IRS Case Selection: Collection Process Is Largely Automated, but Lacks Adequate Internal Controls
Published: 2015-07-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: IRS's collection program pursues individuals and businesses that failed to fully pay their taxes or file returns. Since 2009, the total tax debt inventory has increased 23 percent to $380 billion, while collection staff declined 23 percent. Given its large workload and declining resources, it is important that IRS make informed decisions about the collection cases it pursues to enhance compliance and confidence in the tax system.
GAO was asked to review IRS's processes for categorizing and routing collection cases for potential selection. This report (1) describes collection processes and trends in priority areas; and (2) assesses how well controls support the mission, including applying tax laws with integrity and fairness to all.
GAO reviewed IRS guidance, processes, and controls for categorizing and routing collection cases, reviewed data on results in priority areas, assessed whether IRS's controls followed Standards for Internal Control in the Federal Government , and interviewed IRS officials.
section_title: What GAO Found
paragraphs: The Internal Revenue Service's (IRS) collection program largely uses automated processes to categorize and route unpaid tax or unfiled tax return cases for potential selection. The automated Inventory Delivery System (IDS) categorizes and routes cases based on many factors, such as type of tax and amount owed. Outside of IDS, collection managers set goals for closing cases in priority areas, such as delinquent employer payroll taxes and cases involving certain high-wealth taxpayers. If goals are at risk of not being met, officials may take action to select additional priority cases. In recent fiscal years, the collection program has exceeded nearly all case closure goals for priority cases. However, because IRS has not identified objectives for the collection program, such as fairness, it is difficult to assess the program's overall effectiveness.
GAO identified several areas where the lack of documented objectives and internal control deficiencies for categorizing and routing cases increase the risk that the collection program's mission, including fair case selection, will not be achieved. Examples of key internal control steps and deficiencies follow.
Program objectives and key terms are not clearly defined: Although fairness is specified in the collection mission statement and IDS processes can affect how collection cases are selected, management has not defined fairness or any other program or case selection objectives. IRS collection's management referred to various documents as examples of program objectives. However, the documents were not specific enough nor codified in official IRS guidance to ensure proper control over the program. Without clearly defined objectives that can enhance program effectiveness, it is difficult for IRS to ensure it selected collection cases in a fair and unbiased manner.
Case categorization and routing procedures are not documented: According to management, case categorization and routing procedures were developed over several years as the result of incremental decisions and system changes. However, GAO found that the system and decisions were not documented, such as the selection of priority areas. Without documentation, it is difficult to determine whether processes are effective or consistently applied.
Effectiveness of processes is not routinely monitored : Despite some ad-hoc studies, IRS does not have procedures to periodically monitor IDS, including the dollar thresholds used to identify some cases for collection. Management could not provide GAO with justification for the thresholds because according to officials, they were set so long ago. Without periodic evaluations, out-of-date collection procedures could result in unnecessary costs or missed collections. Unadjusted dollar amounts could lead to inconsistent treatment of taxpayers over time as the real value of dollar thresholds decline over time due to inflation.
section_title: What GAO Recommends
paragraphs: GAO recommends that IRS take five actions to improve collection controls, such as clearly defining and documenting program objectives and control procedures, and periodically evaluating the effectiveness of controls. In commenting on a draft of this report, IRS said it generally agreed with all of GAO's recommendations.

section_title: Letter
paragraphs: By pursuing taxpayers who either failed to fully pay taxes owed or file a  return, the Internal Revenue Service (IRS) enhances compliance and  confidence in the tax system. This also helps to address the tax gap—the  estimated difference between the amount of taxes owed by taxpayers and  the amount voluntarily paid on time. IRS estimated that for tax year 2006,  the $450 billion gross tax gap included $46 billion in delinquent tax  liabilities and an estimated $28 billion from unfiled tax returns. IRS refers  to unpaid tax assessments of delinquent tax liabilities and unfiled tax  returns that accumulate over time as the tax debt inventory. As of  September 30, 2014, the total tax debt inventory was $380 billion  (including interest and penalties), a 23 percent increase since 2009.  During this same 6-year period, IRS’s collection staff declined by 23  percent (from 10,546 to 8,139 full-time equivalents (FTE)). Given the  collection program’s large workload and limited resources, IRS must  make informed decisions about which cases to pursue for collection  action.
Along with former Representative Dave Camp, in his role as Chairman of  the House Committee on Ways and Means, you asked us to review the  processes IRS uses to select collection cases for potential enforcement  action. Our work focused on collections at the enterprise level and on the  Inventory Delivery System (IDS), which is the primary system IRS uses to  categorize and route cases to be worked in collection functions. This  report (1) describes IRS’s processes for categorizing and routing  collection cases, trends in priority areas, and key process changes for  fiscal years 2012 through 2014; and (2) assesses how well the processes  for case selection support the collection program’s mission, including  applying tax laws with integrity and fairness to all.
For the first objective, to describe IRS’s processes for categorizing and  routing collection cases, we reviewed IRS documents describing the  processes and systems at the enterprise level, including program  management reports and presentations prepared by IRS staff. We also  analyzed system rules to determine how they affect case categorization  and routing. We analyzed information about the collection program’s  statistical methods and procedures used in the modeling process, a  statistical method that predicts likely case outcomes. We also visited the  IRS office in St. Paul, Minnesota, that is responsible for building and  maintaining the models. We analyzed documents to learn how the models  were used and how they affect case categorization and routing for case  selection. To describe trends in priority areas, we analyzed IRS case  priorities and closure data in management reports for fiscal years 2013  through 2014. To describe key process changes, we interviewed IRS  officials, reviewed a study that resulted in process changes, and analyzed  data on the application of various IDS business rules for calendar years  2011 through 2014.
For the second objective, we compared the processes identified above to  the relevant federal standards for internal control. We interviewed  collection officials, including the Director of Collection, about the mission,  objectives, and internal controls of the collection program and IDS. We  also reviewed how case routing rules and models are managed, including  the extent to which they were evaluated and revised. We then assessed  whether the procedures met federal internal control standards on  establishing objectives, identifying and assessing risks, establishing  controls to address risks, and monitoring controls. For each objective, we  interviewed IRS headquarters managers in the offices of Enterprise  Collection Strategy, Campus Compliance Services, and Field Collection.  We determined that the data used in our analysis were sufficiently reliable  for the purposes of this review. Our data reliability assessment included  reviewing relevant documentation, interviewing knowledgeable IRS  officials, and manual testing of the data to identify obvious errors or  outliers. For additional details on our scope and methodology, see  appendix I.
We conducted this performance audit from August 2014 to July 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: The mission of the collection program is to collect delinquent taxes and  secure delinquent tax returns through the fair and equitable application of  the tax laws, including the use of enforcement tools when appropriate.  The collection program’s mission also includes educating its customers to  facilitate future compliance, thereby protecting and promoting public  confidence in the American tax system.
In November 2014, IRS reorganized its collection program to produce  greater efficiencies, reduce redundant efforts, streamline decision  making, and improve customer service. Prior to the reorganization, the  collections program was split between the Small Business/Self Employed  (SB/SE) and Wage & Investment divisions. IRS’s collections operations  are now organized under one manager, the Director of Collection in  SB/SE, as shown in figure 1.
The tax debt inventory generally originates from one of three sources: (1)  a tax return with a balance due; (2) an IRS program to collect taxes from  individuals or businesses that did not file a return (nonfilers); or (3) an IRS  action on a tax return, such as an audit. As shown in figure 2, the source  of assessments in the potentially collectible tax debt inventory has been  roughly even among the three categories over the last 6 fiscal years.  Overall, the total tax debt inventory has been trending upward.
IRS has a three-phased process for collecting unpaid tax debts.
Notice Phase: IRS sends an automatically-generated series of letters  to the taxpayer about unpaid debts or delinquent returns. The point of  these letters is to prompt a payment by the taxpayer or a response if  the taxpayer disagrees with the balance due or is unable to pay the  amount owed.
Automated Collection System (ACS): IRS’s system attempts to make  telephone contact with the taxpayer. If successful, ACS staffs discuss  the debt with the taxpayer to prompt a payment or set up a payment  plan (which IRS calls an installment agreement). ACS staff may also  take enforcement actions, such as levying financial assets or filing a  lien against the taxpayer’s property.
Field Collection (Field): IRS revenue officers attempt in-person  contact with taxpayers to prompt a payment or take enforcement  action such as those described above with ACS.
According to IRS officials, IRS designed the collection program to resolve  taxpayers’s debt at the earliest possible time and to use the least costly  process. We previously reported that the notice phase provides IRS with  an opportunity to maximize collections while minimizing costs in pursuing  tax debts. Notices are computer generated and mailed to taxpayers with  little direct involvement by IRS employees. If taxpayers then take action to  pay or otherwise resolve their debts, collections can occur with relatively  little additional IRS investment. When individuals with tax debts do not  respond to notices, IRS may route the case to either ACS or the Field for  collections. While both of these processes are more labor intensive and  expensive than the notice process, costs for routing a case to ACS or the  Field differ significantly. Based on data from fiscal years 2010 through  2014, IRS’s Office of Cost Accounting determined that it cost roughly  $200 to close a case in ACS and about $2,500 to close a case in the  Field. According to IRS officials, Field case closures are more  expensive, in part, because the cases are generally more complex and  are handled by revenue officers who are at higher pay grades than ACS  employees.
With few exceptions, every collection case goes through the notice  phase. Of the total collections cases that were closed in fiscal year 2014,  about 60 percent were closed in the notice phase (see figure 3). Closed  cases are removed from the active inventory and may not include the  collection of taxes. We reported on the notice phase in 2009.
Since fiscal year 2009, IRS’s year-end collection inventory has increased  by 27 percent (14 million to 17.8 million cases). During the same period,  IRS has closed fewer cases, 9.6 million closed in fiscal year 2009  compared to 8.3 million closed in fiscal year 2014, a 13 percent difference  (see figure 4). As previously noted, cases that are not resolved in the  notice phase may be worked in ACS or the Field, in both functions, put on  hold (known as a shelved case), or not worked at all. According to  collection officials, shelved cases are generally not worked unless IRS  later identifies additional tax debts or unfiled returns for a given taxpayer.
During the past several years, IRS’s collection staff has been reduced  significantly. At the end of fiscal year 2014, IRS had 27 percent fewer  collection staff in ACS and the Field than it had in fiscal year 2010 (from  11,210 full-time equivalents (FTE) to 8,139 FTEs) (see figure 5).
section_title: Process for Categorizing and Routing Collection Cases Is Largely Automated, but Management Monitors Priority Cases to Achieve Program Goals
subsections: section_title: Automated Inventory Delivery System Categorizes and Routes Cases to Potentially Be Worked Based on Numerous Factors
paragraphs: IRS uses an automated process to categorize and route most collection  cases for potential selection. Figure 6 shows how the automated  Inventory Delivery System (IDS) fits into the collection process. IDS’s key  functions are to analyze cases to (1) identify and filter out cases that  should not be pursued further (i.e., shelved), (2) categorize some cases  as high risk, and (3) determine whether cases should be routed to either  ACS or the Field to potentially be worked.
IDS considers hundreds of factors about a case while carrying out two  activities that facilitate closures, categorization, and routing:
Modeling is a statistical process that analyzes the results of  previously resolved cases to predict likely case outcomes. In IDS, this  process helps determine if a case should be shelved if a model  predicts it would not be collectible.
Risking determines whether a case is high risk and influences case- routing and shelving decisions. For example, cases where a taxpayer  owes a large amount of money would be considered high risk and  would be a priority for selection.
IDS uses the outputs from the risking process in conjunction with  hundreds of routing rules to route cases for further collections actions in  ACS or the Field. Some common factors considered in IDS routing rules  include dollar amount owed, type of tax owed, type of taxpayer, and age  of the accounts. Other factors are also considered and can lead to cases  not being processed for further collection actions. For example, routing  rules test whether the taxpayer is in bankruptcy. IRS suspends taking  further collections actions (like levying a taxpayer’s wages or putting a  lien on property) if the taxpayer is in bankruptcy or litigation.
If there is not enough information to contact or locate a taxpayer, IDS may  route cases to the Locator Services System, which researches taxpayer  addresses and telephone numbers. This may occur if taxpayer  correspondence has been returned as undeliverable or if IRS does not  have a valid telephone number for the taxpayer.
IDS routes cases for further collections actions to ACS or the Field, or  shelves the cases for no action. Based on our analysis of IRS data, IDS  routes most cases (about 70 percent) to ACS. About 25 percent of  cases go to the Field, and nearly all of them are placed in the Field queue  for potential assignment to a revenue officer; only a very small  percentage are routed directly to the Field for immediate assignment. IDS  shelves about 5 percent of cases based on certain characteristics  described below.
The IDS system can shelve cases by removing them from the Field  queue inventory and indefinitely suspending (subject to the 10-year  statute of limitations) them for further collection action. As previously  noted in figure 4, IRS shelved about 2 million cases in each of the past 2  fiscal years. Most of these cases were shelved by the IDS system. IDS  shelves some cases upon receipt and others after they have been routed  to ACS or the Field for potential collection action but were not been  resolved.
Cases shelved by IDS generally fall into three categories:  cases with a low dollar amount owed or where IRS is unable to  contact the taxpayer or identify a levy source, or a combination of  these factors;  cases predicted as unproductive by IDS modeling; and  cases that have not been assigned to a revenue officer after 52 weeks  of waiting in the Field queue.
When a case is shelved, IRS posts a closing transaction code to the  taxpayer’s account indicating that the case conditions noted above apply.  However, these cases are not necessarily closed permanently. According  to officials, IRS may reactivate these cases for collection actions if, for  example, IRS later identifies another tax debt or unfiled return for the  taxpayer.
IDS shelves the cases in the first and second categories as soon as they  leave the notice phase, rather than routing them to a downstream  collections function. Of shelved cases in the third category, some were  originally assigned to the Field queue by IDS, and others were transferred  there after ACS was unable to resolve them within a given period of time.  IDS regularly reevaluates cases that have been sitting in the Field queue  for 52 weeks. Provided there are no prohibitions on shelving that type of  case, IDS shelves and removes the cases from active collections  inventory.
section_title: Management Identifies and Monitors Cases in Priority Areas
paragraphs: IRS’s executives set priorities for closing cases in certain priority areas.  Since fiscal year 2012, IRS’s collection executives have developed work  plans that establish which areas are priorities. IRS managers and  executives establish goals for the number of cases to close, and then  throughout the year, monitor progress toward the goals. Closures in  priority areas account for roughly 17 percent of all collection case  closures in recent years. Priority cases are identified in the collection  program’s annual program letter, which communicate plans and priorities  for the year.
Most collections cases in these priority areas are already categorized as  high risk by IDS, ACS, and Field inventory management systems.  However, according to IRS officials, if periodic monitoring indicates that  goals may not be met, collection headquarters and program staff  collaborate to determine if they should take action to select and work  priority cases in sufficient numbers to achieve case closure goals.
The seven priority areas for fiscal year 2015 are:
Delinquent employer payroll tax cases: Cases where employers have  not complied with requirements to withhold and pay federal  employment taxes imposed on wages paid to their employees.
Large dollar account cases: Cases with high dollar amounts due.
Global High Wealth (GHW) cases: IRS developed a list of GHW  individuals who have histories of balance dues and wealth in the tens  of millions of dollars. This list is developed by IRS’s Large Business &  International (LB&I) division.
Return preparer penalty cases: Cases where IRS has imposed certain  civil penalties on a person or business that has violated laws related  to preparing tax returns.
Federal employees and retirees (Federal Employee/Retiree  Delinquency Initiative, or FERDI): FERDI cases were established to  promote federal tax compliance among current and retired federal  employees.
High-income nonfilers taxpayers: These cases include taxpayers with  estimated high incomes who have not filed tax returns.
Large business taxpayers with delinquent accounts: LB&I operating  division taxpayers, which may include corporations and partnerships  with assets in the tens of millions of dollars.
IRS officials told us that delinquent employer payroll taxes and large- dollar account cases have been priority areas for several years. IRS  officials explained that nonpayment of employer payroll taxes can involve  “pyramiding,” or instances where a business withholds taxes from its  employees, but intentionally fails to remit them to IRS. Within the  inventory management rules for ACS and the Field, payroll tax cases are  assigned a high priority so that actions can be taken quickly to address  noncompliance against payroll offenders to help prevent pyramiding.
Other priorities like GHW and return preparers were recently added to  align collections activities with other IRS strategic goals. For example in  2009, IRS created a GHW industry group within LB&I to centralize and  focus IRS compliance expertise involving high-wealth individuals and their  related entities (we previously reported on GHW cases). LB&I requested  that collections prioritize GHW cases because, if the unpaid tax debts  identified in such programs are not effectively collected, the deterrence  effect of the audits themselves could be greatly diminished. To track the  number of GHW taxpayer cases that are closed as compared to goals,  collection staff use a list of Taxpayer Identification Numbers (TIN) of  GHW taxpayers developed by LB&I. According to IRS officials, collection  staff compares the list of TINs to cases in active collection inventory to  ensure all cases are worked and closed.
While IRS automatically prioritizes most of the cases that would be  covered by the seven priority areas for selection, there are times when  IRS managers take actions to manually prioritize cases to ensure the  agency achieves its goals. Cases in four priority areas (payroll taxes,  large-dollar accounts, high-income nonfilers, and return-preparer  penalties) are generally identified as “high risk” by IDS and assigned high  priority by ACS’s and the Field’s inventory management systems.  Similarly, IDS automatically routes all FERDI cases involving delinquent  IRS employees directly to the Field. Non-IRS employee FERDI cases are  automatically routed to a dedicated ACS unit, and the cases are assigned  the highest priority within ACS’s inventory management system. In the  remaining two areas—large business and GHW—IRS officials told us  these taxpayers typically owe large dollars and would similarly be  deemed high risk by IDS. However, IRS officials also said that they  periodically search available collections inventory for large business or  high-wealth individuals with unpaid balances when goals are at risk of not  being met.
subsections: section_title: IRS Exceeded Case Closure Goals for Priority Areas
paragraphs: During fiscal years 2013 and 2014, IRS exceeded nearly all of its goals  for collections in its priority areas. As shown in table 1, in fiscal year 2014,  IRS exceeded its targets for closing payroll modules by 11 percent, and  its targets for closing large dollar modules by 16 percent. Payroll cases  account for most of the priority cases tracked. Other priority areas such  as taxpayer cases involving large businesses, high-income nonfilers, and  federal employees exceeded their respective targets by about 20 to 30  percent. IRS collections management reports for the first 6 months of  fiscal year 2015 also project that IRS will meet or exceed its targets for six  of its seven collection priorities by the end of fiscal year 2015.
section_title: IRS Changed Collection Processes to Route More of Two Types of High- Priority Cases to ACS
paragraphs: In recent years, IRS made two key changes to IDS routing rules for two  types of high-priority cases—(1) unpaid payroll tax debts and (2) what  IRS calls “large-dollar cases.” As a result, significant numbers of these  types of cases have been routed to ACS rather than the Field queue.
IRS changed payroll case routing rules in October 2011 after a 2010  study, which found that about 1 million payroll tax cases were sitting  unworked in the Field queue, and were unlikely to be selected to be  worked by revenue officers.  At the time of the study, most payroll cases  were assigned to the Field queue based on routing rules that tested the  total dollar amount owed. Generally, only cases where the business owed  less than a few thousand dollars were routed to ACS, and all other payroll  tax cases were sent to the Field queue. The study recommended  increasing the dollar amount used for splitting payroll cases between ACS  and the Field so more cases would be routed to ACS where they would  be more likely to be worked. Once assigned to ACS, these payroll cases  would then be assigned high priority within ACS’s inventory.
Regarding the second key change, in October 2012, IRS cancelled a  large-dollar case routing rule that was sending all “large-dollar” taxpayer  cases to the Field queue. IRS had previously decided to send all “large- dollar” cases to the Field in response to recommendations in the same  2010 study mentioned above. IRS officials told us they cancelled the  rule because the Field did not have enough resources to work the new  influx of large dollar cases. By cancelling this rule, IRS shifted many large  dollar cases to ACS. Once assigned to ACS, these large dollar cases  were generally assigned the highest priority in ACS’s inventory system. A  much smaller number of very large-dollar cases were still reserved for the  Field, and assigned the highest priority within the Field’s inventory.
IRS officials told us that it is not possible to quantify precisely how many  collections cases were routed differently because of the rule changes. We  analyzed IRS routing rule data and estimate that, as a result of the  changes, several hundred thousand more payroll and large dollar cases  were routed to ACS. IRS officials agreed with our estimate.
section_title: Insufficient Internal Controls for Case Selection Could Limit the Collection Program’s Ability to Carry out Its Mission
paragraphs: Having effective internal control is a fundamental component of managing  an organization. As set forth in Standards for Internal Control in the  Federal Government, also known as the “Green Book,” internal control  comprises the plans, methods, policies, and procedures used to meet an  entity’s mission, goals, and objectives. Internal control helps agency  program managers achieve desired results and provide reasonable  assurance that program objectives are being achieved through, among  other things, effective and efficient use of agency resources. Further, an  effective internal control system helps agencies adapt to shifting  environments, evolving demands, changing risks, and new priorities.  Figure 7 illustrates selected key steps in internal control.
Internal control standards can serve as tools to help IRS management  meet the collections program’s mission of applying the tax law with  integrity and fairness. IRS has an internal control framework in place.  However, when we compared IRS’s processes to standards in the Green  Book, we found that they were deficient in some areas, thereby  increasing the risk that the collections program may not meet its stated  mission.
subsections: section_title: IRS Has Not Clearly Defined Objectives or Key Terms, Such as Fairness, for the Collection Program and Case Selection Process
paragraphs: Internal control standard: define objectives   Program objectives are to be clearly defined in measurable terms to enable the  design of internal control for related risks. Specific terms should be fully defined  and clearly set forth so they can be easily understood at all levels of the entity.
Internal control standards call for management to set program objectives  that align with an entity’s mission, strategic plan, goals, and requirements  of applicable laws and regulations. Clearly defined objectives can  enhance the effectiveness and efficiency of a program’s operations, and  are a prerequisite for risk assessment. Documenting objectives allow  agency officials and staff to understand the organization’s purpose  consistently. IRS’s Chief Risk Officer agreed that clearly articulated  program objectives are essential for effective risk assessments and  should be documented. He provided us with documentation from IRS’s  Enterprise Risk Management Office (ERM) that also outlined this process.
IRS has not defined clear objectives for the collection program, IDS, or  any other parts of its enterprise collection case selection process. We did  not identify any documented objectives, and collection officials had  difficulty articulating the objectives of the program. When we questioned  IRS officials about possible program objectives, we received multiple and  conflicting answers.
During our discussion with IRS collection officials, they referred to the  collection mission statement, contents of the annual program letter, and  program performance measures as potential examples of program  objectives. However, the mission statement, while summarizing the  overall purpose and functions of collection, is not intended to provide  direct program guidance or be used for internal control. Further, the  annual program letter does not identify program objectives, but instead  identifies distinct projects or activities (including the seven priority areas)  grouped underneath IRS’s broad strategic goals. Performance measures  do not serve as objectives, but rather should be derived from objectives.  Having clear objectives, especially as they relate to the seven priority  areas, is important to support management decisions about high priority  areas. For example, collection executives cited GHW and return preparer  penalty cases as high priority areas to enhance the deterrent effect of the  respective completed audits and other IRS compliance initiatives. Without  clear objectives, it is difficult to know whether any other types of audits  warrant priority oversight and attention in collection.
In reviewing IRS’s strategic plan, collection program documents, and the  collection case selection processes, and in discussion with IRS officials,  we identified language that IRS officials could consider using to articulate  clear program objectives. Although we identified potential objectives  language in various program documents, none of the documents  identified them as such. Potential objectives include:  collect the greatest amount of potentially collectible debt, ensure fairness by selecting cases to achieve “coverage” across all  types of taxpayers and encourage voluntary compliance, act promptly to resolve taxpayer filing or payment compliance, make the best use of resources by matching cases with the  reduce taxpayer burden, and  support IRS’s strategic compliance initiatives, such as to collect on tax  debts identified by audits intended to address particular compliance  problem areas.
IRS also has not clearly defined important terms such as fairness.  Although fairness is in the collection mission statement and IDS  processes may affect how collection cases are selected, collection  officials had not defined fairness or established it as a program or case  selection objective. A clear definition of fairness is needed because  program managers provided us with differing explanations of how to  achieve fairness in case selection. An IRS official responsible for case  selection functions defined fairness as when taxpayers with similar case  characteristics—such as the amount or type of tax owed—have an equal  chance of being selected for collection action. However, it is not clear  from this definition which case characteristics should be taken into  consideration and which should not when selecting cases for collection.  Others have suggested that fairness means ensuring that all taxpayers  are pursued to the same degree.
Another collection official discussing fairness said that if the public had  information on IRS’s methods for prioritizing and routing cases for  selection, they would agree that the process was fair. This suggests that,  in addition to comparing chances of selection, the public’s perception of  fairness is an important consideration. Collection program managers  stated that their processes were inherently fair and that they did not see  the need to define fairness. These varying views illustrate that without  fairness being clearly defined and established as a program or case  selection objective, however, IRS management cannot adequately  determine if the collection process is being implemented fairly or in an  unbiased manner. Moreover, officials cannot systematically identify and  address risks to help ensure that fairness is continually achieved, leaving  the agency vulnerable to selecting taxpayer’s collection cases in an  inconsistent manner.
Another important and widely used term—risk—is also missing a clear  definition and officials we spoke with had a variety of ideas as to its  meaning. Officials said that a key concept in IDS and other case selection  processes is to give higher priority to “high risk” or “high compliance risk”  cases. However, program managers have not clearly defined risk. As we  attempted to clarify this, we asked if risk pertained to the amount of debt  due. A program manager responded that risk does not just entail the  amount due and noted that unfiled tax returns do not have a definite  amount due, but IRS still considers them important. Another IRS official  said “risking” included the concept of tradeoffs. A collection program  manager explained that the term risking was established during the term  of a previous IRS commissioner who had promoted the concept as used  in the private sector, where it generally refers to decision making based  on data analytics or modeling. However, the manager said IRS’s use of  the term is not similar to the private sectors, but rather refers to using  case variables and thresholds for prioritizing and routing cases. In  reviewing the types of cases IRS gives high priority—including payroll tax  cases—we found that the concept of compliance risk may also include  the potential future revenue loss, the number of taxpayers affected,  and/or the likelihood that tax debts, if allowed to accumulate, might not be  collectible in the future. Further, risking at the enterprise level seems to  be different than risking in ACS and the Field; IDS risking refers to  processes that identify only high priority cases, whereas in ACS and Field  risking refers to processes that rank order cases in high-, medium-, and  low-priority categories. These various concepts of risk demonstrate that  the term is not clearly or consistently defined or understood even though  the term is widely used by program officials and program documents.
Without clear objectives for the program and case selection processes  codified in official IRS guidance—including definitions for key terms like  fairness and risk—IRS is hindered in its efforts to ensure the program is  achieving its mission, including ensuring that taxpayers are treated  fairly—should fairness become a program objective. Further, the lack of  clear, widely understood objectives can complicate program  management, as assessing risks, developing procedures to respond to  risks, and monitoring program controls cannot be performed easily or with  clarity.
section_title: IRS Has Taken Initial Steps to Identify Risks, but Additional Guidance Needed to Address Program Vulnerabilities
paragraphs: Internal control standard: assess risks to program objectives  Management is to comprehensively identify internal and external risks and  determine relative risk rankings on a scheduled and periodic basis.
Risk assessment is the identification and analysis of relevant risks  associated with achieving program objectives and forming a basis for  determining how risks should be managed. Once risks have been  identified, they should be analyzed for their possible effect. Risk analysis  generally includes estimating the risk’s significance, assessing the  likelihood of its occurrence, and deciding how to manage the risk by  determining what actions should be taken, if any.
The first and most critical step is risk identification. Management should  have well-documented procedures for regularly identifying internal and  external risks to program objectives and procedures, such as in short-  and long-term forecasting and strategic planning. Procedures should  include how internal risks are to be identified, such as risks resulting from  downsizing of agency operations and personnel or redesigning business  processes. Similarly, procedures should include how external risks—such  as economic changes or changing needs or expectations of the  Congress, agency officials, and the public—are to be identified.
Risk identification and assessments are not new to IRS. IRS has relied  upon many long-standing processes and procedures, and conducted a  variety of program reviews to identify and address risks. However, the  agency’s overall approach to risk management became more focused in  2013, when it established the Enterprise Risk Management Office (ERM)  process. IRS implemented ERM, among other reasons, to serve as an  early warning system to allow the agency to identify emerging challenges  and address them before they affect operations. According to IRS’s Chief  Risk Officer, the goal is to embed risk management principles and  practices into the daily operations of the business units and integrate  long-standing processes into the new, more holistic ERM approach.
Officials said the first year of ERM focused on enterprise-level risks that  include potential major reputational risks to IRS. The second year of ERM  has focused on risk at the operating division level. For example, in April  2015, Small Business/Self Employed (SB/SE) (the operation division that  includes the collection program) completed its first division-level risk  register. A risk register is a list of risks and related information, including  strategies for mitigating them. To provide input into the SB/SE risk  register, collection officials told us that they decided to use a “bottom up”  approach whereby potential risks would be identified and elevated by  frontline staff and other lower-level staff who may be aware of risks at an  operational level. Future years of ERM will focus more on risks at the  program level. Collection officials said they have started trying to integrate  risk management into their program’s daily operations. They also noted  that in recent months they have been developing processes and  documentation for the program’s risk management strategy and  establishing the infrastructure for its risk management process.
The risk management guidance collection used to provide input to the  SB/SE risk register focused on how to assess risks identified at the  employee and mid-management levels. Such methods of identifying risks  would be useful for the bottom-up approach collection officials described  to us. Although the guide encouraged managers and executives to self- identify risks—ostensibly to their program objectives for which they are  responsible—the guide did not have information on how managers are to  identify such risks. Collection management would need such information  when determining the priority areas for a given year. For example, if  fairness was defined as a key program objective, then management  would want to define the risk associated with ensuring the priority cases  were selected in a fair way. This underscores that risk assessments  should be based on program objectives. Without clear objectives, as  discussed earlier, comprehensive assessments of risks are difficult to  conduct.
Collection program officials said that they had identified risks using  processes and guidance established by ERM. Although officials said that  managers were involved in identifying risks, they did not have  documentation or guidance on how management identified risks. In May  2015, after the completion of the SB/SE risk register, ERM put forth  guidance to help managers identify risks. While the guidance provides  helpful information for management, further information would be useful  so that managers better understand how to integrate IRS’s long-standing  risk management processes with the new ERM approach. Officials said  SB/SE is in the early stages of developing its own training for collection  executives and managers, which may also provide useful information for  management.
IRS’s ERM efforts are at initial stages and it is too early to determine their  effectiveness. Management’s identification of risks is important because  internal and external risks could affect the collection program and  collection case selection in particular. For example, economic changes  could affect the mix of complex cases that come into IDS and require IRS  to consider making changes to case prioritization and routing. Similarly,  downsizing of IRS operations—as discussed previously—has the  potential for creating risks of greater imbalances between workload and  resources, either overall or between ACS and the Field. Such risks could  be better managed by IRS with guidance that helps to identify and  manage them, particularly when changes occur to collection-wide case  categorization and routing processes. Without risk identification and  assessments linked to program objectives, vulnerabilities may go  unaddressed, resulting in unfair case selection, decreased dollars  collected, greater noncompliance, or other negative program effects.
section_title: IRS Has Not Documented Case Selection Procedures
paragraphs: Internal control standard: document controls to address risks to   program objectives  Procedures should be clearly documented to ensure that management's plans,  policies, and procedures are sufficiently and fully carried out.
Internal control standards require documented procedures to ensure that  management’s plans to mitigate risks are carried out. Documentation is a  necessary part of an effective internal control system and should clearly  identify related objectives and control activities or procedures. Such  documentation should allow agency officials and staff to understand the  purpose of internal control procedures and be readily available for  examination. Documentation provides a means to retain organizational  knowledge and mitigate the risk of having that knowledge limited to a few  personnel. Documenting procedures is evidence that the right controls  are identified and that those procedures are capable of being  communicated to those responsible for their performance, and capable of  being monitored and evaluated.
Comprehensive documentation to describe IDS and the collection case  selection processes was not available, and hinders managers’s ability to  assure these processes are effective in addressing risks. Most of the  documents we were provided to describe IDS and the case selection  process were developed for purposes of our review or for training staff,  rather than for management and control purposes. Further, the  documentation provided contained some errors. For example, one  document showed that IDS uses statistical model results along with  business rules to make decisions on whether to route cases to either ACS  or the Field. IRS officials later told us, and our analysis of routing rules  confirmed, that IDS only uses model results in deciding whether to shelve  cases and not for deciding to which function to route them. As another  example, a different document showed that IDS routes and prioritizes  cases by using a series of business rules and predictive model scores,  which again misstated how IDS uses model scores. Also, IRS officials  later clarified that IDS actually does not prioritize cases. ACS and Field  inventory management systems accomplish this function. Other  documentation, including one 154-page document describing detailed  “risking” and routing rules, was very complex, using multiple acronyms  and code references. IRS officials agreed this documentation could  generally only be interpreted by employees with experience in collection  case routing and selection. We were only able to summarize the key  functions of IDS categorizing and routing (as described earlier) after  conducting a detailed review of these documents and having multiple  discussions with several IRS officials familiar with various parts of the  process. According to IRS collection officials, documents identifying and  describing IDS procedures and the case selection process are not  available because they are the result of incremental decisions and system  changes implemented over several years.
Similarly, we did not identify any guidance on how managers are to select  high priority cases and little documentation exists as to how and why the  priority areas were established, such as analyses of data to determine or  demonstrate the relative benefits and costs of working priority areas as  compared to others. Collection officials told us that management meets  annually to determine what the priority areas should be. As described  earlier, according to collection officials, some areas like delinquent payroll  tax cases historically have been priority cases, in part, due to the  pyramiding effect of the cases and therefore the need to address them  quickly. When we asked officials how they identified GHW taxpayers as  a priority area, they said the collections program had committed to work  all such cases but could not provide additional information on why, such  as analyses for working these cases as compared to others. IRS’s LB&I  division develops the list of GHW taxpayers for collection. When we  asked LB&I and collection program staff about procedures used to  develop the data and list of GHW taxpayers, the officials were not sure of  the answers and said the procedures had been in place for a few years.  They stated that they thought they could get more information by reaching  out to a recently retired person who had developed them. Program  documents show that because the retired staff person did not leave  instructions on how to develop the list, new staff had to recreate the  process.
Without adequate documentation, it is difficult to determine whether the  collection’s case selection procedures are effective in supporting program  objectives. For example, IDS decisions on shelving or routing a case to  either ACS or the Field could have important implications for whether and  when a debt will be collected (timeliness of collection or compliance) and  IRS’s costs (efficiency). According to IRS data, noted earlier, the costs for  sending cases to ACS versus the Field are significant. Similarly, routing to  either ACS or the Field could affect how long it takes IRS to resolve a  case, which could affect the collection result. A lack of documented  procedures also increases the risk that they will be consistently applied.  This is important, for example, when considering the seven priority areas.  Without documented procedures for how to select cases manually when  goals are not being met, IRS risks ensuring fair selection to all taxpayers.
section_title: IRS Does Not Regularly Monitor the Effectiveness of Collection Routing Rules and Has Not Reevaluated Dollar Thresholds Used to Identify High Priority Cases
paragraphs: According to internal control standards, program managers should have a  strategy and establish procedures to continually monitor and assure the  effectiveness of its control activities. This strategy should trigger separate  evaluations whenever monitoring identifies problems or improvement  opportunities.
Although evaluations have been conducted from time to time, IRS does  not have procedures to periodically monitor IDS categorization and  routing rules, such as reevaluating dollar thresholds used for categorizing  some cases as high priority and routing cases to one collections function  instead of another (e.g., ACS versus the Field). IRS does not have any  documentation showing when many rules were established, the rationales  for them, or data supporting them because, according to IRS officials,  most of the rules were established years before IRS starting keeping such  records in 2009. Knowing the rules’s rationales would help managers  evaluate the rules’s effectiveness. Most rules used to route or designate  cases as high priority rely primarily upon tests of the dollar amount owed.  But, IRS documentation does not show the rationale for using a specific  dollar amount or any data to support the selection of the dollar amount.  IRS has about 60 rules to categorize cases as high risk and more than  half of these rules use the same dollar threshold. This same dollar  amount is used to determine whether the case is high risk regardless of  the type of tax owed; the amount owed is an actual current amount due or  a previous amount from a prior return; or IRS has estimated an amount a  taxpayer earned using third-party data.
Our prior reports indicate that the dollar thresholds IRS uses to classify  some individual nonfilers as “high income” are the same as they were 20  years ago. Our analysis of IRS Statistics of Income information  concluded only 5 percent of individual taxpayers had adjusted gross  incomes that exceeded this threshold about 20 years ago. By contrast, in  2012 (the most recent data available), 14 percent of taxpayers had  adjusted gross incomes exceeding the threshold. Assuming that  nonfiling rates for “high income” taxpayers have remained constant, more  nonfilers’s incomes would be exceeding this dollar threshold as overall  taxpayer incomes increased over time.
IRS officials were unable to provide analyses or justification on why the  threshold was chosen, as opposed to a higher or lower amount. IRS  officials told us they did not have documented rationales for thresholds in  most cases because many routing rules were established long ago.  Officials said that, rather than focusing on evaluating the rules, IRS had  decided to dedicate its limited resources to improving other aspects of its  case selection processes, such as modeling.
IRS has evaluated business rules on an ad-hoc basis. For example, as  previously noted, a 2010 study of IRS collections evaluated the routing  rules being used to split the assignment of delinquent payroll tax cases  between ACS and the Field. The study estimated that about 1 million  delinquent payroll tax modules (with a total amount owed of $8 billion)  were sitting in the Field queue and not being worked. The study  recommended that the dollar threshold used to assign payroll tax cases to  collections functions be adjusted so that more cases would be sent to  ACS instead of the Field.
If the rules are not periodically evaluated, over time they could lose their  value and usefulness. Moreover, without adjusting the thresholds, more  and more cases are selected, increasing collection’s already very large  workload. We previously recommended that Congress require IRS to  regularly adjust the dollar amounts of penalties for taxpayer  noncompliance. We found that because IRS penalty amounts had not  been adjusted for decades in some cases, the real value of the fixed  dollar amounts of penalties has decreased. We also reported that not  adjusting these penalties for inflation could lead to inconsistent treatment  of otherwise equal taxpayers over time because taxpayers penalized  when the amounts were set could effectively pay a higher penalty than  those with the same noncompliance pay years later. Since we made our  recommendation, IRS has indexed almost all of the penalties to inflation.
Another risk is that without systematic monitoring, collection procedures  could result in unnecessary costs or missed collections. Given increases  in taxpayer incomes and taxpayer debts over time, it is likely that more  delinquent taxpayer accounts are exceeding the unchanged dollar  amount limits and, as a result, being prioritized within IRS collections  processes regardless of whether their cases are truly high risk. Not  adjusting dollar amounts used to make collections case routing decisions  could lead to inconsistent treatment of taxpayers over time as the real  values of the dollar amounts declined due to inflation.
section_title: Conclusions
paragraphs: IRS’s collection program is the federal government’s primary enforcement  tool for compelling noncompliant taxpayers to file their tax returns and pay  taxes, encouraging voluntary compliance and thereby helping address the  tax gap. The amount of tax debt cases is an ongoing and growing  problem. With recent declines in collections staffing and a growing  caseload, the problem is now more acute. With fewer resources available  to work cases, proper case selection is more important than ever in  ensuring IRS’s ability to achieve compliance and other goals including  that cases are selected fairly. We identified some internal control  weaknesses that leave the collection program vulnerable to unfair case  selection and inefficient use of resources, among other things. Without  effective internal controls, the program may not achieve desired results  and lacks reasonable assurance that program objectives will be met.  These basic management tenants are fundamental in promoting  confidence in the tax system.
section_title: Recommendations for Executive Action
paragraphs: To help ensure the IRS collection program meets its mission and selects  cases fairly, we recommend that the Commissioner of Internal Revenue  take the following five actions:  1.  Establish, document, and implement clear objectives for the collection  program and enterprise-wide case categorization and routing  processes, and define key terms, such as “fairness” and “risk.”  2.  Build upon existing Enterprise Risk Management (ERM) guidance to  help managers identify internal and external risks to collection  program objectives, and better understand how long-standing risk  processes integrate with new ERM approaches; incorporate this  guidance into existing or future ERM or collection program risk  assessment processes.  3.  Clearly establish, document, and implement case categorization and  routing procedures—such as those for IDS, high priority case  selection, and any other important processes—to support collection  program objectives and IRS goals.  4.  Establish, document, and implement procedures for the periodic  evaluation of the efficiency and effectiveness of collection-wide case  categorization, routing rules, and case selection processes.  5.  Establish, document, and implement procedures for periodic updates  of dollar thresholds for categorizing case selection, including those  identified as “high risk.”
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Commissioner of Internal  Revenue for review and comment. The Deputy Commissioner for  Services and Enforcement provided written comments dated July 16,  2015, which are reprinted in appendix II. IRS stated that it generally  agreed with our recommendations and it appreciated our insights as it  strives to continue to strengthen its processes and programs. According  to IRS, it is identifying the actions to be taken to effectively implement our  recommendations and plans to provide a detailed description of them in  response to our final report.
The comments also included an elaboration on the operations of IDS and  case selection processes.  Although IRS said our report described the  case selection process as designed to be automated with no  management discretion on choosing individual accounts or taxpayers, our  report did not provide such a description.  IRS’s comments went on to  discuss factors managers use to assign the “identified next best case”  and variables managers consider in assigning work at IRS campuses and  call sites. However, the issues of prioritization and discretion in function- level case selection processes were not in the scope of our report since  we focused on collection at the enterprise level and on IDS.
IRS also stated that it agrees with the importance of internal controls and  affirmed its commitment to making needed improvements in the areas we  pointed out. To that end, IRS noted actions that it has taken to improve  collection performance in fiscal years 2014 and 2015, including updates  of analytical models and the realignment of the collection program to be  entirely within SB/SE.  IRS further noted that in some cases its  documentation has not kept pace with these changes and committed to  bringing these policies and procedures up-to-date.
Lastly, IRS noted that our report did not identify any instances where the  selection of a case was considered inappropriate or unfair. However, as  described in our scope and methodology, we did not design our study to  look for cases of inappropriate selection but rather to assess the internal  controls that help safeguard the fairness of the case selection processes.  By evaluating the collection program’s enterprise-level internal control  framework for selection, we were able to determine whether IRS had  processes in place that help provide reasonable assurance of fair  selection not just of cases selected in the past but also on an ongoing  basis.  IRS also provided us with technical comments, which we  incorporated into the report as appropriate.
We are sending copies of this report to the Chairmen and Ranking  Members of other Senate and House committees and subcommittees that  have appropriation, authorization, and oversight responsibilities for IRS.  We are also sending copies to the Secretary of the Treasury,  Commissioner of Internal Revenue, and other interested parties. In  addition, this report is available at no charge on the GAO website at  http://www.gao.gov  If you or your staff have any questions about this report, please contact  me at (202) 512-9110 or mctiguej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to (1) describe the Internal Revenue Service’s (IRS)  processes for categorizing and routing collection cases, trends in priority  areas, and key process changes for fiscal years 2012 through 2014; and  (2) assesses how well the processes for case selection support  collection’s mission, including applying tax laws with integrity and fairness  to all.
To describe IRS’s processes for categorizing and routing collection  cases, we interviewed IRS officials and obtained available documents on  how cases flow through the collection process after the collection notice  phase for potential selection in the Automated Collection System (ACS)  and Field Collection (Field). We interviewed IRS headquarters managers  in the offices of Enterprise Collection Strategy, Campus Compliance  Services, and Field Collection. To better understand background and  context for these processes, we reviewed information on the processes  ACS and the Field use to prioritize cases for selection. To better  understand processes results, we reviewed general program  management documents, including regular management reports on IRS’s  collections operations for fiscal years 2009 through 2014. We also  reviewed Collections Pipeline Reports (CPR) and Monthly Monitoring  Report (MMR) data on the inflows and outflows of collections inventory,  as well as data on collections workforce levels (full-time equivalents).  Most of the CPR and MMR data that we used in this report were originally  from IRS Collection Activity Reports (CAR). We previously used CAR  data to report on the IRS notice phase process in 2009. At that time, we  interviewed IRS officials with knowledge about CAR data about the steps  taken to ensure data accuracy. We determined that the CAR data were  sufficiently reliable for our purposes. The CPR also contained data  prepared by the IRS Chief Financial Officer on the sources of assessment  in potentially collectible inventory (PCI). We compared the PCI data to  data from other collection reports and interviewed IRS officials  knowledgeable about the PCI source of assessment data. We reviewed  information on the Inventory Delivery System (IDS) and its various  functions that prioritize and route cases to include functions that either  exclude or include cases from potential selection by ACS or the Field,  affect potential IRS costs (as in the costs to route a case to use ACS  versus Field resources), or reflect how ACS and the Field rank order  cases for selection. Our review of available documents on IDS and  discussions with program officials focused on the various factors IDS  takes into account in deciding how to prioritize and route cases. We  reviewed IRS documents describing the factors considered in routing and  flowcharts illustrating how cases can flow from IDS to ACS and the Field,  or be shelved and not actively pursued further. We also visited IRS offices  in St. Paul, Minnesota, responsible for building and maintaining IDS  models. We interviewed officials and reviewed documents to learn how  the models were used and how they affect case routing and prioritization  for case selection. In addition, we analyzed information about the  collection program’s statistical methods and procedures used in the  modeling process, a statistical method that predicts likely case outcomes.
To describe trends in priority areas, we interviewed IRS officials and  reviewed IRS documents and data, including MMR data on priority case  closures during fiscal years 2013 and 2014, and the first six months of  fiscal year 2015.
To describe key routing process changes, we interviewed IRS officials  about recent changes that had significant impacts on case routing and  reviewed a study that resulted in process changes. We also reviewed IRS  records of routing rule changes from calendar years 2011 to 2014, and  we evaluated available data showing how frequently business routing  rules were applied (“rule firings”) each calendar year from 2011 to 2014.  Based on further discussions with IRS officials, we determined that the  available data on routing rule firings was insufficiently reliable to report  precise figures on how many cases were routed to different collections  functions, or not pursued further, as a direct result of IDS routing rules.  However, the rule firings data were sufficiently reliable to describe  generally how recent routing rule changes have shifted significant  portions of the collection inventory between ACS and the Field.
To assess the reliability of the data we analyzed for our first objective, we  interviewed knowledgeable IRS officials, and conducted manual data  testing for missing data, outliers, or obvious errors. We also reviewed  relevant documentation on management reports and case routing data.
To assess how well the processes for case selection support collection’s  mission, we compared the processes identified above to selected  standards in the Standards for Internal Control in the Federal Government  (GAO/AIMD-00-21.3.1, November 1999). In regard to internal control  standards on establishing program objectives, we interviewed various  collection officials, including the Director of Collection and other IRS  headquarters managers in the offices of Enterprise Collection Strategy,  Campus Compliance Services, and Field Collection, concerning their  understanding of the mission, objectives, and internal controls of the  collection program and IDS processes. We also and reviewed IRS and  collection program guidance in which objectives could potentially be  stated or implied, including the Internal Revenue Manual (which includes  the mission statements of various collection program subunits and policy  statements on collections), annual collection program letters for fiscal  years 2013 through 2015, and potentially collection-program-related  objectives in IRS Publication 3744, Internal Revenue Service Strategic  Plan FY2014-2017. In regard to internal control standards on assessing  program risks, we reviewed the information on IRS’s objectives discussed  above, interviewed collection program officials, and reviewed documents  on the collection program’s identification of risks. This included input into  the Small Business/Self Employed division’s April 2015 risk register and  guidance, and procedures officials used to identify risks. In regard to  internal control standards on establishing and documenting control  activities to address risks, we interviewed IRS officials and reviewed  available documentation on the processes for categorizing and routing  collection cases as gathered to answer our first objective. In regard to  internal control standards on monitoring controls, we interviewed IRS  officials and reviewed documents on procedures to evaluate IDS models  in general and specifically those models used to shelve cases, including  the Inventory Delivery System Model Evaluation study and Collection  Workload Optimization Project study documents. We also interviewed  IRS officials and gathered any available documents and plans on  evaluations of rules and dollar thresholds used for IDS decisions to  shelve cases, designate cases as high priority, and route cases to one  collection function instead of another.
We conducted this performance audit from August 2014 to July 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Internal Revenue Service
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Libby Mixon (Assistant Director),  David Dornisch, Robert Gebhart, Raheem Hanifa, Ted Hu, Ronald Jones,  Mark Kehoe, Albert Sim, Justin Snover, and A.J. Stephens made key  contributions to this report.