+-------+
|            |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
|            |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
| TIGTA      | 627   | 814      | \(842\)  | \(11\) | \(0\) | **    |
| Inve       |       |          |          |        |       | 588** |
| stigations |       |          |          |        |       |       |
| ROI[^29]   |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
| Admi       | 1,202 | 2,186    | (2,256)  | \(55\) | \(3\) | **1,  |
| nistrative |       |          |          |        |       | 074** |
| Case[^30]  |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
| Employee   | 1,228 | 1,331    | (1,872)  | \(72\) | \(0\) | **    |
| Tax        |       |          |          |        |       | 615** |
| Compliance |       |          |          |        |       |       |
| Case[^31]  |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
| Background | 162   | 330      | \(338\)  | \(3\)  | \(0\) | **    |
| Investiga  |       |          |          |        |       | 151** |
| tions[^32] |       |          |          |        |       |       |
+------------+-------+----------+----------+--------+-------+-------+
| **Total**  | **3,  | *        | **(      | **(    | **    | **2,  |
|            | 219** | *4,661** | 5,308)** | 141)** | (3)** | 428** |
+------------+-------+----------+----------+--------+-------+-------+

**Source: Automated Labor and Employee Relations Tracking System
(ALERTS)**

This report is being produced in accordance with 26 USC § 7803(d)(2) and
§ 4(a)2 of Treasury Delegation Order 115-01, January 14, 1999

Extract Date: Sunday, April 02, 2006 Report ID = T1R1

**Summary of Substantiated I.R.C. § 1203 Allegations**

**Recorded in ALERTS for the Period**

**October 01, 2005 through March 31, 2006**

**(Table provided by the IRS)**

+---------+--------+-------+--------+-------+-------+--------+-----+
| **§     | **Rem  | *     | *      | **Re  | *     | **In   | **T |
| 1203    | ovals* | *Resi | *Proba | moved | *Pena | Perso  | ota |
| Viol    | *[^33] | gned/ | tion** | On    | lty** | nnel** | l** |
| ation** |        | Reti  |        | Other |       |        |     |
|         |        | red** | **     | Grou  | **M   | **Pro  |     |
|         |        |       | Separa | nds** | itiga | cess** |     |
|         |        |       | tion** |       | ted** |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Seizure | 0      | 0     | 0      | 0     | 0     | 0      | **  |
| Without |        |       |        |       |       |        | 0** |
| A       |        |       |        |       |       |        |     |
| pproval |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| False   | 0      | 1     | 0      | 0     | 0     | 0      | **  |
| St      |        |       |        |       |       |        | 1** |
| atement |        |       |        |       |       |        |     |
| Under   |        |       |        |       |       |        |     |
| Oath    |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Constit | 0      | 0     | 0      | 0     | 0     | 0      | **  |
| utional |        |       |        |       |       |        | 0** |
| & Civil |        |       |        |       |       |        |     |
| Rights  |        |       |        |       |       |        |     |
| Issues  |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Fal     | 1      | 0     | 0      | 0     | 0     | 1      | **  |
| sifying |        |       |        |       |       |        | 2** |
| or      |        |       |        |       |       |        |     |
| Des     |        |       |        |       |       |        |     |
| troying |        |       |        |       |       |        |     |
| Records |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Assault | 0      | 0     | 0      | 0     | 0     | 0      | **  |
| or      |        |       |        |       |       |        | 0** |
| Battery |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Re      | 0      | 1     | 0      | 0     | 0     | 0      | **  |
| taliate |        |       |        |       |       |        | 1** |
| or      |        |       |        |       |       |        |     |
| Harass  |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Misuse  | 0      | 0     | 0      | 0     | 0     | 0      | **  |
| of      |        |       |        |       |       |        | 0** |
| §6103   |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Failure | 9      | 10    | 2      | 3     | 31    | 60     | *   |
| to File |        |       |        |       |       |        | *11 |
| Federal |        |       |        |       |       |        | 5** |
| Tax     |        |       |        |       |       |        |     |
| Return  |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Underst | 30     | 12    | 0      | 9     | 33    | 48     | *   |
| atement |        |       |        |       |       |        | *13 |
| of      |        |       |        |       |       |        | 2** |
| Federal |        |       |        |       |       |        |     |
| Tax     |        |       |        |       |       |        |     |
| Li      |        |       |        |       |       |        |     |
| ability |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| Threat  | 1      | 0     | 0      | 0     | 0     | 0      | **  |
| to      |        |       |        |       |       |        | 1** |
| Audit   |        |       |        |       |       |        |     |
| for     |        |       |        |       |       |        |     |
| P       |        |       |        |       |       |        |     |
| ersonal |        |       |        |       |       |        |     |
| Gain    |        |       |        |       |       |        |     |
+---------+--------+-------+--------+-------+-------+--------+-----+
| **T     | **41** | *     | **2**  | *     | *     | *      | *   |
| otals** |        | *24** |        | *12** | *64** | *109** | *25 |
|         |        |       |        |       |       |        | 2** |
+---------+--------+-------+--------+-------+-------+--------+-----+

**Source: Automated Labor and Employee Relations Tracking System
(ALERTS) and § 1203 Review Board records.**

Extract Date: Thursday, April 06, 2006

[^1]: 5 U.S.C.A. app. 3 (West Supp. 2005)

[^2]: Public Law No. 105-206, 112 Stat. 685 (codified as amended in
    scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C., 19 U.S.C.,
    22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49
    U.S.C.).

[^3]: The Excise Files Information Retrieval System (ExFIRS) is an
    umbrella system made up of nine subsystems that support the
    collection of motor fuel industry information, automated analysis of
    this information, and identification of areas with the highest risk
    for nonpayment of excise taxes.

[^4]: The most critical ExFIRS subsystem, designed to track the movement
    of motor fuel to and from approved terminals by requiring the
    monthly submission of information documents to the IRS reflecting
    fuel quantity and type.

[^5]: The PRIME contractor is the Computer Sciences Corporation, which
    heads an alliance of leading technology companies that assist the
    IRS in modernizing its computer systems and related information
    technology.

[^6]: *The Cost and Schedule Estimation Process for the Business Systems
    Modernization Program Has Been Improved, but Additional Actions
    Should Be Taken* (Reference Number 2003-20-219, dated September
    2003).

[^7]: The IRS initiated the Filing and Payment Compliance (F&PC) project
    to address its shortcomings of insufficient staff, collection
    processes, and systems, and increase delinquent tax collections. By
    implementing the F&PC project, the IRS expects to increase
    collections by \$15.4 billion over 10 years and reduce the inactive
    delinquent tax case inventory.

[^8]: Pub. L. No. 108-357, 118 Stat. 1418 (2004).

[^9]: Twice a year, the Office of Management and Budget requires Federal
    Government agencies to complete a Capital Asset Plan and Business
    Case (Exhibit 300) for each major information technology investment.

[^10]: The Alternatives Analysis provides estimated cost and benefit
    information on viable alternatives to assist management in
    determining the most effective approach for a project.

[^11]: The non-filer tax gap is the dollar amount of taxes not paid
    timely on delinquent and non-filed returns.

[^12]: Pub. L. No. 103-62, 107 Stat. 285 (codified as amended in
    scattered sections of 5 U.S.C., 31 U.S.C., and 39 U.S.C.)

[^13]: The FISMA is part of the E Government Act of 2002, Pub. L. No.
    107-347, Title III, Section 301, 2002.

[^14]: The COE is a standardized set of commercial\
    off-the shelf and internally developed applications\
    to support the needs of more than 100,000 IRS employees using
    Microsoft Windows.

[^15]: In addition to the full version of Adobe^®^ Acrobat^®^ , other
    applications included InfoConnect, Inso Quick View Plus, Winzip,
    Avery Wizard, and Roxio Easy CD Creator.

[^16]: Tivoli^®^ is a registered trademark owned by IBM.

[^17]: An Occupant Emergency Plan contains the procedures for employees
    to follow during an emergency situation.

[^18]: An Incident Management Plan describes the overall coordinated
    actions to be taken by the Incident Management team to ensure
    recovery and restoration of a facility when an incident occurs.

[^19]: An Incident Commander is directly responsible for frontline
    management of an incident. The Incident Commander, in conjunction
    with other onsite business team managers, will develop and implement
    response strategies and use existing disaster preparedness documents
    for the recovery of business operations.

[^20]: The Integrated Collection System is a case processing application
    that supports IRS employees who work delinquent taxpayer cases
    (i.e., taxpayers who have not filed tax returns or paid tax
    obligations).

[^21]: The Modernization and Information Technology Services
    organization is responsible for supporting the IRS on Information
    Technology issues, which includes protecting and restoring computer
    operations and locating all computers after a disaster.

[^22]: The Transportation, Treasury, Housing and Urban Development, the
    Judiciary, the District of Columbia, and Independent Agencies
    Appropriations Act, Pub. L. No. 109-115, 119 Stat. 2396 (2006).

[^23]: Department of Defense Appropriations Act,\
    Pub. L. No. 109-148, 119 Stat. 2680 (2006).

[^24]: A Full-Time Equivalent is a measure of labor hours in which 1
    Full-Time Equivalent is equal to 8 hours multiplied by the number of
    compensable days in a particular fiscal year. This usually equates
    to 1 person working 1 year, but can equate to 2 people working 1/2
    of a year each, 2 people working part time for a full year, 3 people
    working 1/3 of a year each, etc. For FY 2006, 1 Full-Time Equivalent
    is equal to 2,080 staff hours.

[^25]: Department of the Treasury Circular No. 230, *Regulations
    Governing the Practice of Attorneys, Certified Public Accountants,
    Enrolled Agents, Enrolled Actuaries, and Appraisers before the
    Internal Revenue Service,* contains the standards of conduct and
    professionalism for licensed tax practitioners and authorizes the
    Department of the Treasury to institute disciplinary proceedings
    against tax practitioners whose conduct violates these regulations.
    The Office of Professional Responsibility within the IRS conducts
    this oversight role.

[^26]: *Improved Case Monitoring and Taxpayer Awareness Activities Can
    Enhance the Effectiveness of the Tax Practitioner Disciplinary
    Proceedings Program* (Reference Number 2001-10-027, dated January
    2001).

[^27]: Pub. L. No. 104-168, 110 Stat. 1452 (1996) (codified as amended
    in scattered sections of 26 U.S.C.)

[^28]: The 2005 Filing Season represents the period during which tax
    returns were filed for the calendar year ending December 31, 2004.

[^29]: TIGTA Investigations (ROI) - Any matter involving an employee in
    which TIGTA conducted an investigation into alleged misconduct and
    referred a Report of Investigation (ROI) to IRS for appropriate
    action.

[^30]: Administrative Case - Any matter involving an employee in which
    management conducted an inquiry into alleged misconduct.

[^31]: Employee Tax Compliance Case - Any conduct matter that is
    identified by the Employee Tax Compliance program which becomes a
    matter of official interest.

[^32]: ^?^ Background Investigations - Any matter involving an NBIC
    investigation into an employee's background that is referred to
    management for appropriate action.

[^33]: The cases reported as "Removals" and "Penalty Mitigated" (see
    columns above) do not reflect the results of any third party appeal.