jurisdiction: US

text: b'TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION\n\n\n\n\n The Office of Appeals Should Continue to\n Strengthen and Reinforce Procedures for\n Collection Due Process Cases\n\n\n\n September 20, 2006\n\n Reference Number: 2006-10-123\n\n\n\n\n This report has cleared the Treasury Inspector General for Tax Administration disclosure review process\n and information determined to be restricted from public release has been redacted from this document.\n\n Redaction Legend:\n 1 = Tax Return/Return Information\n\n\n Phone Number | 202-927-7037\n Email Address | Bonnie.Heald@tigta.treas.gov\n Web Site | http://www.tigta.gov\n\x0c DEPARTMENT OF THE TREASURY\n WASHINGTON, D.C. 20220\n\n\n\n\nTREASURY INSPECTOR GENERAL\n FOR TAX ADMINISTRATION\n\n\n\n\n September 20, 2006\n\n\n MEMORANDUM FOR CHIEF, APPEALS\n\n FROM: Michael R. Phillips\n Deputy Inspector General for Audit\n\n SUBJECT: Final Audit Report \xe2\x80\x93 The Office of Appeals Should Continue to\n Strengthen and Reinforce Procedures for Collection Due Process Cases\n (Audit # 200510037)\n\n This report presents the results of our annual statutory review of the Office of Appeals (Appeals)\n Collection Due Process (CDP). The overall objective of this review was to determine whether\n the Internal Revenue Service (IRS) complied with the provisions of 26 United States Code\n (U.S.C.) Sections (\xc2\xa7\xc2\xa7) 6320 and 63301 when taxpayers exercised their rights to appeal the filing\n of a lien or a notice of intent to levy. The Treasury Inspector General for Tax Administration is\n required to determine annually whether the IRS complied with the legal guidelines and\n procedures for the filing of a notice of lien or a notice of intent to levy and the right of the\n taxpayer to appeal.2\n\n Impact on the Taxpayer\n The CDP was designed to allow taxpayers a process for exercising their right to appeal when the\n IRS files a lien or a notice of intent to levy against them. However, procedures for the CDP have\n been inconsistent and incomplete, resulting in incorrectly categorized cases, failure to suspend\n collection action, and incomplete documentation. Consequently, taxpayers may not receive their\n full rights during an appeal hearing.\n\n\n\n\n 1\n 26 U.S.C. \xc2\xa7\xc2\xa7 6320 and 6330 (Supp. III 2000).\n 2\n 26 U.S.C. \xc2\xa7 7803(d)(1)(A)(iii) and (iv) (Supp. III 2000).\n\x0cI The W i c e of Appea/s Should Continue to Strengthen and\n1 I\n Reinforce Procedures for Co//ectionDue Process Cases\n - --\n\n\n Synopsis\n Overall, we could not determine whether the IRS complied with legal guidelines and required\n procedures to protect taxpayer rights because many of the case files or case documentation could\n not be located. However, we did identify instances in which incorrect procedures were followed,\n resulting in potential taxpayer burden. Specifically, we determined requests for CDP hearings or\n Equivalent Hearings (EH) were misclassified and some taxpayers received the wrong type of\n hearing, there were errors in suspension of collection activity during a hearing, and some cases\n did not have documentation of hearing officers\' impartiality and support for decision making.\n A significant portion of the CDP and EH closed case files we requested could not be located or\n were missing key documents. Thus, we could not determine whether all Appeals actions were\n appropriate. In certain instances, a missing or incomplete case file could affect the taxpayer in\n the future because if the taxpayer has a change in circumstances that affects the Appeals\n determination, or if the Collection function does not properly carry out an Appeals\n determination, the case can be reopened in Appeals. In that situation, if the original case file\n could not be located, comparable documentation would again have to be gathered, potentially\n resulting in additional taxpayer burden. Similar results were included in our previous reportY3\n but the Appeals\' planned corrective actions were not scheduled to be completed until\n December 2005, which was subsequent to the period we reviewed in this audit. Therefore, we\n are making no recommendations in this report regarding case files that could not be located or\n were missing key documents.\n In addition, we identified a few situations in which taxpayers were not granted the appropriate\n type of hearing (CDP versus EH). During a CDP hearing, collection action is suspended and the\n taxpayer has the right to judicial review. For an EH hearing, there is no suspension of collection\n action or right to judicial review. The process used by Appeals to classify a hearing request as a\n CDP or EH was not always consistent with information provided to the taxpayer in the levy\n notification letter. Appeals would sometimes use one set of dates to determine when a hearing\n request would be considered timely, while the taxpayer was provided a different set of dates.\n\n\n\n\n of a hearing request were not consistent with other written procedures. These various situations\n resulted in some cases being misclassified as CDP when the taxpayers were only qualified for an\n EH or vice versa. Misclassification causes inequitable application of taxpayer rights, including\n\n\n The Ofice of Appeals Should Strengthen andReznforce Procedzrresfor Collectron Dzre Process Cases (Reference\n Number 2005-10-138, dated September 2005).\n 2\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\nthe failure to suspend collection action and failure to provide the right to judicial review if a CDP\nhearing is not appropriately granted.\nFurthermore, we identified a number of procedural violations. In some instances, hearing\nofficers4 did not comply with the procedural and legal requirement to document and support\nwhether they had any prior involvement with the unpaid tax. Additionally, Appeals CDP case\nfiles did not always contain documentation that Appeals verified the timeliness of the hearing\nrequest or the date on which suspension of collection activity should begin. Specific computer\ncodes are used to indicate the suspension of collection activity and to recalculate the expiration\ndate for the collection statute. When these codes are missing, collection activity may continue\ninappropriately, and the expiration date for the collection statute will not be recalculated. Also,\nalthough the Determination and Decision Letters met minimum requirements, several case files\ndid not contain support for some of the statements in the Letters.\n\nRecommendations\nWe recommended the Chief, Appeals, ensure the process for determining the timeliness of CDP\nrequests is consistent with the information provided to taxpayers in the levy notification letter\nand the examples in the Appeals guide are consistent and clear. Hearing officers should be\nreminded of these procedures and managers should enforce these procedures when reviewing\ncases. We also recommended the Chief, Appeals, emphasize the importance of case files\ncontaining evidence to support the impartiality statement of the assigned hearing officer; ensure\nhearing officers verify suspension of collection activity at the beginning of CDP hearings,\nprovide support for this action in case files, and ensure Appeals has a process to immediately\ncorrect taxpayers\xe2\x80\x99 accounts when hearing officers identify missing computer coding for\nsuspension of collection activity; and develop a process to ensure all actions taken by hearing\nofficers to support decisions and verifications made throughout the hearing process are clearly\ndocumented.\n\nResponse\nIRS management agreed with all of our recommendations. Appeals will revise its written\nguidance to include a consistent process to determine timeliness, provide additional examples\nand clearer documentation requirements, and include the requirement to document all actions\ntaken to support decisions and verifications contained in letters to taxpayers. In addition,\nAppeals plans to revise the CDP template to include a prompt to ensure collection activity is\nproperly suspended on taxpayers\xe2\x80\x99 accounts. Appeals also agreed to implement a procedure to\nimmediately correct taxpayer accounts when hearing officers identify missing computer coding\n\n\n4\n Hearing officers are either Appeals officers or settlement officers.\n 3\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\nfor suspension of collection activity. Furthermore, hearing officers will receive training for these\nrevisions. Management\xe2\x80\x99s complete response to the draft report is included as Appendix V.\nCopies of this report are also being sent to the IRS managers affected by the report\nrecommendations. Please contact me at (202) 622-6510 if you have questions or\nNancy A. Nakamura, Acting Assistant Inspector General for Audit (Headquarters Operations and\nExempt Organizations Programs), at (202) 622-8500.\n\n\n\n\n 4\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Table of Contents\n\nBackground ..........................................................................................................Page 1\n\nResults of Review ...............................................................................................Page 4\n Some Office of Appeals Case Files Could Not Be Located\n or Were Missing Key Documents.................................................................Page 4\n Classification of Hearing Requests Was Not Always Correct......................Page 6\n Recommendation 1:........................................................Page 8\n\n Impartiality Statements Were Not Always Provided or\n Supported As Required .................................................................................Page 8\n Recommendation 2:........................................................Page 10\n\n Procedures for Suspension of Collection Activity Should\n Continue to Be Strengthened to Ensure Taxpayer Rights\n Are Protected ................................................................................................Page 10\n Recommendation 3:........................................................Page 11\n\n Determination and Decision Letters Met Minimum\n Requirements but Need Further Support in Case Files.................................Page 12\n Recommendation 4:........................................................Page 13\n\n\nAppendices\n Appendix I \xe2\x80\x93 Detailed Objective, Scope, and Methodology ........................Page 15\n Appendix II \xe2\x80\x93 Major Contributors to This Report ........................................Page 18\n Appendix III \xe2\x80\x93 Report Distribution List .......................................................Page 19\n Appendix IV \xe2\x80\x93 Outcome Measures...............................................................Page 20\n Appendix V \xe2\x80\x93 Management\xe2\x80\x99s Response to the Draft Report .......................Page 25\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Abbreviations\n\nACDS Appeals Centralized Database System\nAppeals Office of Appeals\nCDP Collection Due Process\nC.F.R. Code of Federal Regulations\nEH Equivalent Hearing\nI.R.C. Internal Revenue Code\nIRS Internal Revenue Service\nTIGTA Treasury Inspector General for Tax Administration\nU.S.C. United States Code\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Background\n\nWhen initial contacts by the Internal Revenue Service (IRS) do not result in the successful\ncollection of unpaid tax, the IRS has the authority to attach a claim, commonly referred to as a\nlien, to the taxpayer\xe2\x80\x99s assets.1 The IRS also has the authority to work directly with financial\ninstitutions and other parties to obtain funds owed by a taxpayer; this is commonly referred to as\na levy.2\nIn February 1996, the IRS established procedures that allowed taxpayers to appeal the filing of\nliens and proposed or actual levies. However, this protection was not mandated by law. If the\nIRS did not follow its procedures, there was no remedy available to the taxpayer. Based on\nconcerns that taxpayers were not always provided adequate notice and that appeal rights were\nneeded for liens and levies, the IRS Restructuring and Reform Act of 1998 codified this\nprotection into law.3\nThe IRS is required to notify taxpayers in writing that a lien has been filed or that it intends to\nlevy.4 A taxpayer is allowed to appeal the lien or levy action through the Collection Due Process\n(CDP) by filing a hearing request.5 This hearing request must be received within 30 calendar\ndays plus 5 business days of the filing of the lien or within 30 calendar days of the date of the\nlevy notice.6 If a taxpayer\xe2\x80\x99s hearing request is submitted on time, the IRS will suspend all tax\ncollection efforts and the Office of Appeals (Appeals) will provide the taxpayer a CDP hearing,\nafter which the taxpayer has the right to a judicial review if the taxpayer does not agree with the\nAppeals decision. If a taxpayer\xe2\x80\x99s hearing request is not submitted timely, Appeals will provide\nthe taxpayer an Equivalent Hearing (EH) and consider the same issues as in a CDP hearing;\nhowever, collection action is not required to be suspended and the taxpayer does not have the\nright to a judicial review.\nTaxpayers are entitled to one hearing per tax period7 for which a notice of lien or intent to levy\nhas been issued. The hearing should be conducted by an Appeals officer or settlement officer\n\n\n\n1\n 26 United States Code (U.S.C.) Section (\xc2\xa7) 6321 (Supp. III 2000).\n2\n 26 U.S.C. \xc2\xa7 6331 (Supp. III 2000).\n3\n Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app.,\n16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).\n4\n 26 U.S.C. \xc2\xa7\xc2\xa7 6320(a) and 6330(a) (Supp. III 2000) and Code of Federal Regulations (C.F.R.) \xc2\xa7\xc2\xa7 301.6320-1 and\n301.6330-1 (2002).\n5\n Taxpayers can use Request for a Collection Due Process Hearing (Form 12153) or other similar written\ncommunication to request a CDP hearing.\n6\n 26 U.S.C. \xc2\xa7\xc2\xa7 6320 and 6330 (Supp. III 2000).\n7\n The tax period is a measure of time for which a tax return is required to be filed.\n Page 1\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n(hearing officer) who had no prior involvement with the unpaid tax.8 During the hearing, the\nhearing officer must verify whether the requirements of all applicable laws or administrative\nprocedures related to the lien or levy were met. The hearing officer must also address any issues\nthe taxpayer may raise relevant to the unpaid tax or the proposed lien or levy, such as whether\nthe taxpayer is an innocent spouse; determine if collection actions were appropriate; and decide\nif other collection alternatives would facilitate the payment of the tax. The hearing officer must\ndetermine whether the proposed collection action balances efficient tax collection with the\ntaxpayer\xe2\x80\x99s legitimate concerns. The taxpayer may not raise an issue that was considered at a\nprior administrative or judicial hearing if the taxpayer participated meaningfully in the prior\nproceeding.\nAt the conclusion of a hearing, Appeals provides the taxpayer a letter that presents the hearing\nofficer\xe2\x80\x99s findings, agreements reached with the taxpayer, any relief provided to the taxpayer, and\nany actions the taxpayer and/or the IRS are required to take. For a CDP case, the taxpayer\nreceives either a Determination Letter, which provides an explanation of the right to judicial\nreview;9 or a Summary Notice of Determination, which is used when the taxpayer agrees with\nAppeals, waives the right to judicial review, and waives the suspension of levy action.10 For an\nEH case, the taxpayer receives a Decision Letter.11\nThe CDP or EH case is reviewed by the hearing officer\xe2\x80\x99s manager at the completion of the case,\nto evaluate whether the hearing officer followed all requirements and procedures. In addition,\nthe Appeals Quality Measurement System evaluates the quality of casework nationwide by\nselecting a national sample. The Appeals Quality Measurement System reported a 77 percent\noverall compliance rate for CDP/EH cases completed in Fiscal Year 2005. This is down from\n80 percent and 88 percent for cases completed in Fiscal Years 2004 and 2003, respectively.\nAfter Appeals has made a determination on a case, if the taxpayer has a change in circumstances\nthat affects the Appeals determination or if the Collection function does not carry out the\ndetermination, the taxpayer has the right to return to Appeals. The taxpayer has this right as long\nas all administrative remedies have been exhausted. The Appeals office that made the original\ndetermination generally retains jurisdiction over the case.12\nThe Treasury Inspector General for Tax Administration (TIGTA) is required to determine\nannually whether the IRS complied with legal guidelines and procedures for the filing of a notice\nof lien or a notice of intent to levy and the right of the taxpayer to appeal.13 The TIGTA has\n\n8\n The taxpayer may waive this requirement.\n9\n Notice of Determination Concerning Collection Action(s) Under I.R.C. Section 6320 and/or I.R.C. 6330\n(Letter 3193/3194).\n10\n Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process\nDetermination, and Waiver of Suspension of Levy Action (Form 12257).\n11\n Decision Letter Concerning Equivalent Hearing Under Section 6320 and/or 6330 of the I,R.C. (Letter 3210).\n12\n C.F.R. \xc2\xa7\xc2\xa7 301.6320-1(h) and 301.6330-1(h) (2002).\n13\n 26 U.S.C. \xc2\xa7 7803(d)(1)(A)(iii) and (iv) (Supp. III 2000).\n Page 2\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\ndivided this requirement into three statutory audits: one to review the filing of a notice of tax\nlien;14 one to review the intent to levy;15 and one to review the rights of taxpayers to appeal these\nissues,16 which is the focus of this report. This is the sixth annual audit of this area conducted by\nthe TIGTA.\nThe previous TIGTA report on the Appeals process was issued in September 2005, and a\nmajority of related IRS corrective actions were planned to be implemented by\nDecember 31, 2005.17 The scope of this year\xe2\x80\x99s audit covered CDP and EH cases closed between\nMarch 1 and July 31, 2005. Because these cases were closed prior to the completion of\ncorrective actions by the IRS, we did not make recommendations for findings that repeat those\nfrom the previous audit.\nThis review was performed at the IRS National Headquarters in the Office of the Chief, Appeals,\nin Washington, D.C., during the period August 2005 through March 2006. The audit was\nconducted in accordance with Government Auditing Standards. Detailed information on our\naudit objective, scope, and methodology is presented in Appendix I. Major contributors to the\nreport are listed in Appendix II.\n\n\n\n\n14\n 26 U.S.C. \xc2\xa7 6320(a) (Supp. III 2000).\n15\n 26 U.S.C. \xc2\xa7 6330(a) (Supp. III 2000).\n16\n 26 U.S.C. \xc2\xa7\xc2\xa7 6320(b) and (c) and 26 U.S.C. \xc2\xa7\xc2\xa7 6330(b) and (c) (Supp. III 2000).\n17\n The Office of Appeals Should Strengthen and Reinforce Procedures for Collection Due Process Cases (Reference\nNumber 2005-10-138, dated September 2005). One corrective action, the implementation of an Electronic Filing\nSystem, was not planned to be completed until December 2007.\n Page 3\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Results of Review\n\nSome Office of Appeals Case Files Could Not Be Located or Were\nMissing Key Documents\nAppeals procedures and guidelines included a list of documents required to be in a closed CDP\nor EH case file. These documents should be retained until the collection statute date expires for\nthe tax period, generally 10 years from the date the tax was assessed. There were four key\ndocuments in the required list:\n \xe2\x80\xa2 Taxpayer\xe2\x80\x99s complete hearing request, including any applicable attachments, used to show\n why the taxpayer was seeking assistance from Appeals.\n \xe2\x80\xa2 Postmark from the envelope the taxpayer\xe2\x80\x99s hearing request was mailed in, used in\n determining the timeliness of the taxpayer\xe2\x80\x99s hearing request.\n \xe2\x80\xa2 Notification of levy or lien, used in determining the timeliness of the taxpayer\xe2\x80\x99s hearing\n request.\n \xe2\x80\xa2 Appeals hearing results provided to the taxpayer. This can be a copy of the\n Determination Letter or Summary Notice of Determination for a CDP case or the\n Decision Letter for an EH case. If the taxpayer decides to withdraw the hearing request,\n the signed Withdrawal18 should be in the closed case file in place of the hearing results\n letter.\nWe selected statistical samples of 80 cases each from the 8,089 CDP cases and 3,628 EH cases\nclosed by Appeals between March 1 and July 31, 2005. Appeals could not locate 5 of the\n80 CDP and 8 of the 80 EH case files requested for our samples. In addition, 61 of the\n75 (81 percent) CDP and 62 of the 72 (86 percent) EH case files we received were missing at\nleast 1 of the key documents needed to support and present Appeals\xe2\x80\x99 hearing results.\nConsequently, we could not verify if all actions were appropriate and met the requirements of the\nlaw for cases not provided or missing key documents. Table 1 summarizes the number of\nAppeals CDP and EH case files in our sample that were not provided or were missing key\ndocuments, as well as the projected estimates for the 5-month period of our review.\n\n\n\n\n18\n Withdrawal of Request for Collection Due Process Hearing (Form 12256).\n Page 4\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Table 1: Appeals Case Files Not Provided or Missing Key Documents\n Sample of 80 CDP Cases From Sample of 80 EH Cases From\n Reason Case Could Not Be\n a Population of 8,089 a Population of 3,628\n Verified for Meeting All Laws, Guidelines,\n and Procedures Sample Estimate of Sample Estimate of\n Exceptions Population Exceptions Population\n\n Case file not provided 5 506 8 363\n Case file received did not include\n 14 1,416 21 953\n complete hearing request\n Case file received did not include\n 44 4,449 47 2,132\n envelope used to mail hearing request\n Case file received did not include\n 40 4,045 55 2,495\n notification of levy or lien\n Case file received did not include\n documentation of Appeals\xe2\x80\x99 2 203 7 318\n determination\n Total case files not provided\n 66* 6,674* 70* 3,175*\n or missing key documents\n (*) Column does not total because some case files were missing more than one of\n the four key documents.\nSource: TIGTA analysis of samples of 80 CDP and 80 EH cases closed by Appeals between March 1 and\nJuly 31, 2005.\n\nAppeals case files not located or missing key documents could affect taxpayers. If a taxpayer\nhas a change in circumstances that affects an Appeals determination, or if the Collection function\ndoes not properly carry out an Appeals determination, the case can return to Appeals.\nDocuments similar to those missing from the case file would then have to be gathered or\nregenerated for Appeals to effectively resolve the case. This delay could burden a taxpayer by\naffecting the timely resolution of the case.\nAppeals responded that physical storage limitations, low staffing levels, and lack of\nunderstanding of procedures contributed to its inability to locate requested case files and the\nabsence of documents in the case files. Similar results were included in our previous report and,\nin response, Appeals\xe2\x80\x99 planned corrective actions included:\n \xe2\x80\xa2 Centralizing the closing and retention of CDP and EH case files to two campus19\n locations.\n \xe2\x80\xa2 Reminding employees of the need to retain closed case files and what documents need to\n be maintained in those files.\n\n\n19\n The campuses are the data processing arm of the IRS. They process paper and electronic submissions, correct\nerrors, and forward data to the Computing Centers for analysis and posting to taxpayer accounts.\n Page 5\n\x0c The Offce of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Distributing a check sheet with instructions for case file contents to be used in every CDP\n and EH case.\n These corrective actions were not scheduled to be completed until December 2005, which was\n subsequent to completion of this year\'s audit period. Therefore, we are making no\n recommendations in this report for case files that could not be located or were missing key\n documents. Additionally, Appeals management responded to our previous report that they were\n working on Electronic Case File programming and equipment for the creation of paperless files\n by December 2007, to minimize physical storage and potentially decrease the number of case\n files that can not be located or are missing key documents.\n\n Classification of Hearing Requests Was Not Always Correct\n If a taxpayer\'s hearing request is filed more than 30 calendar days after the date of a levy notice\n or more than 30 calendar days plus 5 business days after the filing of a lien, Appeals will provide\n the taxpayer an EH. This type of hearing is similar to a CDP hearing, but the IRS is not required\n to suspend collection activity while the EH is being conducted and the taxpayer does not have\n the right to a judicial review. However, the procedures used by Appeals to classify a hearing\n request based on its received date were inconsistent with information provided to the taxpayer\n and should be clarified. The incorrect classification of hearing requests could result in\n inequitable application of protection for taxpayers\' CDP rights.\n\n Appeals used a date other than the levv notification date provided to the taxpayer\n to determine timeliness\n In most cases, the IRS mails the levy notification letter prior to the date on the letter to ensure the\n taxpayer receives it with the full 30 calendar days in which to appeal. The levy notification letter\n instructs the taxpayer to request a CDP hearing within 30 calendar days from the date of the\n letter. However, the Appeals procedure is to start the 30-day time period using the mailing date\n of the levy letter (i.e., when the notification was sent to the taxpayer). This practice contradicts\n the instructions provided to the taxpayer and the IRS\' intent in mailing the letter early.\n Although some hearing requests are submitted substantially past the 30-day time period and\n would not be affected by the Appeals\n -- classification procedure, others could be misclassified as\n EH cases, thus preventing taxpayers fiom receiving rights provided during a CDP case. We\n\nY\n i d e n t i f i e d r j i n our sample of 80 EH cases. r-..- 1\n\n\'fhearing request.\n ]but Table 2 shows how the different dates affected the timeliness determination for this\n\n\n\n\n Page 6\n\x0c The Office of Appeals Should Continue to Strengthen and\n,\n Reinibrce Procedures for Collection Due Process Cases\n\n\n\n\n Table 2: Effect of Different Dates for Timeliness Determination\n\n Timeliness\n Date of Notice Received Date\n Date of Notice Determination for\n Plus 30 Days of Hearing Request\n Hearing Reauest\n\n\n\n\n Source: TIGTA analysis ofsample of 80 EH cases closed by Appeals between March I and July 31, 2005.\n 1\n\n\n\n\n - 1\n We estimated 46 cases\n --\n during our sample period were misclassified as EH cases and could have affected the rights of\n the taxpayers. To ensure taxpayer rights are protected, Appeals should use the same information\n provided to taxpayers when classifying hearing requests.\n\n Procedures can be clarified and enforced to ensure equitable application when\n determining timeliness of hear in^ requests\n The Appeals procedure to classify hearing requests is to use the IRS received stamp date on the\n hearing request, unless it is past the established deadline. If the received stamp date is past the\n deadline, the postmark date on the envelope is then used to determine timeliness. In response to\n our previous audit report, in January 2006, Appeals provided to hearing officers a guide that\n contained 22 examples covering various situations. We reviewed each of the examples and\n determined several contained timeliness determinations that did not follow Appeals\' established\n procedures. We brought this to the attention of Appeals officials, who made immediate changes\n to the guide. The changes clarified the examples and brought them into compliance with\n Appeals procedures.\n Although Appeals is actively reviewing and updating procedures for classification of hearing\n\n\n\n\n the IRS Collection hnction to a taxpayer\'s account when a hearing request is received timely, to\n\n Page 7\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n6_I\n -\n --- -- -- - -- -\n . 1\n However, this is inequitable treatment of hearing rcqucsts and crcatcs thc potential\n for the IRS to miss an opportunity to collect tax revenue during an Appeals hearing for an EH\n case. We estimated 102 cases during our sample period were misclassified as CDP cases.\n Appeals should remind employees and managers of the procedures to use direct evidence to\n determine timeliness of a hearing request.\n\nRecommendation\nRecommendation 9: The Chief, Appeals, should review current procedures to ensure the\nprocess for determining the timeliness of CDP requests is consistent with the information\nprovided to taxpayers and the templates are consistent and clearly indicate the dates to be used in\nthe timeliness determination. Hearing oficers should be reminded of these procedures, and\nmanagers should enforce these procedures when reviewing cases.\n Manaoement\'s Response: IRS management agreed with the recommendation and will\n revise their written guidance to include a consistent process to determine timeliness as well\n as update their templates. In addition, hearing officers will receive training for the revisions.\n\nImpartiality Statements Were Not Always Provided or Supported As\nRequired\nCDP and EH hearings must be conducted by a hearing officer with no prior involvement\nregarding the unpaid tax, unless the taxpayer waives this requirement. To comply with this\nrequirement, Appeals procedures required CDP Determination Letters and EH Decision Letters\nto include an impartiality statement. Additionally, in the case of a Summary Notice of\nDetermination, the impartiality statement should be included in either the Notice itself, the\nAppeals Transmittal and Case Memo (Form 5402), or a more detailed case memorandum, if\nincluded in the file.\nAppeals issued guides, including one updated in February 2002, to help hearing officers in\nwriting Determination and Decision Letters. The guides contained templates for the Letters,\nwhich included impartiality statements. However, impartiality statements were not always\n\n Page 8\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\nincluded in the Letters provided to taxpayers. Of the 43 CDP Determination Letters and\n13 CDP Summary Notices of Determination we reviewed, 7 did not have an impartiality\nstatement.20 Of the 53 EH Decision Letters we reviewed, 4 did not have an impartiality\nstatement.21 Based on our samples, we estimated that 708 CDP and 182 EH cases closed by\nAppeals between March 1 and July 31, 2005, did not contain an impartiality statement in the\nLetter provided to the taxpayer. Additionally, we did not find supporting evidence for any of the\nimpartiality statements made in the 49 CDP and 49 EH cases that contained impartiality\nstatements in the Letters provided to the taxpayers. Based on our samples, we estimated that\n4,955 CDP and 2,223 EH cases closed by Appeals between March 1 and July 31, 2005, did not\ncontain supporting evidence for the hearing officers\xe2\x80\x99 impartiality statements.\nBecause the impartiality of the hearing officer is a legal requirement, the notification of no prior\ninvolvement should always be included in Letters provided to taxpayers and be supported by\nevidence in the case file. Had the templates been consistently used, the impartiality statements\nwould have been in all Determination and Decision Letters. While the lack of impartiality\nstatements in the Letters or evidence in the Appeals case files appears to be an oversight and\ndoes not necessarily indicate a lack of impartiality (we did not find hearing officers with prior\ninvolvement with the unpaid tax), hearing officers are required to certify their impartiality.\nIn addition, hearing officers should have evidence in the case files to support statements,\nincluding impartiality, in the Letters provided to taxpayers. Because the case file is used by the\ncourts for judicial review, there should be some evidence to support the hearing officer\xe2\x80\x99s\nstatement of impartiality other than just the statement itself. Without case file support, there is\nno evidence to inform the taxpayer and any reviewing court that the hearing officer had no prior\ninvolvement with the unpaid tax liability under review and, therefore, could provide an impartial\nhearing. We also reported this condition last year. The Appeals corrective action emphasized\nand provided guidance for including impartiality statements in Letters provided to taxpayers, but\nthe corrective action did not address the issue of including supporting evidence for impartiality\nstatements in case files.\nAppeals officials responded that, although hearing officers were to include impartiality\nstatements in their Determination and Decision Letters, the fallback was the initial Appeals\ncontact letter. We reviewed this initial contact letter and determined it did not include an\nimpartiality statement by the assigned hearing officer. The letter informed the taxpayer of the\n\n\n20\n In our original sample of 80 closed CDP cases, 2 cases should have had Determination Letters issued, but the\nLetters were not included in the files; 17 cases were withdrawn; and 5 case files were not provided to us. We did\nnot include these 24 cases in this test. None of the remaining 56 cases (43 + 13) contained taxpayer waivers of the\nimpartiality requirement; therefore, these 56 cases should have contained impartiality statements.\n21\n In our original sample of 80 closed EH cases, 7 cases should have had Decision Letters issued, but the Letters\nwere not included in the files; 12 cases were withdrawn; and 8 case files were not provided to us. We did not\ninclude these 27 cases in this test. None of the remaining 53 cases contained taxpayer waivers of the impartiality\nrequirement; therefore, these 53 cases should have contained impartiality statements.\n Page 9\n\x0c The Ofice of Appeals Should Continue to Strengthen and\n Reinhrce Procedures for Collection Due Process Cases\n\n\n\nright to an impartial hearing officer and asked the taxpayer to inform the hearing officer if the\ntaxpayer believed the hearing officer was previously involved. However, the Appeals contact\nletter did not include any statement from the hearing officer that, to the best of the hearing\nofficer\'s knowledge, he or she had not been previously involved in the taxpayer\'s case and was\nthus impartial. After our review, Appeals provided us with a revised copy of the contact letter\nwhich did contain a statement by the hearing officer regarding his or her impartiality. This new\nletter was implemented in November 2005, so it was not yet in use during the time of our review.\n\nRecommendation\nRecommendation 2: The Chief, Appeals, should emphasize the importance of case files\ncontaining evidence to support the impartiality statement of the assigned hearing officer.\n Management\'s Response: IRS management agreed with the recommendation and will\n revise their written guidance to include additional examples and clearer documentation\n requirements. In addition, hearing officers will receive training for the revisions.\n\nProcedures for Suspension of Collection Activity Should Continue to\nBe Strengthened to Ensure Taxpayer Rights Are Protected\nA CDP hearing request is held in response to an action taken by the Collection function. When a\nCDP hearing request is received timely, collection activity is suspended from the date the\nhearing request is received until (1) the date the Appeals determination becomes final or (2) the\ndate the hearing request is withdrawn by the taxpayer.22 As the initial recipient of the taxpayer\'s\nhearing request, the Collection function enters computer coding on the taxpayer\'s account to start\nthe collection activity suspension period before transferring the case to Appeals. Later, when\nAppeals returns the case after the CDP hearing, the Collection function enters computer coding\non the taxpayer\'s account to restart collection activity. These computer codes are used to help\ncommunicate to IRS employees when suspension of collection activity is in effect and to\nrecalculate the expiration date for the collection statute. This applies only to CDP cases because\nthere is no requirement to suspend collection activity for EH cases.\nOne of the first tasks of the hearing officer is to verify the timeliness of the hearing request and\n\n\n\n\n22 C.F.R. 44 301.6320-1(g) and 301.6330-1(g) (2002).\n Page 10\n\x0c The M i c e of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n1 I\n\nL- --\nP We estimated\n 102 CDP cases in our sample period did not have collection activity suspended for the duration\n of the Appeals hearing.\nAlthough the remaining CDP cases in our sample had the appropriate computer coding for\nsuspending collection activity on the taxpayers\' accounts, 24 case files did not contain support to\nindicate the hearing officer had verified the date collection activity was suspended. We\nestimated 2,427 CDP cases did not contain the verification support in the case files. Conducting\nthis verification for every CDP hearing can help ensure this process consistently occurs to protect\ntaxpayer rights.\nWe also identified 11 cases in which the codes were not entered at the end of the hearing process\nto restart collection activity. This meant that collection activity remained suspended even though\nthe IRS had the right to resume collection activities. We estimated 1,113 CDP cases in our\nsample period did not have proper coding on the taxpayers\' accounts to restart collection\nactivity.\nIn its response to our previous report, beginning in December 2005, Appeals planned to assume\nresponsibility for entering the computer codes to begin suspending and restarting collection\nactivity on taxpayers\' accounts. However, Appeals later amended its corrective action to involve\nonly the entering of the computer code for restarting collection activity. We agree with Appeals\'\namended corrective action because the Collection function has initial control of the case when\nthe taxpayer requests a CDP hearing. Appeals is in a better position to know when the hearing\nconcluded and thus to enter the computer code for restarting collection activity. Although this\nnew process should decrease the possibility of missing the input of computer codes for\nsuspending collection activity, it does not minimize the importance of Appeals verifying the\ninitial coding when hearings begin. Appeals should still verify the suspension of collection\nactivity is in place at the beginning of the CDP hearing, to ensure taxpayer rights are protected.\nIf an error is identified, Appeals should have an internal process to immediately correct the\ntaxpayer\'s account, which would prevent IRS employees from inappropriately attempting a\ncollection action.\n\nRecommendation\nRecommendation 3: The Chief, Appeals, should ensure hearing officers verify suspension of\ncollection activity at the beginning of CDP hearings by consistently providing support in case\nfiles that this action occurred. In addition, the Chief, Appeals, should ensure Appeals has a\nprocess to immediately correct taxpayers\' accounts when hearing officers identify missing\ncomputer coding for suspension of collection activity.\n\n\n Page 11\n\x0c The OHice of Appeals Should Continue to Strengthen and\n Reinibrce Procedures for Collection Due Process Cases\n\n\n\n Mananement\'s Response: IRS management agreed with the recommendation and will\n revise their written guidance as well as update their templates. Hearing officers will receive\n training for the revisions. In addition, Appeals will develop and implement a procedure to\n immediately correct taxpayer accounts when hearing officers identify missing computer\n coding for suspension of collection activity.\n\nDetermination and Decision Letters Met Minimum Requirements but\nNeed Further Support in Case Files\nAppeals procedures required that the Determination and Decision Letters include a clear and\ndetailed explanation of the basis for the hearing officer\'s decision. At a minimum, each Letter\nmust include:\n 1. Verification that the requirements of applicable laws and administrative procedures have\n been met.\n 2. Issues raised by the taxpayer.\n 3. Determination that the proposed collection action balances the need for the efficient\n collection of taxes with the legitimate concern of the taxpayer that any collection action\n be no more intrusive than necessary.\nAll of the 43 CDP Determination Letters, 13 CDP Summary Notices of Determination, and\n53 EH Decision Letters we reviewed met Appeals\' minimum standard for documentation in\nLetters provided to taxpayers. However, 11 CDP and 8 EH case files did not contain supporting\nevidence for the hearing officer\'s verification that laws and regulations were met, and 2 CDP and\n6 EH case files did not contain supporting evidence for the hearing officer\'s verification of\nbalanced collection action.13 These case files contained standardized statements listing the\nrequirements, and that they were met, but no supporting information specific to the case to\nindicate the hearing officer actually researched the case.\nAppeals staff suggested that the administrative files maintained by the Collection function might\ncontain additional supporting documentation. Based on this suggestion, we decided to review\nthe administrative files for the cases discussed above. We received and reviewed the\nadministrative files for 16 (7 CDP and 9 EH) of the 22 cases that did not have sufficient\nsupporting evidence in the case file for the hearing officer\'s verification that laws and regulations\nwere met andlor of balanced collection action.24 We determined that 14 of the 16 files contained\n\n23\n Our sample identified 22 cases (12 CDP and 10 EH cases) without the required supporting documentation in the\nfile. Ofthose 22 cases, 54 7 and 4 EH cases) were missing documentation to support both types of exceptions\nwe identified.\n\' w e ordered administrative files for all 22 CDP and EH cases for which the Appeals case files did not contain\nsufficient supporting evidence. However, we did not receive six of the administrative files; two files were charged\nout to other employees, two contained no CDP documentation, and two showed unserviceable requests.\n Page 12\n\x0c The Omce of Appeals Should Continue to Strengthen and\n Reintbrce Procedures for Collection Due Process Cases\n\n\n\nthe information that was missing from the Appeals files, while 2 CDP files did not contain\nsupporting evidence for the hearing officer\'s verification that laws and regulations were met.\nWe estimated the Appeals case files for 1,113 CDP and 363 EH cases in our sample period did\nnot contain supporting evidence for the hearing officer\'s verification that laws and regulations\nwere met and the Appeals case files for 203 CDP and 273 EH cases did not contain supporting\nevidence for the hearing officer\'s verification of balanced collection action. We estimated that\nneither the Appeals case files nor the administrative files for 203 CDP cases in our sample period\ncontained supporting evidence for the hearing officer\'s verification that laws and regulations\nwere met.\n\n\n\n\nthe hearing officer did not hlly address the issues raised by the taxpayer.\nThe need to adequately support the actions and decisions of the hearing officer was discussed in\nAppeals procedures, which required hearing officers to "Thoroughly document these three areas\nin the attachment to the determination letter, as the court will evaluate Appeals through our\ndocumented actions in determining whether to sustain appeal^."^^ Without sufficient support in\nthe case file, a court will be unable to verify the actions taken by the hearing officer to determine\nif they were appropriate. Appeals personnel believe additional supporting documentation may\nbe in another set of files maintained by Compliance hnction employees, which was not included\nin our review.\n\nRecommendation\nRecommendation 4: The Chief, Appeals, should develop a process to ensure all actions\ntaken by hearing officers to support decisions and verifications contained in Letters to taxpayers\nare clearly documented.\n Manaaement\'s Response: IRS management agreed with the recommendation and will\n revise their written guidance to include the requirement to document all actions taken to\n\n25\n Internal Revenue Manual 8.7.2.3(17). The three areas referred to in the procedure are those listed at the beginning\nof this section.\n\n\n\n\n Page 13\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\nsupport decisions and verifications contained in Letters to taxpayers. In addition, hearing\nofficers will receive training for this requirement.\n\n\n\n\n Page 14\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Appendix I\n\n Detailed Objective, Scope, and Methodology\n\nThe objective of this audit was to determine whether the IRS complied with the provisions of\n26 U.S.C. Sections (\xc2\xa7\xc2\xa7) 6320 and 63301 when taxpayers exercised their rights to appeal the filing\nof a lien or the intent to levy. To accomplish this objective, we:\nI. Determined whether any new procedures or processes had been developed since the prior\n TIGTA statutory review. This involved interviews with Appeals officials to obtain\n documentation supporting the implementation of corrective actions to prior TIGTA audit\n reports and other procedural or process changes.\nII. Determined whether Appeals\xe2\x80\x99 CDP and EH case files could be located and contained\n minimum documentation for a hearing.\n A. Obtained a computer extract from the Appeals Centralized Database System (ACDS)2\n file maintained at the TIGTA Data Center Warehouse3 of CDP and EH cases closed\n between March 1 and July 31, 2005. We validated the computer extract using\n information from the TIGTA Data Center Warehouse, reviewed appropriateness of\n data within fields requested, and compared population totals to information obtained\n from Appeals officials.\n B. Selected, requested Appeals to provide, and reviewed a sample of 80 CDP and 80 EH\n case files and determined whether the case files could be located and contained\n minimum documentation for a CDP or an EH hearing.\n 1. Selected statistical attribute samples of 80 CDP cases (from a population of\n 8,089 cases) and 80 EH cases (from a population of 3,628 cases) based on a\n confidence level of 90 percent, a precision rate of \xc2\xb15.5 percent, and an expected\n error rate of 10 percent.\n 2. Requested and determined whether Appeals could provide the sample case files.\n We discussed exceptions with Appeals officials to confirm and determine causes.\n After confirmation, we estimated the number of potential exceptions within the\n population.\n\n\n\n1\n 26 U.S.C. \xc2\xa7\xc2\xa7 6320 and 6330 (Supp. III 2000).\n2\n The ACDS is a computerized case control system used to control and track cases throughout the appeal process.\n3\n The TIGTA Data Center Warehouse stores taxpayer data and allows auditors to query and download data needed\nfor audit work.\n Page 15\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n 3. For each sample case file received, reviewed to determine whether the file\n contained the minimum documentation to support a CDP or an EH hearing, which\n included Notice of Intent to Levy (Letter 1058/LT11) and/or Notice of Federal\n Tax Lien Filing and Your Right to a Hearing Under IRC4 6320 (Letter 3172);\n Request for a Collection Due Process Hearing (Form 12153) or similar taxpayer\n request; ACDS Case Summary Card; ACDS Case Activity Record; Appeals\n Transmittal and Case Memo (Form 5402); Notice of Determination Concerning\n Collection Action(s) Under Section 6320 and/or 6330 (Letter 3193/3194);\n Summary Notice of Determination, Waiver of Right to Judicial Review of a\n Collection Due Process Determination, and Waiver of Suspension of Levy Action\n (Form 12257); Decision Letter Concerning Equivalent Hearing Under Section\n 6320 and/or 6330 of the Internal Revenue Code (IRC) (Letter 3210); transcript of\n the taxpayer\xe2\x80\x99s account; and an Integrated Collection System or Automated\n Collection System history.5 We discussed exceptions with Appeals officials to\n confirm and determine causes. After confirmation, we estimated the number of\n potential exceptions within the population.\nIII. Determined whether CDP and EH cases were misclassified (should have been EH or\n CDP).\n A. Using the samples selected in Step II.B.1.; Internal Revenue Code \xc2\xa7\xc2\xa7 7502/7503\n requirements;6 and procedures in Internal Revenue Manual sections\n 5.1.9.3.2.1/5.19.8, reviewed ACDS, case files, and tax account transcript information\n to determine whether the taxpayers\xe2\x80\x99 hearing requests were received timely or late and\n were properly classified.\n B. Discussed exceptions with Appeals officials to confirm and determine causes. After\n confirmation, we estimated the number of potential exceptions within the population.\nIV. Determined whether Appeals was in compliance with 26 U.S.C. \xc2\xa7\xc2\xa7 6320 and 6330 when\n handling CDP and EH hearing requests.\n A. Using the samples selected in Step II.B.1., determined whether the items listed below\n were addressed by the hearing officer.7\n\n\n\n\n4\n \xe2\x80\x9cIRC\xe2\x80\x9d is the Internal Revenue Code.\n5\n The Integrated Collection System provides workload management, case assignment/tracking, inventory control,\nelectronic mail, case analysis tools, and management information capabilities to support tax collection fieldwork.\nThe Automated Collection System is a telephone contact system through which telephone assistors collect unpaid\ntaxes and secure tax returns from delinquent taxpayers that have not complied with previous notices.\n6\n 26 U.S.C. \xc2\xa7\xc2\xa7 7502 and 7503 (Supp. III 2000).\n7\n Hearing officers are either Appeals officers or settlement officers.\n Page 16\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n 1. The taxpayer was provided only one hearing for the tax period8 related to the\n unpaid tax specified in the lien/levy notice. [26 U.S.C. \xc2\xa7\xc2\xa7 6320(b)(2) and\n 6330(b)(2)]\n 2. The taxpayer was provided with an impartial hearing officer or waived this\n requirement. [26 U.S.C. \xc2\xa7\xc2\xa7 6320(b)(3) and 6330(b)(3)]\n 3. The hearing officer obtained verification that the requirements of any applicable\n law or administrative procedure were met. [26 U.S.C. \xc2\xa7 6330(c)(1)]\n 4. The taxpayer was allowed to raise issues at the hearing relating to the unpaid tax\n or the proposed lien or levy action, including appropriate spousal defenses,\n challenges to the appropriateness of collection activities, offers of collection\n alternatives, or the underlying liability. [26 U.S.C. \xc2\xa7 6330(c)(2)]\n 5. The hearing officer made a determination after considering whether any proposed\n collection action balances efficient tax collection with the taxpayer\xe2\x80\x99s legitimate\n concern that any collection action be no more intrusive than necessary.\n [26 U.S.C. \xc2\xa7 6330(c)(3)]\n 6. Determined whether Appeals complied with current Internal Revenue Manual\n guidelines for documenting case actions.\n B. Discussed exception cases with Appeals officials to confirm and determine causes.\n After confirmation, we estimated the number of potential exceptions within the\n population.\n C. For those CDP and EH sample Appeals case files missing required supporting\n documentation, obtained and reviewed the related administrative files from the\n Collection function to determine whether additional supporting documentation was\n maintained. We estimated the number of potential exceptions within the population.\n\n\n\n\n8\n The tax period is a measure of time for which a tax return is required to be filed.\n Page 17\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Appendix II\n\n Major Contributors to This Report\n\nDaniel R. Devlin, Assistant Inspector General for Audit (Headquarters Operations and Exempt\nOrganizations Programs)\nNancy A. Nakamura, Acting Assistant Inspector General for Audit (Headquarters Operations and\nExempt Organizations Programs)\nMichael E. McKenney, Director\nCurtis W. Hagan, Director\nCarl L. Aley, Director\nAaron R. Foote, Audit Manager\nDaniel M. Quinn, Acting Audit Manager\nJanice M. Pryor, Acting Audit Manager\nStephanie K. Foster, Lead Auditor\nTom J. Cypert, Senior Auditor\nCarolyn D. Miller, Auditor\n\n\n\n\n Page 18\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Appendix III\n\n Report Distribution List\n\nCommissioner C\nOffice of the Commissioner \xe2\x80\x93 Attn: Chief of Staff C\nDeputy Chief, Appeals AP\nChief Counsel CC\nNational Taxpayer Advocate TA\nDirector, Office of Legislative Affairs CL:LA\nDirector, Office of Program Evaluation and Risk Analysis RAS:O\nOffice of Internal Control OS:CFO:CPIC:IC\nAudit Liaison: Chief, Appeals AP\n\n\n\n\n Page 19\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Appendix IV\n\n Outcome Measures\n\nThis appendix presents detailed information on the measurable impact that our recommended\ncorrective actions will have on tax administration. These benefits will be incorporated into our\nSemiannual Report to Congress.\n\nType and Value of Outcome Measure:\n \xe2\x80\xa2 Taxpayer Rights and Entitlements \xe2\x80\x93 Potential; 7,281 closed CDP cases either could not\n be located by Appeals; were not properly classified; or did not contain sufficient\n documentation, a sufficient impartiality statement, and/or verification of the suspension\n of collection activity (see pages 4, 6, 8, 10, and 12).\n\nMethodology Used to Measure the Reported Benefit:\nUsing a computer extract from the ACDS,1 we identified a population of 8,089 CDP cases closed\nbetween March 1 and July 31, 2005. We selected a statistical sample of 80 CDP cases and found\n72 (90 percent) could not be located by Appeals; were not properly classified; or did not contain\nsufficient documentation, sufficient impartiality statement, and/or verification of the suspension\nof collection activity. We projected the results of our sample, using a 90 percent confidence\nlevel and a precision rate of \xc2\xb15.49 percent, and estimated 7,281 CDP cases could affect taxpayer\nrights and entitlements.\nThe 72 CDP cases were comprised of the following:\n o There were 66 CDP case files that either could not be located by Appeals or did not\n contain documentation sufficient to determine if the IRS complied with the guidelines\n and procedures to protect taxpayer rights when appealing lien and levy actions\n (see page 4). Using a 90 percent confidence level, we estimated:\n\n\n\n\n1\n The ACDS is a computerized case control system used to control and track cases throughout the appeal process.\n Page 20\n\x0c- P - -\n\n The W i c e of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Reason CDP Case Could Not Be Verified Number of Error Estimate of Precision of\n\n Case file not provided\n -. - - -- - - - -- - - .- - - -- -- - -\n 5 - -\n 6.25% 506 *4.43%\n Case file received did not include complete\n 14\n -\n hearing reauest\n -\n . " - I - _ - ---- .- -- - - - - --- - -\n Case file received did not include envelope\n 44 55% 4,449 *9.1%\n used to- -mail -\n - -\n hearing\n .-- %-.\n reauest\n Case file received did not include-\n notification\n --- .- --_\n of...levv\n .-\n or lien .--- - -- --- - - --- - -- - - - - -- --\n\n\n Case file received did not include\n 2 2.5% 203 i2.86%\n documentation of Appeals\' determination\n Totals 66* 82.5%" 6.674* *6.95%\n (*) Column does not total because some case files were\n\n\n\n\n Using a 90 percent confidence level and a precision of *2.03 percent, we estimated\n 102 cases were misclassified as CDP cases.\no There were 7 CDP case files (8.75 percent) that did not contain an impartiality statement\n in the Determination Letters or Summary Notices of Determination (see page 9). Using a\n 90 percent confidence level and a precision of *5.17 percent, we estimated 708 cases did\n not-include an impartiality statement in the ~eterminationLetters or Summary Notices of\n Determination.\no There were 25 CDP cases (3 1.25 percent) that had 1 of the following errors: no\n suspension of collection activity or no documentation to indicate verification of the\n timeliness of the hearing request and the date suspension of collection activity should\n begin (see pages 10 and 11). Using a 90 percent confidence level, we estimated:\n Reason Suspension of Collection Activity Number of Error Estimate of Precision of\n\n\n activity was not input on taxpayer\'s\n account -.- .- --\n -- - -- --- - - - .- -- - - -. .-...- - - - - --- - -.. .\n - -- . - -.-- -- ----- -\n\n\n Case file did not contain documentation to\n indicate verification of the timeliness of\n 2,427 h8.39%\n the hearing request and the date susvension\n\n\n\n - - (*) Column does not total due to rounding.\n P\n\n\n\n\no There were 12 CDP cases (15 percent) for which the case file did not contain sufficient\n documentation to support the hearing officer\'s verification that laws and regulations were\n met and/or the hearing officer\'s verification of balanced collection action (see page 12).\n Using a 90 percent confidence level, we estimated:\n\n Page 21\n\x0c The OiWce of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Area With Insufficient Supporting Number of Error Estimate of Precision of\n\n Verification that laws and\n rermlations were met\n Verification of balanced collection action 2 2.5% 203 *2.86%\n Totals 12* 15%* 1,214* *6.53%\n\n\n\n o There were 2 CDP cases (2.5 percent) for which neither the Appeals case file nor the\n administrative file contained sufficient documentation to support the hearing officer\'s\n verification that laws and regulations were met (see page 12). Using a 90 percent\n confidence level and a precision of *2.86 percent, we estimated that for 203 CDP cases\n neither the Appeals case file nor the administrative file contained sufficient\n documentation to support the hearing officer\'s verification that laws and regulations were\n met.\n\nType and Value of Outcome Measure:\n Taxpayer Rights and Entitlements - Potential; 3,356 closed EH cases either could not be\n located by Appeals, were not properly classified, or did not contain sufficient\n documentation andlor sufficient impartiality statement (see pages 4,6, 8, and 12).\n\nMethodoloay Used to Measure the Reported Benefit:\nUsing a computer extract from the ACDS, we identified a population of 3,628 EH cases closed\nbetween March 1 and July 3 1,2005. We selected a statistical sample of 80 EH cases and found\n74 (92.5 percent) could not be located by Appeals, were not properly classified, or did not\ncontain sufficient documentation andlor sufficient impartiality statement. We projected the\n *\nresults of our sample, using a 90 percent confidence level and a precision rate of 4.79 percent,\nand estimated 3,356 EH cases could affect taxpayer rights and entitlements.\nThe 74 EH cases were comprised of the following:\n o There were 70 EH case files that either could not be located by Appeals or did not\n contain documentation sufficient to determine if the IRS complied with the guidelines\n and procedures to protect taxpayer rights when appealing lien and levy action\n (see page 4). Using a 90 percent confidence level, we estimated:\n\n\n\n\n Page 22\n\x0c- -\n The m c e of Appeals Should Continue to Strengthen and\n ReinBrce Procedures for Collection Due Process Cases\n\n\n\n Reason EH Case Could Not Be Verified\n Number of Error Estimate of Precision of\n for Meeting All Guidelines and Sample Cases Rate\n Total Cases Estimate\n Procedures P\n\n\n Case file not urovided 8 10% 363 *5.46%\n Case file received did not include\n 21 26.25% 953 *8%\n complete hearing request\n Case file received did not include\n 47 58.75% 2,132 *8.95%\n envelope used to mail hearing request\n Case file received did not include\n 55 68.75% 2,495 *8.43%\n notification of levy or lien\n Case file received did not include\n 7 8.75% 318 *5.14%\n documentation of A D D ~ ~determination\n ~s\'\n Totals 70* 87.5%* 3,175* &6.01%\n (*) Column does not total because some case files were\n missing more than one of the four kev documents.\n \' Y"\n *,, r :-5 "\'3 W&".,?#, -rmJa , -;**, ~178:7 ~ A J ~ l ~\'"-\n ~,p~ ma-\n *. *\' :, \' " * %\n\n\n\n\n Using a 90 percent confidence level and a -precision of *2.02 percent, we estimated\n 46 cases were misclassified as EH cases.\no There were 4 EH case files (5 percent) that did not contain an impartiality statement in\n the Decision Letters (see page 9). Using a 90 percent confidence level and a precision of\n *3.96 percent, we estimated 182 cases did not include an impartiality statement in the\n Decision Letters.\no There were 10 EH cases (12.5 percent) for which the case file did not contain sufficient\n documentation to support the hearing officer\'s verification that laws and regulations were\n met andlor the hearing officer\'s verification of balanced collection action (see page 12).\n Using a 90 percent confidence level, we estimated:\n Area With Insufficient Supporting Number of Error Estimate of Precision of\n\n Verification that laws and regulations were\n 8 10% 363 *5.46%\n met\n Verification of balanced collection action 6 7.5% 273 *4.79%\n Totals lo* 12.5%* 454* *6.01%\n (*) Column does not total because some case files were\n missing sufficient documentation in both areas. -\n\n\n\n\n Page 23\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\nType and Value of Outcome Measure:\n \xe2\x80\xa2 Increased Revenue \xe2\x80\x93 Potential; 1,113 closed CDP cases did not have the expiration date\n for the collection statute recalculated (see page 10).\n\nMethodology Used to Measure the Reported Benefit:\nUsing a computer extract from the ACDS, we identified a total population of 8,089 CDP cases\nclosed between March 1 and July 31, 2005. We selected a statistical sample of 80 CDP cases\nand found 11 cases (13.75 percent) that did not have the expiration date for the collection statute\nrecalculated, which could affect the collection of tax revenue. Using a 90 percent confidence\nlevel and a precision of \xc2\xb16.3 percent, we estimated 1,113 cases did not have the expiration date\nfor the collection statute recalculated.\n\n\n\n\n Page 24\n\x0c The Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n Appendix V\n\nManagement\xe2\x80\x99s Response to the Draft Report\n\n\n\n\n Page 25\n\x0cThe Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Page 26\n\x0cThe Office of Appeals Should Continue to Strengthen and\n Reinforce Procedures for Collection Due Process Cases\n\n\n\n\n Page 27\n\x0c'