TIGTA Semiannual Report to Congress, April 1, 2020 through September 30, 2020
Summary
This TIGTA Semiannual Report to Congress covers April 1, 2020 through September 30, 2020. In the Inspector General's message, J. Russell George states that the Office of Audit completed 53 audits and the Office of Investigations completed 1,123 investigations, and that combined efforts resulted in monetary benefits totaling more than $15 billion. The message states that, as of September 25, 2020, the IRS issued 165.7 million Economic Impact Payments (EIPs) totaling $276.6 billion under the CARES Act, and that TIGTA is reviewing IRS actions to ensure that eligible taxpayers received the EIPs and to prevent improper payments. An audit of the Centralized Authorization File found that tax examiners assigned 290 CAF numbers to 188 representatives with the same name and address; IRS management agreed with nine of the 12 recommendations.
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“TIGTA Semiannual Report to Congress, April 1, 2020 through September 30, 2020.”
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Inspector General’s Message to Congress
I am pleased to present this Semiannual Report to Congress,
summarizing the accomplishments of the Treasury Inspector
General for Tax Administration (TIGTA) during the period
April 1, 2020 through September 30, 2020. Some of TIGTA’s
more notable achievements in the pursuit of its mission to
provide oversight of the Internal Revenue Service (IRS) and
protect the integrity of Federal tax administration are
highlighted in the various audits, investigations, and
inspections and evaluations summarized in this report.
During this reporting period, TIGTA’s Office of Audit has
completed 53 audits, and its Office of Investigations has
completed 1,123 investigations. In addition, TIGTA’s
combined audit and investigative efforts have resulted in the recovery, protection, and
identification of monetary benefits totaling more than $15 billion.
The coronavirus pandemic is now one of the most critical challenges confronting the IRS
and TIGTA. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act) was signed into law. As the largest economic rescue package in U.S.
history, the legislation was enacted to provide fast and direct economic assistance for
American families and businesses affected by the novel coronavirus disease.
The IRS took unprecedented actions to deliver Economic Impact Payments (EIP),
authorized under the CARES Act, to American households while at the same time taking
steps to protect the health and safety of its employees. As of September 25, 2020, the
IRS issued 165.7 million EIPs, totaling $276.6 billion. In addition, the IRS announced the
“People First Initiative” that temporarily adjusted or suspended key IRS compliance
programs, as well as delayed the tax filing deadline in response to the pandemic.
TIGTA is reviewing the actions taken by the IRS to ensure that eligible taxpayers received
the EIPs and to prevent improper payments. TIGTA is also assessing the impact of the
pandemic on the IRS’s ability to provide effective customer service, conduct
examinations, and collect revenue. In addition, TIGTA is evaluating the IRS’s efforts to
protect its employees and its response to health and safety incidents that occurred during
the pandemic.
TIGTA’s Office of Investigations continues to work with the IRS to prevent and detect any
scams, including those involving the theft of EIPs. Similarly, TIGTA continues to
investigate and deter high-profile attacks against online IRS applications, as part of its
responsibility for investigating and deterring tax-related cybercrime and disrupting
cyber-based schemes by illicit actors who seek to steal personal identifiers to
impersonate taxpayers and IRS employees.
April 1, 2020 – September 30, 2020 3
Consistent with TIGTA’s mission, we will continue to work closely with Congress, the
Administration, the IRS, and all of our stakeholders on behalf of taxpayers to ensure that
our Nation’s system of tax administration is efficient, effective, and fair.
Sincerely,
J. Russell George
Inspector General
4 April 1, 2020 – September 30, 2020
Table of Contents
Inspector General’s Message to Congress........................................................................ 3
TIGTA’s Profile .................................................................................................................... 7
Statutory Mandate ........................................................................................................ 7
Organizational Structure............................................................................................... 8
Authorities .................................................................................................................... 8
Promote the Economy, Efficiency, and Effectiveness of Tax Administration ................. 9
Security Over Taxpayer Data and Protection of IRS Resources .................................. 9
Implementing Tax Law Changes ................................................................................. 11
Addressing Emerging Threats to Tax Administration ................................................... 12
Supporting an Enhanced Taxpayer Experience ........................................................... 14
Modernizing IRS Operations ...................................................................................... 15
Improving Tax Reporting and Payment Compliance .................................................... 17
Impact of Global Economies ........................................................................................ 21
Achieving Operational Efficiencies .............................................................................. 22
Protect the Integrity of Tax Administration ....................................................................... 26
The Performance Model ............................................................................................... 26
Performance Area: Employee Integrity ........................................................................ 26
Employee Integrity................................................................................................... 27
Employee Integrity Projects ..................................................................................... 28
Performance Area: Employee and Infrastructure Security ........................................... 28
Performance Area: External Attempts to Corrupt Tax Administration .......................... 30
Cybercrime ............................................................................................................. 30
Corrupt Interference ................................................................................................ 30
Impersonation Scams and Schemes ....................................................................... 32
Tax Preparer Outreach................................................................................................. 36
Advance Oversight of America’s Tax System ................................................................... 38
Audit Statistical Reports ..................................................................................................... 41
Reports With Questioned Costs ................................................................................. 41
Reports With Recommendations That Funds Be Put to Better Use .............................. 42
Reports With Additional Quantifiable Impact on Tax Administration ............................. 43
Investigations Statistical Reports ...................................................................................... 46
Significant Investigative Achievements ......................................................................... 46
Status of Closed Criminal Investigations ...................................................................... 47
Criminal Dispositions .................................................................................................... 47
Administrative Dispositions on Closed Investigations ................................................... 47
Summary of Investigative Reports and Criminal Referrals ............................................ 48
Interference .................................................................................................................. 48
Instances of Whistleblower Retaliation ......................................................................... 48
Closed Investigations Involving IRS Senior Government Employees ........................... 48
Inspections and Evaluations Statistical Reports .............................................................. 50
Evaluation Reports With Significant Unimplemented Corrective Actions ...................... 50
April 1, 2020 – September 30, 2020 5
Ap p e n d i c e s
Appendix I – Statistical Reports – Other...................................................................... 51
Reports With Significant Unimplemented Corrective Actions ........................................ 51
Other Statistical Reports ............................................................................................... 65
Appendix II – Audit Products ......................................................................................... 66
Appendix III – TIGTA’s Statutory Reporting Requirements ..................................... 71
Appendix IV – Section 1203 Standards ........................................................................ 75
Appendix V – Inspector General Peer Review Activity ............................................. 76
Appendix VI – Data Tables Provided by the Internal Revenue Service ................. 77
Internal Revenue Service Memorandum ...................................................................... 77
Report of Employee Misconduct by Disposition Groups ............................................... 78
Report of Employee Misconduct National Summary ..................................................... 79
Summary of Substantiated I.R.C. Section 1203 Inquiries Recorded
in ALERTS ................................................................................................................... 80
Glossary of Acronyms ..................................................................................................... 81
6 April 1, 2020 – September 30, 2020
TIGTA’s Profile
T
he Treasury Inspector General for Tax
Administration (TIGTA) provides audit,
investigative, and inspection and
evaluation services that promote Statutory Mandate
economy, efficiency, and integrity in the
administration of the Internal Revenue laws. • Protect against IRS
TIGTA also provides independent oversight employee improprieties and
of matters of the Department of the Treasury external attempts to corrupt
(Treasury Department) involving activities of or threaten IRS employees.
the Internal Revenue Service (IRS), the IRS • Provide policy direction and
Oversight Board, and the IRS Office of Chief conduct, supervise, and
Counsel. Although TIGTA is placed coordinate audits and
organizationally within the Treasury investigations related to IRS
Department and reports to the Secretary of programs and operations.
the Treasury and to Congress, it functions • Review existing and
independently from all other offices and proposed legislation and
bureaus within the Treasury Department. regulations related to IRS
programs and operations,
TIGTA oversees all aspects of activity and make recommendations
concerning the impact of
related to the Federal tax system as
such legislation or
administered by the IRS. TIGTA protects regulations.
the public’s confidence in the tax system by
• Promote economy and
identifying and recommending strategies for
efficiency in the
addressing the IRS’s management administration of tax laws.
challenges and implementing the priorities of
the Treasury Department. • Prevent and detect waste,
fraud, and abuse in IRS
programs and operations.
TIGTA’s organizational structure (see
following page) is comprised of the Office of • Inform the Secretary of the
Treasury and Congress of
the Inspector General and six functional
problems and deficiencies
offices: the Office of Investigations; the identified and of the
Office of Audit; the Office of Inspections and progress made in resolving
Evaluations; the Office of Mission Support; them.
the Office of Information Technology; and
the Office of Chief Counsel.
April 1, 2020 – September 30, 2020 7
Organizational Structure
Inspector General
Deputy
Deputy Deputy Inspector Deputy
Inspector Inspector General for Inspector Chief Chief
General for General for Inspections General for Information Counsel
Investigations Audit and Mission Officer
Evaluations Support
Authorities
TIGTA has all of the authorities granted under the Inspector General Act of 1978, as
amended (Inspector General Act). 1 In addition to the standard authorities granted to
Inspectors General, TIGTA has access to tax information in the performance of its tax
administration responsibilities. TIGTA also reports potential criminal violations directly to
the Department of Justice (DOJ) when TIGTA deems that it is appropriate to do so.
TIGTA and the Commissioner of Internal Revenue (Commissioner or IRS Commissioner)
have established policies and procedures delineating responsibilities to investigate
potential criminal offenses under the Internal Revenue laws. In addition, the Internal
Revenue Service Restructuring and Reform Act of 1998 (RRA 98) 2 amended the
Inspector General Act to give TIGTA the statutory authority to carry firearms, execute
search and arrest warrants, serve subpoenas and summonses, and make arrests as set
forth in Internal Revenue Code (I.R.C.) Section (§) 7608(b)(2).
1 5 United States Code (U.S.C.) app. (2012 & Supp. IV 2017).
2 Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app., 16 U.S.C.,
19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C. (2012)).
8 April 1, 2020 – September 30, 2020
Promote the Economy, Efficiency, and
Effectiveness of Tax Administration
T
IGTA’s Office of Audit strives to promote the economy, efficiency, and effectiveness
of tax administration. TIGTA provides recommendations to improve IRS systems and
operations and to ensure the fair and equitable treatment of taxpayers. TIGTA’s
comprehensive and independent performance and financial audits of the IRS’s
programs and operations primarily address statutorily mandated reviews and high-risk
challenges the IRS faces.
The IRS’s implementation of audit recommendations results in:
• Cost savings;
• Increased or protected revenue;
• Protection of taxpayers’ rights and entitlements; and
• More efficient use of resources.
Each year, TIGTA identifies and addresses the IRS’s major management and
performance challenges. The Office of Audit places audit emphasis on statutory
coverage required by RRA 98 and other laws, as well as areas of concern to Congress,
the Secretary of the Treasury, the IRS Commissioner, and other key stakeholders.
The following summaries highlight, by major management and performance challenges,
significant audits completed during this six-month reporting period:
Security Over Taxpayer Data and Protection of IRS Resources
Improvements Are Needed to Address Continued Deficiencies in Ensuring the
Accuracy of the Centralized Authorization File
Taxpayers can grant a power of attorney to individuals, i.e., representatives, who are
given the authority to represent a taxpayer before the IRS. These representatives can be
an attorney, certified public accountant (CPA), or enrolled agent. I.R.C. § 6103(c) 3 also
allows taxpayers to authorize a representative to access their returns and return
information. Therefore, the IRS must implement controls to authenticate the validity of the
authorization forms to ensure that the taxpayers signed the form. Without these controls,
identity thieves could submit fraudulent authorization forms to steal the taxpayers’
information.
This audit evaluated the IRS’s controls to authenticate requests received from individuals
seeking to represent taxpayers and access taxpayer information. The audit also
evaluated IRS efforts to implement Provision 2302 of the Taxpayer First Act. 4 This
provision requires the IRS to publish guidance to establish uniform standards for the
3 I.R.C. § 6103(c), Disclosure of returns and return information to designee of taxpayer.
4 Pub. L. No. 116-025.
April 1, 2020 – September 30, 2020 9
acceptance of taxpayers’ electronic signatures, which are meant to validate taxpayer
authorizations to disclose their information or grant a power of attorney to taxpayer
representatives.
TIGTA found that the IRS has not made sufficient progress developing an online
Third-Party Authorization Tool to verify and accept taxpayers’ e-signatures on
authorization forms. In addition, the IRS did not meet the Taxpayer First Act deadline of
January 1, 2020, to publish guidance on standards for verifying taxpayers’ e-signatures
on Form 2848, Power of Attorney and Declaration of Representative, and Form 8821,
Tax Information Authorization.
TIGTA’s review of 20 authorizations that the IRS confirmed as fraudulent in Calendar
Years (CY) 2018 and 2019 identified 11 authorizations, associated with 1,546 Taxpayer
Identification Numbers (TIN), that were not added to the Dynamic Selection List 5 as
required. This list includes TINs that are at risk of tax-related identity theft and should be
monitored for use in the filing of tax returns submitted to the IRS.
TIGTA also reviewed Centralized Authorization File (CAF) 6 numbers assigned from
February 7, 2019 through November 2, 2019, and identified that tax examiners continue
to erroneously assign multiple CAF numbers to the same representative at the same
address. Tax examiners assigned 290 CAF numbers to 188 representatives with the
same name and address.
In addition, IRS processes did not identify and remove authorizations that belonged to
representatives who were deceased, were incarcerated, or had their Preparer Tax
Identification Number revoked by the IRS Return Preparer Office. Finally, tax examiners
were not rejecting Forms 2848 received from representatives who did not provide the bar
jurisdiction, license, or enrollment number for the professional credential reported. TIGTA
estimated that 136,264 representatives may have reported a professional credential that
they do not have.
TIGTA made 12 recommendations to the IRS, including to:
• Develop an alternate solution for verifying taxpayers’ e-signatures on Forms 2848
and 8821;
• Add the 1,546 TINs to the Dynamic Selection List;
• Perform a one-time clean-up of the CAF to identify all representatives with multiple
CAF numbers and remove CAF numbers that were erroneously assigned;
• Develop procedures to conduct initial and periodic suitability checks of
representatives to determine if they are deceased or incarcerated; and
5 A list of TINs that the IRS determined are at risk of tax-related identity theft (i.e., TINs from data breaches associated
with fraudulent Centralized Authorization File authorizations).
6 A computerized system of records which houses authorization information from both powers of attorney and tax
information authorizations. It contains several types of records, among them taxpayers, representatives, tax forms, tax
periods, and authorizations.
10 April 1, 2020 – September 30, 2020
• Remove their authorizations in the CAF as appropriate and develop procedures for
tax examiners to verify professional credentials claimed by representatives on
Form 2848.
IRS management agreed with nine of the 12 recommendations. TIGTA remains
concerned that, without an IRS process to verify a representative’s claimed professional
credential on Form 2848, the IRS will continue to miss a significant fraud indicator on the
form.
Reference No. 2020-40-067
Implementing Tax Law Changes
Interim Results of the 2020 Filing Season: Effect of COVID-19 Shutdown on Tax
Processing and Customer Service Operations and Assessment of Efforts to
Implement Legislative Provision
The 2020 Filing Season was unlike any other because the IRS had to take
unprecedented and drastic actions concerning Coronavirus Disease 2019 (COVID-19) to
protect the health and safety of its employees and the taxpaying public. These actions
included closing Taxpayer Assistance Centers, Tax Processing Centers, and offices
nationwide. In addition, on March 20, 2020, the Treasury Department extended the
Federal income tax filing due date from April 15, 2020 to July 15, 2020.
This audit was initiated to provide selected information related to the impact of COVID-19
on the 2020 Filing Season. The overall objective of this review was to evaluate whether
the IRS timely and accurately processed individual paper and electronically filed tax
returns during the 2020 Filing Season. TIGTA plans to issue the final results of its
analysis later in CY 2020.
Significant coordination and efforts were taken by the IRS to expedite its analysis and
reprogramming of systems and to educate individuals on the EIP. The IRS began issuing
EIPs on April 10, 2020, just 14 days after the passage of the CARES Act. 7 As a result of
these efforts, the IRS had issued more than 157 million payments totaling more than
$264 billion as of May 21, 2020.
TIGTA found that the IRS correctly computed the payment amount for approximately
98 percent of the more than 157 million payments issued as of May 21, 2020;
however, some payments were erroneous. The figure below shows the number and
amount of payments issued to prisoners and deceased individuals as of this same period.
7 Pub. L. No. 116-136, 134 Stat. 281.
April 1, 2020 – September 30, 2020 11
Economic Impact Payments Issued to Prisoners
and Deceased Individuals as of May 21, 2020
Payments Dollars
Prisoners 84,861 $0.1 billion
Deceased 1,151,353 $1.6 billion
Total Payments Issued 1,236,214 $1.7 billion
Source: TIGTA analysis of EIPs issued as of May 21, 2020.
The IRS initiated an education campaign to promote the availability of advanced tax
credits for employers. To enable employers to request an advance, the IRS developed
Form 7200, Advance Payment of Employer Credits Due to COVID-19, and developed
a process to enable employers to submit these requests via a dedicated E-fax line.
As of May 30, 2020, the IRS had received 7,789 Forms 7200, and processed 2,410
Forms 7200, with refunds totaling more than $50 million.
In response to the public health emergency, the IRS closed its four Tax Processing
Centers. The majority of work at these Centers is performed onsite and is not conducive
to telework. As of May 20, 2020, the IRS estimated that 10.4 million pieces of mail were
received during the closure. As of the week ending May 23, 2020, the IRS estimated that
10 million paper individual tax returns and 6.6 million paper business tax returns needed
to be processed. In addition to unopened mail, the IRS had more than 1.7 million tax
returns in its Error Resolution inventory as of that same period. The IRS had 2.5 million
cases in its Accounts Management function inventory as of March 14, 2020, and had
nearly 1.6 million returns in its fraud program inventories as of the week ending
May 23, 2020.
When the IRS closed its offices nationwide, it ceased operations on its toll-free
telephone lines and closed its Taxpayer Assistance Centers. As of May 20, 2020, 48 of
the 105 toll-free lines remained closed, and all of the Taxpayer Assistance Centers
remained closed as well. In addition, 10,792 (98 percent) of the 11,014 Volunteer Income
Tax Assistance/Tax Counseling for the Elderly partner sites remained closed as of
May 24, 2020.
This report was prepared to provide interim information only. Therefore, no
recommendations were made in this report.
Reference No. 2020-46-041
Addressing Emerging Threats to Tax Administration
Taxpayer First Act: Implementation of Identity Theft Victim Assistance Provisions
Identity theft refund fraud adversely affects the ability of innocent taxpayers to file their tax
returns and timely receive their tax refunds, often imposing significant financial and
emotional hardship. Similarly, employment identity theft can affect a taxpayer’s account if
12 April 1, 2020 – September 30, 2020
it results in the IRS assessing additional tax to the innocent taxpayer, i.e., the IRS could
assess taxes to the innocent taxpayer if the IRS does not identify the theft. Furthermore,
the taxpayer may incur problems with his or her Social Security Administration benefits if
the income discrepancies are not resolved.
On July 1, 2019, the President signed the Taxpayer First Act, which aims to broadly
redesign the IRS, expand and strengthen taxpayer rights, and enhance its cybersecurity.
This Act includes four sections that require the IRS to increase protections and further
assist identity theft victims. In addition, TIGTA has issued 13 reports since March 2010
with recommendations for the IRS to improve assistance to victims of identity theft. The
overall objective of this review was to assess the IRS’s efforts to assist victims of identity
theft and implement the victim assistance provisions in the Taxpayer First Act.
The IRS has established a single point of contact to assist identity theft victims and
resolve their cases efficiently. The IRS is also taking actions to address other
requirements in the Taxpayer First Act. For example, the IRS is developing information
about the actions it takes to resolve stolen identity refund fraud cases for public
distribution. In addition, the IRS’s notifications to victims provide useful instructions about
the actions they can take to reduce the burden of identity theft. However, TIGTA
identified other areas that need improvement to better assist victims of identity theft and
address the requirements in the Taxpayer First Act.
TIGTA found that taxpayers eligible to obtain an Identity Protection Personal Identification
Number (IP PIN) may not be aware of their eligibility due to a lack of IRS advertising for
its IP PIN Opt-In Program. In Processing Year (PY) 2019, only 25,130 individuals in the
10 eligible locations obtained an IP PIN, compared to more than 48.5 million tax returns
received from these locations.
Further, Employment-Related Identity Theft notices were not issued to the parents or
legal guardians of 133,864 dependents that the IRS identified as employment identity
theft victims in PY 2019. In addition, systemic programming errors resulted in some
accounts not being updated with the employment identity theft marker, which prevented
the IRS from issuing the notice to 60,872 victims that the IRS had identified.
Finally, the IRS’s policy to notify repeat victims of employment identity theft every three
years may result in many victims not being notified that identity thieves continued to use
the victims’ TINs nearly every year for employment. The 75,451 victims that the IRS first
notified in PY 2017 were not sent a subsequent notice despite identity thieves using the
victims’ TINs again to gain employment in PYs 2018, 2019, or both years.
TIGTA made nine recommendations to the IRS, including to:
• Develop a communication strategy to educate taxpayers about the availability of
the IP PIN;
• Develop a process to identify and notify parents and legal guardians in cases in
which an identity thief uses their dependent’s TIN for employment;
April 1, 2020 – September 30, 2020 13
• Correct programming errors to ensure that the Employment-Related Identity Theft
notice is issued to all identified victims; and
• Issue the notice to victims of employment identity theft every year that they are
identified as a victim.
IRS management agreed with six of the recommendations and disagreed with the other
three. The IRS’s decision to not notify the parents or legal guardians of dependents who
are victims of identity theft is not in accordance with the Taxpayer First Act requirement to
expand taxpayer rights and better assist victims.
Reference No. 2020-45-070
Supporting an Enhanced Taxpayer Experience
Existing Controls Did Not Prevent Unauthorized Disclosures and Case
Documentation Issues in Appeals Trust Fund Recovery Penalty Cases
The IRS may assess a Trust Fund Recovery Penalty (TFRP) against an individual,
e.g., an officer or shareholder, when a corporation fails to pay withheld income and
employment taxes. If a taxpayer disagrees with the proposed or assessed TFRP, he
or she may file a protest that is referred to the Independent Office of Appeals (Appeals).
Appeals is an independent function within the IRS whose mission is to resolve disputes
on a fair and impartial basis without litigation. Appeals has the authority to make the final
determination on whether a taxpayer is liable (or partially liable) for a TFRP. In Fiscal
Year (FY) 2018, Appeals closed 1,511 protested TFRP cases. This audit determined
whether Appeals TFRP cases were processed according to IRS criteria and whether
Appeals decisions on cases were adequately documented.
Appeals generally complied with IRS criteria when processing TFRP protests in FY 2018.
However, Appeals personnel did not follow IRS criteria for 31 of 125 FY 2018 TFRP
protests TIGTA sampled. Specifically, TIGTA identified cases in which Appeals contacted
a representative that did not have the authority to act on behalf of the taxpayer or in which
Appeals inappropriately contacted a taxpayer instead of his or her power of attorney. In
addition, Appeals worked protests that were not signed under penalties of perjury as
required.
TIGTA also observed other case processing and documentation issues. For example,
some cases did not contain the necessary information to support the final decisions made
by Appeals. Further, once TFRP cases were closed, the data were not always accurately
recorded in the Appeals Centralized Database System.
14 April 1, 2020 – September 30, 2020
Appeals Case File Processing Errors
Source: TIGTA review of a statistical sample of Appeals TFRP cases closed in
FY2018 (Note: Four cases had errors in multiple categories).
To improve the processing of TFRP cases, TIGTA made five recommendations to the
IRS, including:
• Reporting potential unauthorized disclosures of tax return information;
• Documenting power of attorney information in case files; and
• Reemphasizing guidance (including the need to input accurate information on the
Appeals Centralized Database System).
IRS management agreed with all of the recommendations.
Reference No. 2020-10-042
Modernizing IRS Operations
Legacy Systems Management Needs Improvement
This audit assessed the IRS’s efforts to identify and replace its legacy systems.
Legacy systems 8 are critical for many organizations because they support key mission
functionalities. However, they can also carry significant risks, including increased
cybersecurity threats and maintenance costs. In FY 2019, the IRS spent over $2.86
billion to operate its current information technology infrastructure, nearly $2.04 billion
(71 percent) of which was on operations and maintenance. If current trends continue,
spending is expected to increase to over $3 billion annually by FY 2026.
The IRS reported that the cost of operating these systems is overtaking other important
components of effective tax administration and limiting the capacity to deliver quality
service to taxpayers. Modernization is necessary to curtail these rising costs.
8 The Treasury Department defines a legacy system as, “…an information system that may be based on outdated
technologies but is critical to day-to-day operations. A legacy system, in the context of computing, refers to outdated
computer systems, programming languages, or application software that are used instead of more modern alternatives.
A legacy system may be problematic, due to compatibility issues, obsolescence, or the lack of support. What is key is
that a legacy system has been identified as strategic, but in need of replacement.”
April 1, 2020 – September 30, 2020 15
The IRS has not developed specific or long-term plans to address updating, replacing,
or retiring most of its legacy systems. Through various initiatives, the IRS identified
45 systems for modernization or candidates for modernization and 34 systems for
retirement.
While various business units and functions have differing definitions of a legacy system,
the IRS does not have an enterprise-wide definition or a complete and accurate inventory
of legacy systems. By applying the Information Technology (IT) organization’s definition
of a legacy system 9 to the As-Built Architecture (ABA) as of April 29, 2020, TIGTA
determined that 288 (43 percent) of the 669 systems in the IRS’s production environment
had missing information that prevented TIGTA from determining whether the systems
should have been considered legacy. Of the remaining 381 systems, TIGTA determined
that 231 systems were legacy and 150 were not legacy. When comparing TIGTA’s list to
the IRS’s lists of legacy systems, TIGTA identified 46 systems as legacy that the IRS had
not, and one system that the IRS incorrectly identified as legacy. Further analysis
determined that an additional 49 systems will become legacy within the next 10 calendar
years.
Furthermore, the IRS generally does not capture operations and maintenance costs at the
system or subsystem levels, only at the investment level. As a result, the IRS does not
have sufficient and detailed cost data that can be used in its decision-making processes
to prioritize its legacy system modernization efforts.
TIGTA recommended that the IRS:
• Establish, implement, and uniformly apply an IRS enterprise-wide definition of a
legacy system;
• Implement Portfolio Rationalization 10 or a similar program IRS enterprise-wide to
identify, prioritize, and execute the updating, replacing, or retiring of current and
future legacy systems;
• Ensure that all systems are included in the ABA with complete and accurate
information;
• Implement a policy requiring system owners to provide and periodically update
system information to the ABA; and
• Capture operations and maintenance costs for the current information technology
infrastructure at the subsystem level.
The IRS agreed with three of the recommendations. It partially agreed with two of the
recommendations, including the implementation of the Portfolio Rationalization or similar
strategy to include IT organization-managed and business-managed systems for an
9 In addition to the Treasury Department definition of a legacy system, the IRS IT organization clarified and further
defined a legacy system to include application age equal to or older than 25 years, programming languages that are
considered obsolete, e.g., Assembler Language Code and Common Business and Oriented Language, and systems
meeting other factors such as a lack of vendor support, training, or resources.
10 Dated March 17, 2020; a program to reduce the system footprint through iterative activities to retire, reduce, reuse, or
replace system code. It provides support for the evaluation and reporting of IT organization initiatives, including
keeping the infrastructure current and reducing legacy applications.
16 April 1, 2020 – September 30, 2020
enterprise-wide strategic approach and the continuation of tracking operations and
maintenance costs at the project/program level.
Reference No. 2020-20-044
Improving Tax Reporting and Payment Compliance
High-Income Nonfilers Owing Billions of Dollars Are Not Being Worked by the
Internal Revenue Service
The gross Tax Gap is the estimated difference between the amount of tax that taxpayers
should pay and the amount paid voluntarily and on time. The average annual gross
Tax Gap was estimated to be $441 billion for Tax Years (TY) 2011 through 2013, and
approximately $39 billion (9 percent) was due to nonfilers (taxpayers who do not timely
file a required tax return and timely pay the tax due for such delinquent returns).
According to the IRS, high-income nonfilers, although fewer in number, contribute to the
majority of the nonfiler Tax Gap. In past audits, TIGTA has identified serious lapses with
the IRS’s nonfiler strategy. This audit determined whether the IRS is effectively
addressing high-income nonfilers and if the new nonfiler strategy and related plans
sufficiently include this segment of nonfilers.
TIGTA found that although the IRS is still in the process of conducting testing, the new
nonfiler strategy appears to approach nonfiling in a more strategic manner. However, the
strategy has not yet been implemented, and TIGTA identified that the new nonfiler
program is spread across multiple functions with no one area being primarily responsible
for oversight. In addition, more needs to be done to address high-income nonfilers.
The figure below summarizes the total number of high-income nonfilers identified during
TIGTA’s analysis.
High Income Nonfilers, TYs 2014 Through 2016
Source: TIGTA analysis of Individual Master File Case Creation Nonfiler Identification
Process nonfiler data from the IRS’s Compliance Data Warehouse and other tax account
information obtained from the Individual Master File as of the end of December 2018.
April 1, 2020 – September 30, 2020 17
Of the 879,415 high-income nonfilers, TIGTA identified that:
The IRS did not work 369,180 high-income nonfilers, with estimated tax due of
$20.8 billion. Of the 369,180 high-income nonfilers, 326,579 were not placed in
inventory to be selected for work and 42,601 were closed out of the inventory
without ever being worked. In addition, the remaining 510,235 high-income
nonfilers, totaling estimated tax due of $24.9 billion, were sitting in one of the
Collection function’s inventory streams and would likely not be pursued as
resources decline.
The IRS removed high-income nonfiler cases from inventory, resulting in
37,217 cases totaling $3.2 billion in estimated tax dollars that would not likely be
worked by the IRS.
In addition, due to the policy on working single tax year cases without regard to how
many returns have not been filed by a taxpayer, the IRS is missing out on opportunities
to bring repeat high-income nonfilers back into compliance. TIGTA identified the top
100 high-income nonfilers for TYs 2014 through 2016 that the IRS did not address or
resolve, who had estimated tax due totaling $9.9 billion.
TIGTA recommended that the IRS:
• Designate a senior management official with appropriate resources and specific
nonfiler duties to address nonfiling;
• Consider a reallocation of resources to ensure that most, if not all,
high-income nonfilers are subject to enforcement action;
• Prioritize nonfilers so that the Individual Master File Case Creation Nonfiler
Identification Process is not paused in the future;
• Analyze the population of TY 2014 through 2016 high-income nonfilers and issue
notices to those high-income nonfilers identified during this review as never being
placed into Taxpayer Delinquency Investigation inventory or closed out of the
inventory without being worked;
• Reconsider working multiple tax year cases for all high-income nonfilers;
• Implement controls that will assist to identify and prioritize high-income nonfilers
who are repeat offenders; and
• Implement controls to ensure that high-income nonfilers are not shelved.
The IRS agreed with two of the recommendations and partially agreed with four of the
recommendations. It disagreed with placing the nonfiler program under its own
management structure.
Reference No. 2020-30-015
18 April 1, 2020 – September 30, 2020
Continued Efforts Are Needed to Address Billions of Dollars in Reporting and
Payment Discrepancies Relating to Tax Withheld From Foreign Persons
In most cases, foreign persons 11 are subject to U.S. tax of 30 percent 12 on their U.S.
source income. This tax owed is generally withheld by a withholding agent. 13
Withholding agents are required to file Forms 1042-S, Foreign Person’s U.S. Source
Income Subject to Withholding, to report income and withholding for each foreign person
and annually file a Form 1042, Annual Withholding Tax Return for U.S. Source Income of
Foreign Persons, to report the cumulative amount of all taxes withheld. This audit
determined whether the IRS has adequate controls in place to ensure that the amounts
reported as withheld on Forms 1042-S are reported on Forms 1042.
In response to TIGTA’s prior recommendations, 14 the IRS has implemented processes to
improve its identification of reporting discrepancies for Federal tax withheld on U.S.
source income paid to foreign individuals. However, these processes did not identify
some withholding tax discrepancies. TIGTA identified that IRS processes did not identify
1,919 withholding agents with reporting discrepancies totaling $182.7 million. The IRS’s
filter criteria compares incomplete or inconsistent data listed on Forms 1042-S to
Forms 1042. In addition, TIGTA identified 366 withholding agents that claimed
$506 million more in credits for tax withheld than was reported on Forms 1042-S.
Also in response to TIGTA’s prior report, the IRS developed a systemic process to identify
withholding agents that are not filing required Forms 1042-S. For example, the IRS’s filter
identified 1,569 withholding agents that had not filed a Form 1042-S. TIGTA also
identified 7,910 Forms 1040NR, U.S. Nonresident Alien Income Tax Return, which
claimed withholding credits that were not supported by a Form 1042-S. These returns
were not selected for IRS verification because the claim amounts were under the IRS’s
return selection threshold. The IRS cannot systemically verify these claims because
withholding agents are not required to provide a payee TIN for all Forms 1042-S.
TIGTA made 12 recommendations, including that the IRS modify its filter criteria to
ensure that all withholding agents that do not file Form 1042 are identified, and modify
procedures to ensure that the withholding credit claimed on Form 1042 matches the
withholding reported on Forms 1042-S.
11 A foreign individual is any person that is not a U.S. person, including a nonresident alien, a foreign corporation, a
foreign partnership, a foreign trust, or a foreign estate.
12 A reduced rate, including exemption, may apply when there is a tax treaty between the U.S. and the country of
residence for the foreign individual.
13 A withholding agent is any U.S. or foreign entity (individual, corporation, partnership, etc.) that takes receipt of, has
control or custody of, or disposes of or makes a payment of any income to a foreign individual that is subject to
withholding. Withholding agents are personally liable for any required tax that is withheld and are legally responsible for
proper withholding and reporting.
14 TIGTA, Ref. No. 2013-40-130, A Process Has Not Been Established to Ensure That Billions of Dollars in Taxes
Withheld From Foreign Persons Are Remitted (Sept. 2013).
April 1, 2020 – September 30, 2020 19
IRS management agreed with five of the recommendations, but disagreed with seven of
the recommendations. For example, the IRS did not agree to review the Forms 1042
and 1042-S that TIGTA identified with potential reporting discrepancies, to modify
Campaign 817 filter criteria to ensure that information used is consistent, or to modify
Error Resolution function procedures.
Reference No. 2020-40-021
The Internal Revenue Service Can Improve Taxpayer Compliance for Virtual
Currency Transactions
The sale or exchange of virtual currencies, the use of virtual currencies to pay for goods
or services, and holding virtual currencies as an investment generally have tax
consequences that could result in tax liability. Taxpayers who do not properly report the
income tax consequences of virtual currency transactions may be liable for tax, penalties,
and interest. In addition to taxpayers’ virtual currency transactions, the IRS reviews
virtual currency exchanges, which engage in the business of exchanging virtual currency
for fiat currency15 or other virtual currency. While exchanges are in a position to provide
important information for use by the IRS in tax administration, information reporting on
virtual currency transactions from the exchanges is lacking.
This audit was initiated because the use of virtual currency as a payment method
continues to grow in popularity and is emerging as an alternative asset to U.S. or other
fiat currencies. This audit focused on virtual currency exchanges because they play an
important role in the transferability and stability of virtual currency by facilitating the buying
and selling of virtual currencies for customers. The objective was to evaluate the IRS’s
efforts to ensure the accurate reporting of virtual currency transactions as required under
U.S.C. Titles 26 (I.R.C.) and 31 (Money and Finance).
TIGTA found that it is difficult for the IRS to identify taxpayers with virtual currency
transactions because of the lack of third-party information reporting that specifically
identifies virtual currency transactions. As of October 2018, both the Large Business and
International and the Small Business/Self-Employed (SB/SE) Divisions’ Examination
functions had started a small number of examinations of taxpayers based on potential
virtual currency issues, and the SB/SE Division’s Examination function had few known
open examinations of virtual currency exchanges.
TIGTA reviewed the examination case files for seven judgmentally sampled virtual
currency exchange examinations closed by Bank Secrecy Act (BSA) Program examiners
and found that some exchanges exhibited business characteristics that may have
qualified them as Third-Party Settlement Organizations (TPSO) under I.R.C. § 6050W.
This would require the filing of Form 1099-K, Payment Card and Third Party Network
Transactions, for customers with more than 200 transactions in a year that total in excess
of $20,000. However, some of the exchanges that appeared to be TPSOs issued
Forms 1099-K for TYs 2015 to 2018.
15 Fiat currency is the name for what is traditionally recognized as currency. Fiat currency is the coin and paper money
of a country and designated as its legal tender.
20 April 1, 2020 – September 30, 2020
Although BSA Program examiners generally pursue Title 31 issues, they are encouraged
to make referrals to the BSA Examination Case Selection for Title 26 income tax
examinations if they identify issues that indicate noncompliance. However, Title 31
examiners did not generally identify income tax issues and refer examinations to Title 26
examination groups. None of the examinations in TIGTA’s review had potential Title 26
issues referred.
TIGTA recommended that the IRS:
• Continue efforts to close the virtual currency information gap by issuing guidance
clarifying the proper information reporting associated with virtual currency
transactions; and
• Develop a process to use and monitor Title 31 virtual currency information in
Title 26 examination workload.
IRS management agreed with both of the recommendations.
Reference No. 2020-30-066
Impact of Global Economies
Withholding Compliance Efforts for Partnerships With Foreign Partners Can Be
Improved
According to I.R.C. § 1446, partnerships are required to withhold taxes on “effectively
connected taxable income” (ECTI) that is allocable to their foreign partners. The
withholding serves as an incentive for foreign partners to file the appropriate U.S. tax
return, i.e., Form 1040NR, or Form 1120-F, U.S. Income Tax Return of a Foreign
Corporation, to report income from the partnership. For TY 2016, the Project 1446
database 16 showed that partnerships reported $12.6 billion in the ECTI allocable to their
foreign partners. This audit determined the effectiveness of the IRS’s efforts to ensure
withholding compliance of partnerships with foreign partners.
Although a review of a sample of 137 partnership filings found that partnerships
remitted the reported I.R.C. § 1446 tax, TIGTA identified barriers for the IRS to
use Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), and
Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax,
data to ensure compliance of partnerships and foreign partners subject to the provisions
of I.R.C. § 1446. TIGTA also identified significant errors in the Project 1446 database,
which limited the IRS’s ability to verify withholding credits and identify potential nonfilers
accurately.
For TY 2016, there were 17,734 partnerships that filed Forms 8804 that had related
Forms 8805 reporting nearly $3.7 billion in withholding credits. Of these, 2,445
Forms 8804 had discrepancies concerning the withholding amounts reported on their
16 The International Web Application is maintained on an Enterprise Tier II SUN system. It is not a Master File program,
but Form 8805 data are uploaded to the Information Returns Master File monthly.
April 1, 2020 – September 30, 2020 21
related Forms 8805. The figure below provides the instances in which Form 8804 data
did not reconcile with Form 8805 data.
Withholding Reported on Form 8804 Versus
Withholding Tax Credited on Form 8805
Source: TIGTA’s analysis of the Project 1446 database and the Master File.
In addition, 5,077 foreign partners did not file their income tax returns reporting their share
of the ECTI. As a result, these foreign partners would potentially owe $184 million in
additional tax.
Further, Form 8805 data were erroneously uploaded multiple times on the Master File,
overstating the income and withholding amounts. Although the IRS identified and fixed
this issue in October 2018, the overstated records still remain.
TIGTA recommended that the IRS:
• Strengthen controls to ensure correspondence with partnerships when there are
no Forms 8805 attached to Form 8804 reporting ECTI and withholding amounts;
• Establish procedures for tax examiners to prevent duplicate or multiple
Forms 8805 filed by partnerships from being entered into the Project 1446
database; and
• Establish procedures using Form 8805 data to identify underreporting and
potential nonfilers.
IRS management agreed with all the recommendations.
Reference No. 2020-30-026
Achieving Operational Efficiencies
Sensitive Tax Records Could Not Always Be Located or Timely Provided
The Federal Government’s interest is harmed when the IRS is unable to produce the
documents needed to support the IRS’s position as part of an examination, appeal, tax
court case, etc. Furthermore, taxpayers’ privacy and financial data are put at risk if
22 April 1, 2020 – September 30, 2020
records, of which the IRS should have custody, cannot be located. In addition,
inaccessible case files can cause taxpayer burden and hinder oversight.
This audit was initiated because both TIGTA and the Government Accountability Office
have previously issued reports highlighting control weaknesses in the IRS’s ability to
locate, retrieve, and control tax records. This audit’s objective was to determine if the IRS
has an effective process for timely locating certain paper files.
While taxpayers continue to file a large number of paper tax returns voluntarily, the IRS
has difficulty locating and timely retrieving some paper tax records. According to the IRS,
in TY 2019, taxpayers filed 17.5 million paper tax returns. In addition to tax returns filed
on paper, most IRS forms cannot be filed electronically, which results in the IRS
processing, storing, and maintaining millions of additional paper records. As a result, the
IRS invests significant resources into moving and storing paper tax records.
Based on a statistical sample of examinations and associated tax returns, TIGTA
found that the IRS could not locate 12 (6 percent) of 185 examination case files and five
(3 percent) of 185 individual tax returns. An additional 43 (23 percent) of 185 examination
case files and 19 (10 percent) of 185 individual tax returns were located but were not
provided timely. Based on the sample, TIGTA estimated that almost 7,000 examination
case files and tax returns may not be able to be located. In addition, if requested, TIGTA
estimated that more than 25,000 examination case files and tax returns may not be able
to be provided timely. TIGTA determined that there were multiple reasons that paper tax
records could not be located or timely provided, including that the IRS does not have a
centralized system to track paper tax records nor does it have a quality review process to
ensure that requested tax records are sent to the correct address.
It is critical that the IRS has systems and processes to control, locate, and retrieve tax
records because each of the IRS’s operating divisions has an ongoing need to obtain tax
returns and related information. As a result, TIGTA made four recommendations,
including that the IRS create a centralized system to track sensitive paper tax records,
and develop a quality review process to provide reasonable assurance that the correct tax
records are being sent to the correct address.
IRS management agreed with the recommendations.
Reference No. 2020-10-050
Process Automation Benefits Are Not Being Maximized, and Development
Processes Need Improvement
Robotic Process Automation is the implementation of automation software to perform
high-volume, labor-intensive, repeatable tasks. Intelligent Automation imitates human
learning actions to perform automated tasks used in chatbots17 and natural language
processing. This audit assessed the effectiveness and efficiencies achieved through the
17 Chatbots are computer programs, known as virtual assistants, which simulate conversations with human users over
the Internet. The end user makes a statement or asks a question, which is interpreted or recognized for its intent, and
then the intent is mapped to a specific task.
April 1, 2020 – September 30, 2020 23
IRS’s implementation of Robotic Process Automation and Intelligent Automation
technologies.
The IRS created the Contractor Responsibility Determination Robot to collect data from a
variety of external websites to determine if a vendor has the financial resources and
capabilities to perform the proposed work and is eligible to receive an award under
applicable acquisition laws and regulations. In its first year of deployment, the IRS used
the Contractor Responsibility Determination Robot to complete contractor determinations
on some of the 2,774 new IRS-administered contracts. If the Contractor Responsibility
Determination Robot is used, the IRS estimated that it will save $300 per contract
determination. Automating manual processes will ensure that the IRS more efficiently
and effectively spends taxpayer funds.
TIGTA found that the IRS has not maximized Contracting Officer and Contract Specialist
use of the Contractor Responsibility Determination Robot. For the first year of its
deployment, TIGTA estimated that the Contractor Responsibility Determination Robot
saved the IRS 2,740 hours totaling approximately $328,800 in processing
1,096 contracts. However, the number of hours actually saved was considerably less
than the number of hours that should have been saved. If the IRS had maximized the
Contractor Responsibility Determination Robot’s use on the 1,618 contracts for which
manual contractor responsibility determinations were potentially made during the first year
of its deployment, TIGTA estimated that an additional $485,400 in unnecessary costs
would have been avoided.
In addition, while the IRS allocated direct costs incurred for the Contractor Responsibility
Determination Robot contract, the Robotic Process Automation Program generally did not
fully allocate direct or indirect costs to specific automation projects. The allocation of
these costs is critical to baseline Federal investments and determine the total costs and
return on investment for each automation project.
Lastly, the Robotic Process Automation Program did not establish an effective
governance structure nor a suitable development methodology for automation projects.
However, the IRS did outline its plans for improving automation project deliverables.
According to the IRS, its ongoing automation projects are in the process of using these
deliverables and are updating them based on learning and feedback. Finalizing a
well-defined automation project development methodology should help to ensure that:
business requirements are captured, privacy and security requirements are addressed,
designs fully satisfy business requirements, solutions are properly tested and deployed in
a controlled manner, and operations are closely monitored.
TIGTA recommended that the IRS:
• Maximize the timely use of the Contractor Responsibility Determination Robot;
• Ensure that direct and indirect costs are allocated to each Robotic Process
Automation and Intelligent Automation project;
• Finalize an automation program governance structure; and
24 April 1, 2020 – September 30, 2020
• Finalize a development methodology suitable for automation projects.
The IRS agreed with all of the recommendations.
Reference No. 2020-20-060
April 1, 2020 – September 30, 2020 25
Protect the Integrity of Tax Administration
T
IGTA is statutorily mandated to protect the integrity of Federal tax administration.
TIGTA accomplishes this mission through the investigative work conducted by the
Office of Investigations (OI). Through its investigative programs, OI protects the
integrity of the IRS and its ability to collect revenue owed to the Federal Government
by investigating violations of criminal and civil law that adversely impact Federal tax
administration, as well as administrative misconduct by IRS employees, both of which
undermine the integrity of the Nation’s voluntary tax system.
The Performance Model
The Office of Investigations accomplishes its mission through the hard work of its
employees, whose efforts are guided by a performance model that focuses on three
primary areas of investigative responsibility:
• Employee integrity;
• Employee and infrastructure security; and
• External attempts to corrupt tax administration.
These performance measures align OI’s investigative activities with the strategic goals of
the organization and protect the integrity of Federal tax administration.
IRS employee misconduct undermines the IRS’s ability to deliver taxpayer services, to
enforce tax laws effectively, and to ensure fairness in tax collection. External threats
against the IRS impede its ability to fairly, efficiently, and safely carry out its role as the
Nation’s revenue collector. Individuals who attempt to corrupt or otherwise interfere with
the IRS through various schemes and frauds adversely impact the IRS’s ability to collect
revenue.
TIGTA investigates these serious offenses and refers them to IRS management when
they involve IRS employee misconduct. When appropriate, TIGTA also refers its
investigations to the DOJ or to State authorities for prosecution.
Performance Area: Employee Integrity
In order for the country’s tax system to operate successfully, taxpayers must have
confidence in the fair and impartial administration of Federal tax laws and regulations.
IRS employee misconduct can erode the public’s trust and impede the IRS’s ability to
effectively enforce tax laws.
Employee misconduct can take many forms, such as: the misuse of IRS resources or
authority; theft; fraud; extortion; taxpayer abuse; unauthorized access to, and disclosure
of, tax returns and return information; and identity theft.
26 April 1, 2020 – September 30, 2020
During this reporting period,
employee integrity investigations
accounted for 41 percent of OI’s
work. OI conducted 416 employee
misconduct investigations that were
referred to the IRS for action. The
IRS took action on 383 and closed
33 investigations without action. 18
Employee Integrity
The following cases represent OI’s efforts to address employee integrity during this
six-month reporting period: 19
IRS Employee Sentenced for Wire Fraud and Theft of Public Money
On March 20, 2020, in the Middle District of Tennessee, IRS employee Tracey Allison
was sentenced for wire fraud and theft of Government property, in connection with a
scheme to fraudulently obtain paid military leave and other benefits from the IRS. Allison
was indicted for these and other offenses on March 6, 2019.
According to the indictment, Allison has been employed with the IRS in Franklin,
Tennessee since October 2007. From about November 2013 through about
October 2018, Allison knowingly devised a scheme to defraud and to obtain money
by means of false pretenses, willingly stole property belonging to the U.S., and
unlawfully used one or more means of identification of another without authority.
Specifically, between 2013 and 2018, Allison regularly submitted fraudulent and forged
Department of the Army Forms 1380 (DA 1380) to the IRS payroll unit seeking payment
for military duties. Allison, however, was discharged from the U.S. Army Reserve in
August 2012, and did not enlist in the Tennessee National Guard until July 2018.
Consequently, she had no military duties for the dates listed on the forms. In furtherance
of Allison’s scheme, she forged the name, title, and Department of Defense identification
number of her former station commander on the Forms DA 1380. Yet, her former station
commander was a military retiree who ceased supervising Allison around July 2013.
Allison was not authorized to use his or her personal identifiers.
Allison submitted approximately 70 false, fraudulent, and forged Forms DA 1380 to the
IRS. As a result of the false submissions, Allison collected payments and benefits totaling
approximately $22,846.24.
18 These data may pertain to investigations referred administratively in prior reporting periods and do not necessarily
relate to the total number of misconduct investigations that were referred to the IRS for action during this reporting
period.
19 The facts in the summarized case narratives come from court documents of the respective jurisdictions named.
April 1, 2020 – September 30, 2020 27
Allison was sentenced to a one-day incarceration, followed by eight months home
confinement, two years’ supervised release, ordered to pay restitution in the amount of
$22,846.24, and a special assessment fee of $200.
IRS Employee Pleads Guilty to Filing False Tax Returns
On June 30, 2020, in the District of Massachusetts, IRS Lead Contact Representative
Jennifer True pled guilty to multiple counts of aiding and assisting in the filing of a false
tax return and filing of a fraudulent tax return by an employee of the United States. True
was initially charged with wire fraud and aggravated identity theft on January 13, 2020.
According to the court documents, from approximately February 2012 through April 2017,
True electronically filed more than 590 Federal tax returns, most of which she prepared
for other individuals, often in exchange for money. She charged between $40 and $100
for preparing tax returns, knowing that she was in violation of rules prohibiting such
activity by IRS employees. In addition, True prepared at least 70 IRS Forms 1040, U.S.
Individual Income Tax Return, that included materially false items, such as false Individual
Retirement Account deductions, false itemized deductions, and false dependent and
childcare expenses, that allowed True and others to receive refunds to which they were
not entitled. Witnesses interviewed during the course of the investigation advised that
they had not provided True with the false information on their returns and that they did not
know that True was including such false information on the returns she prepared for them.
At sentencing, True faces up to three years’ imprisonment for each count of aiding and
assisting in the filing of false tax returns and up to five years’ imprisonment for each count
of filing a fraudulent tax return as an employee of the United States. True also faces
supervised release of up to three years; a fine of $250,000, or twice the gross gain or
loss, whichever is greater; a mandatory special assessment; discharge from employment;
and payment of restitution to the IRS of at least $640,918.98.
Employee Integrity Projects
As part of its employee integrity focus, TIGTA also conducts proactive investigative
initiatives to detect misconduct in the administration of IRS programs. During this
reporting period, TIGTA initiated 34 proactive projects to detect systemic weaknesses or
potential IRS program vulnerabilities. TIGTA’s most successful integrity project involves
the detection of IRS employees who abuse their access to taxpayer information to commit
identity theft and other crimes.
Performance Area: Employee and Infrastructure Security
Collecting taxes is a critical function of the Federal Government. Threats and assaults
directed at IRS employees, facilities, and infrastructure impede the effective and safe
administration of the Federal tax system and the IRS’s ability to collect tax revenue. In
addition to traditional direct threat vectors, TIGTA also actively pursues, investigates, and
mitigates emerging threats to the IRS’s ability to conduct Federal tax administration in
28 April 1, 2020 – September 30, 2020
cyberspace. All reports of threats, assaults, and forcible interference against IRS
employees in the course of performing their official duties are referred to OI.
Contact with the IRS can be stressful and emotional for taxpayers. While the majority of
taxpayer contacts are routine, some may become confrontational and even violent.
TIGTA’s special agents are statutorily mandated to provide physical security, known as
“armed escorts,” to IRS employees who have face-to-face contact with taxpayers who
may pose a danger to the employee, and to ensure that IRS employees have a secure
environment in which to perform their critical functions of tax administration. During this
six-month reporting period, OI provided two armed escorts for IRS employees.
The Office of Investigations undertakes investigative initiatives to identify individuals who
could commit violence against, or otherwise pose a threat to, IRS employees, facilities, or
infrastructure. It also provides intelligence to IRS officials to assist them in making
proactive operational decisions about potential violence or other activities that could pose
a threat to IRS systems, operations, and employees.
The investigative information sharing between OI and the IRS’s Office of Employee
Protection (OEP) to identify “potentially dangerous” taxpayers is one example of TIGTA’s
commitment to protecting IRS employees. Taxpayers who meet OEP criteria are
designated as potentially dangerous. Five years after this designation has been made,
TIGTA conducts a follow-up assessment of the taxpayer so that the OEP can determine if
the taxpayer still poses a potential danger to IRS employees.
During this six-month reporting period,
employee and infrastructure security
investigations accounted for 49 percent of
OI’s work.
The following case represents OI’s efforts
to ensure the safety of IRS employees
during the reporting period: 20
Georgia Man Indicted for Bomb Threat
Against IRS Office in New York
On August 5, 2020, in the Southern District of Georgia, Benjamin Stasko was indicted for
making a willful threat to kill using an explosive and the interstate transmission of a threat
to injure. These charges stemmed from a July 2020 threat Stasko made to bomb an IRS
office located in New York, New York.
According to the court documents, on July 6, 2020, Stasko posted a bomb threat on a
public website. The post claimed that a “highly explosive pipe bomb,” intended for the
IRS, had been placed inside the Federal building located at 290 Broadway, New York,
New York. Law enforcement officers and bomb-sniffing canines responded to the Federal
20 The facts in the summarized case narrative come from court documents of the jurisdiction named.
April 1, 2020 – September 30, 2020 29
building, but did not locate an explosive device. Subsequent investigative efforts by
TIGTA special agents identified Stasko as the person responsible for posting the threat.
These efforts also revealed that Stasko had items at his residence believed to be the
beginnings of a pipe bomb, along with notes explaining how he would blow up the IRS
building.
If convicted of the indicted offenses, Stasko faces fines for each offense and up to
10 years’ imprisonment.
Performance Area: External Attempts to Corrupt Tax Administration
TIGTA also investigates external attempts to corrupt or impede tax administration.
Individuals may interfere with the IRS’s ability to collect revenue for the U.S. in many
ways. For instance, they may impersonate IRS employees or misuse IRS seals and
symbols; file false or frivolous documents against IRS employees; use fraudulent IRS
documentation to perpetrate criminal activity; offer bribes to IRS employees to influence
their tax cases; commit fraud in contracts awarded by the IRS to contractors; or commit
cybercrimes.
Cybercrime
Attacks against online IRS applications can cause wide-ranging negative implications.
This was demonstrated through purposeful misuses of IRS online applications in an effort
to obtain loan benefits associated with the CARES Act. These attempts to corrupt or
otherwise interfere with tax administration not only inhibit the IRS’s ability to collect
revenue, but also undermine the public’s confidence in fair and effective tax
administration.
During this reporting period, investigations
into attempts to corrupt or impede tax
administration accounted for 10 percent of
OI’s work.
Corrupt Interference
The following cases represent OI’s efforts
to address and deter external attempts to
corrupt tax administration during this
six-month period: 21
Software Engineer Charged With $1.5 Million Coronavirus Relief Loan Scheme
On May 22, 2020, in the Western District of Washington, Baoke Zhang was arrested and
charged with wire fraud and bank fraud in connection with the CARES Act. According to
the court documents, Zhang submitted three different loan applications to two different
21 The facts in the summarized case narratives come from court documents of the respective jurisdictions named.
30 April 1, 2020 – September 30, 2020
lenders, seeking more than $1.5 million under the Paycheck Protection Program. This
Program was authorized under the CARES Act to provide forgivable loans to small
businesses for job retention and certain other expenses. Zhang submitted the loan
applications, which included multiple false documents and statements, in the names of
fictitious entities. In order to accomplish the fraud, Zhang obtained Employer
Identification Numbers (EIN) from the IRS in April 2020 to document two fictitious entities.
He then submitted fraudulent CARES Act-related loan applications in the names of these
entities.
The loan applications contained statements that the entities had been assigned EINs
years prior to the actual assignment dates for the EINs and included altered copies of IRS
notices reflecting these earlier assignment dates. The applications also included falsified
IRS documentation purporting to show employee and payroll amounts.
If convicted, Zhang could face a fine up to $1 million and/or up to 30 years’ imprisonment.
Man Arrested for Theft of U.S. Mail Containing Economic Impact Payments
On April 29, 2020, in the Eastern District of New York, Feng Chen was charged with theft
of mail, including multiple EIPs from the Treasury Department, otherwise known as
“stimulus payments.” The arrest was announced by the U.S. Attorney for the Eastern
District of New York, TIGTA, the U.S. Postal Inspection Service, and the New York Police
Department (NYPD).
According to the court documents, on April 28, 2020, NYPD police officers observed a
man, later identified as Chen, looking inside a medical collection bin at a closed medical
office, and then walking to a nearby residential building and examining mail left at the
door. Chen continued to walk to another residential building, carrying what appeared to
be mail. He discarded the mail he was holding when he saw the police officers. When
questioned, Chen made contradictory statements and was discovered to have an
outstanding arrest warrant for a criminal case involving identity theft. While conducting a
search of Chen incident to arrest, the officers recovered U.S. Treasury checks totaling
more than $12,000, credit cards, and opened envelopes and letters bearing the names of
various individuals and addresses.
If convicted, Chen faces a maximum of five years’ imprisonment.
April 1, 2020 – September 30, 2020 31
“The Coronavirus Aid, Relief, and Economic Security Act authorizes payments to taxpayers to offset the
economic impact of the coronavirus,” said J. Russell George, the Treasury Inspector General for Tax
Administration. “Previous government assistance efforts have been used by crooks and scammers who
see this as an opportunity to defraud taxpayers in every way possible.”
J. Russell George
Treasury Inspector General
for Tax Administration
April 7, 2020
Man Indicted for Retaliating Against IRS Employee by Filing False Lien
On May 12, 2020, in the Southern District of West Virginia, Jeffrey M. Reed was indicted
for filing a false lien and encumbrance against the real and personal property of an IRS
revenue officer due to the performance of official duties by the IRS revenue officer.
According to the court documents, an IRS revenue officer was assigned to collect a tax
liability owed to the IRS in excess of $279,000. During the course of the collection
activities, the IRS revenue officer sought to garnish Reed’s wages to satisfy a portion of
his tax liability. Reed’s employment ended and his former employer mailed a check to the
IRS for $598.22, which represented the wage garnishment against him. In May 2015, in
Mercer County, West Virginia, Reed filed a false lien against the IRS revenue officer’s
real and personal property, for more than $4.9 million, due to the IRS revenue officer
performing their official duties, which was collecting Reed’s outstanding tax liability.
If convicted, Reed faces a fine and/or up to 10 years’ imprisonment.
Impersonation Scams and Schemes
Individuals may corrupt tax administration by impersonating IRS employees in an effort
to obtain Personally Identifiable Information (PII) from unsuspecting taxpayers or to steal
their money. Such impersonators may claim to be IRS employees on the telephone or
may misuse IRS logos, seals, or symbols to create official-looking letters and e-mails.
They often tell their victims that they owe money to the IRS and must pay through a
preloaded debit card, wire transfer, or gift card from Apple iTunes®, Walmart®, or
Target®. Sometimes they trick taxpayers into providing their PII, which the impersonator
then uses to commit identity theft.
TIGTA aggressively investigates these criminal activities to ensure that taxpayers
maintain confidence in the integrity of Federal tax administration.
For more than 10 years, the IRS has compiled an annual list of commonly encountered
scams, called the “Dirty Dozen” list of tax scams. Many of these scams peak during the
32 April 1, 2020 – September 30, 2020
filing season, as people prepare their returns or utilize the services of paid preparers.
The IRS telephone impersonation scam is, once again, included in that list.
Between October 2013 and September 2020, TIGTA logged more than 2.5 million
contacts from taxpayers who reported that they had received telephone calls from
individuals who claimed to be IRS employees. The impersonators told the victims
that they owed additional tax and that if they did not immediately pay, they would
be arrested or face other adverse consequences. As of September 30, 2020,
16,062 victims have reported to TIGTA that they had lost more than $82 million,
collectively, to the scam’s perpetrators.
Because of their complexity, scams such as these are not typically resolved quickly. This
wide-ranging scam has claimed victims in every State. The top five States by number of
victims who have suffered financial losses are California, New York, Texas, Florida, and
New Jersey.
Financial Losses by State
Source: TIGTA’s Office of Investigations
In addition to its investigative efforts, TIGTA has taken numerous other steps to
proactively combat the IRS impersonation scam and protect taxpayers from being
victimized. Specifically, OI created a three-pronged “Advise and Disrupt” strategy. The
first part of this strategy involves analyzing the telephone numbers reported to TIGTA.
If a number is confirmed to be part of the scam, OI identifies the telephone carrier and
requests that the carrier deactivate the number.
April 1, 2020 – September 30, 2020 33
The second part of the strategy is to post scam-related telephone numbers on the
Internet, which allows potential victims to determine if the call they receive is a part of the
scam. The final part of the strategy is to deploy a TIGTA auto-dialer to call the
impersonators with a pre-recorded message ordering them to cease and desist their
criminal activity, a procedure which also occupies the impersonators’ time and telephone
lines.
Since the IRS scam’s inception, 213 individuals have been charged in Federal court for
their role, 31 of which were charged during this reporting period. Ninety-seven of those
individuals have been sentenced and collectively received a total of more than 402 years’
imprisonment. This effort has resulted in more than 791 impersonation scam-related
investigations and court-ordered financial restitutions of more than $152,694,806.
The following cases are representative of OI’s efforts to investigate IRS impersonation
scams during this six-month reporting period: 22
Nevada Woman Pleads Guilty for Role in India-Based IRS Impersonation Scam
On July 21, 2020, in the District of Nevada, Ladda Boonlert pled guilty to conspiracy to
commit wire fraud and aggravated identity theft for her role in a scheme involving the
impersonation of IRS employees. Boonlert was initially charged in a 22-count indictment
filed on December 10, 2019.
According to the court documents, from January 2015 through September 2017, Boonlert
conspired with individuals located in India and the U.S. to obtain money from victims
under false or fraudulent pretenses. The scheme involved coconspirators, primarily in
India, pretending to be IRS employees. The coconspirators falsely told the victims they
owed outstanding taxes and threatened victims with arrest if they did not make immediate
payments. Because of the scheme, over 2,700 victims made more than $2.4 million in
payments to the coconspirators.
Boonlert acted as a runner for the scheme, picking up victims’ payments from
MoneyGram®, Target™, and other businesses, knowing that these proceeds were the
product of a fraudulent scheme. She admitted to being a leader in the conspiracy. She
recruited at least 10 additional runners and directed others to recruit more.
Boonlert faces up to 20 years’ imprisonment for the wire fraud conspiracy and a
mandatory minimum sentence of two years’ imprisonment, which must run consecutive to
any other sentence of imprisonment, for the aggravated identity theft offense. In addition,
she faces a maximum fine of $250,000, or twice the gross gain or gross loss, whichever is
greatest; a period of supervised release of up to three years following imprisonment;
special assessment fees of $200; and payment of $2,455,547.06 in restitution to the
victims. Sentencing in this matter is scheduled for October 27, 2020.
22 The facts in the summarized case narratives come from court documents of the respective jurisdictions named.
34 April 1, 2020 – September 30, 2020
New York Freelance Information Broker Pleads Guilty for Impersonating Taxpayers
to Illegally Obtain Federal Tax Information From the IRS
On June 29, 2020, in the Northern District of New York, Stephen Mockler pled guilty to
wire fraud, conspiracy to commit wire fraud, aggravated identity theft, and misuse of
Social Security Numbers (SSN), in connection with a for-profit scheme he devised to
illegally obtain confidential tax information from the IRS.
According to the court documents, from approximately August 2017 through
January 2018, Mockler worked as a freelance information broker from his residences
in New York. In this capacity, private investigative agencies paid Mockler to obtain
confidential Federal tax information, including Federal EINs and wage histories.
As part of the scheme, Mockler called the IRS more than 1,500 times, impersonating
various taxpayers using PII provided to him by the private investigative firms and
fraudulently causing the IRS to release confidential Federal tax information to him.
Mockler then provided the fraudulently obtained confidential Federal tax information to the
private investigative agencies, who passed it on to their clients.
When Mockler engaged in the foregoing activities, he knew that the taxpayers whose
SSNs and other PII he used had not authorized the release of their confidential Federal
tax information (or the confidential Federal tax information of their businesses) to him.
Mockler also knew that the taxpayers did not authorize him to impersonate them or to use
their SSNs.
Mockler faces a maximum fine of $250,000 per count. In addition, he faces a maximum
of 20 years’ imprisonment, per count, for his wire fraud and related offenses; a mandatory
minimum sentence of two years’ imprisonment, per count, for his aggravated identity theft
offenses; and a maximum of five years’ imprisonment, per count, for his misuse of SSN
offenses. Mockler may also be required to serve a period of supervised release of up to
three years following imprisonment.
Oregon Woman Charged With Bank Fraud While Awaiting Trial for Impersonating
an IRS Employee, Among Other Offenses
On May 21, 2020, in the District of Oregon, Anndrea Jacobs, while awaiting trial for other
Federal offenses, was charged with bank fraud related to checks Jacobs stole while she
was employed at a dental practice in Hood River, Oregon. In September 2018, Jacobs
was indicted for numerous Federal offenses, including the impersonation of an IRS
employee.
According to the court documents, Jacobs was involved in a scheme to defraud a
former employer by embezzling approximately $1 million between January 2011 and
December 2015. In order to conceal her embezzlement activity, Jacobs created false
entries in the business books and records that overstated the business’s expenses and
estimated tax payments. Then Jacobs convinced her former employer to grant her limited
power of attorney to handle the employer’s collection action with the IRS. Jacobs
changed her employer’s contact information with the IRS to her own and diverted all IRS
April 1, 2020 – September 30, 2020 35
correspondence and communications to herself. Jacobs then created a fictitious identity
as an IRS Taxpayer Advocate, established a telephone number and a voicemail account
for the fictitious identity, provided her employer with a fictitious IRS tax case number, and
purported to assist her employer with IRS tax collection issues while impersonating an
IRS employee.
While on pre-trial release for the aforementioned offenses, from approximately
August 2019 through October 2019, Jacobs stole checks from the dental practice in
Hood River, Oregon valued at more than $22,000.
Jacobs faces more than 30 years’ imprisonment if convicted of all offenses.
Man Sentenced for His Role in Treasury Check Thefts
On January 17, 2020, in the Southern District of New York, Lenin Guzman-Hidalgo was
sentenced for his role in the theft of U.S. Treasury checks. Guzman-Hidalgo was initially
indicted in June 2018.
According to the indictment, from about May 2012 to September 2017, Guzman-Hidalgo
and his coconspirators knowingly and willfully conspired to steal Government funds,
namely from the IRS, and converted them for their own use. The defendants wrongfully
obtained U.S. Treasury checks in the names of victims and sold, deposited, or cashed the
checks without the victims’ authorization.
Also according to the indictment, Guzman-Hidalgo and the other defendants, knowingly
used and aided and abetted in the use of names, signatures, addresses, dates of birth,
SSNs, and driver’s license numbers of other individuals, without lawful authority, in
connection with the offenses. The defendants cashed and deposited stolen checks into
bank accounts that were often opened using stolen identities.
Guzman-Hidalgo was sentenced to 22 months’ imprisonment followed by three years of
supervised release. He was ordered to pay restitution in the amount of $935,943.03 and
a special assessment fee of $100.
Tax Preparer Outreach
In addition to promoting employee integrity, TIGTA is committed to tax preparers’
education on integrity. Tax preparers play an important role to ensure the integrity of
tax administration because of their frequent contact with the IRS and their influence on
tax compliance or noncompliance. Tax preparers can either assist in the enforcement
of tax administration to ensure that taxpayers comply with Internal Revenue laws, or
they can impede it.
During this reporting period, TIGTA special agents provided one integrity presentation to
tax preparers. The presentation detailed TIGTA’s role in protecting the integrity of
Federal tax administration; the differences between the respective jurisdictions of
36 April 1, 2020 – September 30, 2020
TIGTA and the IRS; how to identify various forms of preparer misconduct; and common
IRS impersonation scams.
The following case represents OI’s efforts to protect tax administration from
unscrupulous tax preparers during this six-month reporting period: 23
Former CPA Sentenced for Making A False Statement to the IRS
On July 8, 2020, in the Western District of Kentucky, Pamela Keyes was sentenced for
making a false statement to the IRS. Keyes pled guilty to the offense in December 2019.
According to the court documents, from approximately October 16, 2014 through
June 25, 2015, Keyes made representations to the IRS that she was a CPA when she
knew that she was not. She made these statements while employed at an accounting
firm in the Louisville, Kentucky area. Her actions resulted in monetary ramifications for
her clients, some of whom obtained civil judgments against Keyes.
Keyes was sentenced to five years’ probation, ordered to pay $97,696.91 in restitution,
and ordered to pay a $100 special assessment fee.
23 The facts in the summarized case narrative come from court documents of the jurisdiction named.
April 1, 2020 – September 30, 2020 37
Advance Oversight of
America’s Tax System
T
IGTA’s Office of Inspections and Evaluations (I&E) identifies opportunities for
improvement in IRS and TIGTA programs by performing inspections and evaluations
that report timely, useful, and reliable information to decision makers and
stakeholders.
This function has two primary product lines: inspections and evaluations.
Inspections are intended to:
• Provide factual and analytical information;
• Monitor compliance;
• Measure performance;
• Assess the effectiveness and efficiency of programs and operations;
• Share best practices; and
• Inquire into allegations of waste, fraud, abuse, and mismanagement.
Evaluations are intended to:
• Provide in-depth reviews of specific management issues, policies, or programs;
• Address Governmentwide or multi-agency issues; and
• Develop recommendations to streamline operations, enhance data quality, and
minimize inefficient and ineffective procedures.
The following report highlights some of I&E’s most significant activities during this
six-month reporting period:
Controls Over the Pseudonym Program Need Improvements
A pseudonym is a fictitious name that IRS employees can use to interact with taxpayers.
In 1992, the IRS authorized pseudonym use to help protect employees who felt they
might be harassed, threatened, or assaulted in the performance of their duties. RRA 98
required employees to justify the need for a pseudonym and obtain management
approval. Enactment of RRA 98 addressed Congress’ concerns that IRS employees
could use pseudonyms to avoid accountability for their actions while protecting an
employee’s right to use a pseudonym.
As of December 2018, the IRS reported that 729 employees had registered pseudonyms.
TIGTA determined whether the IRS has established policies and procedures to manage
its pseudonym program effectively.
38 April 1, 2020 – September 30, 2020
The IRS has taken steps to gradually enhance oversight and control during the
pseudonym program’s 27-year history. Steps taken include requirements for employee
justification and management approval, and Service-wide guidance and centralized
program oversight.
Period Without and With Control Activities
Source: Interviews with IRS Office of Privacy, Government Liaison and Disclosure employees, and
reviews of Internal Revenue Manuals.
However, delays in implementing controls over the pseudonym program, and failure to
update historical records, significantly contributed to the current inaccurate and
incomplete records. For example, upon request, the IRS could not readily provide
adequate documentation to support the justification for issuing pseudonyms to 51 percent
of the 129 employees included in I&E’s statistical sample. Additionally, the IRS could
not readily provide documentation to support that a manager approved the use of a
pseudonym for 43 percent of the employees included in the statistical sample.
TIGTA also found that the record of active pseudonym holders included incorrect legal
names, incorrect standard employee identifiers, and employees who were not actually
using a pseudonym at all. Additionally, TIGTA identified three other employees with
unregistered pseudonyms.
TIGTA’s review of IRS disciplinary records and TIGTA investigative files did not identify
incidents where IRS employees misused their pseudonym. However, inaccurate and
incomplete records and the lack of supporting documentation increase the risk that the
IRS may not be able to timely verify the identity of employees using pseudonyms.
April 1, 2020 – September 30, 2020 39
TIGTA made six recommendations, including that the IRS:
• Perform an inventory to develop a complete and accurate list of active
pseudonyms;
• Ensure that pseudonyms obtained after the implementation of RRA 98 are
supported by adequate justification and management approval; and
• Develop processes to maintain a complete and fully supported list of pseudonyms,
including a standardized form for new pseudonym requests.
IRS management agreed with four of the six recommendations. The IRS did not agree to
determining when all active pseudonym holders obtained their pseudonyms and ensuring
that all active pseudonyms requested after July 22, 1998, are supported by appropriate
justification and management.
Notwithstanding the IRS’s disagreement with certain recommendations, TIGTA believes
that the recommended actions would improve compliance with RRA 98 requirements and
the detection of misuse.
Reference No. 2020-IE-R004
40 April 1, 2020 – September 30, 2020
Audit Statistical Reports
Reports With Questioned Costs
TIGTA issued no audit reports with questioned costs during this semiannual reporting
period. The phrase “questioned costs” means costs that are questioned because of:
• An alleged violation of a provision of a law, regulation, contract, or other requirement
governing the expenditure of funds;
• A finding, at the time of the audit, that such cost is not supported by adequate
documentation (an unsupported cost); or
• A finding that expenditure of funds for the intended purpose is unnecessary or
unreasonable.
The phrase “disallowed cost” means a questioned cost that management, in a
management decision, has sustained or agreed should not be charged to the Government.
April 1, 2020 – September 30, 2020 41
Reports With Recommendations That
Funds Be Put to Better Use
TIGTA issued three audit reports during this semiannual reporting period with a
recommendation that funds be put to better use. 24 The phrase “recommendation that
funds be put to better use” means funds could be used more efficiently if management
took actions to implement and complete the recommendation, including:
• Reductions in outlays;
• Deobligations of funds from programs or operations;
• Costs not incurred by implementing recommended improvements related to
operations;
• Avoidance of unnecessary expenditures noted in pre-award reviews of contract
agreements;
• Prevention of erroneous payment of refundable credits, e.g., Earned Income Tax
Credit; or
• Any other savings that are specifically identified.
The phrase “management decision” means the evaluation by management of the findings
and recommendations included in an audit report, and the issuance of a final decision
concerning its response to such findings and recommendations, including actions
deemed necessary.
Reports With Recommendations That Funds Be Put to Better Use
Amount
Report Category Number
(in thousands)
1. Reports with no management decision at the beginning of the
reporting period 0 $0
2. Reports issued during the reporting period 3 $7,237
3. Subtotals (Item 1 plus Item 2) 3 $7,237
4. Reports for which a management decision was made during the
reporting period
a. Value of recommendations to which management agreed
i. Based on proposed management action 3 $7,237
ii. Based on proposed legislative action 0 $0
b. Value of recommendations to which management did not agree 0 $0
5. Reports with no management decision at the end of the
reporting period (Item 3 minus Item 4) 0 $0
6. Reports with no management decision within six months of
issuance 0 $0
24 See Appendix II for identification of audit reports involved.
42 April 1, 2020 – September 30, 2020
Reports With Additional Quantifiable
Impact on Tax Administration
In addition to questioned costs and funds put to better use, the Office of Audit has
identified measures that demonstrate the value of audit recommendations to tax
administration and business operations. These issues are of interest to executives at the
IRS and the Treasury Department, Members of Congress, and the taxpaying public, and
are expressed in quantifiable terms to provide further insight into the value and potential
impact of the Office of Audit’s products and services. Including this information also
promotes adherence to the intent and spirit of the Government Performance and Results
Act.
Definitions of these additional measures are:
Increased Revenue: Assessment or collection of additional taxes.
Revenue Protection: Ensuring the accuracy of the total tax, penalties, and interest paid
to the Federal Government.
Reduction of Burden on Taxpayers: Decreases by individuals or businesses in the
need for, frequency of, or time spent on communication, record keeping, preparation, or
costs to comply with tax laws, regulations, and IRS policies and procedures.
Taxpayer Rights and Entitlements at Risk: The protection of due process rights
granted to taxpayers by law, regulation, or IRS policies and procedures. These rights
most commonly arise when filing tax returns, paying delinquent taxes, and examining the
accuracy of tax liabilities. The acceptance of claims for and issuance of refunds
(entitlements) are also included in this category, such as when taxpayers legitimately
assert that they overpaid their taxes.
Taxpayer Privacy and Security: Protection of taxpayer financial and account
information (privacy). Processes and programs that provide protection of tax
administration, account information, and organizational assets (security).
Inefficient Use of Resources: Value of efficiencies gained from recommendations to
reduce cost while maintaining or improving the effectiveness of specific programs;
resources saved would be available for other IRS programs. Also, the value of internal
control weaknesses that resulted in an unrecoverable expenditure of funds with no
tangible or useful benefit in return.
Reliability of Management Information: Ensuring the accuracy, validity, relevance,
and integrity of data, including the sources of data and the applications and processing
thereof, used by the organization to plan, monitor, and report on its financial and
operational activities. This measure will often be expressed as an absolute value,
i.e., without regard to whether a number is positive or negative, of overstatements or
understatements of amounts recorded on the organization’s documents or systems.
April 1, 2020 – September 30, 2020 43
Protection of Resources: Safeguarding human and capital assets, used by or in the
custody of the organization, from accidental or malicious injury, theft, destruction, loss,
misuse, overpayment, or degradation.
The number of taxpayer accounts and dollar values shown in the following chart
were derived from analyses of historical data and are thus considered potential
barometers of the impact of audit recommendations. Actual results will vary
depending on the timing and extent of management’s implementation of the
corresponding corrective actions and the number of accounts or subsequent
business activities affected as of the dates of implementation. Also, a report may
have issues that affect more than one outcome measure category.
Reports With Additional Quantifiable Impact on Tax Administration
Number of
Number of Dollar Value
Outcome Measure Category Taxpayer
Reports 25 (in thousands)
Accounts
Increased Revenue 8 377,902 $14,095,635
Revenue Protection 5 5,077 $901,543
Reduction of Burden on Taxpayers 1 1,588 $0
Taxpayer Rights and Entitlements
at Risk 8 290,064 $638
Taxpayer Privacy and Security 1 43,818 $0
Inefficient Use of Resources 1 0 $22,724
Reliability of Management
Information 2 29,834 $723,330
Protection of Resources 0 0 $0
25 See Appendix II for identification of audit reports involved.
44 April 1, 2020 – September 30, 2020
Management did not agree with the outcome measures in the following reports:
• Increased Revenue: Reference Numbers 2020-10-018; 2020-40-029;
2020-30-015; 2020-43-028; 2020-30-027; 2020-40-052; and 2020-30-071
• Revenue Protection: Reference Numbers 2020-30-026; 2020-40-021;
and 2020-10-069;
• Taxpayer Rights and Entitlements: Reference Numbers 2020-40-029;
2020-43-028; 2020-10-038; and 2020-30-058;
• Inefficient Use of Resources: Reference Number 2020-30-031; and
• Reliability of Information: Reference Number 2020-30-055.
The following reports contained quantifiable impacts other than the number of taxpayer
accounts and dollar value:
• Increased Revenue: Reference Number 2020-40-052;
• Revenue Protection: Reference Numbers 2020-10-069 and 2020-40-064;
• Taxpayer Burden: Reference Numbers 2020-30-053 and 2020-40-064;
• Taxpayer Rights and Entitlements: Reference Numbers 2020-10-038;
2020-30-053; 2020-30-065; and 2020-30-058;
• Taxpayer Privacy and Security: Reference Numbers 2020-20-033; 2020-10-042;
2020-10-050; 2020-40-064; and 2020-20-063; and
• Reliability of Information: Reference Numbers 2020-20-022; 2020-30-026;
2020-40-021; 2020-10-039; 2020-20-033; 2020-20-044; 2020-40-067;
2020-30-053; 2020-30-055; 2020-10-069; 2020-40-064; 2020-20-063;
2020-30-071; and 2020-20-045.
April 1, 2020 – September 30, 2020 45
Investigations Statistical Reports 26
Significant Investigative Achievements
(April 1, 2020 – September 30, 2020)
Complaints/Allegations Received by TIGTA
Complaints Against IRS Employees 1,246
Complaints Against Non-Employees 2,007
Total Complaints/Allegations 3,253
Status of Complaints/Allegations Received by TIGTA
Investigations Initiated 715
In Process Within TIGTA 27 312
Referred to IRS for Action 258
Referred to IRS for Information Only 831
Referred to a Non-IRS Entity 28 0
Closed With No Referral 390
Closed Associated With Prior Investigation 592
Closed With All Actions Completed 155
Total Complaints 3,253
Investigations Opened and Closed
Total Investigations Opened 1,297
Total Investigations Closed 1,123
Financial Accomplishments (in dollars)
Embezzlement/Theft Funds Recovered $141,802
Contract Fraud and Overpayments Recovered $5,336
Court-Ordered Fines, Penalties, and Restitution $6,360,678
Out-of-Court Settlements 0
Potentially Compromised by Bribery $931,863
Tax Liability of Taxpayers Who Threaten and/or Assault IRS Employees $9,358,466
IRS Assets and Resources Protected Against Malicious Loss $180,000
Total Financial Accomplishments $16,978,145
26 Includes the reporting requirements under the Inspector General Empowerment Act of 2016 (IGEA), Pub. L. No. 114-
317, 130 Stat. 1595.
27 Complaints for which final determination had not been made at the end of the reporting period.
28 A non-IRS entity includes other law enforcement entities or Federal agencies.
46 April 1, 2020 – September 30, 2020
Status of Closed Criminal Investigations
Criminal Referral Employee Non-Employee Total
Referred – Accepted for Prosecution 3 97 100
Referred – Declined for Prosecution 105 187 292
Referred – Pending Prosecutorial Decision 7 61 68
Total Criminal Referrals 29 115 345 460
No Referral 222 433 655
Criminal Dispositions 30
Criminal Disposition Employee Non-Employee Total
Guilty 1 31 32
Nolo Contendere (no contest) 0 0 0
Pretrial Diversion 0 0 0
Deferred Prosecution 31 0 1 1
Not Guilty 0 0 0
Dismissed 1 1 2
Total Criminal Dispositions 2 33 35
Administrative Dispositions on Closed Investigations 32
Administrative Disposition Total
Removed/Terminated 12
Suspended/Reduction in Grade 36
Resigned/Retired/Separated Prior to Adjudication 59
Oral or Written Reprimand/Admonishment 96
Clearance Letter/Closed, No Action Taken 57
Alternative Discipline/Letter With Cautionary Statement/Other 221
Non-Employee Actions 33 720
Total Administrative Dispositions 1,201
29 Criminal referrals include both Federal and State dispositions.
30 Final criminal dispositions during the reporting period. These data may pertain to investigations referred criminally in
prior reporting periods and do not necessarily relate to the investigations referred criminally in the previous Status of
Closed Criminal Investigations table.
31 Generally, in a deferred prosecution, the defendant accepts responsibility for his or her actions and complies with
certain conditions imposed by the court. Upon the defendant’s completion of the conditions, the court dismisses the
case. If the defendant fails to fully comply, the court reinstates prosecution of the charge.
32 Final administrative dispositions during the reporting period. These data may pertain to investigations referred
administratively in prior reporting periods and do not necessarily relate to the investigations closed in the Investigations
Opened and Closed table.
33 Administrative actions taken by the IRS against non-IRS employees, e.g., contractors.
April 1, 2020 – September 30, 2020 47
Summary of Investigative Reports and Criminal Referrals
Criminal Referral Breakdown
(April 1, 2020 – September 30, 2020)
Number of Investigative Reports Issued 460
Referred to the DOJ for Criminal Prosecution 385
Referred to State/Local Prosecuting Authorities 7
Number of Indictments and Criminal Informations 67
Indictments 55
Criminal Informations 2
The above statistical table was generated as a result of a query of TIGTA OI’s case
tracking system, Criminal Results Management System.
Interference
During the reporting period, there were no attempts by the IRS to interfere with the
independence of TIGTA. Additionally, the IRS did not resist, object to oversight activities,
or significantly delay access to information.
Instances of Whistleblower Retaliation
During the reporting period, there were no investigations regarding whistleblower
retaliation.
Closed 34 Investigations Involving IRS Senior Government Employees 35
Detailed Description of the Facts and Criminal Date If Declined, Date of
Circumstances of the Investigation: Disposition: Status: Referred: Declination:
A senior Government employee was
alleged to have asked a subordinate Resigned in lieu of
N/A N/A N/A
employee to transfer money to a foreign termination/Disciplinary Action
country on their behalf.
A senior Government employee was
alleged to have recorded IRS employees Other N/A N/A N/A
and contractors without their consent.
A senior Government employee was
alleged to have engaged in inappropriate Admonished/Reprimanded N/A N/A N/A
behavior with other employees.
A senior Government employee was
reported to have not made reimbursement Admonished/Reprimanded N/A N/A N/A
for unemployment compensation.
34 When TIGTA refers an IRS employee investigation to the IRS, the investigation remains open until all actions are
completed, including any penalty imposed upon the employee by the IRS. TIGTA closes an employee investigation
after receiving notice from the IRS of the administrative action taken in response to that investigation.
35 For this report, a “senior Government employee” refers to an officer or employee in the Executive branch who
occupies a position classified at or above GS-15 of the General Schedule. 5 U.S.C. app § 5(f)(7).
48 April 1, 2020 – September 30, 2020
Detailed Description of the Facts and Criminal Date If Declined, Date
Circumstances of the Investigation: Disposition: Status: Referred: of Declination:
A senior Government employee was alleged
to have made a false statement regarding a Clearance Letter N/A N/A N/A
subordinate employee.
A senior Government employee was alleged
to have influenced the procurement process Clearance Letter N/A N/A N/A
and disclosed protected information.
A senior Government employee was alleged
to have incorrectly decreased a performance Clearance Letter N/A N/A N/A
evaluation.
A senior Government employee was
reported to have sent e-mails containing PII Admonished/Reprimanded N/A N/A N/A
to an external e-mail account.
A senior Government employee was alleged
to have represented a subordinate
Other N/A N/A N/A
employee in a real estate transaction and
received a commission.
A senior Government employee was alleged
to have created a hostile work environment. Oral/Written Counseling N/A N/A N/A
April 1, 2020 – September 30, 2020 49
Inspections and Evaluations Statistical
Reports
Evaluation Reports With Significant Unimplemented
Corrective Actions
The Inspector General Act, as amended, requires identification of significant
recommendations described in previous semiannual reports for which corrective actions
have not been completed. The following list is based on information from the Treasury
Department’s Joint Audit Management Enterprise System (JAMES).
Projected
Reference Issued Report Title and Recommendation Summary
Completion
Number (F = Finding No., R = Recommendation No.)
Date
2019-IE-R002 November ALTHOUGH VIRTUAL FACE-TO-FACE SERVICE SHOWS PROMISE, FEW
2018 TAXPAYERS USE IT
01/15/21 F-1, R-1: Develop and document a vision and specific goals for Virtual Service
Delivery program, and develop performance measures to monitor and evaluate
the performance of the individual programs.
01/15/21 F-2, R-2: Conduct public awareness activities to increase taxpayers' knowledge
of the Virtual Service Delivery program.
2020-IE-R003 February THE IRS HAS EFFECTIVELY EXPANDED OPTIONS FOR TAXPAYERS TO
2020 PAY WITH CASH, BUT PARTICIPATION REMAINS LOW
01/15/21 F-1, R-1: Consider working with external partners to add retailers in States
without a participating location to increase the availability of the payment option.
50 April 1, 2020 – September 30, 2020
Appendix I
Statistical Reports – Other
Reports With Significant
Unimplemented Corrective Actions
The Inspector General Act, as amended, requires the identification of any outstanding
unimplemented recommendations, including the aggregate potential cost savings of those
recommendations described in previous semiannual reports for which corrective actions
have not been completed. The following list is based on information obtained from the
Treasury Department’s JAMES. 36,37
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2007-10-068 May 2007 INEFFICENCIES IN PROCESSING OPERATIONS ASSISTANCE REQUESTS
CAUSED TAXPAYERS UNNECESSARY DELAYS
12/15/20 F-3, R-1: Revise Form 12412, Operations Assistance Request, to allow requests to
be closed as completed or as misrouted only if they had been sent to the wrong
Operations liaison.
2008-20-176 September THE OFFICE OF RESEARCH, ANALYSIS, AND STATISTICS NEEDS TO
2008 ADDRESS COMPUTER SECURITY WEAKNESSES
09/30/21 F-1, R-5: Ensure that audit and accountability controls are sufficient by requiring
audit logs to be maintained a minimum of six years and to be periodically reviewed
by the security officer.
2011-20-111 September CONTINUED CENTRALIZATION OF THE WINDOWS ENVIRONMENT WOULD
2011 IMPROVE ADMINISTRATION AND SECURITY EFFICIENCIES
11/15/21 F-2, R-2: Ensure that scanning tools, such as the Business DNA software, are
utilized to locate unauthorized servers, workstations, and domains on the IRS
network, and adequate procedures are developed and implemented to ensure that
they are removed.
2012-20-112 September AN ENTERPRISE APPROACH IS NEEDED TO ADDRESS THE SECURITY RISK
2012 OF UNPATCHED COMPUTERS
11/15/21 F-1, R-1: Ensure that the IRS completes the deployment of an automated asset
discovery tool (or tools if needed) and builds an accurate and complete inventory of
information technology assets (including hardware and software) that reside on the
IRS network.
36 This summary data does not include recommendations that are specifically prohibited from disclosure by any
provision of law, such as 26 U.S.C. § 6103, protecting tax returns and return information, or that are specifically
required by Executive Order to be protected from disclosure in the interest of national defense or national security or in
the conduct of foreign affairs. One of these recommendations had a potential increased revenue of $1.5 billion.
37 The Office of Audit has previously designated two reports with unimplemented recommendations as “Sensitive But
Unclassified (SBU).” These SBU reports include subject matter that might create a risk of circumvention of the law if
publicly released. There are no potential cost savings associated with any unimplemented recommendations from
these reports.
April 1, 2020 – September 30, 2020 51
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2012-20-122 September CUSTOMER ACCOUNT DATA ENGINE 2: SYSTEM REQUIREMENTS AND
2012 TESTING PROCESSES NEED IMPROVEMENTS
04/15/21 F-3, R-2: Ensure all database issues identified are resolved or an action plan is
developed with specific corrective actions and time periods.
2014-40-084 September A SERVICE-WIDE STRATEGY IS NEEDED TO INCREASE BUSINESS TAX
2014 RETURN ELECTRONIC FILING
12/15/20 F-2, R-1: Develop a less burdensome electronic signature process for businesses
e-filing employment tax returns using the Modernized e-File system.
2014-23-072 September AFFORDABLE CARE ACT: IMPROVEMENTS ARE NEEDED TO STRENGTHEN
2014 SECURITY AND TESTING CONTROLS FOR THE AFFORDABLE CARE ACT
INFORMATION RETURNS PROJECT
04/15/21 F-1, R-1: Ensure that processes and procedures are developed to provide direction
on how to review and mitigate weaknesses.
2016-40-028 March REVISING TAX DEBT IDENTIFICATION PROGRAMMING AND CORRECTING
2016 PROCEDURAL ERRORS COULD IMPROVE THE TAX REFUND OFFSET
PROGRAM
On Hold 38 F-1, R-1: Revise identification processes to include sole proprietor information from
Form SS-4, Application for Employer Identification Number, to identify individual tax
refunds to offset to business tax debt.
On Hold F-2, R-4: Revise computer programming to ensure that credit elects are offset to
any associated tax debt on the Non-Master File.
03/15/23 F-3, R-1: Revise computer programming to use the Limited Liability Company
indicator on the business tax account to ensure that individual tax refunds are not
offset to the associated Limited Liability Company’s business tax debt.
2017-30-010 October EMPLOYEES SOMETIMES DID NOT ADHERE TO E-MAIL POLICIES WHICH
2016 INCREASED THE RISK OF IMPROPER DISCLOSURE OF TAXPAYER
INFORMATION
10/15/20 F-3, R-1: Update the Enterprise Electronic Fax system to allow encrypted
messages to be sent to the system server.
2017-40-037 May 2017 IMPROVEMENTS ARE NEEDED TO ENSURE THAT TAX ACCOUNTS ON THE
AUTOMATED NON-MASTER FILE ARE ACCURATELY PROCESSED
On Hold F-1, R-1: Correct Automated Non-Master File programming to compute and assess
the Failure to File penalty on Form 1040NR, U.S. Nonresident Alien Income Tax
Return, accounts in which the TIN is an EIN.
On Hold F-1, R-2: Correct Automated Non-Master File programming to use the correct date
when computing the Failure to File penalty. In addition, programming should be
corrected to ensure that the proper penalty rate is used to compute the penalty
amount.
Potential Increased Revenue: $354,153
2017-20-024 June 2017 INFORMATION TECHNOLOGY: IMPROVEMENTS ARE NEEDED IN
ENTERPRISE-WIDE DISASTER RECOVERY PLANNING AND TESTING
07/15/22 F-2, R-1: Reach consensus regarding the maximum tolerable downtime or recovery
time objective for each mission essential function.
38 Except for one report, recommendations designated as “On Hold” were agreed to by the IRS, but action was deferred
pending the availability of funds. The recommendation for report 2017-40-085 was agreed to by the IRS, but was
placed on “On Hold” because the IRS is awaiting input from another agency.
52 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2017-40-038 July 2017 CASE SELECTION PROCESSES RESULT IN BILLIONS OF DOLLARS IN
POTENTIAL EMPLOYER UNDERREPORTED TAX NOT BEING ADDRESSED
On Hold F-3, R-1: Establish a systemic process to match data fields to perfect unpostable
Forms W-3, Transmittal of Wage and Tax Statements.
2017-30-048 August ADDITIONAL CONTROLS ARE NEEDED TO HELP ENSURE THAT
2017 NONRESIDENT ALIEN INDIVIDUAL PROPERTY OWNERS COMPLY WITH TAX
LAWS
On Hold F-1, R-1: Request that a revision be made to Form 1040NR to enable nonresident
aliens to make an election under I.R.C. § 871(d) and revise processing procedures
to ensure that the IRS records the election.
2017-40-085 September FURTHER ACTIONS ARE NEEDED TO REDUCE THE RISK OF EMPLOYMENT
2017 TAX FRAUD TO BUSINESSES THAT USE THE SERVICES OF PROFESSIONAL
EMPLOYER ORGANIZATIONS
On Hold F-3, R-1: Establish processes and procedures to reduce unnecessary resources
expended notifying employers of an address change when programming incorrectly
identifies an address change resulting from minor formatting revisions.
2017-20-062 September THE INTERNAL REVENUE SERVICE IS NOT IN COMPLIANCE WITH FEDERAL
2017 REQUIREMENTS FOR SOFTWARE ASSET MANAGEMENT
09/15/21 F-1, R-1: Establish executive governance for Software Asset Management within
the IRS which acts as a centralized group to ensure that effective and
knowledgeable decisions are being made timely by authorized personnel.
2018-40-010 January PROCESSES NEED TO BE IMPROVED TO IDENTIFY INCOMPLETE AND
2018 FRAUDULENT APPLICATIONS FOR INDIVIDUAL TAXPAYER IDENTIFICATON
NUMBERS
On Hold F-3, R-1: Modify the Real-Time System consistency and validity checks to identify
all duplicate uses of supporting documents.
On Hold F-3, R-2: Ensure that programming changes are made to require mandatory review
when the Real-Time System alerts tax examiners that an applicant is using
duplicate supporting documents as has previously been used to obtain an Individual
Taxpayer Identification Number (ITIN).
12/15/20 F-3, R-5: Review the 10,924 ITINs that TIGTA identified that were issued to
individuals who used duplicate supporting documents to determine the validity of
the ITINs and take the actions necessary to revoke those ITINs that are determined
to be invalid.
12/15/20 F-4, R-1: Review the 8,110 ITINs identified with a revoked status in the Real-Time
System but still valid on the Individual Master File and take necessary action to
change the ITINs to invalid.
2018-40-013 February ACTIONS ARE NEEDED TO REDUCE THE RISK OF FRAUDULENT USE OF
2018 EMPLOYER IDENTIFICATION NUMBERS AND TO IMPROVE THE
EFFECTIVENESS OF THE APPLICATION PROCESS
On Hold F-2, R-1: Correct programming to reject EIN applications when an EIN has
previously been assigned to the same sole proprietor and to reject applications
when IRS data indicate that the sole proprietor is deceased.
On Hold F-3, R-1: Perform an assessment to determine how an additional field could be
added to the Business Master File so that both the decedent SSN and a
responsible party TIN can be captured for estates and trusts.
On Hold F-3, R-5: Develop programming to reject estate applications if the decedent TIN is
not that of a deceased individual.
2018-40-031 April 2018 PROACTIVE PROCESSES TO IDENTIFY AND MITIGATE POTENTIAL MISUSE
OF ELECTRONIC PAYMENT SYSTEMS ARE NEEDED
On Hold F-1, R-1: Ensure that expanded authentication requirements are implemented
without further delays to reduce the risk of misuse of the system.
April 1, 2020 – September 30, 2020 53
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2018-20-029 May 2018 SECURITY OVER HIGH VALUE ASSETS SHOULD BE STRENGTHENED
10/15/21 F-1, R-1: Implement the Office of Management and Budget Cybersecurity Strategy
and Implementation Plan actions to identify and document current system hardware
components for all IRS High Value Assets.
2018-20-034 June 2018 ACTIVE DIRECTORY OVERSIGHT NEEDS IMPROVEMENT AND CRIMINAL
INVESTIGATION COMPUTER ROOMS LACK MINIMUM SECURITY CONTROLS
On Hold F-2, R-1: Complete a cost analysis to: 1) determine the efficacy of relocating
Criminal Investigation (CI) assets in each of the field offices to existing IRS
computer rooms versus upgrading the CI computer rooms to ensure that assets
are protected in accordance with Federal and Internal Revenue Manual (IRM)
security requirements and 2) implement the most cost effective solution.
2018-30-042 July 2018 THE INTERNAL REVENUE SERVICE LACKS A COORDINATED STRATEGY TO
ADDRESS UNREGULATED RETURN PREPARER MISCONDUCT
10/15/20 F-1, R-1: Develop a preparer misconduct strategy that encourages programs with
the authority to address preparer misconduct to coordinate with one another to
establish program goals and track progress towards those goals.
10/15/21 F-1, R-2: Establish goals that support the Service-wide Return Preparer Strategy
being developed by the Deputy Commissioner for Services and Enforcement and
monitor progress towards those goals.
2018-40-062 August IMPROVED PROCEDURES ARE NEEDED TO PREVENT THE FRAUDULENT
2018 USE OF THIRD-PARTY AUTHORIZATION FORMS TO OBTAIN TAXPAYER
INFORMATION
12/15/20 F-4, R-2: Correspond with representatives and designees assigned multiple
Centralized Authorization File (CAF) numbers to inform them that they are permitted
to have one CAF number per location. The correspondence should request a
response from each representative and designee specifying the CAF number that
the IRS should retain. Excess numbers should then be removed from the CAF.
2018-20-063 September IMPROVED CONTROLS ARE NEEDED TO ENSURE THAT CORRECTIVE
2018 ACTIONS FOR REPORTED INFORMATION TECHNOLOGY WEAKNESSES ARE
DOCUMENTED AND FULLY IMPLEMENTED PRIOR TO CLOSURE
11/15/20 F-1, R-1: Ensure that complete descriptions of the specific actions taken to close
proposed corrective actions are documented in Form 13872, Planned Corrective
Action Status Update.
11/15/20 F-1, R-2: Ensure that sufficient supporting documentation is uploaded to the
JAMES to support proposed corrective action closure.
11/15/20 F-1, R-3: Ensure that the IRM and instructions for Form 13872 are updated so that
both the manager responsible for implementing the proposed corrective action and
the executive responsible for the proposed corrective action are required to approve
Form 13872 supporting the proposed corrective action’s closure.
2018-20-066 September CONTROLS CONTINUE TO NEED IMPROVEMENT TO ENSURE THAT ALL
2018 PLANNED CORRECTIVE ACTIONS FOR SECURITY WEAKNESSES ARE
FULLY IMPLEMENTED AND SUPPORTED
11/15/20 F-1, R-3: Update the IRM to broaden the Audit Coordination and Outreach,
Assessment and Reporting offices auditing to include reviewing management’s
corrective actions to ensure that the proposed corrective actions are fully and
appropriately implemented.
11/15/20 F-2, R-3: Update the retention period in the IRM for maintaining documentation with
the JAMES Audit Coordinators to align with the Treasury Department’s retention
period for maintaining supporting documentation in the JAMES.
54 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2018-30-072 September IMPROVEMENTS ARE NEEDED IN THE WITHHOLDING COMPLIANCE
2018 PROGRAM
On Hold F-3, R-2: Analyze the current selection criteria used by the Withholding Compliance
System to determine if the taxpayers identified for systemic lock-in letter issuance
are the best use of limited resources. This would include potentially identifying
taxpayers with multiple years of underwithholding and the percentage of inventory
that includes nonfilers.
2019-10-002 October TAXPAYERS GENERALLY COMPLY WITH ANNUAL CONTRIBUTION LIMITS
2018 FOR 401(K) PLANS; HOWEVER, ADDITIONAL EFFORTS COULD FURTHER
IMPROVE COMPLIANCE
10/15/20 F-1, R-2: Take actions to bring taxpayers who contribute more than the annual limit
to multiple 401(k) plans into compliance with the law.
Potential Increased Revenue: $203,627,585
2019-10-009 October THE TAXPAYER ADVOCATE SERVICE CENTRALIZED CASE INTAKE
2018 PROGRAM NEEDS IMPROVEMENT TO PROVIDE BETTER CUSTOMER
SERVICE
12/15/20 F-1, R-4: Update IRM 13.3 and provide up-to-date guidance to Wage and
Investment Division contact representatives who staff the National Taxpayer
Advocate toll-free line pertaining to current procedures for the Centralized Case
Intake program.
12/15/20 F-1, R-6: Develop and measure progress toward specific and quantifiable program
goals for the Centralized Case Intake program that measure benefits to taxpayers,
the Taxpayer Advocate Service, and the IRS, such as increased customer
satisfaction, reduced direct case time or other measures of program impact.
2019-40-014 December PROCESSES ARE NEEDED TO IDENTIFY SMALL BUSINESSES
2018 ERRONEOUSLY CLAIMING THE RESEARCH TAX CREDIT PAYROLL TAX
OFFSET
11/15/20 F-1, R-1: Review the 81 businesses that TIGTA identified that did not meet the
eligibility requirements for claiming the Research Credit and recover any
erroneously claimed Research Credits.
2019-40-026 March MILLIONS OF DOLLARS IN POTENTIALLY ERRONEOUS EXCESS SOCIAL
2019 SECURITY TAX CREDIT CLAIMS ARE NOT ADDRESSED
10/15/20 F-3, R-1: Establish a process to send and measure the success associated with
soft notices that alert individuals to potential errors on their tax return related to
Excess Social Security Tax Credit claims.
Potential Increased Revenue: $28,327,843
10/15/20 F-3, R-2: Evaluate current resources expended on the issuance of soft notices to
ensure that notices are sent to those taxpayers with the highest tax assessment
potential to maximize the use of limited resources.
2019-20-017 April 2019 ELECTRONIC AUTHENTICATION SECURITY CONTROLS HAVE IMPROVED,
BUT CONTINUED PROGRESS IS NEEDED TO ENSURE THE PROTECTION OF
PUBLIC-FACING APPLICATIONS
02/15/23 F-1, R-1: Ensure that public-facing legacy applications are complying with National
Institute of Standards and Technology Special Publication 800-63-3 and that an
implementation plan includes specific timelines for accomplishing full compliance of
legacy applications.
2019-34-033 May 2019 IMPLEMENTATION OF THE TAX CUTS AND JOBS ACT DEEMED
REPATRIATION TAX PRESENTED SIGNIFICANT CHALLENGES
On Hold F-2, R-1: Take steps to ensure that Section 965 payments are recorded with the
correct designated payment code.
April 1, 2020 – September 30, 2020 55
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2019-20-031 June 2019 SOFTWARE VERSION CONTROL MANAGEMENT NEEDS IMPROVEMENT
10/15/20 F-1, R-3: Create and execute a plan to periodically monitor and compare software
running on the enterprise against the Enterprise Architecture Enterprise Standards
Profile Product Catalog for accuracy.
10/15/20 F-1, R-4: Remove unauthorized software or update the Enterprise Standards
Profile Product Catalog to reflect the correct information, if warranted.
10/15/20 F-1, R-5: Document and approve risk acceptance to continue using older versions
of software, i.e., sunset, archived/retired.
2019-40-042 July 2019 ACTIONS HAVE NOT BEEN TAKEN TO IMPROVE AMENDED TAX RETURN
REVIEW PROCEDURES TO REDUCE ERRONEOUS AND FRAUDULENT
REFUNDS
10/15/20 F-1, R-2: Implement adequate processes and procedures to identify and correct
employee errors to reduce erroneous refunds issued.
On Hold F-1, R-3: Complete a business case and request funding for expansion of e-filing to
amended returns in the 2020 Filing Season in an effort to reduce unnecessary
processing costs and erroneous refunds resulting from amended returns.
Potential Funds Put to Better Use: $79,413,315
10/15/20 F-2, R-1: Update tax examiner and Customer Service Representative review
guidelines to incorporate additional verification steps to be taken similar to those
systemically performed when verifying a refundable claim on an original tax return.
On Hold F-3, R-3: Establish processes to evaluate amended tax returns.
2019-40-044 August BILLIONS OF DOLLARS OF POTENTIALLY ERRONEOUS CARRYFORWARD
2019 CLAIMS ARE STILL NOT BEING ADDRESSED
10/15/21 F-1, R-1: Ensure that criteria is added to the Research Credit selection risk tool to
identify high-risk carryforward Research Credit discrepancy claims on returns
selected for examination and determine if the carryforward claims taken by the
taxpayers are accurate.
12/15/21 F-1, R-2: Identify and examine returns with discrepancies of General Business
Credit carryforward claims.
2019-30-047 August CRIMINAL INVESTIGATION SHOULD INCREASE ITS ROLE IN ENFORCEMENT
2019 EFFORTS AGAINST IDENTITY THEFT
12/15/20 F-1, R-1: Develop a process for transferring taxpayer-initiated cases to the Scheme
Tracking and Referral System for scheme development and CI consideration.
2019-40-048 August ADDITIONAL ACTIONS ARE NEEDED TO REDUCE ALIMONY REPORTING
2019 DISCREPANCIES ON INCOME TAX RETURNS
On Hold F-2, R-1: Include the validation of the alimony recipient TIN as part of the IRS’s tax
return processing systemic TIN validation process.
On Hold F-2, R-2: Modify Error Resolution System programming to send both e-filed and
paper tax returns that contain an invalid recipient TIN to the Error Resolution
function for review and correspondence with the taxpayer.
2019-20-049 August THE FIRST PHASE OF THE DATA LOSS PREVENTION SOLUTION IS
2019 WORKING AS INTENDED, BUT THE REMAINING PHASES CONTINUE TO
EXPERIENCE DELAYS
06/15/21 F-1, R-1: Deploy the Data-at-Rest and Data-in-Use components of the Data Loss
Prevention solution.
10/15/21 F-1, R-2: Ensure that project documents are prepared and maintained as required
for effective project management, which should help ensure the successful delivery
of the final two components of the Data Loss Prevention solution.
56 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2019-20-046 September THE BRING YOUR OWN DEVICE PROGRAM’S SECURITY CONTROLS NEED
2019 IMPROVEMENT
10/15/21 F-3, R-1: Ensure the retention of Bring Your Own Device (BYOD) program
application audit logs for the appropriate period and periodic review of the
application audit logs by an independent source.
10/15/21 F-4, R-1: Update BYOD program procedures and guidelines to include: 1) providing
malware prevention training to users; 2) updating the documentation for device
operating system and technical baseline configurations; 3) maintaining and
reviewing application audit logs, specifically time frames for each; 4) clarifying the
Computer Security Incident Response Center reporting procedures for a lost or
stolen device; 5) informing the BYOD program when a device is lost or stolen so
that the application data are remotely wiped; and 6) tracking the manual and
systemic application data wipes by the BYOD program on a periodic basis.
11/15/20 F-5, R-1: Ensure that BYOD program participants complete the security risk
awareness training annually and that the authorizing official certifies employee
training compliance.
2019-20-055 September CONTROLS SHOULD BE STRENGTHENED TO ENSURE TIMELY
2019 RESOLUTION OF INFORMATION TECHNOLOGY INCIDENT TICKETS
02/15/21 F-1, R-1: Update incident management performance goals and renegotiate specific
levels of service to better reflect current resource allocations.
04/15/21 F-2, R-1: Update incident management performance metrics to better align with
overall program objectives and expanded use in daily operations.
2019-30-059 September FISCAL YEAR 2019 STATUTORY REVIEW OF DISCLOSURE OF COLLECTION
2019 ACTIVITIES ON JOINT RETURNS
10/15/20 F-1, R-2: Require I.R.C. §§ 6103 (e)(7) and (e)(8) training for all employees with
taxpayer contact regarding balance due or collection issues to remind them of the
requirements to disclose tax return and collection activity on jointly filed returns
when requested from individuals who are no longer married or no longer reside in
the same household.
2019-20-061 September FIREWALL ADMINISTRATION NEEDS IMPROVEMENT
2019
11/15/20 F-1, R-1: Conduct annual reviews of all firewall rulesets in accordance with agency
policies and procedures.
11/15/20 F-1, R-2: Assign expiration dates not to exceed 365 days to firewall policies.
2019-20-062 September SOME COMPONENTS OF THE PRIVACY PROGRAM ARE EFFECTIVE;
2019 HOWEVER, IMPROVEMENTS ARE NEEDED
07/15/21 F-2, R-1: Implement a fully integrated information security continuous monitoring
process that includes privacy risks.
11/15/20 F-4, R-2: Update and maintain Privacy Impact Assessment Management System
(PIAMS) training courses to capture PIAMS enhancements.
11/15/20 F-4, R-3: Make completion of PIAMS training courses mandatory for preparers of
rejected Privacy and Civil Liberties Impact Assessments.
April 1, 2020 – September 30, 2020 57
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2019-30-069 September BILLIONS OF DOLLARS OF NONFILER EMPLOYMENT TAXES WENT
2019 UNASSESSED IN THE AUTOMATED 6020(b) PROGRAM DUE PRIMARILY TO
RESOURCE LIMITATIONS
11/15/20 F-1, R-1: Consider allocating additional resources to the Automated 6020(b)
(A6020(b)) program, beginning with the five Full-Time Equivalents planned for in
FY 2020, in conjunction with the SB/SE Division’s Nonfiler Strategic Plan and in
consultation with the Nonfiler Executive Steering Committee.
11/15/20 F-2, R-1: Consider revising the A6020(b) systemic case selection criteria to remove
the upper dollar threshold limit, revise the case assignment routing order, and
update the prioritization to focus on the highest dollar cases.
Potential Increased Revenue: $16,704,598,855
11/15/20 F-2, R-2: Consider revising the A6020(b) manual case selection criteria to remove
the upper dollar threshold limit.
11/15/20 F-2, R-3: Consider transferring the highest dollar standalone Taxpayer Delinquent
Investigation inventory from the Automated Collection System, the Collection
queue, and Field Collection to be worked by the planned five Full-Time Equivalents
in the A6020(b) program and continue to transfer higher dollar standalone Taxpayer
Delinquent Investigation inventory manually to the A6020(b) program until the
systemic criteria are revised.
2019-30-070 September FISCAL YEAR 2019 STATUTORY REVIEW OF COMPLIANCE WITH LEGAL
2019 GUIDELINES WHEN ISSUING LEVIES
09/15/21 F-1, R-2: Ensure that corrective programming is implemented so that Collection
Due Process (CDP) notices are issued for Federal contractor levies that are fully
paid after the levy issuance.
01/15/21 F-2, R-1: Determine the cause and take the appropriate corrective action(s) to
ensure that the Automated Collection System does not issue levies on taxpayers
without a CDP notice.
03/15/21 F-3, R-1: Ensure that corrective programming changes are implemented to
effectively prevent employees from incorrectly identifying disqualified employment
tax levies.
2019-40-071 September STRENGTHENED VALIDATION CONTROLS ARE NEEDED TO PROTECT
2019 AGAINST UNAUTHORIZED FILING AND INPUT OF FRAUDULENT
INFORMATION RETURNS
10/15/21 F-1, R-1: Ensure that the required Digital Identity Risk Assessment is completed for
the Filing Information Returns Electronically system and an implementation plan for
identity proofing the system’s users is developed.
02/15/21 F-2, R-2: Evaluate potential business rules and filters that could be implemented to
identify questionable information return submissions.
04/15/21 F-2, R-3: Develop processes to ensure that entities confirmed as suspicious, and
that received the account lock, are not allowed access to the Filing Information
Returns Electronically system and to prevent paper returns from posting to the
Information Returns Master File.
2019-30-072 September MILLIONS OF DOLLARS IN POTENTIALLY ERRONEOUS QUALIFIED PLUG-IN
2019 ELECTRIC DRIVE MOTOR VEHICLE CREDITS CONTINUE TO BE CLAIMED
USING INELIGIBLE VEHICLES
11/15/20 F-1, R-1: Use Vehicle Identification Numbers (VIN) provided by taxpayers on their
tax returns and readily available third-party VIN information to identify taxpayers
who are claiming the credit for nonqualifying vehicles, using the same VIN to obtain
the credit more than once, using invalid VINs, and using VINs associated to
previously leased vehicles.
02/15/21 F-1, R-2: Develop a compliance program to address the taxpayers who appear to
have erroneously received the Plug-In Credit by using a VIN associated to a
nonqualifying vehicle, using the same VIN more than once, using an invalid VIN,
using VINs associated with previously leased vehicles, or claiming a credit above
allowable thresholds (including the 68 taxpayers that TIGTA identified).
Potential Increased Revenue: $82,761,403
58 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2019-40-074 September ADDITIONAL ACTIONS ARE NEEDED TO FURTHER REDUCE
2019 UNDELIVERABLE MAIL
On Hold F-1, R-1: Develop Service-wide processes and procedures to ensure that all
operating divisions suppress the issuance of nonstatutory notices to taxpayers that
have an undelivered mail indicator on their account; suppress the issuance of
correspondence when a taxpayer’s address of record is an IRS campus; and
research and update taxpayer addresses for which the U.S. Postal Service returns
undeliverable mail with a yellow label that provides a more current address.
On Hold F-2, R-1: Install and use hygiene software to perfect taxpayer addresses on the
ITIN Real-Time System.
2019-30-076 September FISCAL YEAR 2019 STATUTORY REVIEW OF RESTRICTIONS ON DIRECTLY
2019 CONTACTING TAXPAYERS
10/15/20 F-1, R-2: Reemphasize the importance of examiners following established
guidelines and procedures on taxpayer representation rights, including enclosure of
Publication 1, Your Rights as a Taxpayer, in correspondence and discussing rights
during the initial taxpayer interview process.
10/15/20 F-2, R-2: Update guidance to employees that clarifies the applicability of I.R.C.
§§ 7521(b)(2) and (c) and develop training materials, specific to their casework, to
emphasize the importance of protecting taxpayers’ rights to representation and to
designate to whom group managers should report cases with potential violations.
2019-30-078 September THE USE OF SCHEDULE K-1 DATA TO ADDRESS TAXPAYER
2019 NONCOMPLIANCE CAN BE IMPROVED
11/15/20 F-1, R-1: Conduct periodic outreach to encourage submission of reliable
Schedule K-1 data to the IRS.
11/15/21 F-1, R-3: Establish a process to use more e-filed Schedule K-1 data for
noncompliance identification and determine the feasibility of transcribing more data
from paper Schedule K-1.
11/15/20 F-2, R-2: Update flow-through form instructions to explain how a flow-through entity
should address reporting a deceased recipient and the steps a flow-through entity
could take to ensure that accurate recipient information is entered on
Schedules K-1 when ownership changes from a deceased recipient.
11/15/20 F-3, R-1: Conduct periodic outreach to reinforce how Schedule K-1 amounts should
be reported on tax returns to prevent underreporter discrepancies.
On Hold F-3, R-3: Ensure that the computer problem that caused amended Schedules K-1
not to be marked as amended on the Information Returns Master File has been
corrected.
On Hold F-3, R-4: Establish a process to record Schedules K-1 as amended when
submitted with an amended flow-through return regardless of whether the
Schedule K-1 itself is marked as amended.
2019-10-080 September PROCESSES DO NOT ADEQUATELY REDUCE THE RISK THAT OUTSIDE
2019 EMPLOYMENT ACTIVITIES WILL CONFLICT WITH EMPLOYEES’ OFFICIAL
DUTIES
09/15/21 F-2, R-3: Revise internal outside employment guidelines to require employees to
resubmit their outside employment requests at least annually and modify the
Outside Employment System to allow for the systemic closure of all requests for
which a renewal was not timely received.
09/15/21 F-2, R-4: Create a plan for housing the Outside Employment System or create a
new database to ensure that outside employment requests are tracked after the
Totally Automated Personnel System is shut down.
2019-10-081 September PROCESSES AND PROCEDURES FOR REHIRING EMPLOYEES WITH PRIOR
2019 CONDUCT OR PERFORMANCE ISSUES WERE IMPLEMENTED BUT NOT
ALWAYS FOLLOWED
01/15/21 F-1, R-1: Update the IRM to require Employment Talent and Security staff to review
all Automated Labor and Employer Relations Tracking System issues in the hiring
tool, not just those within the past six years.
April 1, 2020 – September 30, 2020 59
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2020-10-003 November FISCAL YEAR 2019 DIGITAL ACCOUNTABILITY AND TRANSPARENCY ACT
2019 REPORTING COMPLIANCE
10/15/20 F-1, R-1: Establish procedures to guide the performance of the planned quality
assurance reviews, such as how frequently the reviews will be performed and how
the sample size will be determined, and initiate the reviews.
2020-40-004 November ACTIONS ARE NEEDED TO IMPROVE THE SAFEGUARDING OF TAXPAYER
2019 INFORMATION AT VOLUNTEER PROGRAM SITES
11/15/20 F-1, R-1: Issue guidance to Volunteer Program partners requiring the development
of an information security plan for each of their sites.
11/15/20 F-2, R-1: Require site coordinators to use the security feature included in the tax
preparation software to restrict volunteers’ access to prepared returns.
12/15/20 F-2, R-2: Develop processes and procedures to confirm site coordinators are
aware of security requirements and hold discussions with volunteers at the sites to
review these security requirements.
11/15/20 F-2, R-3: Ensure that site reviews include an assessment of compliance with
security controls outlined in Publication 4299, Privacy, Confidentiality, and Civil
Rights – A Public Trust.
12/15/20 F-3, R-1: Update procedures for partners to validate volunteers’ identity using only
Government-issued identification prior to participating in the Volunteer Program.
12/15/20 F-3, R-3: Develop procedures to evaluate security incidents at Volunteer Program
sites to identify affected taxpayers whose information is at risk and forward their
TINs to the Return Integrity and Compliance Services function for evaluation and
potential inclusion on the Dynamic Selection List.
12/15/20 F-3, R-4: Emphasize to all volunteer sites and partners their responsibilities
in Publication 4299 to evaluate and report to the IRS all partner-owned and
IRS-loaned lost or stolen computers.
2020-40-005 November IMPROVEMENTS ARE NEEDED TO ENSURE THAT CONSISTENT SUITABILITY
2019 CHECKS ARE PERFORMED FOR PARTICIPATION IN INTERNAL REVENUE
SERVICE PROGRAMS
09/15/21 F-4, R-1: Work with the Federal Bureau of Investigations to identify additional
individuals who submitted fingerprint cards subsequent to September 13, 2016, that
match the fingerprints of another individual.
On Hold F-4, R-2: Develop processes and procedures to ensure that continuous criminal
background checks are conducted on all program participants as part of the Federal
Bureau of Investigations Records of Arrests and Prosecutions Back Program.
2020-10-001 January MANY ORGANIZATIONS ARE NOT NOTIFYING THE INTERNAL REVENUE
2020 SERVICE OF THEIR INTENT TO OPERATE UNDER INTERNAL REVENUE
CODE SECTION 501 (c)(4) AS REQUIRED BY LAW
03/15/21 F-1, R-2: Use internal sources of information, e.g., applications for tax-exempt
status filed after July 8, 2016, to assist with detecting I.R.C. § 501(c)(4)
organizations that have not filed Forms 8976, Notice of Intent to Operate Under
Section 501(c)(4), and update the Exempt Organization function’s Determinations
Unit procedures to include verifying that I.R.C. § 501(c)(4) organizations have met
their Form 8976 notification requirement when processing applications for tax
exempt status.
04/15/21 F-1, R-4: Revise the Computer Paragraph 120 Notice to include information about
the Form 8976 notification requirement and the Form 1024-A, Application for
Recognition of Exemption Under § 501(c)(4) of the I.R.C.
03/15/21 F-1, R-6: Update the Exempt Organization function’s examination procedures to
include ensuring that I.R.C. § 501(c)(4) organizations have met their Form 8976
notification requirement and assessing penalties against responsible officials when
appropriate.
03/15/21 F-3, R-1: Update procedures to ensure that Exempt Organization’s Determinations
Unit tax examiners do not include conflicting information in notices when the filer is
informed about why a Form 8976 was rejected, e.g., develop additional standard
paragraphs that would eliminate possible confusion.
60 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2020-44-007 January RESULTS OF THE 2019 FILING SEASON
2020
On Hold F-2, R-2: Implement programming to compute the correct allowable increase in the
standard deduction for tax returns for which a taxpayer does not have an entry for
the spouse but checks one or more of the checkboxes that indicate that the spouse
was age 65 or older and/or was blind.
On Hold F-2, R-3: Correct programming to no longer reject tax returns with a blank or zero
amount on the Other Adjustments Statement.
On Hold F-2, R-4: Implement programming to reject tax returns with claims for the Child Tax
Credit and/or Additional Child Tax Credit (ACTC) when the child claimed has an
Adoption Taxpayer Identification Number or ITIN. In addition, ensure that
programming is corrected to reject tax returns with claims for the ACTC that exceed
the statutory limit of $1,400 per child.
On Hold F-2, R-11: Create a business rule to reject tax returns when a casualty and theft
loss deduction is included on Schedule A, Itemized Deductions, and Form 4684,
Casualties and Thefts, does not include the required Federal Emergency
Management Agency disaster declaration number.
2020-20-006 February ACTIVE DIRECTORY OVERSIGHT NEEDS IMPROVEMENT
2020
10/15/20 F-1, R-2: Physically separate the submission processing equipment from the
Integrated Submission and Remittance Processing (ISRP) domain controllers and
enforce access standards for critical areas.
12/15/21 F-1, R-3: Prioritize all computer rooms housing ISRP domain controllers for access
control upgrades to ensure that these rooms are compliant with Federal multifactor
authentication requirements.
12/15/20 F-2, R-5: Review all business role accounts in the ISRP Active Directory forests
and ensure that they are in compliance with IRM policy regarding account disabling,
quarantining, and removal.
12/15/20 F-2, R-6: Ensure that business role account passwords are appropriately
configured to expire and require that Personal Identity Verification cards be used in
accordance with policy.
12/15/20 F-2, R-7: Ensure that service account passwords are appropriately configured to
expire.
2020-40-008 February AUTHORITIES PROVIDED BY THE INTERNAL REVENUE CODE ARE NOT
2020 EFFECTIVELY USED TO ADDRESS ERRONEOUS REFUNDABLE CREDIT AND
WITHHOLDING CREDIT CLAIMS
04/15/21 F-1, R-1: Assess the erroneous refund penalty for reduced or disallowed
withholding and refundable credit claims on all claims for which the IRS determines
the claim is excessive and does not have a reasonable basis, and the taxpayer is
not subject to the penalties under I.R.C. §§ 6662, 6662A, and 6663.
Potential Increased Revenue: $534,674,880
On Hold F-2, R-2: Develop processes and procedures to manually set a recertification
indicator on tax accounts associated with refundable credit claims that were
disallowed through the Automated Questionable Credit (AQC) program until a
systemic process is implemented.
10/15/20 F-2, R-3: Add recertification indicators to the tax accounts of the 6,259 cases that
TIGTA identified with a refundable credit claim disallowed through the AQC
program.
Potential Funds Put to Better Use: $371,958,300
On Hold F-2, R-4: Ensure that a systemic process is implemented to set the recertification
indicator on taxpayers’ accounts when refundable credit claims are disallowed as
part of the IRS’s AQC program.
04/15/21 F-3, R-1: Update the systemic process to include applying the two-year ban for
disallowed ACTC and American Opportunity Tax Credit claims.
April 1, 2020 – September 30, 2020 61
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2020-40-009 February COMPLEXITY AND INSUFFICIENT OVERSIGHT OF THE FREE FILE PROGRAM
2020 RESULT IN LOW TAXPAYER PARTICIPATION
10/15/21 F-1, R-2: Require Free File Inc. (FFI) members to fully disclose all criteria on the
IRS.gov Free File web page that taxpayers must meet to e-file their Federal tax
return for free.
10/15/20 F-2, R-1: Take immediate action to address the IRS Advisory Council’s
recommendations to: 1) establish goals and performance metrics for the Free File
Program, 2) develop standards for frequently logging on to members’ Free File
websites as taxpayers and preparing returns that meet the members’ Free File
criteria, and
3) test members’ websites to simulate returning Free File taxpayers to determine if
the websites direct taxpayers to the Free File web page.
02/15/21 F-2, R-3: Update the Adherence Testing Review Guide to include the specific tests
to be performed to assess FFI member compliance with Memorandum of
Understanding requirements.
10/15/20 F-3, R-1: Clearly inform taxpayers of their rights and protections in the Free File
Program.
10/15/20 F-3, R-2: Develop a process for taxpayers to provide feedback or concerns on their
experience using Free File and inform taxpayers of this process by providing
information on both the IRS’s Free File web page and FFI members’ Free File web
pages.
12/15/20 F-3, R-3: Work with FFI members to develop procedures to conduct customer
satisfaction surveys.
2020-20-010 March THE ENTERPRISE CLOUD PROGRAM DEVELOPED A STRATEGY, BUT
2020 WORK REMAINS TO ACHIEVE CLOUD-BASED MODERNIZATION GOALS
03/15/21 F-1, R-1: Ensure that the December 2017 IRS Enterprise-wide cloud strategy is
updated periodically to reflect current Federal and Treasury Department guidance
and requirements.
08/15/21 F-1, R-2: Ensure that all workstreams needed for implementing the Enterprise-wide
cloud strategy are developed.
08/15/21 F-2, R-2: Develop Enterprise-wide policies and procedures that specifically address
cloud requirements that must be considered and met prior to deciding to procure
cloud services.
08/15/21 F-2, R-3: Ensure IRS adherence to the Federal Information Technology Acquisition
Reform Act legislation and Cloud First policy by requiring all new information
technology projects be evaluated by the Enterprise Cloud Program for cloud service
consideration and approval.
2020-20-012 March WHILE PROGRESS IS BEING MADE ON DIGITAL IDENTITY REQUIREMENTS,
2020 COMPLETION DATES TO ACHIEVE COMPLIANCE WITH IDENTITY PROOFING
STANDARDS HAVE NOT BEEN ESTABLISHED
02/15/22 F-2, R-1: Ensure that the Identity and Access Management Design and Innovation
Branch performs the planned tests; completes a go/no-go evaluation of the Secure
Access Digital Identity (SADI) platform based on the results from the tests;
determines and incorporates the additional needs for the initial release of the SADI
platform; and develops and implements the plan to successfully migrate all of the
online applications from the current system of processes to the SADI platform, as
expeditiously as is possible.
10/15/20 F-2, R-2: Coordinate with the Treasury Department on legislative proposals or
policy changes needed to obtain additional assistance from States, Territories, and
Federal agencies that issue identifications in identity proofing users of the IRS’s
public-facing applications that require the Identity Assurance Level 2.
62 April 1, 2020 – September 30, 2020
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2020-40-014 March MILLIONS OF DOLLARS IN DISCREPANCIES IN TAX WITHHOLDING
2020 REQUIRED BY THE FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
ARE NOT BEING IDENTIFIED OR ADDRESSED
10/15/20 F-1, R-1: Initiate actions to address the accuracy of existing data in the Foreign
Investment in Real Property Tax Act (FIRPTA) database.
10/15/20 F-1, R-3: Ensure that tax examiners are aware of the procedures to properly
allocate FIRPTA withholding among multiple sellers when the buyer does not
correctly submit a Form 8288-A, Statement of Withholding on Dispositions by
Foreign Persons of U.S. Real Property Interests, for each seller.
10/15/20 F-1, R-4: Review the 2,988 buyers that TIGTA identified with a discrepancy
between the withholding reported on Form 8288, U.S. Withholding Tax Return for
Dispositions by Foreign Persons of U.S. Real Property Interests, and the
withholding reported on the associated Form 8288-A and correct the withholding
recorded in the FIRPTA database or the buyer’s tax account as appropriate.
On Hold F-2, R-1: Implement processes and procedures to ensure that tax examiners
accurately determine and assess the proper amount of FIRPTA withholding tax a
buyer should report and pay when the application for the Withholding Certificate
attached to the Form 8288 was not filed on or before the date of transfer of the
property.
10/15/20 F-2, R-2: Ensure that tax examiners are aware of the processes and procedures to
determine and assess the proper amount of FIRPTA withholding tax a buyer should
report and pay when the buyer reports reduced withholding and no Withholding
Certificate is attached to the Form 8288.
10/15/20 F-2, R-3: Implement processes and procedures to ensure that tax examiners
accurately determine and assess the proper amount of FIRPTA withholding tax a
buyer should report and pay when an approved Withholding Certificate is attached
to the Form 8288.
10/15/20 F-2, R-4: Ensure that the correct amount of FIRPTA withholding tax is assessed for
the buyers that filed the 2,268 Forms 8288 that TIGTA identified for which the
Withholding Certificate was not submitted timely and the 916 Forms 8288 that
TIGTA identified for which the assessed withholding is not supported by an
approved Withholding Certificate.
10/15/20 F-3, R-1: Review the 1,835 taxpayers that TIGTA identified that potentially received
erroneous FIRPTA withholding credits and take the appropriate steps to recover
credits paid in error.
10/15/20 F-3, R-2: Ensure that tax examiners document the steps taken to verify the claim in
the Credit Verification section of the FIRPTA database as required.
2020-10-016 March BOND PROMOTER MISCONDUCT PROCEDURES SHOULD BE IMPROVED
2020
11/15/20 F-1, R-1: Update guidance to require examiners to document their consideration of
whether promoter penalties are warranted, or not, in every examination and in the
same file location. Provide examiners training on guidance updates.
11/15/20 F-1, R-2: Ensure that quality reviewers determine whether examiners consider
promoter penalties and provide corrective actions when appropriate.
11/15/20 F-1, R-3: Develop a comprehensive training program for Tax Exempt Bonds office
examiners that: 1) prepares examiners to consider whether promoter penalties are
warranted or not; 2) prepares examiners to accurately document their consideration
of promoter penalties and all other required case actions in every tax-advantaged
bond examination; 3) trains examiners to develop promoter penalty referrals for the
Lead Development Center; 4) trains examiners to properly complete and document
their workpapers; 5) uses Tax Exempt Quality Measurement System reports to
evaluate the training program and make changes as necessary and offers periodic
refresher courses as needed; and 6) tracks and documents attendance and subject
matter.
07/15/21 F-2, R-1: Develop a data-driven method to track and quantify specific
noncompliance issues, i.e., the promoter penalty, that are otherwise embedded in
generic reference numbers, and update related guidance and train employees as
needed.
11/15/20 F-2, R-2: Improve identification of Tax Exempt Bonds office examination inventory
by considering the merits of cases pursued by the Securities and Exchange
Commission or reported by media outlets.
April 1, 2020 – September 30, 2020 63
Projected
Reference Completion Report Title and Recommendation Summary
Number Issued Date (F = Finding No., R = Recommendation No.)
2020-30-017 March THE GROWTH OF THE MARIJUANA INDUSTRY WARRANTS INCREASED TAX
2020 COMPLIANCE EFFORTS AND ADDITIONAL GUIDANCE
04/15/21 F-1, R-1: Develop a comprehensive compliance approach, i.e., national
Compliance Initiative Project, for this industry and leverage State marijuana
business lists to identify noncompliant taxpayers.
Potential Increased Revenue: $242,574,875
01/15/21 F-2, R-1: Develop guidance specific to the marijuana industry, such as Frequently
Asked Questions, and document and publicize it on the IRS.gov website to improve
awareness of the tax filing requirements for taxpayers in this industry, such as the
application of I.R.C. § 280E.
10/15/21 F-3, R-1: Leverage publically available State tax information and expand use of
Fed/State agreements to identify nonfilers and unreported income in the marijuana
industry.
Potential Increased Revenue: $19,345,235
01/15/21 F-4, R-1: Increase educational outreach towards unbanked taxpayers making cash
deposits regarding the unbanked relief policies available.
2020-40-019 March A STRATEGY IS NEEDED TO ADDRESS HIRING SHORTAGES AS EFFORTS
2020 CONTINUE TO CLOSE TAX PROCESSING CENTERS
10/15/20 F-1, R-1: Develop a long-term recruitment strategy in an effort to ensure that the
end-state Tax Processing Centers are sufficiently staffed. This strategy should also
include contingency plans to address hiring shortages.
2020-40-020 March ACTIONS CAN BE TAKEN TO PROACTIVELY REDUCE UNPOSTABLE
2020 TRANSACTIONS
10/15/20 F-1, R-1: Establish procedures in the Post-Processing Section to track and monitor
instances of large volumes of repeated unpostable transactions created by IRS
functional areas and to coordinate with the functions to proactively reduce the
volume of cases.
Potential Funds Put to Better Use: $91,900
64 April 1, 2020 – September 30, 2020
Other Statistical Reports
The Inspector General Empowerment Act of 2016 requires Inspectors General to
address the following issues for the Offices of Audit and Inspections and
Evaluations: 39
Issue Result for TIGTA
Interference/Access to Information
Report any attempt to interfere with the independence of As of September 30, 2020, there were no attempts
TIGTA, including: budget constraints designed to limit the to interfere with the independence of TIGTA or any
capabilities of TIGTA; and incidents of resistance or objection instances of restricted or significantly delayed
to oversight activities of TIGTA. access to information.
Report restricted or significantly delayed access to
information, including the justification of the establishment for
such action.
Disputed Recommendations
Provide information on significant management decisions in As of September 30, 2020, there were no instances
response to recommendations with which the Inspector in which significant recommendations were
General disagrees. disputed.
Revised Management Decisions
Provide a description and explanation of the reasons for any As of September 30, 2020, there were no
significant revised management decisions made during the significant revised management decisions.
reporting period.
Reports Issued in the Prior Reporting Period With No
Management Response As of September 30, 2020, there were no prior
Provide a summary of each report issued before the reports for which management’s response was not
beginning of the current reporting period for which no received within 60 days of issuance.
management response was received within 60 days of the
report issuance date.
Disclosure
Provide detailed descriptions of the circumstances of each As of September 30, 2020, there were no reports
inspection, evaluation, and audit that was closed by the that had been closed and were not disclosed to the
agency and was not disclosed to the public. public.
Review of Legislation and Regulations
Review existing and proposed legislation and regulations, TIGTA’s Office of Chief Counsel reviewed 176
and make recommendations concerning the impact of such proposed regulations and legislative requests
legislation or regulations. during this reporting period.
39 Results listed are for this reporting period only.
April 1, 2020 – September 30, 2020 65
Appendix II
Audit Products
April 1, 2020 – September 30, 2020
Audit Products
Reference
Number Report Title Outcome Measure(s)
April 2020
2020-45-024 Interim Results of the 2020 Filing Season
Improper Payment Reporting Has Improved; However, Revenue Protection:
2020-40-025 There Have Been No Significant Reductions to the Billions $10,959,434
of Dollars of Improper Payments
May 2020
Undercover Travel Expenses Were Generally Supported;
2020-10-030
However, Controls Could Be Improved
Increased Revenue:
Additional Actions Could Improve Compliance With Early $51,258,891 impacting
2020-10-018
Retirement Distribution Tax Requirements 7,222 taxpayer accounts
Funds Put to Better Use:
$67,122; Increased Revenue:
$2,544,634 impacting
Improvements Are Needed to Ensure That Members of the 358 taxpayer accounts;
2020-40-029
Military Receive Tax Benefits to Which They Are Entitled Taxpayer Rights and
Entitlements: $638,451
impacting 7,927 taxpayer
accounts
Increased Revenue:
High-Income Nonfilers Owing Billions of Dollars Are Not $9,314,072,425 impacting
2020-30-015
Being Worked by the Internal Revenue Service 369,180 taxpayer accounts
June 2020
Reliability of Information:
Some Corrective Actions to Address Reported Information Nine Planned Corrective
2020-20-022 Technology Weaknesses Were Not Fully and Actions and three Knowledge
Effectively Implemented and Documented Incident Service Asset
Management tickets
Large Dollar Refunds Are Not Always Examined and Sent
2020-30-023
to the Joint Committee on Taxation
Increased Revenue:
$4,473,185,221; Taxpayer
Improvements Are Needed to Ensure That Employer
2020-43-028 Rights and Entitlements:
Shared Responsibility Payments Are Properly Assessed
90 taxpayer accounts
impacted
Tax Return Preparers With Delinquent Tax Returns, Tax Increased Revenue:
2020-30-027 Liabilities, and Preparer Penalties Should Be More $45,643,862
Effectively Prioritized
66 April 1, 2020 – September 30, 2020
Revenue Protection:
$184,114,263 impacting
5,077 taxpayer accounts:
Withholding Compliance Efforts for Partnerships With Reliability of Information:
2020-30-026
Foreign Partners Can Be Improved $723,330,324 impacting
29,483 taxpayer accounts
and 1,183 Forms 8804
Revenue Protection:
Continued Efforts Are Needed to Address Billions of Dollars $704,909,928; Reliability of
2020-40-021 in Reporting and Payment Discrepancies Relating to Tax Information: 62,065 Forms
Withheld From Foreign Persons 1042-S and 23,373 Amended
Forms 10-42-S
The Large Case Examination Selection Method Inefficient Use of Resources:
2020-30-031 $22,723,590
Consistently Results in High No-Change Rates
Performance Measures Are Needed to Evaluate the
2020-10-032
Results of Direct Pay Bond Processing Changes
Access to Facilities and Sensitive Taxpayer Information
2020-10-034
Was Not Always Revoked for Separated Employees
Interim Results of the 2020 Filing Season: Effect of
COVID-19 Shutdown on Tax Processing and Customer
2020-46-041
Service Operations and Assessment of Efforts to
Implement Legislative Provisions
July 2020
Taxpayer Rights and
Fiscal Year 2020 Mandatory Review of Compliance With Entitlements: 369 Freedom of
2020-10-038
the Freedom of Information Act Information Act (FOIA)
requests
Tax Compliance Checks for Federal Employment Suitability
2020-10-035
Have Improved, but There Are Still Some Inconsistencies
Reliability of Information:
$4,293,287, 66 non-
The Annual Inventory Certification Process for
2020-10-039 information technology
Non-Information Technology Assets Needs Improvement
assets, and 26 information
technology assets
Constantly Evolving Refund Fraud Patterns Require
2020-40-040 Continued Refinement and Development of Detection
Initiatives
Review of the Internal Revenue Service’s Purchase Card
2020-10-049
Violations Report
Reliability of Information:
Most Internal Revenue Service Applications Do Not Have 28 IRS applications; Taxpayer
2020-20-033 Sufficient Audit Trails to Detect Unauthorized Access to Privacy and Security: 31 IRS
Sensitive Information applications
August 2020
Fiscal Year 2020 Statutory Audit of Compliance With
2020-30-047 Notifying Taxpayers of Their Rights When Requested to
Extend the Assessment Statute
Strategies and Protocols to Authenticate Network User
2020-20-036 Identities Are Effective; However, More Action Is Needed to
Verify the Identity of Devices
April 1, 2020 – September 30, 2020 67
Reliability of Information:
Existing Controls Did Not Prevent Unauthorized 351 taxpayer accounts
2020-10-042 Disclosures and Case Documentation Issues in Appeals impacted; Taxpayer Privacy
Trust Fund Recovery Penalty Cases and Security 40
Fiscal Year 2020 Statutory Review of Disclosure of
2020-30-048
Collection Activities on Joint Returns
Fiscal Year 2020 Statutory Review of Restrictions on
2020-30-046
Directly Contacting Taxpayers
Reliability of Information:
2020-20-044 Legacy Systems Management Needs Improvement 383 computer systems
impacted
Substantial Progress Has Been Made in Implementing the
2020-20-043
Insider Threat Capability, but Improvements Are Needed
Increased Revenue:
1,142 taxpayer accounts
Review of the Independent Office of Appeals Collection impacted; Taxpayer Rights
2020-10-054
Due Process Program and Entitlements:
3,760 taxpayer accounts
impacted
Controls Over the Management and Security of Official
2020-10-051
Passports Need Improvement
Taxpayer Privacy and
Sensitive Tax Records Could Not Always Be Located or Security: 6,992 examination
2020-10-050
Timely Provided files impacted
September 2020
Taxpayer Privacy and
Security: 43,818 taxpayer
Improvements Are Needed to Address Continued accounts impacted; Reliability
2020-40-067 Deficiencies in Ensuring the Accuracy of the Centralized of Information: 136,264
Authorization File representatives with
unconfirmed credentials
Reliability of Information:
67 cases impacted; Taxpayer
Fiscal Year 2020 Statutory Review of Potential Fair Tax Rights and Entitlements:
2020-30-053
Collection Practices Violations 51 cases impacted; Taxpayer
Burden: six cases impacted
Reliability of Information:
The Accuracy of Currency Transaction Report Data in IRS
25,243,479 Currency
2020-30-055 Systems Should Be Improved to Enhance Its Usefulness
Transaction Report records
for Compliance Purposes
impacted
Fiscal Year 2020 Statutory Audit of Compliance With Legal
2020-30-057 Guidelines Prohibiting the Use of Illegal Tax Protester and
Similar Designations
Taxpayer Rights and
Fiscal Year 2020 Statutory Review of Compliance With Entitlements: 351 taxpayer
2020-30-065
Legal Guidelines When Issuing Levies accounts impacted 41
40 Taxpayer information is redacted because TIGTA has determined that it is tax return information related to taxpayer
privacy.
41 Taxpayer information is redacted because TIGTA has determined that it is tax return information related to taxpayer
privacy.
68 April 1, 2020 – September 30, 2020
Revenue Protection:
Controls Over Offset Bypass Refunds Processed by the
$288,890 impacting 22 Offset
Taxpayer Advocate Service Should Be Improved to Reduce
2020-10-069 Bypass Refunds; Reliability of
the Risk of Abuse and Allow for More Consistent Treatment
Information: 138 Offset
of Taxpayers
Bypass Refunds impacted
Fiscal Year 2020 Review of Compliance With Legal Taxpayer Rights and
2020-30-058 Guidelines When Conducting Seizures of Taxpayers’ Entitlements: 30 taxpayer
Property accounts impacted 42
Taxpayer Rights and
Taxpayer First Act: Implementation of Identity Theft Victim
2020-45-070 Entitlements: 275,245
Assistance Provisions
taxpayer accounts impacted
The Individual Tax Processing Engine Project Is Making
2020-20-062
Progress
Fiscal Year 2020 Statutory Audit of Compliance With Legal
2020-30-059 Guidelines Restricting the Use of Records of Tax
Enforcement Results
Fiscal Year 2020 Statutory Review of Compliance With
2020-30-068
Notice of Federal Tax Lien Filing Due Process Procedures
Funds Put to Better Use:
$4,743,068; Revenue
Protection: $1,270,662 and
509 ITIN impacted; Reliability
of Information: 3,554 ITINs
and 683,839 ITIN applications
Processes Do Not Ensure That Individual Taxpayer impacted; Taxpayer Privacy
2020-40-064 Identification Numbers Are Issued Only to Qualifying and Security: 3,344 ITIN
Individuals With a Tax Administration Need application support
documents impacted;
Taxpayer Burden:
7,003 ITINs impacted;
Taxpayer Rights and
Entitlements: 371 taxpayer
accounts impacted
Reliability of Information:
205 wireless access points
Improvements Are Needed to Ensure That Wireless impacted; Taxpayer Privacy
2020-20-063 and Security: 24 IRS
Networks Are Secure
multifunction printers
impacted
The Enterprise Case Management Solution Deployment Is
2020-20-061 Delayed, and Additional Actions Are Needed to Develop a
Decommissioning Strategy
The Internal Revenue Service Can Improve Taxpayer
2020-30-066
Compliance for Virtual Currency Transactions
Process Automation Benefits Are Not Being Maximized, Funds Put to Better Use:
2020-20-060 $2,427,000
and Development Processes Need Improvement
Fiscal Year 2020 Evaluation of the Internal Revenue
2020-20-073 Service’s Cybersecurity Program Against the Federal
Information Security Modernization Act
42 Taxpayer information is redacted because TIGTA has determined that it is tax return information related to taxpayer
privacy.
April 1, 2020 – September 30, 2020 69
Individual Returns With Large Business Losses and No
2020-30-056
Income Pose Significant Compliance Risk
Increased Revenue:
$24,177,008; Reliability of
More Enforcement and a Centralized Compliance Effort Are Information:
2020-30-071
Required for Expatriation Provisions 16,798 expatriates
information impacted
Reliability of Information:
Mainframe Computing Environment Security Needs
2020-20-045 52 logical partitions
Improvement
impacted 43
Increased Revenue:
$184,753,344 impacting
48,044 Forms 1120-S, U.S.
Income Tax Return for an S
Processes Do Not Ensure That Taxpayers Filing an Corporation, and 6,897
2020-40-052 Incorrect Form 1120 Series Tax Return Are Appropriately Forms 1120, U.S. Corporation
*************** 44 Income Tax Return; Taxpayer
Burden: 1,588 taxpayer
accounts impacted; Taxpayer
Rights and Entitlements:
2,290 taxpayers impacted
43 Information is redacted because TIGTA has determined that it is law enforcement information.
44 Information is redacted because TIGTA has determined that it is law enforcement information.
70 April 1, 2020 – September 30, 2020
Appendix III
TIGTA’s Statutory Reporting Requirements
The following table reflects the FY 2020 statutory reviews.
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Enforcement Statistics Requires TIGTA to evaluate the Ref. No. 2020-30-059; Sept. 2020
IRS’s compliance with restrictions From a sample, TIGTA identified instances
I.R.C. § 7803(d)(1)(A) under RRA 98 § 1204 on the use of of noncompliance with each of the following
enforcement statistics to evaluate IRS subsections of RRA 98: one instance of
employees. § 1204(a) noncompliance in which one IRS
manager self-certified, as part of the IRS’s
internal control process, the use of a record
of tax enforcement results (ROTER) during
one employee’s workload review; 86
instances of § 1204(b) in which IRS
managers failed to either maintain the
retention standard documentation or ensure
that it was appropriately signed and dated;
and one instance of § 1204(c) in which one
manager did not properly certify in writing to
the IRS Commissioner whether ROTERs
and/or production quotas or goals were used
in a prohibited manner.
Restrictions on Directly Requires TIGTA to evaluate the IRS’s Ref. No. 2020-30-046; Aug. 2020
Contacting Taxpayers compliance with restrictions under TIGTA selected a statistically valid sample
I.R.C. § 7521 on directly contacting of case histories to review in the Field
I.R.C. § 7803(d)(1)(A)(ii) taxpayers who have indicated they Collection function for 96 taxpayers who
prefer their representatives be had collection actions documented on the
contacted. Integrated Collection System between
July 1, 2018 and June 30, 2019. TIGTA
found three instances in which revenue
officers contacted taxpayers directly, even
though there was an authorized
representative on file. The contacts
appeared to have violated I.R.C. § 6304,
which could indicate that the rights granted
under I.R.C. § 7521 were also not protected.
For six of the 96 cases, Field Collection
function employees disclosed taxpayer
information to individuals not authorized to
receive that information.
Filing of a Notice of Lien Requires TIGTA to evaluate the IRS’s Ref. No. 2020-30-068; Sept. 2020
compliance with required procedures Tests of a statistically valid sample of
I.R.C. § 7803(d)(1)(A)(iii) under I.R.C. § 6320(a) upon the filing 116 Notice of Federal Tax Liens (NFTL)
of a notice of lien. determined that the IRS timely and correctly
mailed the NFTL and appeal rights notices to
the taxpayers’ last known address.
However, tests of a judgmental sample of
120 undelivered lien notices identified five
cases for which the address on the original
lien notice and the address on the IRS
computer system did not agree.
Extensions of the Statute of Requires TIGTA to include Ref. No. 2020-30-047; Aug. 2020
Limitations for Assessment of information regarding extensions of TIGTA’s review of a statistical sample of
Tax the statute of limitations for 34 closed taxpayer audit files with
assessment of tax under I.R.C. assessment statute extensions found
I.R.C. § 7803(d)(1)(C) § 6501 and the provision of notice to that the IRS was compliant with I.R.C.
I.R.C. § 6501(c)(4)(B) taxpayers regarding the right to refuse § 6501(c)(4)(B). However, eight of the
or limit the extension of particular taxpayer audit files lacked documentation to
issues or a particular period of time. support that employees followed the IRS’s
internal procedures for further explaining the
taxpayers’ rights to the taxpayers.
April 1, 2020 – September 30, 2020 71
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Levies Requires TIGTA to evaluate the IRS’s Ref. No. 2020-30-065; Sept. 2020
compliance with required procedures TIGTA reviewed the levies issued to
I.R.C. § 7803(d)(1)(A)(iv) under I.R.C. § 6330 regarding levies. taxpayers by the different functions within the
IRS Collection organization during the
period October 1, 2018 through
September 30, 2019. TIGTA’s review of
Automated Collection System levies showed
that taxpayers’ rights were not always
protected for both systemic and paper levies.
The review of levies issued by revenue
officers in Field Collection showed that
taxpayers’ rights were not always protected
for both systemically and manually issued
levies.
Collection Due Process Requires TIGTA to evaluate the IRS’s Ref. No. 2020-10-054; Aug. 2020
compliance with required procedures Appeals properly informed taxpayers that
I.R.C. §§ 7803(d)(1)(A)(iii) and (iv) under I.R.C. §§ 6320 and 6330 CDP and Equivalent Hearings were
regarding taxpayers’ rights to appeal conducted by an impartial hearing officer
lien or levy actions. with no prior involvement with the tax or tax
periods covered by the hearing. However,
TIGTA identified some hearing processing
errors that were similar to errors identified in
prior reports. Specifically, Appeals
misclassified CDP or Equivalent Hearing
cases, the Collection function did not timely
forward misdirected Equivalent Hearing
cases to the correct location, and taxpayer
accounts had Collection Statute Expiration
Date errors due to incorrectly input
suspension start and stop dates.
Seizures Requires TIGTA to evaluate the IRS’s Ref. No. 2020-30-058; Sept. 2020
compliance with required procedures TIGTA reviewed 205 (60 percent) of the
I.R.C. § 7803(d)(1)(A)(iv) under I.R.C. §§ 6330 through 6344 342 seizures the IRS conducted from
when conducting seizures. July 1, 2018 through June 30, 2019. TIGTA
identified instances in which the IRS did not
comply with a particular I.R.C. section or
internal procedure and identified IRS
procedures that were problematic and
resulted in potentially unfair outcomes.
Taxpayer Designations – Illegal An evaluation of the IRS’s Ref. No. 2020-30-057; Sept. 2020
Tax Protester Designation and compliance with restrictions under TIGTA’s review showed that the IRS did not
Similar Designations RRA 98 § 3707 on designation of reintroduce past Illegal Tax Protester codes
taxpayers. or similar designations on taxpayer accounts
I.R.C. § 7803(d)(1)(A)(v) during FY 2019. However, TIGTA’s review
of 2 million records from cases closed during
FY 2019 in the Correspondence Examination
Automation Support system identified
18 instances of the use of Illegal Tax
Protester or similar designations on
13 taxpayers’ accounts. Additionally, in
reviewing the narrative data entered for
approximately 1.8 million records in the
Accounts Management Services system with
cases closed in FY 2019, TIGTA found
seven instances in which five taxpayers were
referred to as Illegal Tax Protester or similar
designations.
72 April 1, 2020 – September 30, 2020
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Disclosure of Collection Activity Requires TIGTA to review and certify Ref. No. 2020-30-048; Aug. 2020
With Respect to Joint Returns whether the IRS is complying with TIGTA’s review of computer system history
I.R.C. § 6103(e)(8), which requires files and employee interviews showed that
I.R.C. § 7803(d)(1)(B) (TIGTA the IRS to disclose information to an employees were not always aware of the
requirement) individual filing a joint return on disclosure requirements for joint filer
I.R.C. § 6103(e)(8) (IRS collection activity involving the other taxpayer contacts.
requirement) individual filing the return.
Taxpayer Complaints Requires TIGTA to include in each Statistical results on the number of taxpayer
Semiannual Report to Congress the complaints received are shown on page 46.
I.R.C. § 7803(d)(2)(A) number of taxpayer complaints
received and the number of employee
misconduct and taxpayer abuse
allegations received by the IRS or
TIGTA from taxpayers, IRS
employees, and other sources.
Administrative or Civil Actions Requires TIGTA to include Ref. No. 2020-30-053; Sept. 2020
With Respect to the Tax information regarding any TIGTA identified three potential Fair Tax
Collection Practices Act of 1996 administrative or civil actions with Collection Practices (FTCP) violations closed
respect to violation of the fair debt in FY 2019 that resulted in administrative
I.R.C. § 7803(d)(1)(G) collection provision of I.R.C. § 6304, actions for IRS collection employees.
I.R.C. § 6304 including a summary of such actions Separate from the review of IRS FTCP
RRA 98 § 3466 and any resulting judgments or violations, TIGTA identified 51 potential Fair
awards granted. Debt Collection Practices Act violations and
six potential FTCP violations by private
collection agency employees.
Denials of Requests for Requires TIGTA to include Ref. No. 2020-10-038; July 2020
Information information regarding improper denial TIGTA reviewed a statistical sample of 87 of
of requests for information from the the 2,101 FY 2019 FOIA requests for which
I.R.C. § 7803(d)(1)(F) IRS, based on a statistically valid the IRS denied the requested information
I.R.C. § 7803(d)(3)(A) sample of the total number of either partially or fully based on exemption
determinations made by the IRS to (b)(7) or replied that no responsive records
deny written requests to disclose were available. TIGTA also reviewed all
information to taxpayers on the basis 43 FY 2019 I.R.C. § 6103(c) and (e)
of I.R.C. § 6103 or 5 U.S.C. § requests documented in the Automated
552(b)(7). FOIA system for which the IRS withheld
information from the requestor. While TIGTA
determined that information was properly
withheld in most cases, the Disclosure Office
did not follow FOIA requirements when
redacting information in 15 cases.
Adequacy and Security of the Requires TIGTA to evaluate the IRS’s Security Reviews:
Technology of the IRS adequacy and security of its Ref. No. 2020-40-004; Nov. 2019
technology. Ref. No. 2020-20-006; Feb. 2020
I.R.C. § 7803(d)(1)(D) Ref. No. 2020-20-013; Mar. 2020
Ref. No. 2020-20-012; Mar. 2020
Ref. No. 2020-20-033; July 2020
Ref. No. 2020-20-036; Aug. 2020
Ref. No. 2020-20-043; Aug. 2020
Ref. No. 2020-20-063; Sept. 2020
Ref. No. 2020-20-045; Sept. 2020
Ref. No. 2020-20-073; Sept. 2020
Information Technology Reviews:
Ref. No. 2020-20-010; Mar. 2020
Ref. No. 2020-20-022; June 2020
Ref. No. 2020-10-039; July 2020
Ref. No. 2020-20-044; Aug. 2020
Ref. No. 2020-40-067; Sept. 2020
Ref. No. 2020-30-055; Sept. 2020
Ref. No. 2020-20-062; Sept. 2020
Ref. No. 2020-20-061; Sept. 2020
Ref. No. 2020-20-060; Sept. 2020
April 1, 2020 – September 30, 2020 73
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Government Charge Card Abuse Requires TIGTA to report on the IRS Ref. No. 2020-10-011; Jan. 2020
Prevention Act of 2012 progress in implementing purchase TIGTA’s review of the IRS’s purchase card
and travel card audit program found that controls are generally
Pub. L. No. 112-194 recommendations. effective, and the number of purchase card
(October 2012) violations identified by the IRS Credit Card
Services Branch were minimal and generally
for nominal amounts.
Ref. No. 2020-10-049; July 2020
TIGTA’s review of the IRS’s purchase card
program found that controls are generally
effective, and the number of purchase card
violations identified by the IRS Credit Card
Services Branch were minimal and generally
for nominal amounts.
Improper Payments Elimination Requires TIGTA to assess the IRS’s Ref. No. 2020-40-025; Apr. 2020
and Recovery Act of 2010 compliance with improper payment For FY 2019, in response to TIGTA
requirements. recommendations, the IRS correctly rated
31 U.S.C. § 3321 the ACTC and the American Opportunity Tax
Credit as also being susceptible to significant
improper payments similar to the Earned
Income Tax Credit. However, the IRS still
did not include the Net Premium Tax Credit
improper payment rate and amount in the
Agency Financial Report.
Digital Accountability and Requires TIGTA to assess the Ref. No. 2020-10-003; Nov. 2019
Transparency Act of 2014 completeness, timeliness, quality, and The IRS submitted its FY 2019 first quarter
(DATA Act) accuracy of data that the IRS submits spending data by March 2019, as required,
to comply with the DATA Act. for publication on USAspending.gov. Based
Pub. L. No. 113-101, 128 Stat. on a standardized methodology used across
1124 (2014) Offices of Inspectors General, the IRS
received the highest of three possible ratings
for overall data quality. However, TIGTA
determined that the quality of the spending
data, specifically the award (procurement)
attribute data, continues to need
improvement.
Protecting Americans From Tax Requires TIGTA to conduct an audit Ref. No. 2020-40-064; Sept. 2020
Hikes Act of 2015 of the issuance of ITINs. While the IRS has made some
improvements since TIGTA’s last review,
Pub. L. No. 114-113, 129 Stat. there are indications that there is a reduced
2242 (2015). emphasis on identifying questionable ITIN
applications, which is similar to the problem
that TIGTA reported in July 2012. The IRS
does not ensure that the Secondary Review
Team has sufficient time to complete its
review to identity potentially fraudulent ITIN
applications before ITINs are issued. The
IRS also has not implemented processes to
revoke or deactivate ITINs associated with
applications that the Secondary Review
Team identifies as having potentially
fraudulent supporting documents. Finally,
the IRS continues to allow Certifying
Acceptance Agents (CAA) to authenticate
the identity and foreign status of ITIN
applications despite its own compliance
reviews of the CAAs that identify significant
noncompliance with program requirements.
74 April 1, 2020 – September 30, 2020
Appendix IV
Section 1203 Standards
In general, the IRS Commissioner shall terminate any IRS employee if there is a final
administrative or judicial determination that, in the performance of official duties, such
employee committed any misconduct violations outlined below. Such termination shall be
a removal for cause on charges of misconduct.
Misconduct violations include:
• Willfully failing to obtain the required approval signatures on documents authorizing
the seizure of a taxpayer’s home, personal belongings, or business assets;
• Providing a false statement under oath with respect to a material matter involving a
taxpayer or taxpayer representative;
• Violating, with respect to a taxpayer, taxpayer representative, or other employee of
the IRS, any right under the U.S. Constitution, or any civil right established under
Title VI or VII of the Civil Rights Act of 1964; Title IX of the Education Amendments
of 1972; Age Discrimination in Employment Act of 1967; Age Discrimination Act of
1975; Section 501 or 504 of the Rehabilitation Act of 1973; or Title I of the
Americans With Disabilities Act of 1990;
• Falsifying or destroying documents to conceal mistakes made by any employee
with respect to a matter involving a taxpayer or taxpayer representative;
• Committing assault or battery on a taxpayer, taxpayer representative, or another
IRS employee, but only if there is a criminal conviction or a final judgment by a
court in a civil case with respect to the assault or battery;
• Violating the I.R.C., the Treasury Department regulations, or policies of the IRS
(including the IRM) for the purpose of retaliating against or harassing a taxpayer,
taxpayer representative, or other employee of the IRS;
• Willfully misusing provisions of I.R.C. § 6103 for the purpose of concealing
information from a congressional inquiry;
• Willfully failing to file any return of tax required under the I.R.C. on or before the
date prescribed therefore (including any extensions), unless such failure is due to
reasonable cause and not to willful neglect;
• Willfully understating Federal tax liability, unless such understatement is due to
reasonable cause and not to willful neglect; and
• Threatening to audit a taxpayer for the purpose of extracting personal gain or
benefit.
The IRS Commissioner may mitigate the penalty of removal for the misconduct violations
outlined above. The exercise of this authority shall be at the sole discretion of the
Commissioner and may not be delegated to any other officer. The Commissioner, in his
or her sole discretion, may establish a procedure that will be used to decide whether an
individual should be referred to the Commissioner for determination. Any mitigation
determination by the Commissioner in these matters may not be appealed in any
administrative or judicial proceeding.
April 1, 2020 – September 30, 2020 75
Appendix V
Inspector General Peer Review Activity
April 1, 2020 – September 30, 2020
This appendix implements Section 989C of the Dodd-Frank Wall Street Reform and
Consumer Protection Act. 45
Peer Reviews Conducted of TIGTA by Another Office of Inspector General
During the reporting period, there were no reviews conducted of TIGTA.
Outstanding Recommendations From Peer Reviews of TIGTA
There are no outstanding recommendations from peer reviews of TIGTA.
Peer Reviews Conducted by TIGTA46
During the reporting period, there were no reviews conducted by TIGTA.
Outstanding Recommendations From Peer Reviews Conducted by TIGTA
There are no outstanding recommendations from peer reviews conducted by TIGTA.
45 Pub.L. 111-203, 124 Stat. 1376 (2010) (codified at 5 U.S.C. app § 5(a)(14)-(16)).
46 TIGTA’s I&E collaborated with the DOJ Office of Inspector General (OIG) on a peer review of the Small Business
Administration OIG. A final report was issued by the DOJ OIG September 16, 2020.
76 April 1, 2020 – September 30, 2020
Appendix VI
Data Tables Provided by the
Internal Revenue Service
The memorandum copied below is the IRS’s transmittal to TIGTA. The tables that follow
the memorandum contain information that the IRS provided to TIGTA and consist of IRS
employee misconduct reports from the IRS Automated Labor and Employee Relations
Tracking System (ALERTS) for the period April 1, 2020 through September 30, 2020.
Also, data concerning substantiated RRA 98 § 1203 allegations for the same period are
included. IRS management conducted inquiries into the cases reflected in these tables.
Internal Revenue Service Memorandum
The Following Tables Are Provided by the IRS
April 1, 2020 – September 30, 2020 77
Report of Employee Misconduct by Disposition Groups
Period Covering April 1, 2020 – September 30, 2020
Disposition TIGTA Report Administrative Employee Tax Employee Character Totals
of Case Compliance Investigation
Investigation Case
REMOVAL (PROBATION PERIOD COMPLETE) 9 39 20 - 68
REMOVAL AT OPM DIRECTION - - - 5 5
PROBATION/SEPARATION 1 110 - 4 115
SEPARATION OF TEMPORARY EMPLOYEE - 14 0 - 15
RESIGNATION, RETIREMENT, ETC. (REASON 5 11 10 3 29
NOTED ON SF50)
RESIGNATION, RETIREMENT, ETC. (REASON NOT 10 50 25 2 87
NOTED ON SF50)
SUSPENSION, 14 DAYS OR LESS 36 68 87 - 191
SUSPENSION, MORE THAN 14 DAYS 8 16 14 - 38
-
INDEFINITE SUSPENSION - 2 - - 2
REPRIMAND 34 78 70 9 191
ADMONISHMENT 19 108 90 7 224
WRITTEN COUNSELING 42 171 69 25 307
ORAL COUNSELING - 16 4 - 20
AD: IN LIEU OF REPRIMAND 1 7 3 - 11
AD: IN LIEU OF SUSPENSION 3 7 10 1 21
CLEARANCE LETTER 36 71 7 - 114
CLOSED WITHOUT ACTION CAUTIONARY LETTER 80 182 61 182 505
CLOSED WITHOUT ACTION LETTER 27 83 14 33 157
TERMINATION FOR ABANDONMENT OF POSITION - 30 - - 30
CASE SUSPENDED PENDING EMPLOYEE
RETURN TO DUTY - - - -
PROSECUTION PENDING FOR TIGTA’S ROI - - - -
CLOSED - SUPPLEMENTAL REQUESTED 1 - - - 1
- 2 - - 2
FORWARDED TO TIGTA
TOTAL 312 1065 484 271 2133
Source: ALERTS
Note: Columns containing numbers of two or less and protected by I.R.C. § 6103 are annotated with a
zero and are not reflected in the column and row totals.
Extract Date: October 1, 2020
78 April 1, 2020 – September 30, 2020
Report of Employee Misconduct National Summary
Period Covering April 1, 2020 – September 30, 2020
Cases Closed
Cases
Inventory Open Conduct Non- Ending
Conduct Merged
Case Type Inventory Cases Conduct Inventory
Issues with Other
Received Issues
Cases
ADMINISTRATIVE
CASE 784 1155 1329 45 50 515
EMPLOYEE
CHARACTER
INVESTIGATION 157 305 295 12 - 155
EMPLOYEE TAX
COMPLIANCE 1052 524 534 41 - 1001
CASE
TIGTA REPORT
OF 542 328 369 4 - 497
INVESTIGATION
Total 2535 2312 2527 102 50 2168
Source: ALERTS
Administrative Case – Any matter involving an employee in which management conducted an
inquiry into alleged misconduct.
Employee Character Investigation – Any matter involving a New Background Investigation Case
investigation into an employee’s background that is referred to management for appropriate action.
Employee Tax Compliance Case – Any conduct matter that is identified by the Employee Tax
Compliance program which becomes a matter of official interest.
TIGTA Investigation – Any matter involving an employee in which TIGTA conducted an investigation
into alleged misconduct and referred a Report of Investigation to the IRS for appropriate action.
Extract Date: October 1, 2020
April 1, 2020 – September 30, 2020 79
Summary of Substantiated I.R.C. Section 1203 Inquiries
Recorded in ALERTS
Period Covering April 1, 2020 – September 30, 2020
Removed In
Resigned/ Probation Penalty
§ 1203 Violation Removals On Other Personnel Total
Retired Separation Mitigated
Grounds Process
1203(b)(10):
THREAT OF - - - - - 1 1
AUDIT/PERSONAL
1203(b)(2):
FALSE STATEMENT - - - - - 2 2
UNDER OATH
1203(b)(4):
CONCEALED WORK - - - - - 1 1
ERROR
1203(b)(6):
IRC/IRM/REG
VIOLATION- - - - - - 1 1
RETALIATION
1203(b)(8): WILLFUL
UNTIMELY RETURN 12 4 - 0 13 147 178
1203(b)(9): WILLFUL
UNDERSTATED TAX 19 5 - 4 15 132 175
Total 31 9 - 4 28 284 358
Source: ALERTS
Note: Columns containing numbers of two or less and protected by I.R.C. § 6103 are annotated with
a zero and are not reflected in the column and row totals.
The cases reported as Removals and Penalty Mitigated do not reflect the results of any third-party
appeal.
Extract Date: October 1, 2020
80 April 1, 2020 – September 30, 2020
Glossary of Acronyms
ABA As-Built Architecture
ACTC Additional Child Tax Credit
Automated Labor and Employee Relations Tracking
ALERTS
System
AQC Automated Questionable Credit
BSA Bank Secrecy Act
BYOD Bring Your Own Device
CAA Certifying Acceptance Agent
CAF Centralized Authorization File
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CDP Collection Due Process
CI Criminal Investigation
COVID 19 Coronavirus Disease 2019
CPA Certified Public Accountant
CY Calendar Year
DATA Act Digital Accountability and Transparency Act of 2014
DOJ Department of Justice
ECTI Effectively Connected Taxable Income
EIN Employer Identification Number
EIP Economic Impact Payments
FFI Free File Incorporated
FIRPTA Foreign Investment in Real Property Tax Act
FOIA Freedom of Information Act
FTCP Fair Tax Collection Practices
FY Fiscal Year
I&E Office of Inspections and Evaluations
IGEA Inspector General Empowerment Act
April 1, 2020 – September 30, 2020 81
IP PIN Identity Protection Personal Identification Number
I.R.C. Internal Revenue Code
IRM Internal Revenue Manual
IRS Internal Revenue Service
ISRP Integrated Submission and Remittance Processing
IT Information Technology
ITIN Individual Taxpayer Identification Number
JAMES Joint Audit Management Enterprise System
NFTL Notice of Federal Tax Lien
NYPD New York Police Department
OEP Office of Employee Protection
OI Office of Investigations
OIG Office of Inspector General
PIAMS Privacy Impact Assessment Management System
PII Personally Identifiable Information
PY Processing Year
ROTER Record of Tax Enforcement Results
Internal Revenue Service Restructuring and Reform Act of
RRA 98
1998
SADI Secure Access Digital Identity
SB/SE Small Business/Self-Employed
SBU Sensitive But Unclassified
SSN Social Security Number
TFRP Trust Fund Recovery Penalty
TIGTA Treasury Inspector General for Tax Administration
TIN Taxpayer Identification Number
TPSO Third-Party Settlement Organization
TY Tax Year
U.S.C. United States Code
VIN Vehicle Identification Number
82 April 1, 2020 – September 30, 2020
April 1, 2020 – September 30, 2020 83
84 April 1, 2020 – September 30, 2020
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