Internal Reven, u, e Service

Ann'ual Repoi.t' 1989
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Internal

Revenue Service

Annual Report

1989

Statistics

of Income

Library

As the Internal Revenue Service moves into the last

decade of this century, our nation's tax system stands at a crossroad . While continuing to function admirably,

fundamentals change is necessary if we are to preserve and

maintain its health. In particular, we must make the system

willi more workable for the American public. Taxpayers are

ng to pay what they owe but in exchange, they deserve

a ystem that minimizes complexity, uncertainty and

adanxinsistrative burdens. I believe that we are addressing the need for change

ona number of fronts.

The most significant

- and difficult- long-term

challenge we face is to modernize our systems. With the

technology we are using today, we cannot consistently

provide the taxpaying public with the quality of service

they are entitled to expect from their government.

Instead, they are hassled bya system that was designed

fora computer age, but definitely not an information

technology age. The public is already beriefitting from this

effort in areas such as electronic filing. Nonetheless, we

have

a long, long way to go. In the process, we will change

every facet of the way we administer the tax system.

The recently enacted Taxpayer Bill of Rights has

enhanced the rights of taxpayers in dealing with their

government. Of equal importance, it sends

a message to

he IRS. We must be more responsive in our dealings with

axpayers, and we must help assure that their rights aile

protected. Taxpayer expectations are much higher than

30 years ago.

For all too many taxpayers, and for the IRS, the tax law

is far

t omplicated. In drafting our laws, regulations and

acirnird's7rative procedures, we must move away from theoretical purity. We must operate on the premise that our job is

to make it easier for taxpayers to comply. We should empliasize the practical and workable. Everything we do must be

aggressively analyzed and measured against this standard.

Likewise we must reviewa wide variety of IRS programs

that need to change with the times. For example, we plan

inf ndamental changes in how we examine major corporations n our large case program. We will revamp our approach to

third-party information reporting and redirect our research

efforts and enforcement strategies, focusing on specific

components of the tax gap. Our efforts to control accounts

receivable must focus on areas of vital importance, such as

large dollar cases. Our criminal enforcement area must assess

the dramatic changes that have taken place during the past

ten years In the crimes we pursue and the techniques we use.

Progress can and will be made in the months ahead. But

fundamental improvements must await modernization of

our systems.

Regardless of whether the topic is modernizing our

computer systems, safeguarding taxpayer rights, or redirecting

ourfo us in enforcement philosophy, the point is very much

the sarme. The world around us has changed profoundly

We cannot and should not try to turn back the clock. The IRS

must change

-indeed, is changing

-with the times.

!dT~,dberg I

Commissioner
iili~ie oi~ontents

Collecting the Revenue ............... 4

Returns and Receipts ................. 4

Refunds ............................... 5

Other Programs ....................... 7

Penalties and Interest ................. 8

Assisting the Taxpayer ................ 9

Taxpayer Assistance .................. 9

Taxpayer Information ................. 10

Educating Taxpayers .................. 10

Forms and Publications ............... 11

Problem Resolution Program ......... 12

Public Affairs .......................... 13

Enforcing the Law .................... 14

Examination ........................... 14

Information Returns Program ......... 16

Collection ............................. 16

Criminal Investigation ................. 17

Employee Plans ....................... 19

Exempt Organizations ................. 19

International ........................... 20

Disclosure ............................. 21

Employee Programs .................. 22

Human Resources Management ...... 22

Equal Employment Opportunity ....... 24

Managing the System ................. 25

Planning, Finance and Research ...... 25

Information Systems Development .... 27

Computer Services .................... 28

Resources Management ............... 30

Director of Practice ................... 31

Statistics of Income ................... 31

Legislative Affairs ..................... 32

Quality ................................ 33

Inspection Service ..................... 33

Chief Counsel ......................... 36

Technical ............................. 36

Legislation ............................ 36

International Activities ................ 37

Litigation Programs ................... 37

Appeals ............................... 38

Statistical Tables ...................... 39

Officials ............................... 62

Commissioners of Internal Revenue .. 62

Principal Officers of the IRS .......... 63

Chief Counsel for the IRS ............. 65

Principal Officers of the

Office of Chief Counsel ............. 65

Principal Officers of the

Inspection Service .................. 67

IRS Organization Chart ............... 68

IRS Maps .............................. 70

Index .................................. 71
...jCoRecting the Revenue

G

ross internal revenue collections reached $1.01 trillion

in 1989. Of the record 199.6

million federal tax returns

and supporting documents filed, over

one million were filed electronically

The shift to using the simplified returns

-the short Forms 1040A and 1040EZ -

continued. More taxpayers used the

standard deductions instead of itemizing, while fewer taxpayers requested

automatic extensions of time to file

their returns.

Rehirns and Receipts

Service centers processed 199.6 million Federal tax returns

and supporting documents this year-a 2.9 percent increase

over the 194 million processed last year. Over 90 million or

45 percent of all returns received were individual tax returns,

Forms 1040 and I040A_ More than 19 million individual taxpayers--17.6 percent of all individual fiiers-used the

simplified Form 1040EZ, compared with about 18 million last

year, an increase of 6 percent. The number of individual taxpayers filing Form 1040 increased IA percent from 70B

million to 71,8 million (See Text Table, Number of Returns

Filed, on page 5 and Statistical Table 6 for details)

Gross revenue receipts, up 8A percent over last year,

reached $1.01 trillion, exceeding last year's receipts by $782

billion. Individual and corporation income tax collections accounted for almost two-thirds of the total receipts. Individual

tax receipts totaled $515.7 billion, an increase of 8.9 percent

over last year. Corporation tax receipts rose 6.7 percent to

$117.0 billion. (See Text Table, Gross Internal Revenue Collections, on page 6.)

Employment taxes (social security, self-employment, Federal unemployment and railroad retirement), which were 34

percent of the total revenue, hit $345.6 billion, another record high.

Excise taxes totaled $26.0 billion, an increase of 0.2 percent compared with last year. (See Statistical Tables I and 3

for details.)

L

Over 1.2 million taxpayers from 48 states

filed their income tax return electronically

last year. The information stored in the

IRS computer system can be accessed, if

needed, to provide a hardcopy ofthe

return.

Electronic Filing

Electronic filing of individual income tax returns with refunds

became an operational program for the 1987 processing year.

During the 1987 filing season, about 77,000 return% were filed

electronically by 66 return preparers in 7 metropolitan areas.

The number of participants and returns has increased dratruitically. During the 1989 filing season, the Electronic Filing

System processed 1.2 million returns from 48 districts

through 9,435 participants. The remaining 15 districts %Vill be

added in the 1990 filing season.

Electronic filing benefits to the taxpayer are numerous.

The electronic filer is furnished with the date of acknowledgment that the IRS accepted the return as being filed. The

quality of the tax return information as processed through

the electronic system provides fewer processing errors which

does not delay issuance of refunds.

Taxpayers also receive quicker issuance of refunds due to

the automated processing of electronically filed returns. Refunds issued through direct deposit reached taxpayer savings

and checking accounts approximately three weeks after the

return was accepted during the 1989 filing season. That

period will be reduced to two weeks during the 1990 filing

season.

Saving for the IRS through electronic filing included reduced labor costs, reduced facilities for return storage and

retrieval, a marked reduction in telephone calls from taxpayers, and it decrease in the volume of notices mailed to

taxpayers. Error rates are approximately 3 percent with electronic filing, compared with 16 percent for paper returns.

IRS continued expansion of electronic filing of individual

taxpayer returns by including Form 104ONR, Nonresident

Mien Returns for 1989, and by processing electronically-fiied

remittance returns for the first time. Electronic filing of retunis accelerates processing and results in a more accurate,

higher quality product.

Reftmds

IRS issued 82.6 million refunds totaling $93.6 billion, compared with 83 million refunds amounting to $94,5 billion last

year. Over 79 million individual income taxpayers received

$72S billion in refunds, including $452 million in interest.

(Note: Individual income refund figures in Statistical Tables 4

and 5 include fiduciary and partnership returns. See footnotes in these tables for details.)

By statute, any refund due on individual income tax returns must be issued within 45 days of the date the return is

required to be filed, or the government must pay interest on

the refund amount.

By the end of the fiscal year, IRS had issued refunds with

interest on 1.9 million current-year individual income tax

returns that were timely filed, but not rehmded during the

statutory interest-free period, compared with 2 million last

year. Individual refunds this year averaged $921. (For details,

see Statistical Tables 4 and 5.)

Years ago, the top speed for hand-sorting

of tax returns was about 1,200 pieces of

mail per hour. The Composite Man Processing System at the service centers can

now sort, count, and sand

open

20,000to

30,000 envelopes per hour with 98 percent

accuracy.

Number of Returns by Principal Type of Return

(Figures in thousands. For details see Statistical Table 6.)

Type of return 1988 1989

Grand total

Income taxes, total 152,121 157,129

Individual 106,994 110,253

1040 70,770 71,787

1040A 17,657 18,720

1040EZ 18,337 19,488

1040 other' 230 257

Individual estimated tax 35,489 37,591

Fiduciary 2,783 2,625

Fiduciary estimated tax 1,055 663

Partnership 1,814 1,788

Corporation 3,986 4,209

Estate tax 52 55

Gift tax 103 121

Employment taxes 28,236 28,930

Exempt organizations 490 490

Employee plans 1,819 1,633

Excise taxes 957 949

Supplemental documents' 10,527 10,260

Note: Detail may not add to totals due to rounding.

Includes 104OSS/PR and 1040C

Includes Forms HIM, 1120X, 2688,4868,7004, 1041A and non-master file

returns

'A
Gross Internal Revenue Collections

(In thousands of dollars. For details see Statistical Table 1.)

Source

Percent of 1989

collections 1988 1989

Increase or decrease

Amount Percent

Grand total 100.0% 935,106,594 1,013,322,133 78.215,539 8.4%

Income taxes, total 62.4% 583,349,120 632,746,069 49,396,949 8.5%

Corporation I 1 .5% 109,682,554 117,014,564 7,332,011 6.7%

Regular 11.5% 109,393,550 116,743,148 7,349,597 6.7%

Exempt organizations business income tax 289,004 271,417 (17,587) -6.1%

Individual, total' 50.9% 473,666,566 515,731,504 42,064,938 8.9%

Withheld by employers 1 2 35.7% 341,467,682 361,418,569 19,950,886 -.5.8%

Other' 15.2% 132,198,884 154,312,936 22,114,052 16.7%

Employment taxes, total 34.1% 318,038,990 345,625,586 27,586,596 8.7%

Old-age, survivor's, disability and

hospital insurance, total 33.2% 307,594,215 336,809,068 29,214,853 9.5%

Federal insurance contributions 31.4% 289,903,877 317,780,046 27,876,170 9.6%

Self-employment insurance

contributions 1.9% 17,690,338 19,029,022 1,338,684 7.6%

Unemployment insurance 0.5% 6,178,000 4,692,520 (1,485,480) -24.0%

Railroad retirement 0.4% 4,266,775 4,123,997 (142,777) -3.3%

Estate and gift taxes, total 0.9% 7,784,445 8,973,146 1,188,702 15.3%

Estate 0.8% 7,348,679 8,143,689 795,010 10.8%

Gift 0.1% 435,766 829,457 393,691 90.3%

Excise taxes, total 2.6% 25,934,040 25,977,333 43,293 0.2%

NOTE: Detail may not add to totals due to rounding,

Includes presidential election campaign fund contributions of $33,421,709 in fiscal year 1988 and $32,307,941 in fiscal year 1989.

2 Collections of individual income tax are not reported separately from old-age, survivor's, disability and hospital insurance (OASDHI) taxes on wages, salaries

and self-employment income. The amount of OASDHI tax collections shown is based on estimates made by the Secretary of the Treasury pursuant to the

provisions of section 201 (a) of the Social Security Act as amended and includes all OASDHI taxes. The amounts shown for the two categories of individual

income . taxes were derived by subtracting the OASDHI lax estimates from the combined totals collected.

Less than 0.5%

Tax Refund Offset Program

If a taxpayer fails to make support payments to a child or

spouse who receives public assistance, Congress requires the

IRS to withhold all or part of the taxpayer's income tax refund to cover the delinquent payments. This legislation has

been in effect since 1981. Since 1986, the IRS has also been

required to apply individual income tax refunds to child support payments for individuals who are not on welfare and to

nontax debts owed to some Federal agencies, such as student loans, military enlistment bonuses, and home mortgage

loans, etc.

Through an agreement with the Department of Health

and Human Services, IRS acts as a collection agent for the

state welfare agencies in all child or spousal support cases.

The refund amounts are used to reimburse the agencies for

the support they furnish through Aid to Families with Dependent Children (AFDC), or are turned over to the parents

having custody of the child or children in nonwelfare cases.

A total of $449S million was collected from 780,630 refunds

to cover delinquent payments. Since the program began, IRS

has collected $1.1 billion front 2 million refunds for child or

spousal support.

Other agreements with the Departments of Housing and

Urban Development, Agriculture, Energy, Interior, Education,

Defense, Treasury, Justice, Health and Human Services, and

the Veterans Affairs, Railroad Retirement Board and Small

Business Administration require the IRS to act as a collection

agent for delinquent nontax Federal debts. Refunds were offset for this purpose on 478B52 individual income tax returns

in the amount of $258,8 million. Since 1986, IRS has collected

$602.9 nrillion from 1.2 million refunds for nontax debts

owed to Federal agencies.

Net Internal Revenue Collections

(in thousands of dollars)

Gross

collections Refunds'

Net collections

Percent

Amount of total

Grand total 1,013322,133 91,810,620 921,511,513 100.0

Corporation income taxes 117,014,564 13,828,220 103,186,344 11.2

Individual income taxes 515,731,504 74,450,5292 441,280,975 47.9

Employment taxes, total 345,625,586 1,337,684 344,287,902 37.4

Old-age, survivor's, disability and hospital insurance 336,809,068 1,085,010 335,724,058 36.4

Railroad retirement 4,123,997 10,783 4,113,214 2.1

Unemployment insurance 4,692,520 241,890 4,450,630 0.5

Estate and gift taxes 8,973,146 228,487 8,744,659 0.9

Excise taxes 25,977,333 1,965,700 24,011,633 2.6

NOTE: Detail may not add to totals due to rounding.

Does not include interest paid on refunds. In the narrative, the total refund figure of $93.6 billion includes $1.8 billion of interest.

Refunds of Forms 1040, 1040A and 1040EZ including withheld taxes, minus FICA.

Other Programs

In a cooperative effort with the Pension and Welfare Benefits

Administration (PWBA) of the Department of Labor, IRS established an enhanced system for the processing of Form

5500 (pension/welfare benefit plan) series returns. Both IRS

and PWBA share responsibility for processing Form 5500 series returns under the Employee Retirement and Income

Security Act (ERISA). The new system provides for the increased transcription and key verification of Form 5500

information, greatly expanded computerized edit checking,

and implementation of an extensive correspondence program

to secure missing or inaccurate data from filers.

The product of this new system will be a monthly transaction file used by PWBA to build and maintain the newly

developed ERISA Information System. PVV`BA's computer system, designated a Presidential Priority Automation Initiative,

will provide more timely information to the agency, allowing

implementation of a more effective enforcement program.

Lockbox Program

One of the IRS cash management initiatives this year was to

expand the Department of Treasury's Lockbox Program Network nationwide. Lockbox is a process whereby individual

taxpayers send their estimated tax payments (Forms 1040ES)

to a designated commercial bank. The bank is authorized by

the Department of the Treasury to collect and deposit the remittances into Treasury's account. The vouchers are

processed and forwarded to the respective service center.

On April 1, 1989, the remaining six service centers successfully implemented the program. Taxpayers who formerly

filed their Form 1040ES at Austin, Memphis, Fresno, Ogden,

Philadelphia, and Cincinnati Service Centers now send their

tax payments to addresses which belong to commercial

banks.

Treasury reports that the Lockbox Program Network deposited $56.0 billion resulting in a total $46.7 million in

interest avoidance savings. This savings is from accelerated

funds and is used to reduce the amount of money the Govemment would have to borrow to meet its daily obligations.

Presidential Election Campaign Fund

Citizens and resident aliens who owe at least one dollar in

Federal income tax may designate one dollar of the tax to

the Presidential Election Campaign Fund. This year, 20.1 percent of the total individual income tax returns, or 22.1

million, showed designations to this fund of $323 million.

The curnulative amount credited to the fund since it began

in 1972 is $567.1 million.

Contribution to Reduce Public Debt

Last year was the seventh year taxpayers were invited to

make voluntary contributions to reduce the public debt. Taxpayers could send separate checks payable to the Bureau of

Public Debt with their Federal tax returns and take a deduction on the next year's tax return, subject to limitations on

charitable deductions. This year there were 529 contributions, totaling $204,000 bringing the number of contributions

to 11,334 and the total contributed to $1.9 million since the

program started.

Earned Income Credit

Low income taxpayers who keep a home for themselves and

at least one child may claim the Earned Income Credit (EIC).
Assisting the Taxpayer

In 1989, IRS received 199.6 million Federal

tax retu s and supporting documents. As

the tax deadline draws near

each

year,

the volume ofreturns at the 10 IRS taxprocessing centers increases dramatically.

Taxpayers who quality for the credit may choose to get it in

their paychecks in the form of advance payments during the

year, rather than wait and file for it on their tax returns after

the year is over. About 10.9 million taxpayers claimed a total

of $5,8 billion earned income credit of which 7.4 million received refunds totaling $4 billion. Employers reported they

paid out $9.3 million in advance payment of EIC.

IRS provided materials to print media such as news relea.ses, question and answer columns, and fact sheets in both

English and Spanish explaining EIC and advance payment of

EIC. IRS also included articles on EIC in the 1989 Tax Supplement and 1989 Spanish Clip~heet. For electronic media, the

IRS provided a video news release for television explaining EIC.

IRS also worked with private, state and local organizations to get the message on EIC availability directly to

low-income taxpayers through a video conference, publicity

materials, audio conference, and a stutter suitable for inclusion with welfare and unemployment checks.

Master File

The number of taxpayer accounts on the Individual Master

File grew to 151 A million by the end of September 1989, a

.5 percent increase over last year. The Business Master File

contained 41.8 million accounts, a one percent increase over

the previous year. The Martinsburg Computing Center proLc_~~ 1912 million individual and business accounts, up by

million or nearly a .3 percent increase over 1988.

Quality

The Returns Processing and Accounting Division Quality

Branch has contributed significantly to efforts to make quality a way of life. Several programs (listed below) are aimed

at identifying areas for quality improvement and for maintaining the gains already achieved:

-Perforn-kance Indicators measure the performance of key

processing areas within the ten service centers. This provides a standard measurement and control system for critical

work areas. Since this is the first year of the system, it is primarily an educational and data gathering year. However,

reduced rework is already evident in Error Resolution and

Unpostables functions in the centers.

-Prograrn Analysis System performs detailed analysis of

both service center and taxpayer errors and suggests solutions. Special training will be provided for service center

employees to prevent service center errors in the future. Tax

preparer groups have been provided information about the

most frequent taxpayer errors so that there can be a reduction in taxpayer-caused errors.

Penalties and.Interest

The law requires that IRS charge penalties for failure to file

returns, late payments, payments with bad checks, negligence, false withholding statements, fraud, and other

violations. Penalties may be lowered or canceled when appropriate. IRS imposed 262 million net penalties totaling $7.1

billion. (See Statistical Table 14 for details.)

'the law also requires that interest be charged on late

payments. Generally, the IRS may not reduce interest due on

taxes owed, but in cases where interest is not justified, it

may be lowered or canceled as appropriate. Interest charges

totaled $43 billion on individual returns with reductions of

$570 million. Interest charged to business returns totaled $8A

billion, reduced by $2.8 billion.

The Penalty and Interest Notice Explanation (PINEX) notices are available upon request. These information notices

show exactly how assessed penalties and interest have been

computed on specific taxpayer accounts. The explanatory

PINEX notices can be quickly computer-generated in response to taxpayer inquiries received by district offices and

service centers. Taxpayer Service representatives are trained

to answer taxpayer questions about these notices. Taxpayer

responses to the notices show public reaction to be

favorable.

The PINEX notices show computations of underpaid and

overpaid interest, as well as the following penalties: failure to

file, failure to pay, individual and corporate estimated tax,

failure to report tip income, fraud, negligence, and dishonored check.

M

any avenues of help are

available from the IRS to

taxpayers. More than 65.1

million people took advantage of free telephone services last year;

the Volunteer Income Tax Assistance

Program provided free tax help to 2.6

million people, and the Community

Outreach Tax Assistance Program helped

more than one million people, both in the

United States and abroad. The One-Stop

Service concept provided complete service the first time the taxpayer contacted

the IRS. Hundreds of suggestions resulted

from town meetings where taxpayers

commented on forms, instructions, publications and IRS operations. Authority to

issue Taxpayer Assistance Orders was

granted last year to the Taxpayer

Ombudsman.

The automated Taxpayer Service Expert

Assistant System leads the taxpayer servi.

cc representative through a series of

questions in the calling taxpayer's tax

topic to provide accurate and complete

answers. -

Taxpayer Assistance

The 1989 filing season saw Taxpayer Service continuing the

quality initiatives started last year. The "One-Stop Service"

concept-providing complete service the first time a taxpayer contacts the IRS-was a primary effort to provide the

most assistance to the largest group of taxpayers at a convenient time and location.

IRS provided convenient help for taxpayers through three

forms of telephone assistance; the toll-free system with

trained staff to help with technicad tax law, procedural questions and account problems; Tele-Tax for either recorded

technical tax law information or the status of the current

year's refund; and a special toll-free service for taxpayers to

order fomis and publications.

An expanded authority program to resolve account probterns while talking to the taxpayer has been well received by

both taxpayers and their practitioners. Until recently, most

account-related questions had to be referred to the IRS service centers. Under expanded authority to handle account

problems, assistors can, in certain cases, resolve taxpayer

problems at the district office level. Examples include address changes, tax adjustments, and abatements of penalty

charges.

IRS continued to measure the quality of service delivered

to the public through the Integrated Test Call Survey System

(ITCSS), Specially-trained personnel from the IRS National

Office placed calls to toll-free telephone sites around the

country to assess the courtesy, completeness, and accuracy

of the responses to taxpayer inquiries.The system allows

Taxpayer Service to identify those areas of tax law that need

to be emphasized in training, as well as those offices that

need particular assistance.

In 1989, overall telephone accuracy on selected technical

calls was below a satisfactory rate. The answer to increasing

the accuracy lies in improving the training provided to assistors, working to build a stable and experienced workforce,

and implementing new technology.The IRS is taking these

steps. In addition, each of the seven regional offices has established a diagnostic center to improve the quality of

telephone assistance offered in their respective toll-free telephone site.

The public's awareness of Tele-Tax has continued to

grow since the beginning of the program in 1983. In 1989 the

system answered more than 27B million calls, compared to

13A million calls last year, an increase of more than 100 percent in one year. In response to the increased demand, IRS

plans to purchase and install 12 additional Tele-Tax systems

for 1990.

Disaster Assistance

In 1989, people in 438 counties in 19 states suffered losses

because of floods, hurricanes, tornadoes, and other emergencies and disasters. The IRS provided on-site help to the

victims in preparing amended return, for casualty loss

claims and expediting refunds to the affected taxpayers.
Assisting Taxpayers

Write, Call or Walk-in 1989

Toll-Free Telephone 37.OM

Account & Problem Resolution 6.9M

Technical 33M

Service for the Deaf 3,273

Non Toll-Free Telephone .3M

Tele-Tax 27.8M

Automated Response 3.1 M

Refund 24.7M

Correspondence 187,000

Walk-In TOM

Permanent Offices 495

Filing Season Only Offices 57

Foreign Language Assistance Offices 115

Libraries, Banks and Postal Service 64,000

Tax~Fornrs and Instructions Distributed 300M

Disaster/Emergency Assistance

States 19

Counties 438

Taxpayer Education

Outreach Taxpayers Assisted LOM

Community Sites 9,000

VITA & TCE Taxpayers Assisted 2.6M

Volunteers 77,000

Students Receiving Understanding

Taxes Material 4.2M

Workshops

Small Business Attendees 63,000

Tax Practitioner Institute Attendees

Taxpayer Information

Free Advertising Received $102.6M*

Broadcast (Radio and Television) $98.6*

Print and Outdoor $4.OM*

Television Clinics/Special Programs 42

Network Radio Programs 5

Newspapers Using Tax Supplement 5,600

Estimated Tax Supplement Circulation 53.2M

ded by the Advertising Council reflect Calendar Year 1988 p~i,g,iu~r%=icarnpaigns

L

Taxpayer Information

Partnerships with the Advertising Council, Public Broadcasting Service television stations, Financial News Network,

American Forces Press Service and the media worldwide

made this a banner year for the delivery of taxpayer information to general and specialized audiences.

During the third year of its formal partnership, the IRS

and the Advertising Council again used the campaign theme,

"Make Your Taxes Less Taxing," and focused on early filing

and volunteerism. Public service materials in English and

Spanish were well received by television, radio stations,

newspapers and magazines, and appeared on billboards and

buses th ughout the country. The free advertising obtained

broadcast media was worth more than $102.6

million, and generated many additional opportunities to inform taxpayers of their rights and responsibilities.

To provide specialized tax information to targeted audiences, the IRS developed an alliance with various industry

groups and Public Broadcasting Service stations to produce

and market "Tax Tips on Tape," a series of 27 videos. The

programs were shown on 240 public broadcasting stations

and coordinated with special Outreach Program events

across the country.

IRS also joined with Financial News Network to produce a

weekly half-hour live show, "IRS Tax Beat." Topics ranged

from tax-exempt organizations to estate taxes and featured

IRS executives and specialists answering call-in questions.

Audie ces averaged 150,000 per week. As part of the continuing efforts to use the most efficient means to distribute

information, the IRS began a weekly satellite transmission of

tax programs, which were made available to cable outlets

and television stations free of charge.

Working with the print media, tax supplements for mass

media circulation, and several clipsheets aimed at specialized

audiences, were published in nearly 5,600 newspapers and

in-house newsletters, reaching an estimated audience of approximately 532 million. US4 Today published a special tax

guide reaching millions of readers. The American Forces

Press Service published a special "income Tax Edition,"

which was distributed to over 1,000 publications worldwide

having an estimated readership of more than 4 million

military and civilian personnel.

Educating Taxpayers

Throughout the year, IRS offered a wide variety of educational and assistance programs designed to help people meet

their Federal tax obligations.

The Technical and Miscellaneous Revenue Act of 1988

(TAMRA), the major new law this year, included the Taxof Rights. Efforts to educate people required

Taxpayer Service to coordinate with other IRS functions to

make this information available, as in the development of

Publication 1, "Your Rights as a Taxpayer."

The Volunteer Income Tax Assistance (VITA) and Tax

Counseling for the Elderly (TCE) programs trained volunteers

to prepare tax returns at sites throughout the community.for

people with special needs and for whom professional help

was often out of reach. Those assisted included the lowincome, handicapped, non-English speaking, and elderly.

Over 77,000 VITA and TCE volunteers assisted 2.6 million

people. In addition, nearly 64,000 banks, post offices and libraries volunteered their services to distribute tax forms and

many also served as assistance sites.

To promote the use of volunteers in order to help more

people, IRS worked with national and local community service organizations, as well as state and local governments, in

cooperative efforts to recruit, train, and retain active volunteers. Through joint efforts with the Federation of Tax

Administrators (FTA), the number of federal/state cooperative

projects grew from 180 in 1988 to 253 in 1989, an increase of

over 40 percentThe Community Outreach Tax Assistance Program also

provided tax assistance and information to more than 1.0

million people.This program offered tax assistance at convenient times and locations in the community for people who

were unable to seek help at IRS offices during regular business hours. IRS representatives discussed pertinent tax law

topics and prepared Federal tax returns for special interest

groups such as small business owners, self-employed people,

farmers, and retirees.

Educating the nation's young was another avenue IRS employed to further voluntary compliance. In 1989, 42 million

high school students nationwide studied the Federal tax system through the Understanding Taxes Prograrri. With the

cooperation of the Joint Council on Economic Education and

the Agency for Instructional Technology, course materials are

being developed to extend this program to eighth-grade

students.

Following a successful pilot in 1988, the IRS formally established the revised Small Business Tax Education Progra5in

designed to educate small business owners and other selfemployed individuals about their rights and responsibilities

as business taxpayers. This program is based on partnerships

between IRS and community educational facilities. Course

materials containing instructor and student guides and a

videotape were designed to be tailored to fit the needs of different audiences. Over 1,382 colleges, universities, and

business associations began using these program materials.

IRS also maintained valuable liaisons with the professional tax practitioner community. Practitioner institutes

provided a forum for IRS and preparers to discuss mutual

concerns.

Forms and Publications

The IRS continued efforts to improve the quality of tax forms

and instructions and taxpayer information publications by involving the users in the process. During the tax filing season,

taxpayers and tax practitioners in 12 cities around the country participated in town meetings convened to raise issues

and opinions on forms, instructiorm, and publications. The

IRS released advance copies of major tax forins early in the

summer to solicit comments from the users of those forms.

Groups of taxpayers met in focus groups to study forms including a new version of Form 1040A that could be used by

people with retirement income.

Hundreds of suggestions resulted from this customer contact regarding forms, instructions, publications, and IRS

operations. Many of these have been adopted already; more

will be in the next year or two. Two new publications, one

targeted for military personnel and one for stuclents~ are the

A taxpayer in the early 1970's visits an IRS

office for help on his tax return. Whether

in years past or today, courteous and accurate service is a vital part of all the IRS

programs. 'A
direct result of suggestions made by taxpayers. And to help

elderly taxpayers, a large print worksheet of the tax return

form is now in Publication 554, "Tax Information for Older

Americans."

The IRS conducted a survey to sample taxpayer opinions

on Publication 2, "Ibe ABC's of Income Tax," which was developed in response to taxpayers' requests for simpler tax

information. Ibis publication is easy to read, and will help

taxpayers understand the basic tax rules that apply to most

taxpayers. It provides examples of how the law applies in the

most common situation.

The purpose of the survey was to identify whether Publication 2 could be substituted for Publication 17, "Your

Federal Income Tay," which is a much larger publication. As

a result of the survey, the quantities of Publication 17 will be

reduced and quantities of Publication 2 will be printed.

Although most simplification efforts have concentrated on

forms used by individuals, IRS is also concerned about reducing burden and complexity for businesses. To help these

taxpayers, IRS developed a new Form 940FZ, Employer's

Annual Federal Unemployment Tax (FUTA) Return. It is a

short, simple form designed for use by employers who do

business in only one state. Nearly four of the five million employers who are liable for FUTA can file this shorter form.

Employees at three Fornis Distribution Centers filled

about 15 million taxpayer orders for forms and publications,

most of them within 48 hours of receipt More than seven

million orders came in over the toll-free order telephone systems during 1989. The 15 million filled orders represent a

decrease from what was filled in fiscal year 1988. This decrease can be attributed to: (1) the impact of the Tax Reform

Act of 1986; and (2) the special mailout of I I million Publicadon 920s, "Explanation of the Tax Reform Act of 1986," to

taxpayers during 1988.

.

IRS mailed about 119 million tax packages to individual

income tax filers and business tax return filers. More than

425 million tax forms and instructions were distributed to

taxpayers through the voluntary services of nearly 64,000

libraries, banks and post offices.

A new system for updating the Taxpayer Information Publications was implemented this year. State of the art software

is now used to update files previously maintained and updated on magnetic tape. A publication file can be updated by

a tax law specialist, sent to the typesetting contractor, and

camera copy is received in two or three days. This new process reduces the turnaround time by as much as two weeks.

Problem Resolution Program

A major goal of the Problem Resolution Program (PRP) is to

solve tax problems that have not been resolved through normal procedures. PRP represents the interests and concerns

of taxpayers within the IRS and seeks to prevent future problems by identifying the root causes of such problems. During

1989, 407,000 taxpayers received PRP assistance in solving

their tax problems.

The Taxpayer Ombudsman, an executive reporting to the

IRS Commissioner, directs the program. Each IRS district, service center and regional office has a Problem Resolution

Officer 'PRO', In resolving problems and protecting taxpayer

rights, PROs have authority to intervene to assure IRS actions are correct and appropriate. PROs also publicize PRP

through the media, and meet regularly with tax practitioner

associations, congressional staffs, and outside groups to promote and explain the program.

The PRP staff also works with other IRS functions to improve existing systems and procedures and implement new

laws. A major effort in this regard was implementation of the

Omnibus Taxpayer Bill of Rights. Effective January 1, 1989,

authority to issue Taxpayer Assistance Orders (TAOs) was

granted to the Taxpayer Ombudsman. This authority was

delegated to Problem Resolution Officers, as field representatives of the Ombudsman.

Layout and design of tax forms and

instructions, as late as 19&3, was a laborintensive process involving hot metal

page make-up procedures. A large publication could take 5-7 days to typeset and

required 4-6 type compositors for page

make-up.

TAOs may be issued when, in the judgement of the Ombudsman or PRO, a taxpayer is suffering, or is about to suffer

a significant hardship as a result of an IRS action or inaction.

A TAO can order the function that is handling the taxpayer's

case to take appropriate steps to relieve the hardship. 'Me

order can also suggest alternative actions to resolve the

case. Requests for such relief may be made by taxpayers,

their representatives, or by IRS employees on behalf of

taxpayers.

During the year, PRP processed 12,083 Applications for

Taxpayer Assistance Orders (ATAOs).

Public Affairs

Public Affairs Officers (PAOs) in each field office and in the

National Office use a variety of communication means to

inform and educate IRS employees and outside audiences

about changes in tax laws and tax return processing

procedures.

PAOs provide information on changes in tax law and processing procedures, potential tax filing problems, taxpayer

rights, tax assistance available, and many other subjects. This

Today, using computer-aidcd design of the

Tax Forms Automated Composition Systern (TFAC$), the layout and design of tax

forms and instructions con be accomplished in about hall the time previously

required using a hot metal process.

information is directed to specialized audiences such as taxpractitioners, state government officials, Congressional staff,

businesses, media, civic organizations, and to the general

public, and IRS employees. This is accomplished through the

use of radio, television, printed materials, news releases, factsheets, tours, teleconferences, speakers, tax practitioner

newsletters, the IRS Annual Report, and other media.

Publicity efforts last year emphasized areas such as the

Problem Resolution Program as the advocate of the taxpayer,

taxpayer rights, and informing taxpayers of the importance of good recordkeeping, starting early to file, being aware of

common mistakes and knowing about available assistance

services. Activities highlighted electronic filing, plans for

redesigning the tax processing system, IRS renewed commitment to quality and customer service and efforts to recruit

and train a top-quality workforce with emphasis on insuring

integrity and security of employees.

PAos worked closely with other IRS offices on programs

such as cooperative efforts with state tax officials to provide

taxpayers with joint news releases, radio and television interviews, speakers, tax forms, and assistance under the

"One-Stop Service" concept.

Field PAOs had more than 52,000 media contacts; the

staff in the National Office Public Affairs responded to over

3,200 inquiries. Field PAOs coordinated requests for nearly

4,200 speakers to address civic groups and professional

tax groups.

'A
Enforcing the Law

V

oluntary compliance continues to be a

prime objective for the IRS. While the

majority of taxpayers voluntarily report

their taxes without any enforcement

action, two future automated systems - Underreporter and Integrated Collection -will aid

in identifying those people who do not report

all their income. One of the most successful

Organized Crime Drug Enforcement Task Force

Program investigations last year was Operation

Polar Cap, a multi-agency investigation of a worldwide drug trafficking/money laundering operation.

Examination

Examination administers a nationwide audit program involving the selection and examination of all types of Federal tax

returns, except returns examined by the Exempt Organizations, to determine correct liabilities of taxpayers.

Examinations are conducted either through interviews or

correspondence.

The IRS examined 985 thousand individual income tax returns in 1989, of which 786 thousand were examined through

office and field examination programs at district offices. District examinations are normally conducted at an IRS office or

at a taxpayer's place of business. Of the total, 199 thousand

returns were examined through the service center examination program.

District and service center examination of individual taxpayer returns resulted in $42 billion additional tax and

penalties, and refunds totaling $318 million.

In addition, service center tax examiners correspond with

taxpayers to resolve questions regarding filed tax returns.

Through this program, service center tax examiners corrected 412 thousand individual tax returns resulting in

recommended tax and penalties of $555 million. (Corrections

are not considered examinations and are not counted in the

examinations figures above.)

Through efforts in districts and service centers, Examination verified or corrected 1.07 percent of all returns filed in

1988. Overall, .92 percent of all individual returns were

examined.

I L

The International organization adminstered 35

income tax, 16 estate tax and 7 gift tax treaties

worldwide and held its first international tax

conference with practitioners. A new program

was launched to begin accepting employee plan

returns filed on magnetic media, and Employee

Plans and Exempt Organizations initiated a special

emphasis program to increase compliance with the

charitable solicitation rules. IRS established a

telephone hotline to help charities determine the

value of premiums offered to and answer questions

from donors.

IRS examined 108,999 returns with tax shelter issues.

Examination of these returns resulted in total recommended

additional tax and penalties of $12 billion.

The Tax Reform Act of 1986 significantly reduced the tax

benefits for tax shelter investors, resulting in substantially

fewer promotions and registrations of tax shelters. IRS is

continuing to reduce existing inventories of old tax shelter

investor returns by establishing joint agreements between

taxpayers and the Government to settle tax disputes.

Through the Coordinated Examination Program, teams of

the most experienced examiners and specialists in the IRS

conducted examinations of 1,570 of the largest and most

complex domestic and foreign-controlled corporations. In

1989, the examinations conducted through the Coordinated

Examination Program resulted in recommended tax deficiencies and penalties totaling $10B billion.

Through the Automated Examination System (AES), IRS

continued its initiative to automate the examination process.

In previous years, AES distributed 18,000 portable computers

for use by revenue agents and group managers within Examination, International, Appeals, and Employee Plans and

Exempt Organizations. Agents also received an additional 681)

desktop computers for use in team or large case

examinations.

During 1989, the accomplishments of this initiative included the distribution of hard disk laptop computers and

computer software for examinations of employment, engineering, excise, and corporate taxpayers. Also, test sites were

selected and both tax auditors and tax examiners were

trained in the use of AES equipment and software.

Industry Specialization Program

The IRS established the Industry Specialization Program to

ensure uniform and consistent treatment of issues nationwide and to provide better identification and development of

issues. It involves continuing efforts to identify industry

groups requiring centralized coordination and expertise.

Industries are selected based upon the complexity and significance of tax issues. This information is obtained through a

nationally coordinated industry study.

Currently, there are 19 designated industries and two industries under study. Once an industry is designated for the

program, the Examination and Chief Counsel functions assemble a team of experts. This team becomes the focal point

for providing legal and audit direction to examining agents.

The primary purpose of this program is to promptly identify and resolve issues having industrywide impact.

Research to Improve Compliance

Under the-Taxpayer Compliance Measurement Program

(17CMP), the IRS conducts a variety of large-scale compliance

studies. For TCMP income tax studies, representative samples of filed tax returns are selected and thoroughly audited. 'Me IRS uses the data from the TCMP audits to measure overall compliance levels and for tax gap research studies.

TCMP audit data is also the primarysource of information

for IRS systems designed to select returns for examination.

A TCMP survey for corporations with assets under $10

million is currently underway and will be completed by May

31, 1990. A TCMP survey of individual taxpayers will start

January 1, 1990 and be completed by May 31, 1991. These

surveys will provide the first comprehensive measurement of the compliance effects of the Tax Reform Act of 1986.

In addition to TCMP, IRS conducts special studies to de- termine pockets of noncompliance and conducts research to

determine the reasons for noncompliance. For example, the IRS is conducting examinations to study taxpayer compliance with specific provisions of the Tax Reform Act of 1986. The

IRS uses the inforniation derived from these types of specific studies to determine future enforcement strategy.

This young man in 1935 may have been

an employee in the Sales Tax Division

which administered taxes on items such

as oleomargarine (colored or uncolored),

adulterated butter, filled cheese, mixed

flour, mechanical refrigerators, and coconut oil.
W Information Retimis Program

The IRS document matching program, also referred to as the

Information Returns Program (IRP), is a computerized cornpliance program used by the IRS to match third-party

infonnation on items such as wages, interest, dividends, and

certain deductions with the amounts reported by taxpayers

on their income tax returns. The IRS also uses the information to identify people who are reported to have received

income, but did not file returns.

The IRS received 990 million information returns in its

tax year 1987 Information Returns Program (IRP), including

over 220 million Forms W-2, Wage and Tax Statement, and

W-2P, Statement for Recipients of Annuities, Pensions, Retirement Pay, or IRS Payments, received and processed by the

Social Security Administration.

More than 100 million of the total receipts were filed for

deductions rather than income items. These consisted of

information returns filed by trustees for contributions to individual retirement arrangements and mortgage interest

deductions.

The IRS processes all magnetic media and paper filed

information returns received. Over 920 million, or 93 percent,

of the information returns were submitted on magnetic

media.

An output of IRP is the Underreporter Program, the primary method used by IRS to resolve apparent discrepancies

between data reported by taxpayers on their tax returns and

data reported by payers on information returns filed with the

IRS. For tax year 1986, during the July 1988 through August

1989 period, approximately 3.7 million taxpayers received

CP-2000 notices that reflected apparent discrepancies. Some

40 percent of taxpayers contacted agreed fully with the proposed assessments shown on this nofice. In addition to the

Underreporter Program, some 3S million taxpayers were

contacted through Collection's Nonfiler Program for apparent

failure to file tax returns based on payer information returns

filed with the IRS. (See Statistical Table 10A for details.)

The Automat6d Underreporter (AUR) System was conceived to move the Underreporter Program toward a

paperless environment using a network of personal computer

terminals at each tax examiner's workstation and linking

them to a central computer. The AUR System will provide

both IRP and taxpayer account data on-line, making it easy

for tax examiners to analyze and complete the IRP matching

process. The primary purpose of the matching process in the

Underreporter Program is to determine if a discrepancy

notice to the taxpayer is applicable.

The AUR model will be tested to measure the effectiveness of the screen displays and usefulness for job

performance. The system will provide case control, on-line

data for case analysis, calculations, and Service Center Replacement System (SCRS) interface for functions such as

notice generation. The AUR System will promote the IRS

"One-Stop Service" concept by providing access to district

offices. Expanded notice information to Taxpayer Service in

the district office will enhance IRS customer service capabiliLies and further this concept.

IRS completed the AUR System analysis and design in

1989, enabling testing to begin and implementation to take

place at a designated pilot site in fiscal year. 1990.

Payer Compliance

To aid payer compliance, IRS sent a mailout to all filers of

information returns giving them requirements and guidelines,

including detailed information covering changes in fonns,

backup withholding, magnetic media reporting, paper document reporting, and specific form preparation. Also included

in the mailout were transmittal documents and mail labels

for subsequent use.

IRS sponsored a nationwide series of seminars to educate

and update payers on magnetic media reporting. In addition,

IRS provided speakers to a variety of organizations. These

speeches covered all areas relating to information return reporting. The most requested topics were backup withholding

and filing requirements.

As part of the joint IRS/payer effort to avoid unnecessary

cases of backup withholding under the Interest and Dividend

Tax Compliance Act, payers were furnished a list of payees

designated as having incorrect Taxpayer Identification Numbers CMs) on existing financial accounts for tax year 1987.

IRS also furnished payers a suggested message to be sent to

the payees advising them of the potential backup withholding

from their accounts in subsequent years if the TINS are not

properly cerfified. Backup withholding is currently required

for those accounts with missing TINs.

The IRS continued to assess appropriate penalties for failure to file on magnetic media and for delinquent filing of

information returns. Generally, payers are required to utilize

magnetic media when they file 250 or more of a specific type

of information return.

The requirements am applied separately to original and

corrected submissions. For Forms 1099-INT, 1099-DIV, 1099-

Off) and 1099-PATR, the magnetic media threshold starts

when an aggregate of 50 or more information returns are

filed. For Form 1099-B, all information returns must be filed

utilizing magnetic media. The due date for filing of information returns is generally the last day of February, following

the close of the tax year.

Colledion

Collection is responsible for securing delinquent Federal tax

returns and for collecting taxes where the amount owed is

not in dispute, but remains unpaid. Collection officials in the

National Office set policy and write procedural guidelines for

all field offices. The field offices are divided into three major

components: Service Center Collection Branch (SCCB), Automated Collection Branch (ACB) and Collection Field

Functions (CFF).

The SCCB is Collection's first point of contact with taxpayers who are delinquent in filing returns and paying taxes.

7be SCCB sends notices to taxpayers and acts on the replies

to the notices. The SCCB also addresses taxpayers' noncompliance through the use of automated Internal Revenue Code

6020(b) and Substitute for Return Programs for businesses

and individuals, respectively. These Programs automate the

preparation and assessment of returns for taxpayers who

have been notified of the delinquency and have not filed

their returns. Approximately 949,000 returns with assessments exceeding $2.1 billion were processed under these

programs this fiscal year.

The SCCB also reviews selected Forms WA, Employee's

Withholding Allowance Certificate, to determine whether employees have the correct amount of tax withheld from their

wages and directs employers to increase the amount withheld when appropriate.

The ACB is the next point in the collection process for

the tax accounts and delinquencies that are unresolved by

the SCCB. The 21 ACB call sites attempt to contact the taxpayer and resolve the delinquency by telephone. Collection

is piloting a Prototype automation system at one of the call

sites, which allows the ACB employees to view on one

screen information from several computer data bases, such

as the data base showing the current account payments and

return filing. This innovation should improve Collection's capability to resolve taxpayers' accounts as well as enhance

the quality of ACB performance.

The Collection field employees at the 63 district offices

have the responsibility for the last step in the collection process. Accounts are assigned to revenue officers who can

make personal visits to the taxpayers to secure information

on which to resolve the account.

Collection Actilivity,

This fiscal year, Collection secured $23.5 billion, compared

with $23.3 billion last year. A total of $9.7 billion was collected as a result of the first bill, and subsequent billings

yielded $5.6 billion. Additional action on taxpayer delinquent

accounts generated $6.7 billion, and various other programs

yielded $15 billion. (See Statistical Table 13, Delinquient Col- lection Activity.)

Collection is also responsible for examining certain employment tax returns. Approximately 95 percent of the cases examined resulted in proposed assessments. Proposed assessments reached $93S million for approximately 16,604

retunis examined under this program. In addition, 1,405 de- linquent returns were secured for $9.7 million in assessments. As a result of these examinations, Collection reclassi- fied over 76,761 workers from independent contractors to employee status. Revenue officer examiners secured an addi- tional 8,524 information returns resulting in recommended

penalties of over $4 million.

Collection has a comprehensive automation initiative

called the Integrated Collection System (ICS), the goal of which is to improve Collection quality, productivity, timeliness of case processing, and customer service in over 650 Collection offices nationwide. Collection intends to accomplish this goel by strvarnlining its current labor-intensive

Paper system. A new common computer data base is planned which will allow the sharing and exchange of information by employees in the Collection functions and will

automate many manual tasks, reduce paperwork, and pro.

vide quicker access to more current taxpayer information.

IRS is currently evaluating formal vendor proposals and

plans to award a contract early in fiscal year 1991.

A major Collection initiative was the creation of an Office

of Continuous Quality Improvement under the Assistant

Commissioner (Collection). The Office has the responsibility

for bringing together all existing quality initiatives and programs in the Collection organization and for providing a

unified purpose and strategy.

Criminal Investigation

vCArfTitnhaeJ tanxeasntifaction (CI) promotes voluntary compliance

urrency laws through the effective enforcement of the tax code and related criminal statutes. Special

agents of Criminal Investigation identify and investigate those

individuals for taxand currency violations who organize,

direct and finance high-level criminal enterprises, and those

leaders who try to circumvent the voluntary tax system.

These individuals may be involved in narcotics-related

crimes, organized crime, public corruption, or in other domestic or international violations. A balanced compliance

program is maintained among different enforcement programs through the criminal investigation and prosecution of

individuals in a variety of industries and occupations.

One way Criminal Investigation investigates drug leaders

and financiers of the illicit drug trade is through participation

in several multi-agency enforcement programs. CI is an integral part of the highly successful Organized Crime Drug

Enforcement Task Force (OCDETF) Prograrn-a multi-agency

enforcement effort. Cl provides nearly 50 percent of Treasury's effort to the OCDETY Program and participates in

nearly 70 percent of all OCDEW investigations, second only

to the Drug Enforcement Adn-tinisbration.

The OCDE77F Program was established to identify, investigate and prosecute members of high-level drug trafficking

enterprises and to destroy the operation of those

organizations.

One of the most successful OCDETF investigations, in

which Criminal Investigation was a leading participant, was

Operation Polar Cap, a multi-agency investigation of an international drug trafficking/money laundering operation. This

money laundering organization laundered over one billion dollars in drug proceeds, much of which was transferred to

banking facilities in South America and Europe. The investi- gation resulted in dismantling the organization, indicting the

major participants, seizing in excess of $80 million, and freez- ing nearly $500 million which was being funneled through

several New York banks.

The enforcement of currency laws and money laundering

statutes is closely related to the investigation of narcotics

crimes. Narcotics traffickers generate huge amounts of currency from the sale and distribution of drugs and channel

the money into legitimate investments and assets, often in contravention of existing currency laws.

A

.1
Criminal investigation enforces nearly all the provisions

of the Currency and Foreign Transactions Reporting Act,

commonly known as the Bank Secrecy Act. These regulations

require financial institutions or individuals to report certain

domestic and foreign currency transactions to the Federal

government. Failure to comply with regulations is a criminal

violation under Tide 31 of the United States Code.

During 1989, Criminal Investigation made seizures of

more than $40 million through enforcement of the money

laundering statutes under Title 18 of the United States Code.

Under these provisions, money and assets obtained from or

used in an illegal activity are forfeited. The statutes are effecL

Proper training of agents is critical to the

success of Criminal investigation's en~

forcement efforts. New special agents

receive 19-weeks of training at the Federal

Law Enforcement Training Center in

Glynco, Georgia The Program includes

criminal investigator training, tax for criminal inuestigators, and special agent

investigative courses

tively used in narcotics-related violations and in any financial

investigation where violations of currency laws exist.

IRS successfully used these forfeiture provisions last year

in operation Greenback, a coordinated Department of the

Treasury effort. The operation investigated violations by individuals involved in laundering large surns of currency,

generated primarily from narcotics trafficking, through financial institutions in Florida.

The IRS is one of the major participants in the Justice Department's Strike Force Program. Working on this program

with other agencies, CI enforces statutes against criminal activity in organized crime and investigates and prosecutes

organized crime subjects. IRS ranks second, only behind the

Federal Bureau of Investigation, in participation on the Strike

Force Program. CI also enforces the wagering tax laws and

conducts investigations relative to the pornography industry.

Another important area of C1 is the Questionable Refund

Program, a proactive approach to detect and stop claims for

multiple fictitious tax refunds. During this year, more than

$19 million in fictitious clairris were detected prior to being

refunded.

Each of the ten IRS service centers has a Questionable

Refund Detection Team (QRDT). Tax examiners review a

portion of the millions of refund returns to identify refund

schem(%. When a scheme is identified, the information concerning the characteristics of the scheme are provided to all

other centers to assist in identifying possible multi-center

schemes. All available information on the perpetrator is forwarded to the district offices for prompt investigation.

Although CI devotes considerable resources to special

emphasis activities such as narcotics, organized crime or

money laundering, equal attention is given to investigating

violations involving income from legal sources.

Two Cl cases during 1989 involving income tax violations

from legal income sources, which received nationwide Pubficity, were against Leona Helmsley of New York and Lyndon

The computer training lab at Glynco provides instruction

in all types of industry standard software. Last year, 300 senior special agents were trained on electronic spreadsheet

programs, data base management systems, and how to retrieve data from computers the IRS has seized.

Employee Phms

The Employee Plans function administers the tax laws governing pension plans by issuing letters determining whether

a plan qualifies under the law, examining returns to ensure

that plans are complying with the law, and publishing rulings

to clarify the law. During 1989, IRS issued 79,872 of these letters and examined 36,681 returns.

Many complex qualified plan provisions of the Tax Reform Act of 1986 (TRA 86) were addressed by Employee

Plans personnel to assist in the development of Treasury regulations on these provisions. Guidance was published in the

form of revenue rulings, revenue procedures, notices and announcements; new programs were initiated for the approval

of qualified plans. Speakers addressed various practitioner

groups across the country to highlight new Employee Plans

developments and receive insights first-hand from

practitioners.

With Employee Plans assistance, regulations involving

TRA 86 participation and coverage provisions were issued on

the rules for determining the portion of an employer's workforce that must benefit Linder a qualified plan. Regulations

were al~o issued on the rules for integrating benefits undera

qualified plan with benefit,; provided under the Social Security System.

Other significant issuances included a revenue ruling on

plans that had been terminated, but had not distributed

assets to plan participants, and two notices that provided

H. LaRouche, Jr. ofVirginia. guidance in the form of model plan amendments that could

Mrs. Helmsley was convicted of evading approximately $1 be adopted by plans in order to comply with TRA 86 provimillion in taxes by using corporate funds for personal ex- sioni that had become effective. A notice providing a

penditures. The hotel executive was sentenced to four years simplified method that retirees can use for calculating the

in prison, 750 hours of community service and fined $7.1 tax treatment of their retirement distributions was also

million for tax evasion, mail fraud and conspiracy. issued.

Mr. LaRouche was sentenced to 15 years in prison on Revenue Procedure 89-13 was issued to describe the procharges of Federal conspiracy, tax fraud, and mail fraud vio- cess for requesting notification and determination letters on

lations, stemming from a mulfi-agency grand jury investi- the qualification of new regional prototype defined contribugation into his fund-raising activities. tion and defined benefit plans. TWs program will enable

CI is developing an Automated Criminal Investigation Sys- more entities, including law finns, accounting firms and actutem to provide special agents with modem computer tools arial consulting lurns to provide pre-approved prototype

for the analyses of business records and other investigative plans to their clients. Burden and expense is lowered for tax.

applications. This new system will be integrated with other payers and the IRS realizes savings in review and processing

IRS automated systems. time.

Critical to the success of Criminal Investigation's enforce- A new Program was launched at the Andover Service

ment efforts is the proper training of agents. Last year, 321 Center to begin accepting Employee Plan returns filed on

new agents received 19 weeks of training at the Federal Law magnetic media. In 1989, a successful Pilot test was conEnforcement Training Center in Glynco, Georgia. The training ducted for processing these returns arid supporting

progr.am

consists of criminal investigator training, tax law for schedules. Due to increased interest in this program from

criminal investigators, and special agent investigative many of the large accounting firms, up to 10,0()o automated

courses. returns may be processed in 1990. The filing of returns on

magnetic media provides benefits to both taxpayers and the

IRS. These benefits include a reduction in the lengthy processing cycle experienced with paper returns, a reduction in

IRS processing effors, and ultimately a reduction in the costs

associated with the handling, filing, and retrieval of paper

returns. Taxpayers also benefit from reduced return preparation and postage costs.

Exempt C"amizations

The Exempt Organizations function administers the tax laws

governing exempt organizations and private foundations. In

1989, IRS disposed of 57,757 applications from organizations

requesting qualification for exemption under the law and

examined 15,034 returns to ensure that organizations are

complying with the law. IRS also published numerous tax rulings to clarify the law. (See Statistical Table 17 for details.)

In response to a Congressional request that the IRS monitor whether sponsors of charitable fundraising events are

providing accurate information on the extent to which contributions are deductible, the Assistant Commissioner

(Employee Plans and Exempt Organizations).initiated a special emphasis program to increase compliance with the

charitable solicitation rules. The two-part effort to prevent overstated deductions includes educating the soliciting organizations and conducting a special examination program to

decrease the abusive and misleading fundraising practices of

some charities.

Publication 1391, "Deductibility of Payments made to

Charities Conducting Fundraising Events," was distributed to

400,000 charitable organizations as part of an on-going educational program that includes speeches, taxpayer assistance

workshops, and revisions to forins and publications. IRS

established a telephone hotline to help charities make a determination of the value of premiurns offered in fundraising

activities and to help charities answer questions from donors

on the deductibility of contributions made.

Charitable organizations engaging in misleading or abusive practices are referred for examination. In examinations

of charitable organizations, where there is evidence that

donors received something in return for their donations, individual donors are referred for examination. The educational

and renewed enforcement activities are to address the concerns of Congress and to improve voluntary compliance in

this area.

Two significant court cases were decided in the Exempt

Organizations area. In Association of theBar of the City of

New York v. Commissioner, the Second Circuit held that a

bar association's practice of rating (arid publishing the rating

of) candidates for elective judicial office violated the Internal

Revenue Code section 501(cX3) prohibition against political

campaign activity and thus disqualified it from reclassification as a tax-exempt charitable and educational organization.

This decision upheld the IRS positions that this statutory

prohibition is absolute and that its violation does not depend

upon the motivation of the organization.

Ad
In Hernandez v. Commissioner, the Supreme Court held

that payments made to the branch churches of the Church of

Scientology for auditing and training services were not deductible charitable contributions under Internal Revenue

Code section 170. The Court applied the traditional quid pro

quo analysis to conclude that the payments were not deductible charitable contributions despite the religious nature of

the benefits.

Applications & Filing Forms

A major revision of the Employee Plans and Exempt Organizations determination letter applications was completed. The

revised forms simplify the inforniation required to be submitted and contain simplified instructions. The number of

incomplete applications received (which significantly delay

processing) will be monitored to evaluate the effectiveness of

the new applications.

A new Form 990EZ, Short Form Return of Organization

Exempt From Income Tax, was developed and is proposed

for adoption for 1989 filing. This form will substantially

reduce the record keeping and reporting burden for approximately one-fourth of the Internal Revenue Code section

501(c) organizations that are required to file an annual information return with the IRS.

IRS is redesigning the Annual Retum/Report of Employee

Benefit Plans to include pre-printed plan identifying inforrykation from the Employee Plans Master File. This action

eliminates the need for plan sponsors or plan administrators

to report certain plan information that does not change from

year-to-year. It is also expected to expedite and increase the

accuracy of the processing of these reftirris.

Intem-litionW

As an increasingly global economy continues to impact the

world's tax authorities, International plays the lead role in

devising strategies to assure that worldwide revenues ue

the United States are assessed and collected. With r ibility for all international tax matters, the Office of the

Assistant Commissioner (international) develops, executes

and evaluates assistance and compliance programs around

the world.

International kept its commitment to quality customer

service, maintaining a high number of taxpayer service visits

to U.S. embassies and consulates to help U.S. taxpayers living abroad and in U.S. territories and possessions, including,

for the first time, visiting the U.S. Naval Base in Guantanamo,

Cuba, to help 4500 U.S. military and civilian citizens there.

Year-round taxpayer assistance by IRS staff at 14 over_

seas posts is supplemented by these visits and by taxpayer

education efforts such as Volunteer Income Tax Assistance

(VITA) and Outreach Programs. VITA classes dramatically increased, from 4,016 volunteers trained in 1988 to 5,047 in

1989. Outreach sessions increased from 145 in 1988 to 265 in

1989, reaching over 11,000 U.S. taxpayers worldwide. Coffespondence and telephone assistance helped 139,996 and

11,386 taxpayers respectively.

Threading the maze ol worldwide postal regulations, the

LL

viction of a Puerto Rico bank of failing to file reports of

currency transaction., over $10,000. For its role in a moneylaundering scheme, the bank was fined $25 million, the

!argestt,criminal nstitu on. fine ever imposed on a U.S. financial

International Enforcement Division provided program

direction

to

approximately 500 specially-trained examiners

based in 24 district offices within the United States. The Division recommended (1) net reductions in allowable foreign

tax credits of $32 billion; (2) adjustirnents increasing taxable

income by $6,8 billion; (3) penalties of $70 million; and (4)

increases in other foreign taxes of $4.5 million.

In addition to these accomplishments, International Compliance undertook a number of special projects. Prominent

among these projects is one for an automated objective audit

potential ranking system similar to that used for domestic

returns. Collection Division established the Automated

Collection System (ACS) for accounts in foreign countries.

These accounts are now being processed through Intemational's ACS site in Puerto Rico. ACS replaces formerly paper

and labor-intensive manual processing and improves respon.

siveness to taxpayers.

International's Office of International Programs administers 35 income tax treaties, 16 estate tax treaties and 7 gift

tax treaties worldwide and works in a technical advisory capacity with the International Tax Counsel, Department of the

Treasury, in negotiating new treaties. These treaties provide

for relief from double taxation, exchanges of information,

routine sharing of information, and simultaneous examinations. During the past year, this office successfully completed

negotiations in 122 cases for US. taxpayers who requested

relief from double taxation. International Exchanges and Activities Division honored 307 specific requests for information

from treaty partners. Routine exchanges of information were

enhanced with the first exchange of data on magnetic media,

in both directions, with a major treaty partner.

The IRS international Office is active in

providing technical and administrative

help to foreign governments wanting to

i

.mprove theirtax system.

International Tax Forms Program distributed tax forms and

publications to over 250 U.S. embassies and consulates, as

well as to IRS offices worldwide. International publicized

worldwide undelivered refunds, attempting to reach 800

taxpayers owed over $1 million in refunds returned as undeliverable by the world's postal authorities.

On the compliance side, the Examination Division examined 3,637 individual tax returns and 401 corporate and other

returns for a total of 4,038, resulting in total recommended

addil ionall revenue of $41 A million. Collection Division resolved 23,476 tax delinquency accounts and investigations,

collecting $48.2 million. An invesfigation by International's

Criminal Investigation Division was instrumental in the canTechnical and Administrative Help

International's Office of Tax Administrative Advisory Services

(TAAS) is active in providing technical and administrative

help to foreign governments wanting to improve their tax

systems. Project teams began long-term assistance projects

in the Virgin Islands and Puerto Rico. TAAS also performed

preliminary surveys to identify tax administration needs for

the governments of Jamaica, Mali, Nigeria, the Philippines,

Poland, Senegal, Taiwan and Thailand. Tax officials from Barbados, Columbia, Jordan. Pakistan, Paraguay, Saudi Arabia,

Singapore and Taiwan attended a TAAS middle management

seminar. The InterriationaLlState Visitors Program arranged

visits to the IRS for some 350 international and state tax

officials.

Another important TAAS activity is forging agreements for

coordinated exchanges of information and cooperative assistance with state governments within the United States.

Cooperation between the states and the IRS fosters growing

public respect for the tax system and increases voluntary

compliance. State tax administrators and IRS collaborated on

sharing of resources and one-stop shopping locations for

state and Federal tax forms and assistance. An important

new development is states' participation in electronic filing

programs and working with IRS in developing standards for

electronic data exchange.

International reached out to tax practitioners with its first

international tax newsletter, now being sent regularly to over

2,000 practitioners, and its first international tax conference

with practitioners. 'Me response to this first conference led

to the planning of a second one in Washington in December

1989 and its first such conference overseas in London in January 1990.

Plans for the '90s include working to help negotiate new

tax treaties, putting an objective electronic selection system

in place for better use of examination resources, and maintaining a high level of taxpayer service.

Disclosure

Nationwide, IRS responded to 19,507 requests made in calendar year 1988 under the Freedom of Information and Privacy

Acts, and provided telephone and walk-in services to 17,705

people in the National Office Freedom of Information Reading

Room.

Under the FederaVState Exchange Program, 56 state tax

agencies requested extracts from the IRS files, and 40 state

tax agencies received copies of adjustments resulting from

information returns reporting discrepancies. The IRS and the

states also exchanged results of their enforcement efforts.

New legislation was implemented making cities with populations of 250,000 or more and an income tax eligible to

participate in the program. Exchange agreements with all

interested affected cities were completed or are in process.

New programs were instituted to accommodate disclosures required by the Technical and Miscellaneous Revenue

Act and the Anti-Drug Abuse Act. The Acts allow the release

of addresses to Health and Human Services to help locate

blood donors who are potential AIDS victims and the release

of certain information returns to Federal agencies for the

administration of nontax Federal criminal statutes. Approximately 45 Federal agencies and 106 state tax agencies

received Federal tax information subject to confidentiality

safeguarding. More than 50 state and local welfare agencies

received information to verify eligibility for benefit programs.

Educational institufions received tax information for collection of defaulted student loans, and several Federal agencies

received information on Federal tax refunds offset against

Federal debts.

Because of statutory changes, there has been a proliferation of agencies receiving tax information. IRS National Office

and field disclosure personnel conduct on-site reviews of

procedures used by organizations receiving Federal tax information to prevent unauthorized disclosures of returns and

return information.

The IRS may agree to forward letters from both private

and government agencies to individuals at the latest address

available in IRS records. Specific humane circumstances must

exist for private requesters to participate in this program.

The IRS National Office processed approximately 55 requests

(involving 360,911 potential recipients) for forwarding services of 50 or more letters each.

'A
-i

Employee Programs

N

ew recruitment strategies

and techniques, preparing

to meet future human

resources needs, expanding

or enhancing employee programs,

and making Equal Employment Opportunities a reality in the organization

are some of the IRS achievements

during the past year. A Leave Bank

Program, a new Eldercare Counseling

program and a revised Incentive

Awards Program are three of the many

employee programs which help to

make IRS a competitive employer

through programs that assist with the

retention of a high-qualityworkforce.

Human Resources Management

As part of the plan to make the IRS the best employer in the

Federal sector, Human Resources developed new and innovative approaches to human resources management to recruit

and retain a quality workforce and to prepare for workforce

changes anticipated in the 1990's and beyond. IRS started

new programs, revitalized existing programs, and increased

management development.

New recruitment products and prograrns; reinforced the

college recruitment program. Award-winning advertisements

and targeted recruitment videos for the revenue agent and

revenue officer occupations were developed. The Campus

Executive Program was revitalized to ensure the involvement

of top-level IRS executives in the recruitment process. A new

quarterly newsletter shares innovative recruitment tech_

niques with all field offices. A new self-instructional recruiter

training course teaches qualifications of major occupations

and provides practical information for IRS recruiters. The IRS

Corporate Recruitment Plan, developed from interviews with

private sector corporations and government agencies, lays

out recommendations for recruitment strategies and

techniques.

The Competitive Recruiting and Examining Systems

(CRES), implemented last year, is. being expanded to include

optical scanning technology so that test results of job applicants are available within a few hours of administration.

CRES has already significantly streamlined IRS' ability to

hL

The equipment and style of clollie,,,have

changed since this

picture was a

n

,

but

IRS employees continue their dedication

to doing a quality job

recruit, examine and hire seasonal workers, and it is an importaril part of the filing season recruitment program. The

enhancement will result in substantially more dollar and staff

savings in seasonal recruitment efforts.

To more effectively reward employee performance, IRS

revitalized and simplified the Incentive Awards Program with

new and more efficient processing methods and redesigned

award certificates. Manager; are encouraged to reward toplevel performance and to continually motivate employees to

do their best. From a comprehensive analysis of the IRS Employee Suggestion Program, a more effective and streamlined

program

will result to improve agency operations. A revised

Perfonnance Management and Recognition System will support strategic initiatives by focusing on equal employment

opportunity, quality, and customer service objectives in managers' annual appraisals.

Program Enhancements

A new Eldercare Counseling Prograin provides RS employees

with information on how to find and evaluate quality eldercare services for elderly parents or other dependents. The

IRS on-site child care and AIDS education programs are

models for marry Federal agencies and for state and foreign

governments. A total of 11 on-site health improvement centers are operational and another 20 health improvement

programs are operating in IRS offices.

The Traumatic Incident Counseling Prograin, designed to

provide personal, professional counseling services to employees involved in a threat or assault, was expanded to provide

program training to field offices. A customized computerbased career development system, developed for use by

career advisors, is planned for implementation next year.

As a result of Executive Order 12564, which was signed

by President R~glan on September 15, 1986 and established

the goal of a Drug-Free Federal Workplace, the IRS impleiiiented its program on January 5, 1990. Notification was sent

to all employees on November 1, 1989. The IRS plan contains

a number of components: drug testing, manager training,

drug awareness education, and rehabilitation opportunities

through the Employee Assistance Program.

For the IRS to be prepared to meet all future human

resources management challenges, it must have a sound

strategic planning process. As a step to improve the quality

of strategic plans, the IRS intensified its efforts to identify significant demographic, societal, and technological trends

through "environmental scanning" in order to plan for the

worldorce-of-the-future.

IRS enhanced the Workforce Research Analysis Program

(WRAP), an automated personnel management information

system. Now offered to WRAP users are standardized workforce reports, programs for producing special reports, and

faster access to archival workforce data. WRAP allows all

managers and their staff analysts to conduct immediate and

interactive research into the personnel management characteristics of the entire IRS worldorce. WRAP is now the

principal personnel management research too] with the IRS.

A new management development system incorporates

management selection, core training curriculum, and continuing management education programs into an integrated . management selection and development process. Leadership

Excellence and Development is the new entry-level development program. The Management Achievement Program is a

selection and development process for existing managers

and supervisors to enhance their career self-development

activities.

Training 2000

The IRS conducted a study to look at the strategies and di.

rection needed for the massive and continuous training

needs that will be created as a result of the impact of technology and the changing workforce. The report that resulted

from the study, Training 2000, outlines the ideal training system for the IRS, based on in-depth analysis of progressive

institutions in the public and private sectors and the most

promising technologies that can deliver quality training and

contain costs. The report includes an implementation plan

that details how the IRS intends to meet the needs and incorporate those technologies in the years to come.

The report focuses on ways to optimize limited resources

expanding in areas such as: (1) Distance Learning, which

uses a live classroom broadcast with two-way audio and

video; (2) Expertline Systems, representing a broad category of artificial intelligence software that organizes and applies

the knowledge of human experts to specific problems; and

(3) Embedded Training in on-line computer applications,

which allows for training in the use of a particular computer

application to be delivered by the computer as the person

works.

The IRS is the first agency to conduct a study of this

magnitude. The report was also presented at the 1989 Annual

Conference of the American Society for Training and

Development.

Leave Bank Program

The IRS will participate in a five-year leave batik experiment

as authorized by Public Law 100-566, the "Federal Employees

Leave Sharing Act of 1988." The Leave Bank Prograim permits

employees to contribute unused accrued annual leave to a

leave bank for withdrawal and use by leave bank members

who need such leave because of it medical emergency.

The IRS Leave Bank Program will consist of eight independent leave banks (one for each region and the National

Office). Each leave bank will be administered by a th~eemember Leave Bank Board consisting of two management

officials and a representative from the National Treasury Ernployees Union (NIEU).

The new Leave Bank Program became effective July 31,

1989. An interim procedure will serve IRS employees in this

area until the leave bank process is fully automated and

negotiations with the NTEU are completed.

Leave-sharing in the IRS is one of many initiatives designed to make the IRS a competitive, empathetic, personal,

and humane employer with program that assist with the retention of a high-quality workforce. With participation in the

new Leave Bank experiment, the IRS continues its leadership

role for expansion of the leave-sharing concept in the Federal sector.

Collective Bargaining

IRS completed negotiations with NTEU over its principal bargaining agreements. Negotiations began in November 1988

and ended in February 1989. The new agreements, one covering service center bargaining unit employees and the other

the remainder of IRS bargaining unit employees, went into

effect on July 2, 1989.

A primary goal of the IRS is to improve

the overall health of its entire workforce,

Many employees can participate in a

health improvement program offered at

on-site fime~s centers.
These agreements will remain in place until June 1994

The -five-year duration of the agreements (compared with the

typical three-to-four-year Federal sector agreements) represents a first in the Federal sector.

Though these contracts are primarily an evolution of

prior agreements, several major changes were made that are

consistent with recent IRS initiatives in enhanced recruitment

and retention. Foremost among these are relaxed work rules

that bring greater flexibility to the process of outside recruiting for entry-level positions. The new provisions are designed

to allow the IRS to recruit and hire aggressively, but in a

manner that does not adversely impact the ability of existing

employees to progress within the organization.

The other major change, aimed at retention, is a provision that gives some senior employees an opportunity to

relocate within an appointing office. The new relocation system balances mission requirements with employees' personal

needs. Taken together, the new hiring and relocation provisions enhance the ability of the IRS to hire the best available

candidates, while simultaneously ensuring that the needs of

current employees are adequately addressed.

The IRS and NTEU also negotiated the Total Evaluation

Performance System (TEPS), which evaluates the quality and.

production of service center employees, based on a fixed- -

performance standard concept. The hallmarks of this system

are faster, more accurate performance appraisals, reduced

administrative overhead for managers, and a fairer, more

easily understood system for affected employees. The TEPS

has been installed on an upgraded computer system

so the system will be operational in 1990.

Equal Finployinent Oppodunity

IRS continues to make advances in its overall accomplishments within Equal Employment Opportunity (EEO). Strategic

Business Plans were developed to ensure that EEO is evaluated and monitored with the same degree of emphasis as ail

other functional programs. Programs are being expanded

beyond the traditional EEO perimeters. The organization is

positioning itself to be prepared to face a dramatically different labor market than the one to which IRS has been

accustomed.

A major accomplishment for this year was the publication

of Document 6491, "Equal Employment Opportunity Handbook for Managers." Approximately 18,000 copies were

published and distributed to IRS supervisors, managers and

executives. This new publication is the first comprehensive,

yet precise and easy to read, EEO document published and

distributed for IRS management. Information about EEO and

affirmative employment is disseminated at various times during an IRS employee's career. Nevertheless, the geographic

dispersion of IRS district and post-of-duty offices often hinders informal response to questions as they arise. This

handbook will fill this void and provide an easy reference for

management.

In response to the national need to revitalize mathematics and science education, the IRS participated with the

Federal Interagency Committee of Education and the Mathematical Sciences Education Board Research Council to

address the problem. A review of "A Report to the Nation on

6k

the Future of Mathematics" reveals that minorities, women,

and disabled persons are underrepresented in fields that

require advanced mathematics. IRS developed a strategy to

address the need to be sure the quality of the workforce

remains high, and that education will prepare candidates, especially minorities, women, and disabled persons, to carry

out the important responsibi

lities

of Federal service.

Georgetown University Law Center and the IRS agreed to

establish a Cooperative Employment-Scholarship Program.

This program will provide an opportunity for IRS and

Georgetown University to enhance the representation of

women and minorities in Georgetown's Master of Laws in

Taxation curriculum. It will also benefit IRS and the tax bar

community by increasing the potential application pool of

highly trained professional women and minorities. From the

pool of applicants, the IRS will select annually one or two

nominees, based on its usual criteria for hiring full-time entry

level Tax Law Specialists.

The IRS, implemented a partnership agreement with the

Hispanic Association of Colleges and Universities, a national

organization dedicated to bringing together the member colleges and universities (a minimum Hispanic enrollment of 25

percent of total enrollment).

The IRS received recognition at the National Conference

of the National Urban League's Black Executive Exchange

Program (BEEP). BEEP is a voluntary effort on the part of

industry and government agencies which agree to loan designated key Black executives and professionals to participating

colleges, where they give lectures in appropriate credit-bearing courses. Each person is scheduled for a two-day

assignment during the course of the semester. Black men

and women carrying considerable responsibility within industry and government agencies are identified as candidates for

BEEP participation. These professionals serve as an example

to students that the chance for success depends more on

competence then color.

On-site child care centers is one program

to help make IRS the best employer in the

Federal sector. IRS is involved in 15 ceniers nationwide, such as this one at the

National Office.

Manawniu Ono the System

RS reinforced its-initiatives on integrity,

ethics and conduct awareness during

1989, and installed an IRS hotline in

Washington to provide employees with

another avenue to report fraud, waste or

abuse. Other achievements included continued modernization of its computer-based

tax administration system and research

efforts on voluntary compliance, optical

scanning of tax returns, and a system to

replace the current paper-depending return

processing at the service centers. Clarifying

and personalizing notices will improve

correspondence with taxpayers, and a pilot

test in 1990 of an expert system will help

taxpayer service representatives provide

accurate and complete answers to taxpayers'

questions.

The IRS hired its first professional historian;

established hotlines for practitioner use and

expanded practitioner newsletter items;

developed its first legislative liaison training

course; completed a test using a commercial

credit card for procurement of small purchases;

and continued its pursuit of improved quality

and productivity through the Joint Quality

Improvement Process.

Plannhig, Fmance & Reseamh

IRS initiated a major organizational change in the Commis- sioner's Office. The Deputy Commissioner (Planning and Resources) was also designated Chief Financial Officer with responsibility for establishing standards and controls for the IRS financial systems. Also, a Chief Information Officer posi- tion, with responsibility for information resources and technology management, was established.

The Assistant Commissioner (information Systems Devel- opment) and (Computer Services) positions, which had

reported to the Deputy Commissioner (Planning and Re- sources), were retitled Assistant Chief Information Officer (Information Systems Development) and Assistant Chief Infonnation Officer (Inforn-lation Systems Management), reso 0

Technology in the IRS has come a long

way from the early keypunch tabulation

machines ofthe 1950's to the sophisticated computer systems of today.

sPectively. The two positions now report to the Chief Information Officer. These changes became effective on Octo. her 12, 1989.

IRS made significant strides in implementing the recom- mendations resulting from the Joint ll~_YGAO General Management Review. The development of the budget is now directly linked to strategies and actions contained in the Strategic Business Plan. Coupled with the strategic business planning process, a new business review process was devel- oped and successfully tested. Business reviews evaluate how well an office or activity accomplished the strategies and ac- tions contained in the Strategic Business Plan based upon measurable critical success factors. Chief Financial Officer and Chief Information Officer positions, described above, were established. IRS consolidated telecommunications func- tions Servicewide into the Computer Services organization.

'A
Also, an Automated Financial System Project Office, with a

project manager, was established reporting to the Assistant

Commissioner (Planning, Finance andResearch).

Personalization of Notices

IRS is committed to improving correspondence with the public by clarifying and personalizing notices. Several studies

resulted in decisions to add the name of a responsible IRS

official to all notices and to establish a centralized point for

notice review. Based on feedback from the public, IRS has

developed standards for all notices. These standards will be

used by a central notice unit housed in the Taxpayer Ombudsman's office and notices will be revised based on how

they measure up to the standards. While the notices are

being reviewed, a new stuffer will be added that will include

a brief message signed by the appropriate IRS official.

Research Projects

IRS research efforts continue to emphasize voluntary compliance, trend identification, and analysis. An annual conference

of researchers, tax professionals, and IRS personnel discussed the impact of a complex system of tax administration

on taxpayer compliance.

Improved dealings with the practitioner community was

the focus of an executive-level task force which reviewed the

results of a 1987 Survey of Tax Practitioners and Advisers.

IRS is implementing their recommendations on how to improve dealings with practitioners, including a hotline for

practitioners for resolving account-related problems of their

clients and providing professional organizations with curnculum materials for the continuing education of their staff.

One of the IRS primary objectives is to provide high quality service to its customers, the taxpayers.fbis year, IRS

focus group moderators conducted several in a series of taxpayer opinion surveys for IRS functions having direct contact

with taxpayers. By periodically measuring taxpayer perceptions about the level of quality they receive, and soliciting

their suggestions for improving IRS service, IRS stays abreast

of changes in taxpayer opinions and areas where it needs to

improve the quality of service. A related study was started to

determine the services that taxpayers expect from the IRS

and the best way for the IRS to deliver those services.

IRS continued researching the use of expert systems to

increase productivity, quality, and consistency in programs

affecting taxpayers and general IRS operations. One example

is the Taxpayer Service Expert Assistant System feasibility

prototype, which was successfully tested in the Boston District this year. The system leads frontline taxpayer service

representatives through a series I probing questions in the

caller's tax topic in order to discover a caller's real problem

and lead the assister to substantially more correct and complete answers. Based on the success of the 1989 test, the

system has been expanded significantly and will be tested

again in Boston in 1990.

The impact of IRS taxpayer assistance on taxpayer compliance was the subject of a controlled experiment in which

groups of taxpayers were given mock tax returns to prepare

and varying levels of taxpayer assistance to help them. The

test demonstrated that taxpayer service has a significant

effect on taxpayer compliance by lowering the number of

return errors and thereby generating increased revenue.

IRS completed a second major study of the effects of

refund offsets for nontax debts on subsequent taxpayer behavior. In findings similar to the initial study, IRS learned

from a sample of 1987 taxpayers offset in 1986 that they are

more likely to file balance-due returns or not to file in the

subsequent year. These findings support the IRS concern that

refund offset programs should not be made permanent until

hirther research is completed on long-term compliance

effects.

IRS continued researching optical scanning of tax returns

in an effort to reduce paper handling and improve processing

capabilities. A successful test was conducted for scanning a

specialized Form 1040 prepared by practitioners using commercial tax-preparation software. Scannable returns provide

small practitioners with a low-cost interface to the electronic

filing system.

IRS developed an improved method for estimating the

amounts of additional revenue which can be raised by expanded compliance activities. Using the new model, IRS now

o that the delay between hiring additional revenue

3gents and the realization of net additional revenue is two to

Lhree years, substantially longer than previously thoughtThis analysis has resulted in several other initiatives

including development of a centralized Enforcement Management Information system (EMIS,), planning and revenue

projection models for all enforcement functions, and review

I - ities to accelerate In the late 1950's, this card sorter couN of enforcement opmations or

oppo

n

sort 800 cards per minute. Both the equip- revenue collections arising from enforcement. The EMIS

ment and the style of dress were much project will link several eidsting data bases into a centralized

diffe

.

rent than those of today. system that will provide on-line information about the progress of Servicewide enforcement cases from start through

collection.

Automated Financial System

IRS is currently developing an Automated Financial System

(AFS) which will ultimately provide a Servicewide integration

of financial management functions. Accounting and budget

data for all regions is entered into an Integrated Data Management System (IDMS) on a large mainframe computer at

the Detroit Computing Center. In December 1988, the Budget

Plan Execution module of AFS became operational in the

Central Region, and it was extended to all regions in the second quarter of this fiscal year. This module allows regional

managers to enter, access, and process information for

project authorization, grade structure data, obligation data,

and financial reviews.

In addition to the advantages that regional managers realize from the use of this data base, National Office is able to

generate Servicewide information and reports. The AFS Budget Plan Execution module offers numerous enhancements

over the old system, such as menu-driven applications and

readily available financial reports that reflect current information. In addition to executive requirements for use of

budget data, other modules such as accounting, budget

formulation, and plan formulation are future enhancements

to AFS.

Strategic Management Process

The Strategic Management Process sets Servicewide longterm directions and priorities. The Strategic Business Plan

(SBP), the centerpiece of the IRS strategic management process, contains a comprehensive set of long-range objectives

and strategies based on planning trends and critical issues. It

provides a Servicewide blueprint showing how IRS plans to

continue to serve the public through quality tax administration in the future.

The SBP also integrates two additional components into

the IRS strategic management process. First, budget decisions

are guided by priorities which are established in the SBP.

Second, through the use of Critical Success Factors (CSF), which define in

'

measurable terms the most important events

which must occur if real progress is to be achieved, Annual Business Plans translate the long-range objectives and strategies from the SBP into day-to-day operational activities in the functional areas.

In February, the first IRS executive conference devoted entirely to strategic planning was held. At that conference,

executives developed the fiscal years 1991-1995 SBP objectives and strategies.

Another important component in the Strategic Management Process is the Business Review used to periodically

assess progress in achieving objectives. As a step in this de- velopment, a trial Business Review was conducted of one of

the seven IRS regions. A critique of the trial review identified refinements that will be used in future Business Reviews.

The review process uses the CSF developed in the SBP to establish specific performance measures against which progress is measured. The process is carried out by the Business Review Executive (the Deputy Assistant Commissioner for

Planning, Finance and Research), who oversees preparation of a comprehensive report for the Executive Committee and

assures follow-up on corrective actions to be taken.

The role of the Strategic Issues Plan is to focus on longrange issue areas where significant change or challenge to the IRS is envisioned. Initiatives begun last year to establish

an ongoing organizational planning process and reinforce ethics, integrity and conduct awareness. Much work has been

accomplished on the initiative to enhance the role of minorities and women in IRS. Several interim recommendations

were made and adopted by the Board of Directors, and a final report is nearing completion. A new area of concern will

focus attention on new and developing issues affecting work,

employees and environment as the IRS information systems

are modernized.

Infonnation S-.,-tems Development

IRS recognizes the need to modernize its computer-based tax

administration system; it remains one of the most vital issues

facing the agency today. In view of new services that are routinely provided by most financial institutions, the Agency

must make itself capable of providing these same services, in

both a timely and efficient manner.

The Office of the Assistant Commissioner (information

Systems Development) (ISD) was established to plan, oversee, integrate, and coordinate the steps needed to

accomplish this Servicewide modernization effort. It includes

developing a large-scale, ageneywide perspective to incorporate all the facets of the tax processing system into one

compatible and cohesive unit-including those projects al- ready underway to automate specific parts of the system.

This effort will increase responsiveness to IRS employees and

vastly improve all aspects of customer service.

One means of ensuring flexibility and ease of modification

and expansion in the future system is through the development of, and adherence to, standards. Servicewide standards

are being developed giving the modernized system specifica- tions for computers, computer systems, and all forms of

automation that are the same nationwide. Compliance with

these standards will simplify repairs, replacement of machinery, and the ordering of supplies.

The setting of standards is not taking place in the realm

of hardware alone, however. A task force has been established to generate standard names and definitions for all IRS data used in programming environments--names and definitions that will hold true irrespective of the hardware systems in which the data will be used. These standards represent a

major change in the way the IRS identifies data and will increase its ability to manage data effectively and efficiently.

Because of the wide scope of the modernization effort, IRS has adopted a project management framework composed

of quality planning, project planning, and project manage- *ment methods, along with the IRS ~;stenis Development

Methodology. During 1989, an Information Systems Policy

Board (ISPB) oversight process for major modernization

projects was defined and implemented. This process includes specific milestones in the project life cycle at which the iSPB

determines whether project products are acceptable and

whether the project should proceed. A variety of techniques

are being used to ensure efficient design and development of

the modernization initiatives, including prototyping, analytical modeling, and simulation.

As the first step toward the definition of an overall target

architecture for the modernized tax administration systems,

1SD has prepared a Global Baseline User Requirements document It provides an official, comprehensive statement of the

'A
requirements for the modernized system in user's tenris-a

statement of obligations IRS must meet in its processing. It

also provides a benchmark by which work done to support

various stages of tax systems modernization can be

measured.

Significant "ects

A number of significant projects are now underway: The Document Processing System (DPS) has as its goal the

replacement of the current paper-dependent, labor-intensive

operations referred to as the "service center pipeline" (die

route a tax return takes as it is processed in the service center). This replacement will include both automation of

manual activities and the incorporation of new technologies.

A prototype was recently completed that demonstrated the

feasibility of using images instead of paper for data entry-a

key concept of the system.

The On-Line Entity (OLE) Project will improve quality by

providing early validation of document information at point

of entry and provide on-line research capability to employees. OLE will enable identification and correction of

inconsistent or inaccurate entity data before transactions

leave the service center systems for posting to the master

files. In addition to assisting the IRS internal processing, OLE

will also assist taxpayers by decreasing the time involved in

resolving problems with their returns.

The Service Center Support System (SCSS) will support

and/or interface with almost all maj. or IRS systems and will

serve as the base for a modernized and flexible service center tax processing environment. The SCSS will support a

major portion of the newly designed or redesigned service

center processing as well as the conversion of some existing

applications.

ISD has developed a model Overall Acquisition Strategy

for large systems design, which provides the means to

acquire technical and management support, as well as computer hardware and software. This strategy details plans for

interim systems and allows for an orderly transition to the

target system. A key element is the award of fewer, but

larger, mulfi-user contracts, which simplifies and shoriens

the acquisition/contracting process so that products can be

acquired when they are needed.

The modernization effort must proceed gradually, addressing certain items immediately and phasing others in

through intermediate and long-range plans. Some of the

project systems will be permanent improvements; others will

provide transitional service as IRS changes from one system

to another.

Successful transition is difficult for an effort of the scope

of the tax systems modernization. Recognizing this, ISD is

working closely with the other IRS organizations, particularly

Computer Services and Human Resources Management and

Support, under the guidance and authority of the Information

Systems Policy Board, to see this effort through to fruition.

Equally important, ISD is soliciting participation by public

groups-the Commissioner's Advisory Group, tax practitioners, and state tax administrators-to ensure that the tax

systems modernization meets the customers' needs, as well

as the needs of the IRS.

Computer SeMces

The Assistant commissioner (Computer Services) directs the

operating arm of the inforniation systems area and provides

a comprehensive data processing and telecommunications

support program for the IRS. Computer Services develops

and tests automated data processing (ADP) and telecommunications equipment and software; implements and evaluates

Thousands of computer tapes are used

throughout IRS

offices

to store data ranging from employee personnel records A)

the master file o,rall taxpayers'accounis,

Storage of tax return data on optical laser

disc is one of several possible technologies the IRS is exploring to reach its goal

of a paper-freesystem by the year 2000.

Each side of a laser disc can hold the tax

data from about one million returns.

computer programs and systems; participates in all policy

decisions concerning potential or existing utilization of telecommunications or data processing systems and equipment.

Computer Services also ensures the effective control of all

tax administration and other computer systems and related

equipment within IRS, and is responsible for all IRS tax systems, computer programming activities, and design,

development and operation of nontax ADP systems.

Due to careful, quality planning, the 1989 filing season

progressed smoothly resulting in an extremely successful

year. Computer Services' components provided timely and

accurate responses to inquiries regarding the details of filing

season preparations. Improvements in procedures and close

coordination resulted in no major processing problems.

In preparation for the 1990 filing season, Readiness Review Teams, comprised of personnel from Computer Services

and Information Systems Development, have been formed.

The review teams visit each service center to isolate irreguWities and determine any problems which can be corrected

prior to the start of the 1990 filing season. The visits also inciude software briefings and reviews of computer operations

and hardware readiness. Each review is concluded with an

executive level close-out, conducted by a Computer Services

director or assistant director with both service center and regional office management participation. Computer Services

has already met with Information Systems Development to

improve the reviews and briefings, integrate the operational

and hardware reviews, and encourage executive coordination

and close-outs.

Command Center

In order to more effectively oversee and control the reporting and resolution of problems occurring in service centers

and Automated Collection System (ACS) call sites, the National Office Command Center (NOCC) was established in

January Iq96. The Center provides for a centralized problemreporting process and monitors and follows-up on the

resolution of reported problems. Ibis function-is also a primary source for management information that keeps

Computer Services executives and line-managers apprised of the overall status of automated tax processing. This permits

a more proactive involvement in field operations by identify- ing potential problem areas through the use of daily

monitoring data.

The NOCC operation operates 24-hours a day, 7-days a

week, 365-days a year. It is the primary point of contact for

any ADP problem occurring in field processing sites that requires the involvement of National Office programmers or

hardware analysts. It is the dissemination point for informaLion that needs to be conveyed to all service centers, ACS

call sites, and the Detroit or Martinsburg Computing Centers.

Through use of an automated data base system called PERCS

(Problem Evaluation and Reporting Control System), the

NOCC controls, tracks and follows-up on all field ADP problems until they are resolved. The NOCC also includes the

Problem Control and Contact (PCQ Unit. The PCC Unit controls and monitors less critical field ADP problems that are

related to procedures and other documentation.

Mirror Imaging

Mirror imaging means having the ability to run either the

Martinsburg Computing Center or the Detroit Computing

Center workload on the other site's equipment (i.e., processing capability). This implies that the installed hardware is the

same or completely compatible. It also implies that there is

sufficient processing power, peripherals, and internal communications available to enable each site to run any portion of

the other site's workload. Mirror imaging requires that the

operating environment and the processing support environment be the same. It further implies that people can move

relatively easily from site to site. Both the Martinsburg and

Detroit Computing Centers are moving towards mirror imaging through major development efforts from 1989 through

1991.

Disaster Recovery

Computer Services began testing plans for handling critical

operations in the event that any of the processing centers

become incapacitated for an extended period. These plans

will go into effect if fire, flood, tornado, sabotage, or some

other major catastrophe results in substantial damage or

long-term disruption of services.

Other Programs

Computer Services and Information Systems Development

jointly developed a telecommunications strategy (Telestrat)

to support the modemizafion effort. Telestrat is designed to

provide a standardized design for local networks and nationwide communications for the interim and target architecture.

The strategy provides for a migration from products that are

available today in the market place to emerging technologies

'A
in the 1990s. Standard telephone wire will provide connections for voice, data, and image communications at the

employees' desks to common building local networks. There

will be gateway access to wide-area networks that include

packet-switched as well as high-speed communications. This

strategy, if enforced as agency policy, will permit shared ac

cess to IRS systems and will eliminate the islands of

communications that now exist within the Service.

The Communications Replacement System (CRS) replaced the existing IRS data communication processing

system and aging computer terminals. The installation and

operation of the CRS occurred at the Martinsburg Computing

Center and all service centers in 1989. The CRS installations

were officially complete with the installation at the Andover

Service Center in the first quarter of fiscal year 1989. The

CRS relieves the IRS of the throughput and connectivity restrictions imposed by its predecessor system and provides

for the anticipated communications needs of the Integrated

Data Retrieval System through the CRS system life which

ends June 30, 1994.

The Consolidated Data Network (CDN) provides a nationwide data communications network for the Department of

the Treasury, including all IRS sites. All data communications

needs are to be satisfied by the CDN unless a specific

exemption is granted by Treasury. The CDN is a secure

packet-switched data network and is designed to support all

known IRS data communications needs by providing a variety of transmission speeds and supporting many standard

protocols and a multitude of equipment types. Over 600 sites

are currently served by the CDN, including the regional and

district offices, computing centers, service centers, and postsof-duty.

For the past five years, Computer Services has sponsored

the Management Development Program (MDP).The MDP is

designed to preidentify, select, train, and develop promising

employees for entry-level managerial positions within Computer Services. Those selected for the program continue to

perform many of their current duties, but are made available

to receive training and developmental assignments. To date,

Computer Services has selected, developed and placed over

I I I technicians identified as having good management potential. The MDP also meets many objectives outlined in

Strategic Initiative, ERR-6, Treatment of Managers and

Executives.

Quality improvement

In concert with the IRS commitment to improving the quality

of its products and services, Computer Services established a

Quality Assurance Division. This division serves as a

Servicewide resource for the implementation of quality pnnciples in ADP-related products. In addition, the division

conducts systems acceptability

tests

of all the Service's computer software used in both tax and nontax processing at the

various centers nationwide.

ne IRS prints millions of pieces of correspondence for

the taxpaying public on its high speed laser printers in the

10 service centers. Computer Services' first completed Quality Improvement Project (QIP) dealt with user-concerns

associated with the laser print system in the service centers.

The Quality Council voted. to implement, in principle, the QIP

Team's 32 recommendations. The implementation effort has

included the creation of a Print Oversight Office to ensure

kL

that print operations in the service centers meet the needs of

their customers. Implementation of all 32 recommendations

is expected to be completed by the end of 1990.

Resources Mmagement

Contracts and Acquisitions Division serves as an advocate to

actively encourage and facilitate contract awards to small

and minority businesses. An Automated Solicitation Mailing

List of Small Businesses is under development to encourage

greater awareness in the small business community and to

promote increased competition for these contracts. As a

result ol these efforts, IRS awarded over $11 million in contracts to small and minority businesses during 1989.

This year, the IRS successfully completed a pilot of the

use of a commercial credit card as an alternative to more

costly traditional procurement of small purchases. As part of

the Commerce DepartmenCs demonstration project for a U.S.

Government Bankcard, contracting personnel in the Southwest Regional Office and the National Office used the

bankcard for certain purchases up to $25,000. Additionally,

specially designated non contracting personnel, including

field revenue officers in the Denver District, Used the card for

purchases up to $1,000.

Vendor acceptance of this program has been excellent as

they receive reimbursement through the contract credit card

service within 24-48 hours, a very attractive alternative to

small businesses over the typical 30-day payment cycle. This

program, which reduces administrative costs at the same

time as greatly reducing the payment period, will be exparided during 1990 as part of the new General Services

Administration governmentwide contract with VISA.

Capitalizing on the Service's technical and contracting expertise, the Treasury Department has selected IRS to serve as

the Executive Agent for several major, multi-year automated

data processing and telecommunications acquisitions. In the

complex telecommunications environment resulting from the

divestiture of AT&T, the IRS has the lead on two acquisitions, the Department of Treasury Telephone System and the

Digital Telecommunications System. These projects involve

acquisition of automatic telephone switching equipment and

related services, both nationally and in the metropolitan

Washington area.

In automated data processing, the Treasury Multi-User

Acquisition Contract is a contract for all Treasury bureaus to

provide mini-computers, workstations, local area networks

and software, and integration support services. These three

contracts will have a life of seven years, including renewal

options, and have an estimated value in excess of $2 billion.

IRS Historian

in the midst of Servicewide efforts to establish futureoriented strategic and organizational planning functions, the

IRS took a step back towards the past by hiring its first

professional Historian. The IRS decision to create this position follows a growing trend in both the government and

corporate worlds to establish history offices, archives, and

historic preservation efforts. This new function will help the

IRS move into the future with an understanding and appreciation of its past

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'rThe IRS hired its first professional His.

torian to develop several programs one

of which is an archival collection ~f pictures and documents reflecting the history

of IRS.

Throughout this first year, the Historian evaluated the needs of the IRS and developed a five-point program to cap.

ture and use the past in preparing for the future. The program will involve development of an archival collection of the most important historical documents created by the IRS, research and writing of policy and management-related his- torical reports, preparation of a full-length history of taxation in the United States, establishment of a collection of oral his- tory interviews, and assistance to IRS staff members in answering historical research questions.

The Historian's efforts during the past year focused on locating and identifying collections of important historical documents and conducting initial research for a study of the evolution of automated data processing systems in the IRS

over the past 25 years.

Director of Practice

The Director of Practice administers and enforces regulations

governing individuals who represent taxpayers before the IRS. Also within the jurisdiction of the Director of Practice is the administration and enforcement of the regulations gov- erning individuals enrolled to perform actuarial services under the Employee Retirement Income Security Act of 1974. In addition, the interpretation and administration of the Com- ~missioner's Conference and Practice Requirements (powers of attorney) are the responsibility of the Director of Practice. During the year, the Director of Practice assumed the task of making decisions on appeals from denials of applications to

engage in the IRS electronic filing program. This year, the Director of Practice served as the official

IRS practitioner liaison, a position recommended &,, the re- sult of a survey of tax advisors and return preparers. The

t

primary objective of the liaisonnis to augment and coordinate he flow of information betwee the IRS and practitioner or- ganizations. Among the efforts undertaken were continuing education modules prepared for practitioner use in the areas of the examination and collection processes; working with district offices in establishing heterogeneous practitioner liaison groups; establishing "hotlines" for practitioner use; and helping expand practitioner newsletter items. The Director of Practice was designated as the IRS con- tact point for part of the Zero Tolerance Program. Under the

program, which has as its objective the prosecution of indi- viduals moving illegal drugs across U.S. borders, the U.S. Customs Service notifies the issuing agency of a matter when

a violator is the holder of a professional license. The Director of Practice receives such information for appropriate action with respect to attorneys, certified public accountants, en- rolled agents, enrolled actuaries, appraisers, and persons approved to engage in the electronic filing program. In the enforcement area, disciplinary actions and related decisions involved 120 practitioners. Of these, 47 constituted suspensions, disbarments, or resignations from eligibility to practice before the IRS. Sixteen actions resulted from formal proceedings before an administrative law judge.

Statistics of Income

Statistics of Income (SOI) continued to provide data to the Department of the Treasury, Office of Tax Analysis for use in evaluating the Tax Reform Act of 1986. Some of the data

came from a weekly sampling of 1988 individual income tax returns as they were received at the 10 service centers from January through April 1989. However, most of the data came from the returns for 1987, the first transitional year under the

new law. In addition, a data file on 1985 sales of capital as- sets was produced for Treasury use. IRS completed SOI data studies covering not only individ- ual income tax returns for 1987, but corporate income tax returns for 1986 as well, including a source book giving detailed financial data by industry and size. As part of its sta- tistical program, the IRS also reluised the quarterly "SOI Bulletin," which presents key data in advance of the two more comprehensive SO[ reports or in place of SOI reports formerly published. Special topics included were tax-exempt

'A
organizations, marginal and average tax rates, unincorporated businesses

,

private activity bonds, foreign recipients of

U.S. income, and foreign corporate invesWient and activity in

the United States.

Plans were made to issue an individual income tax public

use file for 1987 on magnetic tape, which will contain selected income, deduction and tax items taken from a random

sampling of individual income tax returns. This file will consist of about 100,OW unidentifiable records representing the

107 million returns filed and will be primarily used for special tabulations or to simulate administrative and revenue

effects of tax law changes. Another file has been developed

to meet public requests and requests by state tax officials for

detailed data by state. Special compilations are now also

available which show migration patterns by state and county

based on changes in the taxpayer address. Each of these files

or compilations is offered on a reimbursable basis.

I.jL-&I;a&e A~

The Legislative Affairs Division has primary responsibility for

Congressional and legislative activities in the National Office.

it is responsible for developing legislative Proposals; tracking

selected pendbog

legislation; and reviewing, analyzing, and

implementing enacted legislation affecting IRS. The Division

also works with the Commissioner and other top officials to

prepare them to testify before Congressional committees,

prepares replies to General Accounting Office reports, provides information to Congress on IRS operations and

responds to their questions, and cominunicates legislative

information throughout the IRS.

The Legislative Affairs Division handled a busy schedule

of activities in the legislative, oversight and liaison areas in

the First Session of the 101st Congress. Final implementation

plans were issued for the Technical and MisceJWleous Reve_

nue Act (TAMRA) of 1988, the Anti-Drug Abuse Act of 1988,

the Medicare Catastrophic Coverage Act of 1988, the Family

Support Act of 1988, the Computer Matching and Privacy

Protection Act of 1988, and the Procurement Integrity Act of

1988, The TAMRA plan alone contained over 300 pages and

listed almost I MOO actions to be taken by IRS.

implementation plans were also being developed for the

Omnibus Budget Reconciliation Act of 1989, the repeal of the

Medicare Catastrophic Coverage Act of 1988, and other legislation which was enacted at the end of the First Session.

The Division also prepared analyses of the Financial Institutioms Reform, Recovery, and Enforcement Act of 1989; the

Disaster Assistance Act of 1989, and the Act for Better Child

Care, and how they affect IRS, and closely monitored other

significant tax issues, including changes to current laws on

capital gains, repeal of Section 89,

and

the Earned Income

Tax Credit.

During Congressional consideration of these bills, the Division worked closely with the Department of the Treasury

and Congressional staffs, including the Joint Committee on

Taxation, to insure that the changes being considered could

be effectively administered by IRS. Division staff attended

committee hearings, markups, and drafting sessions, and provided Servicewide comments on draft statutory language and

committee reports.

6L

Tlie Division prepared a package of legislative Proposals

for review by the Treasury and office of Management and

Budget and possible submission to the Second Session of the

101st Congress. These proposals were chosen from suggestions made by various regions arid National Office functions.

Division representatives attended several Industry Specialization Program meetings to encourage field recommendations

for legislative initiatives.

Legislative Affairs also provided leadership andstaff

support on three issues of significant legislative interest to

the IRS:

-Study of civil penalties in the Internal Revenue Code: The

Division was heavily involved in the activities of the Commissioner's Penalty Study Task Force and the Task Force's

report, which was issued in conjunction with hearings on

this topic field by the Oversight Subcommittee of Ways and

Means. The Subcommittee's Improved Penalty Administration

Compliance Tax Act was introduced shortly thereafter. This

legislation was enacted as part of the Omnibus Budget Reconciliation Act of 1989 and represents a major step toward

penalty reform.

-Analysis of legislative burden: The Division chairs the

multi-functional task force studying ways to reduce the burden on taxpayers and on the IRS of proposed legislation.

_-Quality improvement projects: The Commissioner's Quality

Council approved projects suggested by the Division on the

legislative implementation plan process and on responses to

General Accounting Office reports.

Oversight and Liaison Acti0ties

Congressional oversight and liaison activities expanded during the year. The Division developed the IRS' first legislative

liaison training course, the CAongressional Affairs Program

(CAP). Designed to provide guidelines for field executives in

establishing ongoing, positive relationships with the members

and staffs, of the delegations they serve, CAP was endorsed

by the Corrunissioner arid the Senior Deputy Commissioner

and provided to all regional conunissioners for their use at

regional executive conferences. The training was also given

to the IRS Executive Selection and Development Program

participants and dL%cussed at regional Public Affairs Officers

serninars. Ultimately, CAP can change the way IRS communicates with Members of Congress and their staffs at the local

level.

Division staff attended five district office orientation seminars held for local Congressional staffers and issued five

Legislative Affairs Updates to IRS executives on topics of

interestThe Division coordinated preparations (including testimony and briefing materials) and follow-up activities for 14

Congressional hearings on a wide variety of topics, including

filing season performance, the budget, penalty reform, and

money laundering and anti-drug abuse legislation. The DMsion handled a total of 44 General Accounting Office

issuances, including preparing replies for the Commissioner

when necessary, and handled a total of 14,200 Congressional

contacts (some 6,700 telephone calls and about 7,500 letters).

To keep Congress aware of IRS activities, the Division

produced 16 mailings, including a Legislative fact sheet, on a

wide variety of subjects. The fifth edition of Publication 1273,

Guide to the IRS for Congressional Staff, was sent to some

2,000 Congressional offices nationwide, as was the sixth an.

nual TAXBOX of tax forms and publications. Legislative Affairs staff led the IRS delegation at the Constituent Resource Exposition, held On Capitol Hill by the White House Office of Consumer Affairs.

The Division staff also made 15 visits to selected Congressional Offices to explain IRS activities and the divi- sion's programs and services, and frequently arranged and conducted briefings for Congressional staffs on various tax

administrative issues. Division staff also assisted other National Office ftinctions with Congressional activities by providing expert liaison advice and assistance.

Quaffly

The IRS continued its Pursuit of improved quality and pro- ductivity by making advances in quality planning, quality ontrol, and quality improvement The position of Assistant

to the Commissioner (Quality) was established this year and filled with an experienced line executive, a former assistant commissioner. The Assistant to the Commissioner (Quality) is

responsible for overall development and coordination of quality efforts Servicewide.

The number of Quality Improvement Projects nationwide has increased to over 900. Two IRS offices, the Ogden and Fresno Service Centers, were honored this year as being Quality Improvement Prototypes and presented awards by the Office of Management and Budget. Tangible savings re- ported by these two centers are over $12 million from Quality Improvement Projects and other quality management initiatives.

The five Commitment to Quality Service Strategic Initia- tive Teams are completing their work and submitting recommendations designed to greatly advance the IRS in the

areas of quality measurement, customer service, commitment to quality, and removing barriers to quality. The five tearm,

recommendations will be consolidated into one document, culminating two years of work by the teams. To enhance the Joint Quality Improvement Process (JQIP)

,

IRS management and National Treasury Employees Union representatives on the Joint National Quality Council established specific goals concerning the following issues: communications, training, recognition, JQIP support and as- sistance, the Quality Improvement Information System assessment, strategic planning for the JQIP Joint Natio~al Quality Council development and growth, and integration of quality concept tools and techniques.

Employee involvement continues to be high, as joint In- ternal Revenue Service/National Treasury Employees Union councils manage the Quality improvement Process at all organizational levels.

The IRS has formally embarked on developing and testing a model for Quality Planning (QP) following the principles of Dr. Joseph M. Juran, one of the world's leading experts in quality. A steering group Linder the leadership of a field exec- utive is developing a model and handbook for the QP

process. This model will be tested on projects at the national and local levels.

Other area achievements in quality are included in other sections of this Annual Report.

7be hmpecdon SeMce

"When people are dishonorable in private business, they in. jure only those with whom they deal...but when there is a

lack of honor in governmeriL the rnorals of the whole people

are poisoned." (President Herbert Hoover.) The Internal Revenue Service is a high visibility agency Abemcearuise.of

fhilss dmiraekcetscloRSnteacmtplwoityheensetahrleygeuvaerrdyiatarnoilyainninsfltution that is always on-the-line. People tend to expect more of IRS employees because they are IRS. So does IRS! The Inspection Service, composed of Internal Audit and Internal Security, is an independent office consisting of 498 criminal investigators and 508 internal auditors. The organi- zation is headed by the Assistant Commissioner (inspection) who reports directly to the IRS Commissioner. Each regional office is located in the same cities as other IRS regional of- fices and is headed by a Regional Inspector who reports directly to the Assistant Commissioner (inspection). The Directors for Internal Audit and Internal Security are located in the headquarters office where their staffs, in addition to conducting audits and investigations, plan, develop and im- plement the organizational programs

and

procedures. The 1300 employees of the Inspection Service are respon- sible for safeguarding the rules and regulations established for the IRS employees and operational programs. The Inspec- tion Service accomplishes its mission by auditing the nearly 700 assessable units, by investigating allegations of wrong- doing by any of over 113,000 IRS employees, and by protect- ing these programs and employees from outside threats or attempts to corrupt.

Inspection's Internal Audit Division's activities resulted in 77 internal audit reports: 21 national audits; 13 regional au- dits, and 43 single office audits (9 of this total were financial review reports).

Internal Security investigations resulted in the arrest or indictment of 182 taxpayers and tax practitioners and 136 current or former IRS employees. In fiscal year 1989, 281

cases were adjudicated in the criminal justice system, which

A
People tend to expect more of IRS employees because they are IRS. So does IRS!

The Inspection Service is responsible for

safeguarding the rules and regulations established for the IRS employees and

operational programs to maintain the

highest integrity and ethical conduct

resulted in 254 defendants pleading guilty or being found

guilty at trial. Internal Security completed 2,749 investigations

in the Criminal Misconduct

Because Program. of Inspection's independence within the Internal

Revenue organization, audit findings and investigative reports

are reported directly to the Commissioner.

Inspection initiatives

Inspection initiatives in the past year include the following:

-To increase bribery awareness, a new Document 7418,

Bribery Awareness for IRS Employees, was distributed

throughout the Service.

-An IRS hotline, located in Washington, was installed to

provide employees with another avenue to report fraud,

waste and abuse.

-inspection made 1,500 integrity presentations to 52,000

new and incumbent employees, as well as members of

professional groups nationwide.

-A Managers' Outreach Program regarding the use and sale

of drugs in the workplace was presented to managers in

several regions.

L

-Some Inspection personnel are board members on a

Federal Computer Investigation Committee which meets periodically to discuss special problems posed by the growth of

high technology crimes.

-All regional inspectors and National Office division directors established Quality Councils which are responsible for

implementing the IRS principles of quality. Inspection has

been involved in 28 Quality Improvement Projects.

Intemal Audit

planned to implement a revision to the BMF Offset Program

for fiscal year 1989. Internal Audit's review of the proposed revision showed that overpayments totaling $21 million would be erroneously refunded to 28,000 BMF taxpayers. Internal Audit recommended several program enhancements which would assist the IRS in its efforts to control the growth of accounts receivable and maximize the collection of

revenue with minimum adverse customer relations. One such recommendation, involving the reinstatement of a computer

program to offset available credits to taxpayer's existing tax liabilities, would limit the release of erroneous refunds.

internal Audit Integrity Program

The three major sub-programs of the Internal Audit Integrity Program are: (1) integrity tests which are incorporated into regularly scheduled audits to identify material fraud and to evaluate the effectiveness

of

controls in deterring and detect- ing material fraud by IRS employees; (2) integrity projects which are special probes of areas with a high risk of integrity breakdown to assess the extent of integrity breaches that have occurred due to control weaknesses or circumvention

of controls; and, (3) technical assistance to Internal Security

on integrity investigations.

During the year, Internal Auditors spent 13 percent of direct staff time conducting integrity projects, performed in- tegrity related reviews in 52 locations, evaluated key controls

designed to deter and detect material fraud in 30 auditable

areas, conducted 17 analyses of transactions with the greatest potential for erroneous or fraudulent actions, and made 15 awareness presentation- to operating managers and

employees.

Internal Audit referred information to Internal Security on

161 employees and five nonemployees. From these referrals, Internal Security initiated investigations on 51. employees and

one nonemployee.

Management acted to strengthen 17 control weaknesses reported in 24 audits of high risk areas.

During an audit of travel ticket usage in one region, inter- nal auditors identified potential fraud on the part of several

travel agencies. The IRS was not credited with employee travel tickets which had not been used and were returned to the agencies. The audit disclosed that the IRS did not receive Over $50,000 in credits from four agencies over an 18-month period.

As a result of this audit the Director, Finance Division,

issued an alert to all regions requiring them to respond indi- cafing what controls are in place to prevent this condition

from occurring in their regions.

During another review, Internal Audit found controls over the receipt and processing of remittances in Taxpayer Ser- vice walk-in areas were not adequate to prevent or identify Occurrences of employee fraud. A nationwide alert was is- sued

to

all regional

commissioners

and district directors av e.r

m

2

g

~ew

i

.107

ing the

of

'ftuation

and

encouraging them to h th a e s rev the r operations to ensure conInternal Audit directs its highest priorities to those activities

that most directly relate to collection of tax revenues, enforcement of tax laws and processing of returns and other

information, and those areas most susceptible to breaches of

integrity.

Internal Audit's activities are divided into four main reviews: (1) the design and development of new information

systems and significant modifications of existing systems; (2)

the extent to which desired results or benefits are being

achieved for major IRS programs and whether management

has considered alternatives that might yield results at a

all IRS operations; and, (4) lower cost; (3) conformity of.

whether IRS financial reports fairly present the results of

financial operations, results of operations and cash flow or

chan in financial position.

In a National Audit Report entitled Resolution and Collec- trols are in place to prevent the possibility of employee

tion offlusiness Master File Accounts Receivable, Internal fraud.

Audit reported that the IRS had not effectively applied over-

's and credits to unpaid tax liabilities of Business Professional Affiliations paymen

Master File (BMF) taxpayers- Limitations placed on the BMF The Internal Audit staff has a strong interest in professional

offset Program in 1985 increased the Service's accounts re- certification and continuing education. Many hold at least

ceivable balance and jeopardized collection of tax liabilities One professional certification and many serve on the boards

before expiration of the collection statute. Management Of Professional organizations.

Intemal Sectnity

tThhreouagchtivtihtieesEmofptohyeelenteMimscalonSdecutritNyoDnievimsipolnyaereeVoipoleartaitoends,

Integrity, and Background Programs.

Employee Misconduct Program

The Employee Misconduct Program involves investigations of allegations of misconduct or criminality against IRS employees. The results of conduct investigations are reported to the

appropriate IRS managers so they can then determine if the employee is suitable for retention in the IRS or if other disci- plinary action is necessary. Violation,; of criminal statutes are referred to the U.S. Attorney's offices for prosecutive

determination.

Nonemployee Violations

[The Nonemployee Violations Program assures the integrity of RS by investigations of attempts by nonemployees to corrupt or interfere with the administration of the Federal tax

system. These attempts usually involve bribery, assaults, im- personation of IRS employees and fraudulent claim.

In June 1989, a taxpayer was sentenced to 15 months in jail and a fine of $20,000 for bribery and conspiracy. This

sentence was the culmination of a three-year investigation

which began when a taxpayer offered an IRS revenue officer pornographic material and $5,000 in order that he would

have no tax liabilities.

Integrity Program

The Internal Security Integrity Program is designed to em.

phasize prevention and early detection of internal fraud and corruptive practices within the IRS.

An Integrity Project was initiated to identify IRS employees who improperly requested emergency salary payments in

order to receive more than one salary payment for a pay pe- riod. A number of cases resulted in successful prosecutions. One such case revealed that an employee requested 13

emergency salary payments. She claimed she had not re- ceived her original salary check in home mail delivery.

Investigation revealed that she had cashed all 13 of her origi- nal salary checks in addition to the replacement checks.

Background Program

The Background Program consists of personnel security

investigations which are conducted in accordance with Exec- utive Order 10450 for the purpose of furnishing to proper

authorities sufficient information concerning a person's character, reputation and loyalty to the United States. Internal

Security personnel conduct several types of background investigations.

During one routine background investigation it was re- vealed that a revenue agent failed to pay U.S. income taxes

and had falsified job application forms. The revenue agent, who no longer works for IRS, was indicted by a Federal Grand Jury and arrested.

Ibis year, Internal Security closed 7,469 background

investigations.

Although the responsibilities of Internal Audit and Inter- nal Security are significantly different; these two Inspection

functions complement one another and provide the Commis- sioner with an independent source of inforruation regarding significant conditions throughout the IRS.

A
Chief Counsel

T

he Office of Chief Counsel

provides legal advice and

technical support to the

Commissioner and his staff on

all matters relating to the IRS7 administration of the tax laws. Chief Counsel's

lawyers are assigned to 60 local offices

around the country as well as the

National office. Attorneys in the district

and regional Counsel offices represent

the Commissioner in all tax court

litigation and assist with collection

and other enforcement-related legal

proceedings. National Office attorneys

provide a technical support and

coordination function by providing

litigation guidelines, technical advice,

and other assistance. In addition,

National Office attorneys provide

guidance to the IRS and the public

through the publication of regulations,

revenue rulings, and other materials.

Technical

A principal challenge facing the Office of Chief Counsel

(Technical) was to provide timely guidance on recent legislation, including the Tax Equity and Fiscal Responsibility Act of

1982 (TEFRA), the Tax Reform Act of 1986 (TRA), the Omnibus Reconciliation Act of 1987 (OBRA), and the Technical

and Miscellaneous Revenue Act of 1988 (TAMRA). Each oil

these acts made extensive revisions in a multitude of Internal

Revenue Code sections. This guidance was primarily provided by the Associate Chief Counsel (Technical) and the

Associate Chief Counsel (International).

To implement the TRA, the Office used a variety of vehicles to provide prompt guidance on which taxpayers could

rely, including announcements, short regulations, revenue

rulings, revenue procedures, press releases, fonTis and instructions to forms, other publications, and designation of

areas as appropriate subjects of private letter rulings. This

practice has been continued with respect to OBRA and

TAMRA.'fbe overall intent has been to provide necessary

basic guidance on a broad range of important issues, rather

than detailed comprehensive guidance in a limited number of

areas.

Statistical Tables 27 through 39 give details on Counsel

workload and receipt and disposal of cases.

Through the United States Tax Court in

Washington, D.C, attorneys from the

office of Chief Counsel tried 1,871 cases

for the IRS in fiscal year 1989.

Legislation

Although providing guidance (in already enacted legislation

was Chief Counsel's primary focus, continued legislative

activity in the tax area required the Office's extensive

participalion in the development of bills pending this yearAlong with staff from the Department of the Treasury and

Legislative Affairs Division, attorneys in the Office of the

Associate Chief Counsel (Technical) attended committee

markups and participated in drafting statutory language and

committee reports. This involvement in the legislative process helps identify potential technical and administrative

problems that can be corrected before enactment. It also enables the IRS to identify legislative provisions which need

early guidance.

Simplification

An additional challenge facing the Office of Chief Counsel is

the simplification of the legislative and regulations process. It

is becoming clear that legislation and the regulations implementing that legislation is exceeding the comprehension of

marry tax practitioners and is beyond the reach of many ordinaiy citizens. The Offices of the Associate Chief Counsel

Crechnical) and (international) have participated in task

forces to confront the problems of increasing complexity.

International Activities

Chief Counsel's International staff focused on three major

tasks. First, the International office continued its program of

public guidance relating to the major international provisions

of the Tax Reform Act of 1986 and subsequent legislation.

The office substantially completed its publication of regulations, notices and rulings providing detailed guidance on the

implementation of tax reform in the international area. Second, as the tax reforni guidance process wound down, the

office turned to assisting other IRS functions now required to

enforce the new law. The office thus designed and conducted

a major training course for international examiners and provided significant support to other IRS implementation and

training efforts. Finally, the International office launched a

major new effort to expand its support of the IRS intemational enforcement and litigation activities. The centerpiece

of this effort was the formation of a field liaison staff of experienced international tax attorneys, assigned to coordinate

the office's assistance to IRS field offices worldwide.

Litigation Programs

The Litigation functions furnish legal advice and representaLon to the IRS on all matters relating to administration and

enforcement of the Internal Revenue laws in order to resolve

tax controversies, without litigation when possible, on a basis

that is fair and consistent with the law.

The Litigation functions in the District Counsel and the

National Office are responsible for litigating cases in the

United States Tax Court, presenting the views of IRS to the

Department of Justice in litigation in the Federal district

courts, the United States Claims Court and all Federal appellate courts. .

The IRS Tax Shelter Program has made progress in resolving the tax shelter inventory. Although tax shelter cases

continue to represent a large percent of the United States

Tax Court inventory, the number of docketed tax shelter

cases has declined by 27 percent in the last two years and

many of the remaining cases are "piggybacked" to the outcome of test cases which have been tried and submitted. The

Tax Shelter Program employs a project approach to resolve

tax shelter litigation more effectively. Under this program, a

single attorney or team of attorneys is responsible for developing the litigation position for all investors in the project.

Currently, 87 percent of all docketed shelter cases are handled as part of litigation projects. This approach enhances

consistent treatment for all investors and more efficient

settlement of cases.

Under a 1987 shelter settlement initiative jointly implemented by the Commissioner and the Chief Counsel, project

settlement offers may also be made to investors who have

yet to file suit. The resolution of tax shelter examinations

prior to the initiation of litigation saves time and resources

for taxpayers, the IRS and the courts. (See Statistical Table

36, Tax Litigation Refund Suits.)

Special trial attorneys were active in prosecuting the largest and most significant cases in the Tax Court, particularly

large tax shelter litigation projects involving hundreds of individual dockets and key issues of first impression with

nationwide impact. In addition, special trial attorneys have

become more involved in providing assistance to Examination in major cases to improve the quality of case

development. (See Statistical Table 33, Appellate Court Case

Record and Statistical Table 37, Trial Court Case Record.)

Chief Counsel's Industry Specialization Program (ISP) was

established in 1985 to support and assist the ISP program in

Examination in its efforts to identify, develop, and resolve

significant industry wide issues. Designated field and National

Office attorneys advise Examination on technical positions

for significant tax issues which are widespread in major industries and also provide advice on individual industry cases

to ensure appropriate case development on identified issues.

Key issues are also developed for litigation. Leveraged buyouts was added as a coordinated industry area.

The Large Case Program started in Chief Counsel's

office in 1988 to provide more direct Counsel assistance to Examination in the development of large cases, primarily

corporate cases in the Coordinated Examination Program. Attomeys assist in the examination planning process, aid in the

early identification and resolution of audit problems, expedite technical advice requests, and facilitate better case and issue

coordination.

In 1895, the Supreme Court of the United

States declared the Federal income tax

unconstitutional. Pictured are members of

that court.
, Chief of the Chief Counsel library in

5hington D.C. researches a question in

- of the more than 1 00, 000 resource

uments available to Counsel and IRS

sonnel.

The Tax Litigation Division works closely with components of the Office of the Commissioner to develop key

issues for litigation in the Employee Plans area, and is involved in providing training for Counsel attorneys and

Examination specialists on procedures and significant issues.

General litigation attorneys in the National Office and the

field provide advice and legal services to the Collection function. Field attorneys are involved early in providing advice in

large dollar collection cases, and increasingly are directly

handling litigation in bankruptcy courts. Counsel's Office was

substantially involved in the bankruptcy cases of several major corporations and successfully developed procedures to

handle the significant administrative and coordination problems presented by such cases.

General litigation attorneys in the National Office also

prepared legislation and regulations on collection matters.

With the enactment of the Taxpayer Bill of Rights, which

applies primarily to the IRS collection activities, General LAtigation attorneys prepared regulations on the Taxpayer

Ombudsman's authority to issue Taxpayer Assistance Orders

and on procedures for the administrative appeal of liens.

(See Statistical Table 31, Receipt and Disposal of General Litigation Cases.)

A Criminal Tax Policy Committee was created by the

Chief Counsel, the Assistant Commissioner for Criminal Investigation and the Assistant Attorney General, Tax Division,

Department of Justice. The committee is comprised of senior

personnel from each of the three offices and meets monthly.

It was created to address, on a coniinuing basis, issues involving the investigation, review, referral, and prosecution of

criminal cases, with a view to improving tax administration.

Its projects have included policies on pleas, referral processes, and the interplay between the criminal and civil

aspects of tax cases.

Disclosure litigation attorneys helped with the Government's defense in civil litigation using the disclosure statutes

as a basis to challenge several key IRS programs. Taxpayers

L

continue to challenge the Service's issuance of press releases

used

to

publicize successful IRS enforcement actions despite

the holding of the Ninth Circuit that press releases based on

tax return information contained in public court records of

judicial tax proceedings are not unauthorized disclosures.

Four suits

have

challenged the IRS use of circular letters

during criminal investigations. Circular letters are identical

letters the 116 typically uses when a large number of potentiai witnesses need to be interviewed or where potential

witnesses we geographically scattered. The IRS position is

that disclosures of tax return inkrrmation in such letters are

authorized by the Internal Revenue Code section 6103(k)(6),

which permits disclosure of tax return information to obtain

investigative information not otherwise reasonably available.

To date, there is a split of judicial authority as to the propriety of circular letter disclosures.

Another suit, brought under the Right to Financial Privacy

Act, claimed that a banks informal disclosure of its bank records to the IRS without a subpoena or the taxpaye~s consent

violated the Act. The district court held, however, that since

the Internal Revenue Code section 7602(aXI) authorizes the

Service's informal access to documents, the disclosure met

the Act's exception which permits the disclosure of financial

records authorized by the Internal Revenue Code.

Administrative Appeals

The Appeals organization is responsible for resolving tax

controversies without litigation, on a basis that is fair to both

the Government and the taxpayer, and in a way that enhances voluntary compliance and public confidence in the

tax system. Appeals officers, located in major cities, met with

taxpayers and their representatives and were usually suc-

.cessful in resolving the disputed issues. Appeals closed

approximately 87,000 cases, of which 88 percent were agreed.

(See Statistical Tables 15 and 16 for breakdown of Appeals'

cases.) Appeals also has responsibility for providing specialized valuation help throughout IRS and to other government

agencies on tax-related fair market value determinations for

financial assets, real estate, art objects, and intangible property. The Art Advisory Panel of outside experts considered

1,600 items with claimed values of $177 million. The panel

recommended $53 million of changes to the value of these

items.

The Tax Equity and FLwal Responsibility Act of 1982

(TEFRA) established new unified procedures for examining

certain partnerships and S corporations. As a result, marry

established procedures used to process pre-TEFRA cases

cannot be used. Therefore, Appeals developed new proce_

dures to facilitate the implementation of the TEFRA

provisions.

Automated Systems Environment

Counsel continued to implement the Counsel Automated Systems Environment (CASE), a system of local area networks

providing access at each attorney workstation to legal research, automated case tracking, an electronic mail system,

and wordprocessing and spreadsheet software.

One of the key management information systems accessi.

ble via CASE is the Counsel Automated Tracking System

(CATS), implemented by Computer Services and Chief Counsel. This automated system allows on-line access to

workload data to provide for increased case control, better

allocation of resources, the ability to predict workload based

on actual performance data, and the assurance that uniform

positions will be taken in cases with similar issues.

VIStatistical Tables

Note., Statistical data used in the text and tables of this volume are on a fiscal year basis, unless otherivise noted. For example, data headed "1989 " pertain to the fiscal year ended September 30, 1989.

Graphs, charts and text figures have been rounded and may

not compute precisely compared to the statistical tables~ which are based on unrounded figures.

Table 1. Internal Revenue Collections

Table 2. Table deleted in 1998

Table 3. Internal Revenue Collections by Principal Sources

Table 4. Amount of Internal Revenue Refunds Including

Interest

Table 5. Number of Internal Revenue Refunds Issued

Table 6. Number of Returns Filed

Table 7. Returns Filed, Examination Coverage (1989)

Table 8. Returns Filed, Examination Coverage (1988)

Table 9. Additional Tax and Penalties Recommended After

Examination

Table 10. Number of Returns Examined

Table 10A. Information Returns and

Other Correction Programs

Table 11. Returns Examined by Examination Divisions

Table 12. Examinations Resulting in Refunds

Table 13. Delinquent Collection Activity

Table 14. Civil Penalties Assessed and Abated

Table 15. Appeals Workload (Nondocketed)

Table 16. Appeals Workload (Docketed)

Table 17. Employee Plans and Exempt Organizations

Tax Rulings and Technical Advice (Closings)

Table 18. Determination Letters Issued on Employee Benefit Plans

Table 19. Exempt Organizations Examinations

(Number of Returns Examined by Type)

Table 20. Exempt Organizations (Number of Active Entities

on Master File)

Table 21. Exempt Organizations Applications (Disposals)

able 22. Internal Revenue Collections, Costs, Employees and U.S. Population

Table 23. Internal Revenue Service Costs by Activity

Table 24. Internal Revenue Service Costs by Office

Table 25. Internal Revenue Service Personnel Summary

Table 26. Criminal Investigation Activity

Table 27. Chief Counsel Cases Received

Table 28. Chief Counsel Receipt and Disposal of Cases

Table 29. Regional Offices Caseload Report-All Cases

Table 30. Receipt and Disposal- of Criminal Tax Matters

Table 31. Receipt and Disposal of General Litigation Cases

Table 32. Tax Litigation Workload

(Tax Court Cases and Cases on Appeal)

Table 33. Appellate Court Case Record

Table 34. United States Tax Court Opinions

Table 35. United States Tax Court Cases

Table 36. Tax Litigation Refund Suits

Table 37. Trial Court Case Record (Opinions Rendered- Refund litigation)

Table 38. Receipt and Disposal of CasesAssociate Chief Counsel (International)

Table 39. Receipt and Disposal of CasesAssociate Chief Counsel (Technical)




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Table 7-Rehu-ns Fded, Examination Coverage (1989) Table 7-Conflnued

1040 , A. TH1 nda, 925,000

1040A. TPI uncier $25.0DO

M 125 ODO ianda S%ODO 25:76M

TPI =:ODD Under $1DO.000 10 030 000

TPI S100.000 and

Schinink, SOW C-TGR2 C_TGn ndar S25,00D 2,M,ODD 2 *

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Sdaafift C-MR SIOD'ODO and

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Sdmdde F- GR wider S100.0013 665000

Schedute F-TGR $100.000 and Mr 263 ODD

Fignabity,

partambiship

carpanduad, ambI

A1.01--dM 231,000 2.486

Unda, S50,OD03

SSOAO inydar SIOO.ODD

$100.0DO-

SM.ODO

S250,000 unde, =ADD

MODO itnat, SI bfil 211,000 3,654

51 .11 und. S5 MH

$5 mh unde, $10 mil

$10 not inidan, &5D nni

$50 aul iandin S100 .41

ED

5100 did dambr S250 in!]

S250 nul and c- 4.483 2.980

f- 112OF

suall 6.9yabas CWPMM

F- 1120 CHU

E.Idda, bital

baidnim, niata and gin, MUI

E.i.

Eniph"unde

wananall Met

S.A. andaid,

MEE U., by

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40mW inchnie eniggloynantW nd

H= .dai Sam.

cv Isu tina ainday,

107.0M.0100 242.9155 542.7M MAn SU.643

32 M7

*

OOD 20,336 150:585 37:80 2B8.722

Z9 112 396

7 156.737 ODD Z3.340 0700

46:357

28 9M

2,193.ODO 42.146 32.661 .907

2160.800 3,193

1,704.080 12195

2'T74.24c 56,165

817.0D) 8,192

381,000 6.989

525.000 am

317.DDO 5,296

203.000 5~639

2B,ODD 2.627

31,000 5.335

6.000 1,819

4.457 1.852

16.ODO 487

1.170.0015 I.M

I.IDD no

52,000 12.40

6- e0an, d"Wan' si it 29.ODO 5,201

G- andate 51 nid unda, 55 nifl 21.000 6,236

Grands cibad, S5 M11 andm 2,000 1.026

104.00D I'M

115.5D4,D40 336,963

WOOD 34.567

28.335.000 33.515

2,500 1.122 1

875

3

2:897

'111'2

174 36584 257

1

X'do' 28:~ 101:72'3

13:092 20: 14053

331 '7

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112 213

~7

.5

17

8.

501 6,286

1.355

411.517

Tatal

62 62

P-0

-M.Nm

1:201

119.794 5,46

28:055 1.931

49.952

2

52304 3.79

323 5,'14 087

522

4

531 1.72

311 0.12

12.295 G.T2

56.155 2.02

2,486 1.08

8,192 I.DD

6.989 113

8.8% 1.70

5.296 1.67

3.&M 1.73

5.09 2.78

2,627 9,38

5.335 17.21

1.819 30 32

1.862 41.78

2ABD 64.24

487 ID4

7,775 0.65

350 n.27

12,463 22.97

5,201 IT93

6.236 29 TO

1,026 51.30

1.716 1.23

542.7D6 19SA71 1,078,640 0.93

34,567 3.53

34,870 0.12

1,122 "m

R-.dd Mb-IW .0P-M.

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R- T. S.M. R- To Sinai. R- Tani

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2.755 223 476 4XIA 11.3117 1.927 2.393 11 14

251 ZD7 28 516 1.374 729

99 27 220 13.0 4 21450 I.ODD 678

9263

93 25794 37 Q7 4.170 1.473 1,018 10 13 TPI 125,ODD undat S50.000

11

98 151

14 169 243 1.326 21:6M95

52.203 3.4329 17 TPI S50.000

'180

5

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62 32

1 95 4,699 2.243 8w

9 10 Sclaiddle C-TGR dinter M.ODO

190 739 272 7.195 3594 2.793 14 Giihadluk, C-TGA S25.ODO idide, SIOO.ODO 690 58 32 780 18.430 6:778 5

.14211 20 SChadulti C-TGR SIOD.0130 and oi,

10

53

31

5 957 420 14 7 413 20 SIbinkid. F-TGR unft, S100,00o

2,252 2.486

m Schadule F-TGR S100,0DO and

104 104

12.917 12.917

22,M

229.M

402 402 161,450 26 a,,iana nin -mad

54 54 6,598

25 25 3,594 27 S50,000 and. SIOO,ODO

44 44 5,480

58 58 11.053 27 sm'000 unda, s5m,000

45 45 14,MI

195 195 35.362

132 132 50.247 17 S5 mil Under S10 MR

346 34B M.720 12 $1

D .11 d"dar LID nal

257 257 191,932

6D6 W6 423.319

10,329 10.329 3,536,986

422 422 MAN

14 14 Un

745 746 60.346

326 326 52,168

SD9 309 300.292

M2 409 321,M

16,963 993 476 18,414 W341 1.83 2.393

259 258 71449

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27 $100,000 War $250,ODO

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Form 112OF

Small Is....... evaterrifits,

Nes, 1120 OISC

W.1c 1.1

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G-v ested Sl .1 net' S5 Md

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I-e. move, and gin total

a

Employments,

Windfall .fit

M..."imenves

Sless" 'Imeer coment!...

Note I Trials "emayis ora

0 doe 10 IDI'd-19

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1113,251.020 352.80f

2D:198 OGO 10.221

10 050,M 0.269

14 117

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to.177 000 106,256

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85

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24

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242.000 5.267

2.336.0011 4.201

1,7112,79111 15,789

2,0611.500 33107111

249,000 1,706

865,0004 088

4D9,000 3.398

5KOOO4 920

295.000 2,396

2DOGOO 2,229

196,000 5'M9

28,0002 12,1

30,000 4.841

6,300 1.969

4.700 2.058

4,500 2,858

17.010 432

892.111110 8.M

3.000 1.116

55,51111 12.525

37GDD6 325

17.ODD5 195

1.5001 M5

Ific" 1.510

111,212,786 434,868

952.20al M.960

28A65.01111 23.311

4.2% Too

50

still.. Is.

532,324 175.662

'1 '1: 2' 1'

85,125

1,241

R.... ......ad

3fig

609. 35' 632

20,725

":3'128'

225 2'~

36 302 675

s4.W9

15

9 1.3119 8 66 7"28

801 2,970

1 491 157

1,071 285

532,32,l 175 682

Total

561.767 5fr4,767

Percent

'ovi

1,060,807 1.03

10.31~

01.2'S' 1 21

236 4M2 32

2

7

45 '73212 12

5U594M

0 78

4 '2?40 95 2 74

4.201 0.18

15.789 0.93

U.078 f.33 1 706 069

4.0w0 ~7

3.398 083 v 9M 08,

2.3lHi 081

5,0492 58

2,124 7.59

4,Ul lb 14 1 969 31 25

2.058 43 79

2,868 63 73

4372 54

8.148 0.99

1.115 37.20

12.525 n.57 6 325 1 7G9

5,195 3656 1 005 67 DO

1.5101 ~45

1 142.8741 03

X.960 318

21,552 0,09

790 18.52

50

-.- -1.1-11"Ifts

Amage ts, and 11-tel

or, seenn '..'et

Revlon., his S.-

.Past, ImIll centers final!

R ...no,

.

asout ndlions 'Intel- H=

3.440 1.166 737 5.343 9,750 2.190 14 14'

163 5,1 158 375 3,1 '

77 74 5078 !~~'25

l.792

15~

11.6761

87

615

68

D

1

12 lp

4 958

~5' 7' '$to under S25.000. simple 2' Tpl $10.00no

207 272 58 537 2.085'

1 og 1,609 16 31

Tle"al $25,051) ornal

S25GDO under MOOD

455 436 2.673 16 711 A 3

5 277 98% 12 5.- CMI S50 000 and me 11 63 9 2238 2

5.55i 3.09

4 753 or 12 Sch-e C-TGR 125 ODGDqunUd`vrSS10205 OOODO

112 41 996 21,171

2

121

32 '25

501colle C- IGH SIDO,000 and

o

7

9

6B 763

2 16

2 828 92b

1 8291 22

5"",b slF-TGA und,, $25

;e,,

F-1G8 $25,000 under Slam

626

3 72 11,810 SM9 12 173 l'I 21 Scovenuis f-TGR $100.000 and over

198 198 47,099 15

150 150 88 173

$250.000 under MGOg

59 59 26 357 20 liSOD DDO under S, .,r

320 320 63.293

217 217 102.027

461 461 95.276

203 203 103.080

601

189

156 156 17.661

69,

144

19

Recurnmemild addition-] las ,it pemods

Im millions)

46 22

11.676 305.62

43

8 750 $100 ODD inner S2M ODO

32 32 T3.328

W,

M 123

9 302

'4'

54

891 71,126 - 22380

290 290 55.886

s56 456 ~54 171

241 241 159.475

1660,

1 166 73? 18'50~ 38 176

21K4 195

flat 190 SAM

2031 204 8.718 952

1.060 1,060 I.Ul ~933

17 466 27

7,98, 27

3113 670 12

750 750 1,329

Se"t, lere, rong, st,m do. ~s no,

S.... .....r vommorlm, 'es."'s 19 or"'m no'noT

Individuals. total

;040A TPIu-SIG `22 19 2110 Nom NOA Tint nd1r $10 ON 79

Is parmandem

17

144

Finds-,

clessestreal ,I

Asant, no, nned

Under SSO.ODO

W DOD under $IDO,M

$1 me on, $5 .1.

$5 mol under S10 rid

10 SIO eml no,, $50 sn'

$50 .11 under S100 .11

$100 .,1 under S250 .11

1250 il .0 me,

Z6

.......

..Naverandes

28 F.- in Disc

unal

10 Gross es"', under $1 m'I

Gross estate $1 mf under S5 mill

Gross man S5 Mir old-

imomn. estal, and ft to., l

Eumplumman't

Windfall Pmant M

S'nis. in re"ovies












Officials

COMMISSIONERS OF

INTERNAL REVENUE

The Office of Commissioner

of Internal Revenue was created by Act of Congress, July

1,1862.

GEORGE S. BOUTWELL

Massachusetts

July 17, 1862/March 4, 1863

JOSEPH J. LEWIS

Pennsylvania

March 18, 1863/June 30, 1865

WILLIAM ORTON

New York

July 1, 1865/Oct. 31,1865

EDWARD A. ROLLINS

New Hampshire

Nov. 1, 1865/March 10, 1869

COLUMBUS DELANO

Ohio

March 11, 1869/Oct. 31, 1870

ALFRED PLEASONTON

New York

Jan. 3,1871/Aug. 8,1871

JOHN W. DOUGLASS

Pennsylvania

Aug. 9, 1871/May 14, 1875

DANIEL D. PRATT

Indiana

May 15, 1875/July 31, 1876

GREEN B. RAUM

Illinois

Aug. 2, 1876/April 30, 1883

WALTER EVANS

Kentucky

May 21, 1883/March 19,1885

JOSEPH S. MILLER

West Virginia

March 20, 1885/March 20, 1889

JOHN W. MASON

West Virginia

March 21, 1889/April 18,1893

JOSEPH S. MILLER

West Virginia

April 19, 1893/Nov. 26, 1896

W, ST.JOHN FORMAN

Illinois

Nov. 27, 1896/Dec. 31, 1897

NATHAN B. SCOTT

West Virginia

Jan. 1, 1898/Feb. 28, 1899

GEORGE W.WILSON

Ohio

March 1, 1899/Nov. 27, 1900

L

JOHN W. YERKES

Kentucky

Dec. 20, 1900/April 30, 1007

JOHN G. CAPERS

South Carolina

June 5, 1907/Aug. 31, 1909

ROYAL E. CABELL

Virginia

Sept. 1, 1909/April 27, 1913

WILLIAM H. OSBORN

North Carolina

April 28, 1913/Sept. 25, 1917

DANIEL C. ROPER

South Carolina

Sept. 26, 1917/March 31, 1920

WILLIAM M. WILLLAMS

Alabama

April 1, 1920/April 11, 1921

DAVID H. BLAIR

North Carolina

May 27, 1921/May 31, 1929

ROBERT H. LUCAS

Kentucky

June 1, 1929/Aug. 15, 1930

DAVID BURNET

Ohio

Aug. 20, 1930/May 15, 1933

GUY T. HELVERING

Kansas

June 6, 1933/OcL 8, 1943

ROBERT E. HANNEGAN

Missouri

Oct. 9,1943/Jan. 22, 1944

JOSEPH D. NUNAN, JR.

New York

March 1, 1944/June 30, 1947

GEORGE J. SCHOENEMAN

Rhode Island

July 1, 1947/July 31, 1951

JOHN B. DUNLAP

Texas Aug. 1, 1951/Nov. 18

'

1952

T. COLEMAN ANDREWS

Virginia

Feb. 4, 1953/Oct. 31, 1955

RUSSELL C. HARRINGTON

Rhode Island

Dec. 5, 1955/Sept. 30, 1958

DANA LATHAM

California

Nov. 5, 1958/Jan. 20, 1961

MORTIMER M. CAPLIN

Virginia

Feb. 7, 1961/July 10, 1964

SHELDON S. COHEN

Maryland

Jan. 25, 1965/Jan. 20, 1969

RANDOLPH W. THROWER

Georgia

April 1, 1969/June 22, 1971

JOHNNIE M. WALTERS

South Carolina

Aug. 6, 1971/April 30, 1973

DONALD C. ALEXANDER

Ohio

May 25, 1973/Feb. 26, 1977

JEROME KURTZ

Pennsylvania

May 5, 1977/Oct. 31, 1980

ROSCOE L. EGGER, JR.

Indiana

March 14, 198I/April 30, 1986

LAWRENCE B. GIBBS

Texas

Aug. 4,1986/March 4, 1989

FRED T. GOLDBERG, JR.

Missouri

July 5,1989 to present

The following served as Acting

Commissioner during the

peric~ds when there was no

Commissioner holding the

office.

JOSEPH J. LEWIS

Pennsylvania

from March 5 to March 17,

1863

JOHN W. DOUGLASS

Pennsylvania

from Nov. 1, 1870 to Jan. 2,

1871

HENRY C. ROGERS

Pennsylvania

from May I to May 10, 1883,

and from May I to June 4, 1907

JOHN J. KNOX

Minnesota

from May I I to May 20, 18&1

ROBERT WILLIAMS, JR.

Ohio

from Nov. 18 to Dec. 19, 1900

MILLARD F. WEST

Kentucky

from April 12 to May 26, 1921

H.F. MIRES

Washington

from Aug. 16 to Aug. 19, 1930

PRESSLY, R. BALDRIDGE

Iowa

from May 16 to June 5, 1933

HAROLD N. GRAVES

Illinois

from Jan. 23 to Feb. 29, 1944

JOHN S. GRAHAM

North Carolina

from Nov. 19, 1952 to

Jan. 19,1953

JUSTIN F. WINKLE

New York

from Jan. 20 to Feb. 3, 1953

0. GORDON DELK

Virginia

from Nov. I to Dec. 4,1955,

and from Oct. I to Nov. 4, 1958

CHARLES 1. FOX

Utah

from Jan. 21 to Feb. 6, 1961

BERTRAND M. HARDING

Texas

from July 11, 1964 to

Jan.24,1965

WILLIAM H. SMITH

Virginia

from Jan. 21 to Aug. 5, 1971

HAROLD T. SWARTZ

Indiana

from June 23 to Aug. 5, 1971

RAYMOND F. HARLESS

California

from May I to May 25, 1973

WILLIAM E. WILL14MS

Illinois

from Feb. 27 to May 4, 1977,

and from Nov. 1, 1980 to

March 13, 1981

JAMES 1. OWENS

Alabama

from May I to Aug. 3, 1986

MICHAEL J. MURPHY

Wisconsin

from March 5 1989 to July 4,

1989

PRINCIPAL OFFICERS

OF TIHE INTERNAL

REVENUE SERVICE

as of September 30,1989

NATIONAL OFFICE

Commmissioner

FRED T. GOLDBERG, JR.

Senior Deputy

Commissioner

MICHAEL J. MURPHY

Deputy Commissioner

(Operations)

CHARLES H. BRENNAN

Deputy Commissioner

(Planning and Resources)

JOHN L. WEDICK, JR.

Assistant to the Commissioner

GARY J. GASPER

Assistant to the Commissioner

THOMAS R. HOOD

Assistant to the Commissioner

HUGH S. HATCHER

Assistant to the Senior

Deputy Commissioner

ROBERT F. HILGEN

Executive Secretariat

DAVID W. JUNKINS

Assistant to the Commissioner

(Equal Employment

Opportunity)

HARDI L. JONES

Assistant to the Commissioner

(Legislative Liaison)

GAYLE G. MORIN (Acting)

Assistant to the Commissioner

(Public Affairs)

ELLEN MURPHY

Assistant to the Commissioner

(Quality)

ALVIN H. KOLAK

Assistant to the Commissioner

(Taxpayer Ombudsman)

DAMON 0. HOLMES

Director, Legislative

Affairs Division

RICHARD HINKEMEYER

(Acting)

COLLECTION

Assistant Commissioner

RAYMOND P. KEENAN

Deputy

Assistant Commissioner

PAUL M. HARRINGTON

Directors:

Continuous Quality

Improvement

WILLIAM STIFF

Evaluation and Research

WILLIAM ROONEY

Field Operations

GRANT A. NEWMAN

Planning & Management

LEWIS 1. BAURER

Project Managers:

Connectivity Project

MICHAEL L. SOLLITTO

Integrated Collection

System Project

ANDREW MERANDA

CRIMINAL INVESTIGATION

Assistant Commissioner

BRUCE V. MILBURN

Deputy

Assistant Commissioner

BRIAN M. BRUH

Directors:

Enforcement

GREGORY ZAMPOGNA

Planning & Development

WARREN E. HARRISON

EMPLOYEE PLANS AND

EXEMPT ORGANIZATIONS

Assistant Commissioner

ROBERT 1. BRAUER

Deputy

Assistant Commissioner

ROBERT E. WITHERS

(Withers also directs the

EP/EO Operations Division)

Directors:

Employee Plans & Exempt

Organizations Operations

ROBERT E. WITHERS

Employee Plans

Technical and Actuarial

MARTIN 1. SLATE

Exempt Organizations

Technical

EDWARD D. COLEMAN

EXAMINATION

Assistant Commissioner

DAVID G. BLATTNER

Deputy

Assistant Commissioner

MARSHALL W. WASHBURN

Chief of Staff

WILLIAM C. ROTH

Directors:

Disclosure

CARMAN L. GANNOTTI

Examination Planning

and Research

RICHARD W. HAYS

Examination Programs

MANNY RUSCHEINSKI

Examination Quality

and Customer Advocacy

JAMES J. FEEHAN, JR.

Examination Automation

LARRY E. BURKEY

Matrix Projects

DIANNE GRANT

INTERNATIONAL

Assistant Commissioner

DONALD E. BERGHERM

Deputy

Assistant Commissioner

DONALD L. HOUCK

Directors:

International Programs

STANLEY NOVACK

Resources Management

NANCY D'AMATO

TaxAdministration

Advisory Services

SOCORRO VELAZQUEZ

Taxpayer Service

and Compliance

THOMAS ANDRET7A

RETURNS PROCESSING

Assistant Commissioner

CHARLES J. PEOPLES

Deputy

Assistant Commissioner

JOHN T. ADER

Directors:

Returns Processing

and Accounting

CHARLES 0. GUY

Statistics of Income

FREDERICK J. SCHEUREN

Office Directors:

Information Systems

and Resources

CHARLES V. WARZECHA

Integrated Management

Systems

GARY L. BRANDT

Legislative and

Management Support

EDWARD J. MARTIN

Program Manager:

Electronic Filing

Systems Office

RICHARD MORAN

TAXPAYER SERVICES

Assistant Commissioner

ROBERT A. LEBAUBE

Dhrectors:

Taxpayer Service

JOHN J. DUNNE

Tax Forms and

Publications

ARTHUR ALTMAN

Project Manager:

Automated Taxpayer

Service System

RONALD 1. PICKERING

COMPUTER SERVICES

Assistant Commissioner

HENRY H. PHILCOX (Acting)

Deputy

Assistant Commissioner

WALTER A. HUTTON, JR.

Directors:

Compliance Systems

DONALD E. CURTIS

Detroit Computing Center

Detroit, Michigan

JACK L. SCHROEDER

Martinsburg Computing Center

Martinsburg, West Virginia

GERALD A. RABE

Planning, Budgeting

and Review Staff

RICHARD J. MORGANTE

Quality Assurance

LUDWIG G. KUTTNER

Systems Management

JOHN F. DEVLIN

Tax Systems

CHRISTOPHER J. EGGER

Telecommunications

JOHN T. BLANK

HUMAN RESOURCES

MANAGEMENT & SUPPORT

Assistant Commissioner

ROBERT T. JOHNSON

Deputy

Assistant Commissioner

ORION L. BIRDSALL, JR.

Directors:

Contracts and

Acquisitions

EDWARD J. CURVEY

Facilities & Information

Management Support

MICHAEL L. KILLFOIL
Human Resources

HELEN L. WHITE

National Office

Resources Management

ROBERT L. BUONO

Practice

LESLIE S. SHAPIRO

INFORMATION SYSTEMS

DEVELOPMENT

Assistant Commissioner

MARK D. COX (Acting)

Deputy

Assistant Commissioner

CHRISTOPHER J. EGGER

(Acting)

Directors:

Corporate Systems

MARGARET M. OROURKE

Departmental Systems

DAVID BOOSE

Input Processing

THOMAS H. DEGA

Planning and

Project Management

CLARENCE C. CRAWFORD

Standards and Data

Administration

MARCIA L. BEEZY (Acting)

Systems Acquisition

RENEE 0. SHAW

Systems Engineering

and Integration

THEODORE F. GONTER

PLANNING, FINANCE

AND RESEARCH

Assistant'Commissioner

JOHN D.JOHNSON

Deputy

Assistant Commissioner

REGINA M. DEANERAN

Directors:

Finance

STEPHEN E. TAYLOR

Planning

Vacant

Research

ROGER L. PLATE

REGIONAL AND DISTRICT

OFFICERS

CENTRAL REGION

Regional LEON MOORE Commissioner

6L

Assistant

Regional Commissioners:

Collection

ROBERT G. PHILLIPS

Criminal Investigation

INAR MORICS

Data Processing

BRUCE L. PITT

Examination

PAUL C. LALLY

Resources Management

JON R. SWAN

District Directors:

Cincinnati, OH

HAROLD M. BROWNING

Cleveland, OFF

JACK CHIVATER0

Detroit, MI

JOHN 0. HUMMEL

Indianapolis, IN

WILLIAM M. JACOBS

Louisville, KY

WILLIAM E. PALZKILL

Parkersburg, WV

RONALD W. KIRBY

Director, Cincinnati

Service Center

FREDERIC P. WILLIAMS

MID-ATLANTIC REGION

Regional Commissioner

J. ROBERT STARKEY

Assistant

Regional Commissioners:

Collection

LEROY C. GAY

Criminal Investigation

THOMAS A. WISE

Data Processing

DEBORAH S. DECKER

Examination

JACK B. CHESKATY

Resources Management

PAM BIGELOW

District Directors:

Baltimore, MD

PHIL BRAND

Newark, NJ

JOHN J. JENNINGS

Philadelphia, PA

GARY H. MATTHEWS

Pittsburgh, PA

GEORGE A. O'HANLON

Richmond, VA

JACK G. PETRIE

Wilmington, DE

JOSEPH F. KUMP

Director, Philadelphia

Service Center

JOSEPH H. CLOONAN

MIDWIESTREGION

Regional Commissioner

ELMER W. KLETKE

Assistant

Regional Commissioners:

Collection

ALLEN G. WOODHOUSE

Criminal Investigation

DONALD K. VOGEL

Data Processing

JAMES A. GRANT

Examination

ALVIN 1. FREEMAN, JR.

Resources Management

JACK E. SHANK

District Directors:

Aberdeen, SD

DAVID H. REIZES

Chicago, 11.

RICHARD S. WINTRODE, JR.

Des Moines, IA

HERMA J. HIGHTOWER

Fargo, ND

BRIAN T. WELLESLEY

Helena, MT

ARNOLD 1). \VILEY

Milwaukee, WI

LAWRENCE M. PHILLIPS

Omaha, NE

MITCHELL E. PREMIS

St. Louis, MO

RALPH F. SHILLING

St. Paul, MN

C. DUDLEY SWITZER

Springfield, IL

IRA S. LOEB

Director, Kansas City

Service Center

EVERE77 LOURY

NORTH ATLANTIC REGION

Regional Commissioner

CORNELIUS J. COLEMAN

Assistant

Regional Commissioners:

Collection

EUGENE P. PFEIFFER

Criminal Investigation

MICHAEL D. ORTH

Data Processing

FRANCINE CROWLEY

Examination

LOUIS E. CARLOW

Resources Management

ARLENE G. KAY

District Directors:

Albany, NY

EDWIN A. KELLEHER

Augusta, ME

RICHARD E. SIMKO

Boston, MA

GERALD R. ESPOSITO

Brooklyn, NY

EUGENE D.ALEXANDER

Buffalo, NY

DONALD MITGANG

Burlington, VT

STEPHEN L. DAIGE

Hartford, CT

JAMES E. QUINN

Manhattan, NY

ROBERT E. MIRSBERGER

Portsmouth, NH

(Vacant)

Providence, RI

MALCOLM A. LIEBERMANN

Director, Andover

Service Center

THOMAS M. QUINN

Director, Brookhaven

Service Center

BOBBY G. HUGHES

SOUTHEAST REGION

Regional Commissioner

MICHAEL P. DOLAN

Assistant

Regional Commissioners:

Collection

CHARLES G. HOYLE

Criminal Investigation

DAVID B. PALMER

Data Processing

HENRY E. LEECH, JR.

Examination

GUERRY G. NOTTE

Resources Management

NELSON AL BROOKE

District Directors:

Atlanta, GA

PAUL D. WILLIAMS

Birmingham, AL

PHIL.IP J. SULLIVAN

Columbia, SC

DONALD L. BREIHAN

Ft. Lauderdale, FL

MERL0 W. HEYE

Greensboro, NC

JOHN E. BURKE

Jackson, MS

TULLY MILLER

Jacksonville, FL

JAMES J. RYAN

Little Rock, AK

LEE R. MONKS

Nashville, TN

GLENN CAGLE

New Orleans, LA

JOHN C. WENDCIRFF

Director,Atlanta

Service Center

MICHAEL R. ALLEN

Director, Memphis

Service Center

RICHARD W. MARSH

SOUTHWEST REGION

Regional Commissioner

RICHARD C. VOSKUIL

Assistant

Regional Commissioners:

Collection

JACK L. MILLER

Criminal Investigation

RONALD J. EATINGER

Data Processing

STEPHEN J. STALCUP

Examination

JAMES R. KOPIDLANSKY

Resources Management

JAMES A. LINDSEY

District Directors:

Albuquerque, NM

WILLIAM M. WAUBEN

Austin, TX

RICHARD R. OROSCO

Cheyenne, WY

CONRAD L. CLAPPER

Dallas, TX

GARY 0. BOOTH

Denver, CO

GERALD F. SWANSON

Houston, TX

ARTURO A. JACOBS

Oklahoma City, OK

KENNETH J. SAWYER

Phoenix, AZ

PRESCOT7 A. BERRY

Salt Lake City, LIT

CAROL M.FAY

BWRicUtCEta,FKS

. THOMAS

Director, Austin

Compliance Center

ROBERT D. AH NEE

Director, Austin

Service Center

LARRY G. WESTFAILL

Director, Ogden

Service Center

ROBERT E. WENZEL

WESTERN REGION

Regional Commissioner

THOMAS P. COLEMAN

Assistant Regional

Commisslone~s:

Collection

JAMES D. HELM, JR.

Criminal Investigation

PAUL M. MIYAHARA

Data Processing

JUDY K. VAN ALFEN

Examination

WAYNE R. THOMAS

Resources Management

ANN BROWN

District Directors:

Anchorage, AK

ROBERT W. BROCK

Boise, ID

DOUGLAS A. HOLM

Honolulu, HI

BILLY J. BROWN

Laguna Niguel, CA

MICHAEL J. QUINN

Los Angeles, CA

(Vacant)

Portland, OR

CAROLYN K. LEONARD

Las Vegas, NV

JESSE A. COTA

Sacramento, CA

RAYMOND A. SPILLMAN

San Francisco, CA

FRANCIS S. MICELI

San Jose, CA

CALVIN E. ESSELSTROm

Seattle, WA

WOODROW D. MALONE

Director, Fresno

Service Center

THERON C. POLIVKA

CHIEF COUNSEL FOR

TIHE INTERNAL

REVENUE SERVICE

WALTER H. SMITH/1866

WILLIAM MCMICHAEU1871

CHARLES CHESLEY/1871

THOMAS J. SMrrFV]888

ALPHONSO HART/1890

ROBERT T. HOUGIV1893

GEORGE M. THOMAStI 897

ALBERT W. WISHARD/1901

A.B. HAYES/1903

FLETCHER MADDOX/1908

ELLIS C. JOHNSON/1913

AA. BALLANTINE/1918

D.M. KELLEHER/1919

ROBERT N. MILIFW1919

WAYNE JOHNSON/1920

CARL A. MAPES11920

NELSON T. HARTSON11923

ALEXANDER W. GREGG/1925

CLARENCE M. CHAREST11927

E. BARRETT PRE771iMAN/1933

ROBERT H. JACKSOM1934

MORRISON SHAFORTTV1936

JOHN P. WENCHEU1937

CHARLES OLJPHANT/1947

CHARLES W. DAVIS/1952

DANIEL A. TAYLOR/1933

JOHN POTTS BARNES/1955

NELSON P. ROSE/1957

ARCH M. CANTRALU1958

HART H. SPIEGEU1959

CRANE C. HAUSER/1961

SHELDON S. COHEN/1964

MITCHELL ROGOVNI 965

LESTER R. UREIWI%.6

K. MARTIN WORTHY/1969

LEE H. HENKEL, JR./1972

MEADE WHITAKER/1973

MART E. SEIGEU1977

N. JEROLD COHEN/1979

KENNETH W. GIDEON1981

FRED T. GOLDBERG, JR./1984

WILLIAM F. NELSON/1986

The following were Acting

Chief Counsel during periods

when there was no Chief

Counsel holding the office:

JOHN W. BURRUS

from March 2 to Nov. 30, 1936

MASON B. LEMING

from Dec. 6, 1951 to May 15,

1952

KENNETH W. GEMMILL

from June I I to Nov. 8, 1953

RUDY P. HERTZOG

from Dec. 1, 1954 to MAY 8,

1

955 and from Jan. 20 to Aug.

16, 1 i)61, and from Sept. 1, 1963

to Jan. 5, 1964

HERMAN T. REILING

from Jan. 19 to March 13, 1957

and from Aug. 31 to Sept. 20,

1959

RICHARD M. HAHN

from Jan. 20 to June 25, 1969

LEE H. HENKEL, JR.

From Jan. 16 to June 11, 1972

LAWRENCE B. GIBBS

from April 17 to Oct. 19, 1973

CHARLES L. SAUNDERS, JR.

from Jan. 20 to April 15, 1977

LEON G. WIGRIZER

from April 16 to June 23, 1977

LESTER STEIN

from June I to Nov. 16, 1979

JEROME D. SEBASTIAN

from Jan. 21 to Feb. 2, 1981

and from March 30 to Aug. 14,

1981

EMORY L. LANGDON

from Feb. 3 to March 29, 1981

JOEL GERBER

from May 28, 1983 to March 17,

1984

V.JEAN OWENS

from March 14 to July 27, 1986

NOTE:

From 1866 to 1926, the chief

legal officer for the Internal

Revenue Service was known as

the Solicitor. For the next eight

years, 1926 to 1934, he had the

title of General Counsel for the

Bureau of Internal Revenue.

Since 1934, he has operated

under the title of Chief

Counsel.

PRINCIPAL OFFICERS

OF THE IRS OFFICE

OF CHIEF COUNSEL

as of September 30, 1989

NATIONAL OFFICE

Chief Counsel

PETER K. SCOTT (Acting)

Deputy Chief Counsel

PETER K. SCOTT

Special Assistant to the

Deputy Chief Counsel

KENNETH KEMPSON

Associate Chief Counsel

(Technical)

KENNETH KLEIN

Deputy Associate Chief

Counsel (Technical)

Vacant
Associate Chief Counsel

(international)

STEVEN R. LAINOFF

Deputy Associate Chief

Counsel (international)

CHARLES S. TRIPLETT

Associate Chief Counsel

(Litigation)

JAMES J. KEIGHTLEY

Deputy Associate Chief

Counsel (Litigation)

PATRICK J. DOWLING

Associate Chief Counsel

(Finance and Management)

RICHARD J. MIHELCIC

Deputy Assoc. Chief Counsel

(Finance and Management)

KENNETH LITTLE

National Director of Appeals

JAMES J. CASIMAR

Special Litigation Counsel

STEPHEN M. MILLER

Special Appellate Counsel

DANIEL F. FOLZENLOGEN

Assistant Chief Counsels:

Corporate

MARIO E. LOMBARDO

Criminal Tax

BARRY J. FINKELSTEIN

Disclosure Litigation

PETER V. FILPI

Employee Benefits and

Exempt Organizations

MARY OPPENHEIMER (Acting)

Fiancial Institutions

and Products

JAMES F. MALLOY

General Legal Services

WILLIAM F. LONG, JR.

General Litigation

ARNOLD E. KAUFMAN

Income Tax and Accounting

JAMES J. MCGOVERN (Acting)

Assistants Chief Counsel:

(international)

ROBERT E. CULBERTSON

JOHN T. LYONS

Passthroughs and

Special Industries

PAUL F. KUGLER

Tax Litigation

MARLENE GROSS

in

Regional and District

Officers:

CENTRAL REGION

Regional Counsel

CLARENCE E. BARNES, JR.

Regional Director of Appeals

THOMAS J. YATES

Deputy Regional Counsel

(Criminal Tax)

CHARLES M. LAYTON

Deputy Regional Counsel

(General Litigation)

ROBERT M. VENABLE

Deputy Regional Counsel

(Tax Litigation)

MARY HELEN WEBER

Assistant Regional Counsel

(General Legal Services)

Vacant

District Counsels and

Chiefs, Appeals Office.

Cincinnati, OH

Counsel-RICHARD E.

TROGOLO

Appeals-BENNY R.

MCCANDLESS

Cleveland, OH

Counsel-BUCKLEY D.

SOWARDS

Appeals-RAYMOND H.

FEHRIBACH

Detroit, MI

Counsel-OKSANA 0. XENOS

Appeals-ZORA S. HARGRAVE

Indianapolis, IN

Counsel-ROSS E. SPRINGER

Appeals-GERALD W. WENDEL

Louisville, KY, Counsel

FERDINAND J. LOTZ III

Appeals-DOUGLAS A. WEAVER

MID-ATLANTIC REGION

Regional Counsel

DAVID E. GASTON

Regional Director of Appeals

JAMES A. DOUGHERTY

Deputy Regional Counsel

(Criminal Tax)

RICHARD A. FRANCIS, JR.

Deputy Regional Counsel

(General Litigation)

J. DARREL KNUDT'SON

Deputy Regional Counsel

(Tax LWIlation)

CHARLES F.T. CARROLL

Assistant Regional Counsel

(General Legal Services)

DAVID J. MARKMAN

District Counsels and

Chiefs, Appeals Office:

Baltimore, MD

Counsel-HERBERT A. SEIDMAN

Appeals-SUSAN H. HALE

Newark, NJ

Counsel-MATTHEW MAGNONE

Appeals-PARTICK J. GLYNN

Philadelphia, PA

Counsel-H. STEPHEN

KESSELAIAN

Appeals-THOMAS G.

SPACCARELLI

Pittsburgh, PA

Counsel-EDWARD F.

PEDUZZI, JR.

Appeals-MALVERN P. POWELL

Richmond, VA

Counsel-MARION B. MORTON

Appeals-JOHN D. PIPER

Washington. DC

Counsel-MELVIN E.

LEFKOWTTZ

Appeals-THOMAS L. KRUSE

MIDWEST REGION

Regional Counsel

DENIS J. CONLON

Regional Director of Appeals

PAUL H, THORNTON

Deputy Regional Counsel

(Criminal Tax)

VIRGINIA C. SCHMID

Deputy Regional Counsel

(General Litigation)

WILLIMI J. YORK

Deputy Regional Counsel

(Tax Litigation)

HARMON B. DOW

Assistant Regional Counsel

(General Legal Services)

JEFFREY J. SIEBURG

District Counsels and

Chiefs, Appeals Office:

Chicago, IL

Counsel-JAMES F. KIDD

Appeals-JOHN F. ECKERT

Des Moines, IA

Counsel-MARK E. O'LEARY

Helena, MT

Counsel-THOMAS C.

MORRISON

Kansas City, MO

Counsel-JAMES R. WELLS

Milwaukee, WI

Counsel-ROBERT J. COLLINS

Omaha

'

NE

Counsel-RONALD M.

FRYKBERG

Appeals-EDWIN L. BROOKE

Springfield, IL

Counsel-JEFF P. EHRLJCH

St. Louis, MO

Counsel-RICHARD A.

WITKOWSKI

Appeals-DOUGLAS KELLEY

St. Paul, MN

Counsel-ROBERT F.

CUNNINGHAM

Appeals-H. LARRY STEWART

NORTH ATLANTIC REGION

Regional Counsel

AGATHA L. VORSANGER

Regional Director of Appeals

KEVIN P. MORGAN

Deputy Regional Counsel

(Criminal Tax)

MARGARET C. TINAGERO

Deputy Regional Counsel

(General Litigation)

MYRON LEVINE

Deputy Regional Counsel

(Tax Litigation)

JAY S. HAMELBURG

Assistant Regional Counsel

(General Legal Services)

ELLJOT M. CARLIN

District Counsels an

Chiefs, Appeals Offic

Albany, NY

Counsel-GERALD A. THORPE

Boston, MA

Counsel-LINDA M. GARRARD

Booklyn, NY

Counsel-MARTHA SULLIVAN

Buffalo, NY

Counsel-JOSEPH H. WALZ

Hartford, CT, Counsel

POWELL W, HOLLY, JR.

Appeals-JOSEPH F.

SCHERZINGER

Long Island, NY

Appeals-JOHN P. CHAMBERS

Manhattan, NY

Counsel-JOSEPH F. MASELLI

New York City, NY

Appeals-EDWARD M.

SCHAEFFER

Assistant-JOHN G. IMBESI

SOUTHEAST REGION

Regional Counsel

WILLIAM A. GOSS

Regional Director of Appeals

RICHARD E. FOLEY

Deputy Regional Counsel

(Criminal Tax)

STEPHEN J. WALLER

Deputy Regional Counsel

(General Litigation)

RONALD P. CAMPBELL

Deputy Regional Counsel

(Tax Litigation)

ROY L. ALLISON

Assistant Regional Counsel

(General Legal Services)

HARRY G. MASON

District Counsels and

Chiefs, Appeals Office:

Atlanta, GA

Counsel-DEAN R. MORLEY III

Appeals-CHARLES R. BARNES

Birmingham, AL

Counsel-JOHN B. HARPER

Appeals-ROBERT D. HOLT

Greensboro, NC

Counsel-ALAN 1. WEINBERG

Appeals-LARRY L. DAVIS

Jacksonville, FL

Counsel-ROY S. FISCHBECK

Appeals-Vacant

Miami, Fl,

Counsel-DAVID R. SMITH

Appeals-STEVEN D.

HERSCOVITZ

Nashville, TN

Counsel-RICHARD J.

NEUBAUER

Appeals-LOUIE C. MAYS

New Orleans, LA

Counsel-JAMES E. KEETON, JR.

Appeals-SANDRA T. FREELAND

Tampa, FL

Appeals-WILLIAM E.

OPPENHEIM, JR.

SOUTHWEST REGION

Regional Counsel

DAVID L. JORDON

Regional Director of Appeals

CLAUDE C. ROGERS, JR.

Deputy Regional Counsel

(Criminal Tax)

CARLETON E. KNECH`rEL

Deputy Regional Counsel

(General Litigation)

CHARLES L. MCREYNOLDS, JR.

Deputy Regional Counsel

(Tax Litigation)

MARK L. PURYEAR

I

Assistant Regional Counsel

(General Legal Services)

GARY A. ANDERSON

District Counsels and

Chiefs, Appeals Office:

Albuquerque, NM

Courisel-HARRY BECKHOFF

Austin, TX

Counsel-LEWIS J. HUBBARD

Appeals-FREDERICK R. BOX

Dallas, TX

Counsel-WILLIAM F.

HAMMACK, JR.

Appeals-RONALD J. BLAIR

Denver, CO

Counsel-MARTIN B. KAYE

Appeals-DWIGHT M. SUMNER

Houston, TX

Counsel-HAROLD FRIEDMAN

Appeals-AUBRY 0. MYRICK

Oklahoma City, OK

Counsel-MICHAEL J. O'BRIEN

Appeals-WILLLAM C. REITAN

Phoenix, AZ

Counsel-ROGER RHODES

Appeals-DARRELL P.

LADMIRAULT

Salt Lake City, UT

Counsel-MARION K.

MORTENSEN

Appeals-ROBERT B. STIPEK

WESTERN REGION

Regional Counsel

BENJAMIN C. SANCHEZ

Regional Director of Appeals

DONATO CANTALUP0

Deputy Regional Counsel

(Criminal Tax)

WILLL&M K. SHIPLEY

Deputy Regional Counsel

(General Litigation)

PERRY T.FOSTER

Deputy Regional Counsel

(Tax Litigation)

CONSTANCE L. COUTS

Assistant Regional Counsel

(General Legal Services)

ALBERT LARSON [if

District Counsels and

Chiefs, Appeals Office:

Anchorage, AK

Counsel-JERRY L. LEONARD

Boise, ID

Counsel-RANDALL G. DURFEE

Honolulu, HI

Counsel-WILLLAM A. SIMS

Laguna Niguel, CA

Counsel-HARRY M. ASCH

Appeals-RAYMOND E. GUMP

Las Vegas, NV

Counsel-RICHARD A. JONES

Los Angeles, CA

Counsel-JOSEPH 0. GREAVES

Appeals-Vacant

Assistant-BRUCE J. CONYNE

Portland, OR

Counsel-WAYNE R. APPLEMAN

Appeals-GEORGE F. KAUFER

Sacramento, CA

Counsel-STEVFN J. MOPSICK

Appeals-ORIS MCMILLIAN

San Diego, CA

Counsel-DONALD W. WOLF

Appeals-CHARLES E. MASON

San Francisco, CA, Counsel

J. RICHARD MURPHY, JR.

Appeals-JAMES ELLIOTT

San Jose, CA

Counsel-LAWRENCE G. LILLY

Appeals-JACKSON S.

KOHAGURA

Seattle, WA

Counsel-RICHARD J. SHIPLEY

Appeals-JERALD MPETERSON

Thousand Oaks, CA

Counsel-JAMES A. NELSON

PRINCIPAL OFFICERS

OF INSPECTION

NATIONAL OFFICE

Assistant Commissioner

TEDDY R.KERN

Deputy Assistant

Commissioner

KENNETH A. THOMPSON

Director,

Internal Audit

GARY D. BELL

Director,

Internal Security

C. ARNOLD DECKER

CENTRAL REGION

Regional Inspector

JOHN A. GIBSON

Assistant Regional

Inspector

Internal Audit

EDWARD L. BALL

Assistant Regional

Inspector

Internal Security

HAROLD J. MICHAELS

MID-ATLANTIC REGION

Regional Inspector

WALTER D. DUVALL

Assistant Regional

Inspector

Internal Audit

MARY V. BAKER

Assistant Regional

Inspector

Internal Security

WILLIAM GILL

MIDWEST REGION

Regional Inspector

RONALD J. LAMBERT

Assistant Regional

:nspector

nternal Audit

HARRY B. ODOM

Assistant Regional

Inspector

Internal Security

PHILIP NEWSOME

NORTH ATLANTIC REGION

Regional Inspector

JOSEPH F. REINBOLD

Assistant Regional

Inspector

Internal Audit

KERRY R. KILPATRICK

Assistant Regional

Inspector

Internal Security

JOSEPH LAMONICA

SOUTHEAST REGION

Regional Inspector

BILLY G. MORRISON

Assistant Regional

Inspector

Internal Audit

LAWRENCE A. GRANT

Assistant Regional

Inspector

Internal Security

MICHAEL J. BIK

SOUTHWEST REGION

Regional Inspector

E. DERLE RUDD

Assistant Regional

Inspector

Internal Audit

EMMETTE WALKER

Assistant Regional

Inspector

Internal Security

JOHN DIETZ

WESTERN REGION

Regional Inspector

ALDWYN K. HYAT7

Assistant Regional

Inspector

Internal Audit

WALTER ARRISON

Assistant Regional

Inspector

Internal Security

KENNETH DAVIDSON

A
V1' IRS Organization Chart

Department

of the

Treasury

Assistants

to the

Commissionerl

Associate Chief Counsel

(Finance and Management)

General Legal Services

- Office at Information Systems

- Office of Planning and Finance

- Office of Human Resources

(Appeals) Associate Chief Counsel

(Technical)

(Technical & Legal Services)- - Financial Institutions and

Products

- Corporate

Passthroughs and Special

Assistant Commi;~nej r

Industries

(inspection)

Internal Audit Division

Internal Security Division

Commissioner

Senior Deputy

Commissioner

Deputy

Commissioner

(Operations)

Chief

Information

Officer

Deputy

Commissioner

(Planning and

Resources)/

Chief Financial

Officer

Assistant

to the

Sr. Deputy

Commissioner

1 Public Affairs Legislative Liaison, Taxpayer Ombudsman, Equal Opportunity,

kh~

uaJity, Assi;~nlts to the Commissioner, Legislative Affairs Division

Regional Commissioners M

Assistant Regional

Commissioners

Resources Management

criminal Investigation

Examination

Data Processing

Collection

Serrice Center

Directors (10)

Divisions:

Compliance

Resources Management

Computer Services and

Accounting

Processing

Tax Accounts

Quality Assurance and

Management Support

:

District Directors (63)

Divisions:*

_

ge

M

pays

_

E

F

_

'_

Collection W sa

Z

Criminal Investigation

Examination 0

mployee Plans and

L

Exempt Organizations

.7%~rcesManagement

Taxpayer Service

'Wift i-in at dw.~=

Chief Counsel

Deputy Chief Counsel

- Income Tax and Accounting

- Employee Benefits and

Exempt Organizations

Associate Chief Counsel

(Intemational)

Technical

Litigation and Field Advice

Associate Chief Counsel

(Litigation)

Criminal Tax

Disclosure Litigation

General Litigation

Tax Litigation

71

LReqij orwal0 InspeCIVIS Lag'07 (7)"

Assistant Regional Inspectors

I

_ W

Internal Audit

rdemal Security

National Director of Appeals

- Office of Training and

Quality Programs

- Office of Field Services

- Office of Large Case

Programs

- Office of TEFRA and Tax

Shatter Programs

- Office of Information

Management Services

- Office of AES

- Office of Appraisal Services

Regional Counsel (7)

Deputy Regional Counsel

Criminal Tax

General Litigation

Tax Litigation

Assistant Regional

Counsel

. General Legal Services

Regional Director of Appeals

District Counsel

Assistant Commissioner Assistant Commissioner

(Criminal Investigation) (Examination) Assistant Commissioner Assistant Commissioner Assistant Commissioner Assistant Commissioner Assistant Commissioner (Collection) (Employee Plans and (Internationa]) (Returns Processing) (Taxpayer Services)

Office of Enforcement Office of Examination Office of Planning and

Exempt Organizations)

Office of Planning and Progra a . Office of Resources Office of Legislative end TUipayer Service

Development Office of Examination Management Exempt Organizations Management Management Support Division

Automated Criminal Planning and Research Office of Field Operations Technical D

I

m

.

Sion

Office of Taxpayer Office of Information Tax Forms and

Investigation Project Office Office of Disclosure Office of Evaluation and Employee Plans Technical Service and Compliance System and Resources Publications Division

Office of Examination Research and Actuarial Division Office of Tax Returns Processing and Automated Taxpayer

Ouafity and Customer Office of Continuous Employee Plans and Administration Advisory Accounting Division Service System Project

Advocacy Quality Improvement Exempt Organizations Services Statistics of Income Office

Office of Examination Office of the Integrated Operations Divislo I of International Division Collection System Project Office of Pt nin Automation

-

91 Prog a Office of Electronic

office

,

of Matrix Projects Office of the Connect" Development and Quality Filing Systems Project Office of Integrated

Management Systems

I

Assistant Commissioner

(Planning and Research)

Fine P ce Division

tanning Division

Research Division

Assistant Commissioner

(RnanceYController Assistant Commissioner

(Human Resources

Management and Support)

Human Resources Division

National Office Resources

Management Division

Facilities and Information

Management Support

Division

Contracts and

Acquisitions Division

Director of Practice

Systems Acquisition

Division

. Systems Design Division

Systems Integration

Division

. Project Management

Division

I

Assistant Chief

nfoffnaflon Officer

Information Systems

Management)

Planning, Budgeting

and Review Staff

Systems Management

Division

Compliance Systems Division

Tax Systems Division

Quality Assurance Division

Telecommunications

Division

Detroit Computing Center

Martinsburg Computing

Center

December 1989
'IRS Maps

Internal Revenue Service 16

Regions, Districts

and Service Centers

Chief Counsel

Regional and

District Offices

soum

U-1

A

I

Administrative Appeals,

Chief Counsel ...................... 38

Assisting the Taxpayer ....... : .......9

Automated Criminal Investigation ... 18

Automated Examination System ..... 14

Automated Financial System

.........

27

Automated Systems Environment,

Chief Counsel ...................... 38

Automated Underreporter ............ 16 B

Bankcard, U.S. Government .......... 30

Bank Secrecy Act ..................... 18 C

Charitable Contributions ............. 19

Chief Counsel ........................ 36

Collecting the Revenue ..............4

Collective Bargaining ................. 23

Collection ............................. 16

Communication Replacement

System ............................. 30

Community Outreach

Tax Assistance Program ...........I I

Computer Services ................... 28

Consolidated Data Network

..........

30

Contributions to Reduce the

Public Debt ........................7

Coordinated Examination Program .. 14

Criminal Investigation ................ 17 D

Director of Practice ................... 31

Disaster Assistance ...................9

Disclosure ............................ 21

Disclosure Litigation, Chief Counsel 38

Document Processing System ........ 28

Drug-Free Federal Workplace ........ 23 E

Earned Income Credit ................

7

Educating Taxpayers ................. 10

Eldercare Counseling ................ 22

Electronic Filing ......................4

Employee Plans ...................... 19

Employee Programs .................. 22

Enforcement Programs ............... 17

Enforcing the Law .................... 14

Equal Employment Opportunity ..... 24

Examination ................ : ......... 14

Exempt Organizations ................ 19

Expert Systems ....................... 26

F

Forms 5500 ............................7

Forms and Publications ..............II

H

Historian .............................. 30

Human Resources Management ..... 22 I

Industry Specialization Program ..... 15

Industry Specialization Program,

Chief Counsel ...................... 37

Information Systems Development ... 27

Information Returns Program ........ 16

Inspection Service .................... 33

Integrated Collection System ......... 17

Internal Audit ......................... 34

Internal Security ...................... 35

International .......................... 20

International Activities,

Chief Counsel ...................... 37

IRS/GAO General Management

Review ............................. 25

L

Large Case Prog~am, Chief Counsel 37

Leave Bank Program ................. 23

Legislation, Chief Counsel ........... 36

Legislative Affairs ..................... 32

Litigation Programs, Chief Counsel .. 37

Lockbox Program ....................7

M

Managing the System ................. 25

Maps, IRS ............................. 70

Master File ............................8

Mirror Imaging ........................ 29

Money Laundering ................... 17 N

National Office Command Center .... 29

Notices, Personalization of .......... 26

ODCETF Program ..................... 17

Officials ............................... 62

On-Line Entity Project ................ 28

Optical Scanning ..................... 26

Organization Chart, IRS .............. 68

Organized Crime ..................... 17 P

Payer Compliance .................... 16

Penalties and Interest ................

8

PINEX Project .........................8

Planning, Finance and Research .... 25

Presidential Election Campaign

Fund ................................

7

Problem Resolution Program ........ 12

Public Affairs ......................... 13 Q.

Quality ................................ 33

Questionable Refund Program ....... 18 R

Research Projects .................... 26

Resources Management .............. 30

Recruitment .......................... 22

Refund Offset Program ...............6

Refunds ...............................5

Research to Improve Compliance ... 15

Returns and Receipts ................4

S

Simplification, Chief Counsel ........ 36

Small Business Tax Education

Program ............................II

Statistical Tables ..................... 39

Statistics of Income .................. 31

Strategic Management Process ....... 27 T

Table of Contents ....................3

Tax Administrative Advisory

Services ............................ 21

Tax Counseling for the Elderly ....... 10

Taxpayer Assistance ..................9

Taxpayer Compliance Measurement

Program ............................ 15

Taxpayer Information ................ 10

Tax Refund Offset Program ..........

6

Tax Shelters, Chief Counsel .......... 37

Tax Treaties .......................... 21

Technical, Chief Counsel ............ 36

Telephone! Assistance ................9

Telestrat .............................. 29

Tele-Tax ..............................9

Total Evaluation Performance

System ..................

*

.......... 24

Training 2000 ......................... 23 U

Underreporter Program ............... 16

Understanding Taxes Program ....... I I V

Volunteer Income Tax Assistance

Program ............................ 10

'A