Report - Tigta Sar 2021 09 Tigta Semiannual Report To Congress April 1 2021 September 30 2021
Summary
The Treasury Inspector General for Tax Administration (TIGTA) Semiannual Report to Congress for the period April 1, 2021 through September 30, 2021. The Inspector General's message, from J. Russell George, states that during the period TIGTA's Office of Audit completed 52 audits and its Office of Investigations completed 1,430 investigations, with monetary benefits totaling more than $9 billion. It discusses COVID-19 pandemic effects on Internal Revenue Service (IRS) operations, including Economic Impact Payments, the American Rescue Plan Act of 2021 and the expanded Child Tax Credit, and says that as of August 16, 2021 the IRS reported approximately 11 million paper tax returns waiting to be processed. The table of contents lists sections including Pandemic Relief Oversight Efforts, Audit Statistical Reports and Investigations Statistical Reports.
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- Tigta Sar 2021 09 Tigta Semiannual Report To Congress April 1 2021 September 30 2021
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“Report - Tigta Sar 2021 09 Tigta Semiannual Report To Congress April 1 2021 September 30 2021.”
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Treasury Inspector General for
Tax Administration
(TIGTA)
TIGTA’s Vision
Maintain a highly skilled, proactive, and diverse Inspector General organization
dedicated to working in a collaborative environment with key stakeholders to foster
and promote fair tax administration.
TIGTA’s Mission
Provide quality professional audit, investigative, and inspection and evaluation services that
promote integrity, economy, and efficiency in the administration
of the Nation’s tax system.
TIGTA’s Core Values
Integrity – Maintain the highest professional standards of integrity,
personal responsibility, independence, objectivity, and operational excellence in pursuit of
TIGTA’s mission.
Organizational Innovation – Model innovative practices in organizational structure,
operational programs and processes, audit, investigative, and inspection and evaluation
methodologies, and the application of advanced information technology.
Communication – Achieve effective organizational approaches and solutions by encouraging
open, honest, and respectful communication among TIGTA’s executives, employees,
offices, and functions, as well as between TIGTA and its external stakeholders.
Value Employees – Respect the dignity, contributions, and work-life balance of our employees,
and recognize diversity as fundamental to the strength of our organization.
Commitment to Collaboration – Establish and maintain collaborative and professional
relationships with other Government and non-Government stakeholders.
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, 2021 through September 30, 2021. 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 completed
52 audits, and its Office of Investigations completed 1,430
investigations. In addition, TIGTA’s combined audit and
investigative efforts resulted in the recovery, protection, and identification of monetary
benefits totaling more than $9 billion.
The Coronavirus Disease 2019 (COVID-19) pandemic continues to significantly impact IRS
operations. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the
Consolidated Appropriations Act, 2021 were enacted to provide financial relief to Americans.
Most notably, the CARES Act required the IRS to send the first of three Economic Impact
Payments (EIPs) to eligible American households, while the Consolidated Appropriations Act,
2021 provided a second EIP payment. Subsequently, on March 11, 2021, the President
signed the American Rescue Plan Act of 2021 into law. This Act includes approximately $1.9
trillion in economic relief and stimulus to address the continuing impact of the COVID-19
pandemic on the economy, public health, State and local governments, individuals, and
businesses. In addition to providing for a third round of EIPs, a key provision in the American
Rescue Plan Act of 2021 is the expanded Child Tax Credit. Determining eligibility and the
amount of the Child Tax Credit is a complex process. TIGTA continues to assess IRS
processes and procedures to ensure that Child Tax Credit advanced periodic payments are
accurate and made to only those taxpayers who meet eligibility requirements.
Although Tax Processing Centers were open for the 2021 Filing Season, the IRS was not
always able to operate at full capacity due to social distancing requirements. As such, the IRS
was unable to perform many of its essential functions. The backlog of individual tax returns
and other types of taxpayer account work nearly doubled when compared to the 2020 Filing
Season. As of August 16, 2021, the IRS reported having approximately 11 million paper tax
returns waiting to be processed and approximately 9.6 million cases in other key tax
processing functions that still needed to be addressed. At about the same time in 2020, the
IRS reported having more than 4.8 million tax returns waiting to be processed and about
5.4 million cases in other key tax processing functions that still needed to be addressed.
TIGTA is reviewing the IRS’s actions to address the backlog of unworked returns and
inventories.
April 1, 2021 – September 30, 2021 │3
TIGTA’s Office of Investigations continues to work with the IRS to prevent and detect scams,
including those involving the theft of EIPs. Similarly, TIGTA continues to investigate and deter
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.
Consistent with TIGTA’s mission, we will 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, 2021 – September 30, 2021
Table of Contents
Inspector General’s Message to Congress ........................................................................................... 3
TIGTA’s Profile ......................................................................................................................................... 7
Statutory Mandate ....................................................................................................................... 7
Organizational Structure .............................................................................................................. 8
Authorities..................................................................................................................................... 8
Pandemic Relief Oversight Efforts ......................................................................................................... 9
Promote the Economy, Efficiency, and Effectiveness of Tax Administration ...................................... 19
Enhancing Security Of Taxpayer Data and Protection of IRS Resources ................................. 19
Modernizing IRS Operations ...................................................................................................... 21
Improving Tax Reporting and Payment Compliance ................................................................. 22
Protect the Integrity of Tax Administration ............................................................................................ 27
The Performance Model .............................................................................................................. 27
Performance Area: Employee Integrity....................................................................................... 27
Performance Area: Employee and Infrastructure Security ....................................................... 30
Performance Area: External Attempts to Corrupt Tax Administration ...................................... 32
Advance Oversight of America’s Tax System ........................................................................................ 37
Congressional Testimony ....................................................................................................................... 38
Audit Statistical Reports ......................................................................................................................... 39
Reports With Questioned Costs ................................................................................................ 39
Reports With Recommendations That Funds Be Put to Better Use.......................................... 40
Reports With Additional Quantifiable Impact on Tax Administration ........................................ 41
Investigations Statistical Reports .......................................................................................................... 44
Significant Investigative Achievements ...................................................................................... 44
Summary of Investigative Reports and Criminal Referrals ........................................................ 46
Interference .................................................................................................................................. 46
Instances of Whistleblower Retaliation ...................................................................................... 46
Closed Investigations Involving IRS Senior Government Employees ........................................ 47
Inspections and Evaluations Statistical Reports .................................................................................. 48
Evaluation Reports With Significant Unimplemented Corrective Actions ................................. 48
Appendices
Appendix I – Other Statistical Reports .................................................................................................. 49
Reports With Significant Unimplemented Corrective Actions ................................................... 49
Other Statistical Reports ............................................................................................................. 63
Appendix II – Audit Products ................................................................................................................. 64
Appendix III – TIGTA’s Statutory Reporting Requirements ................................................................... 69
April 1, 2021 – September 30, 2021 │5
Appendix IV – Inspector General Peer Review Activity ......................................................................... 75
Appendix V – Data Tables Provided by the Internal Revenue Service ................................................ 76
Internal Revenue Service Memorandum .................................................................................... 76
Report of Employee Misconduct by Disposition Groups ............................................................ 77
Report of Employee Misconduct National Summary ................................................................. 78
Summary of Substantiated I.R.C. Section 1203 Inquiries Recorded in ALERTS...................... 79
Appendix VI – Section 1203 Standards ................................................................................................ 80
Glossary of Acronyms ............................................................................................................................. 81
6│ April 1, 2021 – September 30, 2021
TIGTA’s Profile
The Treasury Inspector General for Tax Administration (TIGTA) provides audit, investigative,
and inspection and evaluation services that promote economy, efficiency, and integrity in
the administration of the Internal Revenue laws. TIGTA provides independent oversight of
matters of the Department of the Treasury (Treasury Department) involving activities of the
Internal Revenue Service (IRS), the IRS Oversight Board, and the IRS Office of Chief Counsel.
Although TIGTA is placed organizationally within the Treasury Department and reports to the
Secretary of the Treasury and to Congress, it functions independently from all other offices
and bureaus within the Treasury Department.
Statutory Mandate
Protect against IRS employee improprieties and external attempts to corrupt or threaten IRS
employees.
Provide policy direction and conduct, supervise, and coordinate audits and investigations related
to IRS programs and operations.
Review existing and proposed legislation and regulations related to IRS programs and
operations, and make recommendations concerning the impact of such legislation or regulations.
Promote economy and efficiency in the administration of tax laws.
Prevent and detect waste, fraud, and abuse in IRS programs and operations.
Inform the Secretary of the Treasury and Congress of problems and deficiencies identified and
of the progress made in resolving them.
TIGTA oversees all aspects of activity related to the Federal tax system as administered by
the IRS. TIGTA protects the public’s confidence in the tax system by identifying and
recommending strategies for addressing the IRS’s management challenges and
implementing the priorities of the Treasury Department.
TIGTA’s organizational structure (see following page) is comprised of the Office of the
Inspector General and six functional offices: the Office of Investigations; the Office of Audit;
the Office of Inspections and Evaluations; the Office of Mission Support; the Office of
Information Technology; and the Office of Chief Counsel.
April 1, 2021 – September 30, 2021 │7
Organizational Structure
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 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 IRS 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 United States Code (U.S.C.). App. (2018).
2 Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2, 5, 16, 19, 22, 23, 26, 31,
38, and 49 U.S.C.).
8│ April 1, 2021 – September 30, 2021
Pandemic Relief Oversight Efforts
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Consolidated
Appropriations Act, 2021, and the American Rescue Plan Act of 2021 were enacted to
address the impact of the coronavirus pandemic on the economy, public health, and State
and local governments. 3 These relief packages also contained numerous tax-related
provisions intended to provide assistance to individuals and businesses. These provisions
have had, and will continue to have, a significant impact on IRS operations and Federal tax
administration. Since the beginning of the pandemic, the IRS has received $3.1 billion in
supplemental funding to plan and execute three rounds of Economic Impact Payments,
expand multiple tax credits, and modernize and secure IRS systems. Much of this additional
funding will remain available to the IRS through Fiscal Year (FY) 2023.
The following summaries highlight some of the key pandemic-related audits, investigations,
and inspections completed during this six-month reporting period:
Assessment of the Effects of the Coronavirus Pandemic on Customer Service Operations
(Report Number 2021-46-029)
The IRS took unprecedented and drastic actions in response to the Coronavirus Disease 2019
(COVID-19) pandemic to protect the health and safety of its employees and taxpayers during
the 2020 Filing Season. These actions included closing most customer service channels
available to taxpayers. In an effort to restore service to taxpayers as quickly as possible, the
IRS accelerated the implementation of several customer service options that it had been
testing, and it expanded the use of existing technologies and capabilities. However, the IRS’s
ability to assist taxpayers continued to be affected by COVID-19.
As of March 31, 2020, the IRS shutdown 81 (93 percent) of its 87 toll-free telephone lines
because all call center locations were closed. The IRS had reopened 78 of the 81 toll-free
telephone lines by September 30, 2020, and all but one of the previously closed lines were
open as of November 5, 2020. As of September 25, 2020, the IRS reported a 51.1 percent
Level of Service (i.e., rate at which taxpayers who called IRS toll-free telephone lines actually
got through and received service), with an average speed of answer of 18 minutes.
The IRS worked with a third-party contractor to establish a dedicated toll-free telephone line to
assist taxpayers with general questions about their Economic Impact Payment (EIP). As of
November 28, 2020, this line had received nearly 24.6 million calls. The IRS also established
a dedicated e-mail address to receive EIP inquiries from congressional staffers. The IRS
estimated that it had received over 127,000 inquiries to this electronic mailbox as of
November 27, 2020.
3 Pub. L. No. 116-136, 134 Stat. 281 (codified as amended in scattered sections of 2, 5, 12, 15, 20, 21, 29, 42,
and 45 U.S.C.); Pub. L. No. 116-260, 134 Stat. 1182 (2020); and Pub. L. No. 117-2, 135 Stat. 4 (codified in
scattered sections of 7, 12, 15, 19, 20, 26, 29, 42, and 45 U.S.C.).
April 1, 2021 – September 30, 2021 │9
The IRS closed all 358 Taxpayer Assistance Centers (TAC) in March 2020. As of
November 16, 2020, 95 of the TACs remained closed due to staffing issues, many of which
were related to COVID-19. The IRS was limiting the services it provided at its TACs to reduce
the risk of exposure to COVID-19 for its employees and taxpayers. The IRS tested a virtual
service option that would enable it to provide virtual face-to-face assistance to taxpayers from
anywhere. However, continued expansion of the test was needed to provide taxpayers better
access to face-to-face assistance.
As of March 31, 2020, there was a 91.1 percent decrease in the number of open volunteer
tax preparation sites compared to FY 2019. TIGTA’s analysis of taxpayers who used volunteer
preparation services to file a Tax Year (TY) 2018 return in Calendar Year (CY) 2019 identified
that 555,689 of the taxpayers had not filed a TY 2019 return as of October 22, 2020. As of
February 15, 2021, the IRS reported that 8,369 sites were opened or planned to open, which
was significantly fewer than the start of the FY 2020 filing season.
TIGTA made four recommendations to the IRS to further improve its ability to assist
taxpayers during the 2021 Filing Season. IRS management agreed with three of the four
recommendations. IRS management indicated that it did not plan to offer tax return
preparation services at TACs during the 2021 Filing Season, as most taxpayers were seeking
assistance from other sources.
Implementation of Economic Impact Payments (Report Number 2021-46-034)
One of the most significant parts of the CARES Act is a refundable Recovery Rebate Credit for
individuals. The CARES Act authorized the IRS to make an advance payment of the Recovery
Rebate Credit to eligible individuals by December 31, 2020. This advance payment is referred
to as the EIP. As of December 31, 2020, the IRS had issued 168.2 million EIPs totaling
$280 billion.
The IRS, as required by the CARES Act, initiated a multipronged public awareness campaign to
inform taxpayers about the availability of the EIP. These efforts included coordinating with
local community organizations, food banks, and homeless shelters to reach unsheltered
individuals; notifying approximately 9 million individuals who did not have a tax return filing
requirement but may have qualified for an EIP; and designating a National EIP Registration
Day. In addition, the IRS established processes to issue a notice to each EIP recipient as
required by the CARES Act. The notice provided the recipient with the amount of their
payment and the method used to send their payment, e.g., direct deposit or paper
check/prepaid debit card.
As TIGTA reported in June 2020, the review of the more than 157 million EIPs issued as of
May 21, 2020, found that the IRS correctly computed the EIP amount for 98 percent
(154 million) of these payments. However, as of July 16, 2020, the IRS had issued more than
4.4 million EIPs totaling nearly $5.5 billion to potentially ineligible individuals. This included
payments made to deceased individuals, potentially nonqualified dependents, nonresidents,
individuals in U.S. Territories (who had also received payments from the Territories), and
individuals with filing status changes. In response to TIGTA alerting management of the
10 │ April 1, 2021 – September 30, 2021
issuance of payments to the previously mentioned potentially ineligible individuals, the IRS
added instructions to IRS.gov to inform these types of individuals of their ineligibility and the
need to return the payments, including the process to be followed for returning the payment.
As of October 1, 2020, individuals voluntarily returned 65,447 payments totaling more than
$80 million.
Finally, the IRS recognized that the EIP created a new risk for tax-related identity theft. In
response, the IRS developed specific filters to identify potentially fraudulent filings. Once a
return was identified as potentially fraudulent, it was sent to an IRS team for review. As of
November 11, 2020, the IRS had identified for review 457,325 questionable tax returns
associated with the EIP and determined that 38,273 returns were fraudulent EIP claims.
TIGTA recommended that the IRS implement a multipronged public awareness campaign to
inform the public about the availability of the Recovery Rebate Credit related to individuals
who died in CY 2020 and develop processes to identify and prevent the issuance of future
EIPs to individuals who are ineligible based on applicable dependency requirements.
IRS management disagreed with both recommendations. The IRS believed that a public
awareness campaign was not warranted and its systems did not have the ability to look to
outside data sources to identify and prevent the issuance of future EIPs to ineligible
individuals based on applicable dependency requirements.
Implementation of Tax Year 2020 Employer Tax Credits Enacted in Response to the
COVID-19 Pandemic (Report Number 2021-46-043)
The IRS initiated an educational campaign to promote the availability of the various credits to
employers; developed Form 7200, Advance Payment of Employer Credits Due to COVID-19;
and developed processes and procedures to enable employers to request an advance
payment of the employer tax credit even though the Tax Processing Centers were closed. The
IRS started processing Forms 7200 on April 28, 2020. As of October 16, 2020, the IRS had
processed 10,163 Forms 7200 and issued over $583 million in employer tax credits.
TIGTA identified that the expediency required to implement the much-needed relief to
employers did not allow for the development of complex systemic verifications, including
prerefund controls (e.g., electronic business rules). As such, the IRS established procedures
to manually review and process Forms 7200. TIGTA’s review of 9,459 advance payment
requests received as of June 4, 2020 determined that the IRS had accurately processed most
of them. TIGTA identified processing errors on only 17 Forms 7200 that had incorrect credits
totaling $83,806. The errors included forms processed more than once, forms involving a
government entity (which does not qualify), and forms that claimed an amount over the
allowable threshold. The IRS was able to initiate actions to ensure that the taxpayers’
accounts reflected the correct amount of employer tax credits.
TIGTA also identified 113 government entities that filed a TY 2020 Form 941, Employer’s
Quarterly Federal Tax Return, as of September 23, 2020, totaling $2 million, that were not
eligible for the employer tax credits claimed. In addition, as of December 17, 2020, the IRS
April 1, 2021 – September 30, 2021 │ 11
had identified another 420 government entities that had received $7.2 million in erroneous
employer tax credits, and it was working to reverse those credits.
The IRS has implemented processes and procedures to continue to identify erroneous
employer tax credit claims associated with government entities. As a result, TIGTA made no
recommendations as the IRS addressed all concerns during the review.
Interim Report – Status of Coronavirus Response Funding (Report Number 2021-16-026)
As of September 30, 2020, the IRS had spent $438.5 million of the $765.7 million 4 in
appropriated funds that it received for its coronavirus response, with $327.2 million still
available for use. TIGTA found that the IRS provided an initial spending plan to Congress, as
required, describing its planned use of the $765.7 million in coronavirus funding. The IRS did
not, however, provide Congress with a quarterly report of its coronavirus response funding
expenditures through June 30, 2020, as required. The first quarterly spending report
provided to Congress was through September 30, 2020. The IRS stated that ongoing
discussions with the Treasury Department over what information should have been included
in the spending report caused the delay in its quarterly reporting.
The IRS advised TIGTA that, although the initial spend plan provided to Congress specified the
need for 5,020 additional full-time equivalent (FTE) employees, in general, the employees who
worked in support of the coronavirus response in FY 2020 were current employees. In the
IRS’s September 30, 2020 spend plan update, the IRS had increased its total FTE estimate
for its coronavirus response efforts from 5,020 FTEs to 5,404 FTEs. The IRS stated that
through hiring or devoting current employees to coronavirus response efforts, it had dedicated
2,144 FTEs of the 5,404 total FTEs estimated that it would need.
TIGTA identified three areas in which the IRS could improve tracking of its coronavirus
response funding. These areas included: reporting actual expenditures by requirement area,
reporting FTEs budgeted and dedicated by requirement area, and updating the employee
awards and overtime budget amount reported to include all budgeted funds for this activity.
Although preliminary observations and areas for IRS consideration were included in this
report, TIGTA did not make any recommendations.
TIGTA issued this report to provide information about the status of the IRS’s coronavirus
response funding as of September 30, 2020, and plans to issue a subsequent report in
FY 2022 that will supplement the information in this report.
Effects of the COVID-19 Pandemic on Business Tax Return Processing Operations
(Report Number 2021-46-064)
The IRS took unprecedented and drastic actions to protect the health and safety of its
employees and the public. These actions included closing its Tax Processing Centers
4 Subsequently, the IRS received additional funding for its pandemic-related response for a total of
$3.1 billion.
12 │ April 1, 2021 – September 30, 2021
nationwide as of April 6, 2020. In addition, the Treasury Department extended to July 15 the
Federal income tax filing due date for various tax filings and payments due between
April 1, 2020 and July 15, 2020. As a result, affected businesses had until July 15, 2020, to
file returns and pay any taxes that were originally due during this period.
The closure of Tax Processing Centers created a significant backlog of business tax returns,
correspondence, and other types of business taxpayer-related work that needed to be
processed. The following figure compares the backlog for CYs 2019 and 2020.
Comparison of Business Return Inventory as of the End of CYs 2019 and 2020
Type of Inventory CY 2019 CY 2020 Percentage Change
Unprocessed Paper Returns 239,285 7,967,182 3,230%
Error Resolution 5 6,867 34,303 400%
Rejects 6 31,052 82,476 166%
Unpostables 7 310,557 746,294 140%
Amended Returns 8 372,339 291,763 (22%)
Source: IRS Filing Season Statistics and IRS inventory numbers provided to TIGTA for the end of CYs 2019
and 2020.
As of the week ending December 31, 2020, the IRS had more than 7.9 million paper-filed
business returns that still needed to be processed. In comparison, the IRS had
239,285 paper-filed business returns that were in process as of December 31, 2019.
Some penalties were inappropriately assessed due to delays in processing payments or tax
forms. Some examples included the IRS erroneously assessing 211 Failure to Pay penalties
totaling $45,451 due to a programming error, and incorrectly assessing 1,256 estimated tax
penalties from April 1, 2020 through December 31, 2020. The IRS submitted an information
technology work request on July 15, 2020, to update penalty processing, but the programming
was not implemented until January 2021. As a result, estimated tax penalties assessed for
business taxpayers with tax years ending from April 2020 through December 2020 (and filed
before January 2021) had penalties calculated without considering the relief.
Finally, redirecting more payments to the lockbox sites could have facilitated reducing the
backlog. 9 While the majority of paper payments were directed to a lockbox location, more
5 Tax returns identified with an error condition are suspended from processing and sent to a tax examiner for
correction.
6 Tax returns that cannot be processed, usually due to missing or incomplete information. Tax examiners
correspond with the taxpayer to clarify an entry on a return. When the taxpayer responds, the tax examiner will
resolve the issue and the return will continue processing.
7 Transactions that will not post to the taxpayer’s account because of failed validity checks. The unpostable
condition must be resolved in order to complete processing of the transaction.
8 Corrected tax returns filed that are either being worked by the Submission Processing or Accounts Management
functions.
9 An IRS lockbox is a facility operated by a Federally insured bank with which the IRS has contracted for the
purpose of, among other things, processing Federal tax remittances.
April 1, 2021 – September 30, 2021 │ 13
than 6.9 million payments totaling more than $37.6 billion were processed at the IRS’s Tax
Processing Centers during FY 2020. This included more than 339,000 payments totaling
$3.4 billion received by IRS field office employees.
TIGTA recommended that the IRS ensure that the incorrectly assessed estimated tax penalties
were corrected and evaluate the feasibility of directing additional types of payments from Tax
Processing Centers to lockbox sites. IRS management agreed with both recommendations.
People First Initiative Actions Helped Taxpayers During the Pandemic; However, Many
Taxpayers Received Inaccurate Collection Notices (Report Number 2021-36-060)
The IRS announced the People First Initiative to reduce the tax compliance burden on
taxpayers by temporarily adjusting and suspending key compliance programs in order to help
people facing the challenges of COVID-19.
During the start of COVID-19, the IRS was impacted in many ways. IRS sites closed for
months, thus postponing everyday operations such as mailing notices and receiving and
processing correspondence from taxpayers. During that time, the IRS had to act and make
decisions as to how to proceed, and some of the decisions potentially caused confusion and
undue burden to numerous taxpayers who received erroneous Collection notices. Upon
reopening its print sites, the IRS decided to issue millions of notices to taxpayers that had
generated during the shutdown, many with erroneous notice dates and payment due dates.
TIGTA’s review of these notices identified that the IRS issued 89,338 premature Notices and
Demand for tax that were generated for 87,542 individual taxpayers who filed TY 2019 tax
returns before the COVID-19 filing date extension of July 15, 2020. The notices showed that
balances were owed even though the taxes were not actually due because of the filing
extension. Although the majority of these Notices and Demand included enclosures to explain
the correct notice and payment due dates, taxpayers could have been confused as to how to
proceed, whether they received an enclosure of explanation with their notice or not, simply
due to the original notices including incorrect information. The IRS had the opportunity to
prevent undue burden to taxpayers by purging the outdated and incorrect notices and sending
them at a later date.
However, the IRS was effective in providing relief to taxpayers as outlined in its People First
Initiative, including properly suspending defaults on Installment Agreements, passport
certifications to the State Department, new account transfers to private collection agencies,
systemic filings of Notices of Federal Tax Lien, systemic and automated levies, and seizures.
TIGTA did identify that, for 23 levies (14 taxpayers) issued by revenue officers, there was no
indication of the required levy approvals during the People First Initiative time frame. The IRS
took corrective action by contacting these taxpayers and issuing refunds or credit transfers on
the levied funds. Additionally, TIGTA identified that 40 of 49 Notice of Federal Tax Lien filings
by revenue officers were made in error, but the IRS took corrective action to withdraw them.
TIGTA recommended that the IRS implement changes to its processes to avoid sending
erroneous notices causing taxpayer burden. IRS management partially agreed with the
14 │ April 1, 2021 – September 30, 2021
recommendation. While they acknowledged that this was not an action management would
take under ideal conditions, they believed their solution (to send the incorrect notices) was
appropriate given the extraordinary situation. However, management further stated that,
should future circumstances cause the IRS to be faced with a similar decision, they will take
this report’s recommendation into consideration.
Taxpayers Were Notified About the CARES Act Retirement Plan Provisions; However,
Additional Actions Could Be Taken to Identify Potential Noncompliance
(Report Number 2021-16-044)
Section (§) 2202 of the CARES Act allowed taxpayers to take coronavirus-related early
distributions from their retirement plans, up to $100,000, without paying the early distribution
tax. Additionally, § 2203 of the CARES Act waived Required Minimum Distributions for
taxpayers for TY 2020.
The IRS took a number of steps to oversee the retirement-related provisions of the CARES Act,
including educating taxpayers and the development of high-level compliance plans to enforce
taxpayer compliance with the provisions. For example, the IRS created and distributed various
news releases, notices, and a tax tip to educate taxpayers of the new retirement provisions.
Additionally, IRS management developed compliance plans for §§ 2202 and 2203 to assess
the impact on examination activities and outline the steps necessary to efficiently encourage
and enforce taxpayer compliance. IRS management stated that it was adding § 2202 training
to examiners’ FY 2021 Continuing Professional Education training, and it planned to add
information to the Knowledge Management and Transfer program to increase tax examiner
and revenue agent awareness about coronavirus-related distribution risks.
Reports from investment management companies and other news sources indicated that
millions of taxpayers took coronavirus-related distributions in TY 2020. Although the § 2202
Compliance Plan assessed the effect on examination activities and outlined the steps
necessary to encourage and enforce taxpayer compliance, it could have been improved. For
example, IRS management could have included objective criteria that would warrant a
research project or a compliance initiative project. IRS management could have also ensured
the assignment of a sufficient number of cases involving coronavirus-related distributions or
the creation of a § 2202 Lead Sheet. 10
TIGTA recommended that the IRS ensure that its management had sufficient information
available to assess compliance with § 2202 of the CARES Act, and consider creating a Lead
Sheet to assist examiners when reviewing cases for potential noncompliance.
IRS management disagreed with both recommendations. TIGTA believes that these actions
would help the IRS assess potential noncompliance and would assist examiners in reviewing
returns with coronavirus-related distributions for potential noncompliance.
10 Lead Sheets are used to document the adjustments, conclusions, audit steps, facts, laws, and taxpayer’s
positions for examined issues and to index and reference supporting workpapers.
April 1, 2021 – September 30, 2021 │ 15
Steps Were Taken to Protect Employee Health and Safety, but Additional Efforts Are
Needed to Ensure Compliance With Federal Guidelines During Pandemics
(Report Number 2021-16-073)
The COVID-19 pandemic continues to affect the IRS’s ability to perform its responsibilities.
The pandemic also threatens the health and safety of IRS employees. As such, the IRS has
had to balance the completion of its mission with the health and safety of its employees.
Overall, the IRS completed necessary actions related to the requirements outlined in its
Pandemic Incident Management Plan and continues to take steps to ensure the health and
safety of its employees. In addition, the IRS leveraged data related to employee infection and
transmission rates, employee telework eligibility and status, and facility status to allow for
informed decision-making during the pandemic.
During unannounced site visits to the IRS’s eight campuses, TIGTA confirmed that the IRS
provided employees with personal protective equipment such as disposable masks, hand
sanitizer, and disinfectant wipes. While adequate signage pertaining to health and safety
guidelines was found, TIGTA observed instances where signage was missing or damaged, or
unofficial signage was used. Following discussions with IRS officials, signage was updated
and replaced. Additionally, the IRS generally continued to ensure that its COVID-19 guidance
aligned with Federal policies. However, during the unannounced site visits, TIGTA observed
instances of noncompliance with Federal mask requirements and social distancing guidelines.
The IRS designated direct supervisors as responsible for addressing noncompliance issues.
However, there were a number of circumstances under which direct supervisors could not or
might not feel comfortable addressing an employee’s failure to adhere to COVID-19 guidance.
Noncompliance with Federally-mandated guidance could jeopardize the health and safety of
all employees in the workplace. Further, COVID-19 infections in IRS facilities could result in
the temporary closure of IRS workspaces and the inability of employees to work, thereby
impacting the IRS’s ability to fulfill its mission.
TIGTA also noted that IRS officials had varying degrees of understanding of the types of paid
leave available to employees who had COVID-19-related needs. While the IRS had internal
guidance, in some instances, IRS guidance had been superseded by newly enacted Federal
laws, and had yet to be updated while the IRS awaited additional direction from the Office of
Personnel Management and the Treasury Department. As a result, COVID-19 leave options
were not clearly understood by the IRS workforce.
TIGTA recommended that the IRS update the Pandemic Incident Management Plan to help
ensure that employees are following policies and guidance issued in response to emergency
conditions. IRS management agreed with the recommendation. In addition, as a result of
TIGTA’s finding and unannounced site visits, the IRS updated existing guidance clarifying the
leave options, reminded employees of the current mask wearing requirements, and updated
(or replaced) signage where needed.
16 │ April 1, 2021 – September 30, 2021
Inspection of Health and Safety Measures at Select IRS Facilities During the COVID-19
Pandemic (Report Number 2021-IE-R003)
There are approximately 550 IRS managed facilities throughout the United States. In
response to the COVID-19 pandemic, in CY 2020, the IRS closed and then reopened facilities
for mission-essential functions and nonportable work.
TIGTA determined that the IRS generally implemented health and safety measures to help
protect individuals physically present at selected IRS facilities during the COVID-19 pandemic.
In March 2021, TIGTA conducted unannounced health and safety inspections of nine
judgmentally selected IRS facilities. Overall, the IRS generally implemented health and safety
measures to help protect individuals at the nine facilities. The IRS had an adequate supply of
face masks, hand sanitizer, disinfecting wipes, or other cleaning supplies on-site, and these
items were generally available in common areas or near shared equipment for individuals to
use.
In response to the pandemic, the IRS developed printable COVID-19 health and safety posters
to help inform and remind individuals of health and safety procedures. TIGTA observed that
most of these were posted at all nine facilities.
According to the Centers for Disease Control and Prevention, masks are a critical step to help
prevent individuals from getting and spreading COVID-19. At the time of TIGTA’s inspection,
all individuals, whether vaccinated or not, were required to wear masks while in an IRS facility.
While most individuals were wearing face masks correctly, TIGTA observed some who were
wearing them improperly. For example, TIGTA observed individuals within the facilities with
the face mask below the chin or off the face completely. TIGTA also observed that the IRS
implemented modifications at all nine facilities to help maintain social distancing. Examples
of these modifications include separating employee desks, posting occupancy limit signs at
elevators and in conference and meeting rooms, and limiting seating and self-service food
tasks in cafeterias and break rooms.
Although TIGTA observed most individuals maintaining social distance, TIGTA identified some
who were not maintaining at least six feet of separation as required by IRS guidance. For
example, TIGTA observed individuals walking together in hallways, sitting together and eating
in the cafeteria or break rooms, and working together in cubicles.
TIGTA made no recommendations in this report.
April 1, 2021 – September 30, 2021 │ 17
Inspection of Health and Safety Measures at Select IRS Taxpayer Assistance Centers
During the COVID-19 Pandemic (Report Number 2021-IE-R004)
There are approximately 350 IRS TACs throughout the United States. In April 2021, TIGTA
conducted unannounced inspections of 20 judgmentally selected TACs. TIGTA determined
that the IRS generally implemented health and safety measures to help protect individuals
(both IRS employees and taxpayers). The IRS had an adequate supply of face masks, hand
sanitizer, disinfecting wipes, or other cleaning supplies on-site, and these items were generally
available in common areas or near shared equipment for individuals to use. In response to
the pandemic, the IRS developed printable posters to help inform and remind individuals of
COVID-19 health and safety procedures. TIGTA observed that these were generally posted at
each of the 20 TACs.
According to the Centers for Disease Control and Prevention, face masks are a critical step to
help prevent individuals from getting and spreading COVID-19. At the time of TIGTA’s
inspection, all individuals, whether vaccinated or not, were required to wear face masks while
in an IRS facility. While most individuals were wearing face masks correctly, TIGTA observed
some who were wearing them improperly. TIGTA also observed that the IRS implemented
modifications at all 20 TACs to help maintain social distancing. Examples of these
modifications include alternating employee workstations or cubicles, installing glass barriers,
limiting seating in waiting areas, and limiting TAC entry to taxpayers with appointments only.
Although TIGTA observed most individuals maintaining social distance, some were not
maintaining at least six feet of separation.
The Centers for Disease Control and Prevention recommends routine cleaning and
disinfection of frequently touched surfaces. During our inspections, TIGTA observed instances
in which employees did not clean their workstation between meetings with taxpayers, cleaned
only the employee side of the workstation, or cleaned both sides of the workstation.
TAC employees are allotted 15 minutes for cleaning between appointments with taxpayers
due to a system limitation in the appointment scheduling system. However, the IRS
acknowledged that the 15 minutes allotted for cleaning may be more time than is needed and
could potentially limit the number of appointments each day. The IRS considered modifying
the scheduling system to allow increments of time less than 15 minutes for cleaning
workstations between appointments. However, the IRS determined it would be too costly and
require a two- to four-month period to update the design and configuration of the system.
TIGTA made no recommendations in this report.
18 │ April 1, 2021 – September 30, 2021
Promote the Economy, Efficiency, and
Effectiveness of Tax Administration
TIGTA’s Office of Audit (OA) 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 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 OA places audit emphasis on statutory coverage required by the 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.
Audit Emphasis Areas for April 2021 Through September 2021
Enhancing Security of Taxpayer Data and Protection of IRS Resources
Modernizing IRS Operations
Improving Tax Reporting and Payment Compliance
The following summaries highlight significant audits completed in each area of emphasis
during this six-month reporting period:
Enhancing Security of Taxpayer Data and Protection of IRS Resources
The Endpoint Detection and Response Solution Has Been Deployed to Most Workstations
and Is Operating As Intended, but Improvements Are Needed
(Report Number 2021-20-065)
Endpoint devices (e.g., laptops, desktops, and other applicable devices) are computer
components that connect end users to an organization’s networks and systems. These
devices can also be a major source of vulnerabilities and a frequent target of attackers
against networks. The IRS implemented an Endpoint Detection and Response solution to
obtain a more complete picture of security incidents that occur on the IRS network by
April 1, 2021 – September 30, 2021 │ 19
monitoring and obtaining detailed records of the incident from the affected workstation(s),
which allows the IRS to conduct root cause analysis of identified threats. As a result, the
security of taxpayer data on the IRS systems and network is improved.
On May 7, 2020, the IRS began deploying the Endpoint Detection and Response solution,
which analyzes various items, including the processes running on the workstations, memory
artifacts, and other data points, and collects them on the computer. The collected data are
correlated and compared to rules that have been established or associated with known
indicators of compromise (e.g., nation-state attackers and organized crime attacks). If
anything is detected, the Endpoint Detection and Response security software agent will
generate an alert. From January 1, 2021, through April 30, 2021, Computer Security Incident
Response Center analysts reviewed 735 alerts to determine whether these alerts should be
elevated to an incident. As of the date of this review, TIGTA found that none of the alerts were
elevated to an incident and that the Endpoint Detection and Response solution was effectively
generating alerts from the workstations. The alerts were being tracked and worked.
While the IRS was effective with the alerts, the IRS could have improved accounting for and
deployment of the Endpoint Detection and Response solution to all workstations
enterprise-wide. In its 4th Quarter Fiscal Year 2020 Information Technology Investment
Report, the IRS reported that the Endpoint Detection and Response solution was at full
operating capability. However, TIGTA found 91 confirmed workstations that were on the
network and should have had the solution and 7,032 workstations that required further
investigation to determine whether they were valid workstations and should have had the
solution installed. As a result, the Endpoint Detection and Response solution was not at full
operating capability on all enterprise workstations.
Security management for operating the Endpoint Detection and Response solution could have
been strengthened. For example, Homeland Security Presidential Directive-12 credentials
had not been implemented. 11 In addition, system administrator accounts were not timely
disabled for inactivity, e.g., TIGTA found that two of the six system administrators had not
accessed their accounts in the solution for more than 60 days, yet the accounts were not
disabled.
TIGTA recommended that the IRS ensure that (1) All workstations in use are properly updated
with the Endpoint Detection and Response solution; (2) The Homeland Security credentials
are used for access to the solution; and, (3) An effective process is developed to identify all
users who are inactive beyond time requirements.
The IRS agreed with all of the recommendations.
11 The Homeland Security Presidential Directive-12 is designed to enhance security, increase Government
efficiency, reduce identity fraud, and protect personal privacy.
20 │ April 1, 2021 – September 30, 2021
Modernizing IRS Operations
Enterprise Case Management Deployed Its Initial Release, but Process Improvements Are
Needed for Future Releases (Report Number 2021-20-059)
Tax administration in the IRS is supported by more than 60 different case management
systems that widely vary in complexity, size, and customization. The IRS implemented these
case management systems over many years to support the individual needs of multiple
business units. The Enterprise Digitalization and Case Management Office is working to
provide an enterprise solution for performing case management functions utilizing a Treasury
Department Cloud platform that increases operational efficiency, innovation, and security.
The solution is designed to streamline case and workload management and improve resource
alignment, resulting in integrated information technology programs that enable improved
services to the taxpayer.
The Enterprise Case Management program developed a formal Sequencing Plan which
provides a documented, repeatable method to select business processes for migration
prioritization. The selected processes are intended to balance near-term business value,
leadership priorities, and long-term scalability while working to establish operational
footprints within IRS organizations.
However, the Enterprise Case Management program has not finalized its Scaled Agile
Framework configuration. An Enterprise Case Management team with contractor support is
evaluating how the program aligns with agile best practices. It began reporting quarterly
results in January 2021. The quarterly reports and internal review are being used to evaluate
the current Scaled Agile Framework configuration. In addition, a contractor’s Independent
Verification and Validation reported that the Enterprise Case Management program met or
exceeded some best practices, but there were areas for improvement. For example, the
program has yet to finalize a roadmap to achieve its goals, and program benefits were not
specifically defined.
In April 2021, the Enterprise Case Management program completed a draft of its
decommissioning strategy to enable and expedite the retirement of legacy case management
systems. It also completed an initial inventory of legacy case management systems and tools.
TIGTA made four recommendations that included ensuring that the Enterprise Case
Management program optimizes and fully implements the selected Scaled Agile Framework
configuration’s core competencies and that end users are involved early in development.
The IRS agreed with all four of the recommendations.
April 1, 2021 – September 30, 2021 │ 21
Improving Tax Reporting and Payment Compliance
Backup Withholding Noncompliance and Underreported Employment Taxes Continue to
Contribute Billions of Dollars to the Tax Gap (Report Number 2021-40-030)
Prior TIGTA reviews identified that, due to a lack of adequate processes, billions of dollars in
underreported tax by employers were not addressed and taxpayers avoided payment of
billions of dollars in backup withholding. This review was initiated to assess the IRS’s
progress in making improvements to its Federal tax withholding processes and procedures. In
response to recommendations included in the prior reviews, the IRS enacted several
corrective actions. However, our analysis of information return filings identified continued
significant backup withholding noncompliance and employer underreporting of employment
tax and discrepancy cases that remain unworked.
Backup withholding noncompliance continues to result in payers avoiding payment of billions
of dollars in withholding each year. For TY 2018, TIGTA identified 182,075 payers that
submitted 440,404 information returns for which the payee Taxpayer Identification Number
(TIN) was either missing or incorrect, yet the payers did not backup withhold $13.3 billion on
$55.6 billion in reported income.
In addition, payers continue to report billions of dollars in payments associated with TINs of
deceased individuals. We identified 52,500 payers that submitted 2.7 million information
returns for which the payee was deceased at least three years prior to the issuance of the
information return. These 2.7 million information returns had reportable payments totaling
$3.7 billion. Generally, payers should not submit information returns using the TIN of a
deceased taxpayer for identification of the payee.
Finally, due to a programming error, the IRS did not select Combined Annual Wage Reporting
discrepancy cases with the highest assessment potential. TIGTA’s analysis of TY 2017 IRS
discrepancy cases determined that the IRS worked 21,372 cases and assessed $58.8 million.
However, for the 21,372 cases worked, the IRS still did not select cases with the highest
potential tax assessment. Had the programming been working as intended, the IRS could
have selected and worked cases with a higher potential assessment, resulting in an additional
$133.1 million in assessments.
As a result of these findings, TIGTA recommended that the IRS develop processes and
procedures to identify and address the reporting of income on information returns using a
deceased payee TIN and conduct an analysis of additional worked discrepancy cases to
evaluate the use of the repeater indicator as another characteristic to prioritize Combined
Annual Wage Reporting discrepancy cases.
IRS management agreed with the first recommendation; however, it did not agree with the
recommendation to conduct an analysis on the use of the repeater indicator on discrepancy
cases. IRS management did not believe there was any evidence that such a study was worth
the diversion of its limited resources.
22 │ April 1, 2021 – September 30, 2021
Criminal Restitution Assessment Procedures Need Improvement
(Report Number 2021-30-033)
The Firearms Excise Tax Improvement Act of 2010 authorized the IRS to assess criminal
restitution ordered after August 16, 2010, so that the IRS could collect the amount as if it
were a tax. 12 Prior to this change in the law, the IRS accepted payments of restitution but
could not assess the amount of restitution ordered or use its administrative collection tools to
collect the restitution. Only the Department of Justice could collect the amount of restitution.
During FYs 2016 through 2020, defendants were ordered to pay over $2.7 billion in criminal
restitution to the IRS but paid only $844 million, or 31 percent during that same period. TIGTA
found that in cases for which the IRS had the authority to assess the restitution ordered, a
higher percentage of restitution was paid.
Improvements can be made to ensure that the restitution ordered is properly assessed. IRS
Criminal Investigation did not always send closing documents to the IRS’s Small
Business/Self-Employed (SB/SE) Division for the assessment of restitution, and it incorrectly
assessed interest and penalties on some restitution-based assessments.
TIGTA also found that a lack of resources within Criminal Investigation and the SB/SE
Divisions contributed to the IRS not being able to adequately monitor defendants’ compliance
with the conditions of probation or supervised release. Internal controls could have been
improved to prevent the IRS from issuing erroneous refunds for restitution payments. Lastly,
TIGTA identified numerous errors in the Criminal Investigation Management Information
System related to defendants who were sentenced for tax-related crimes and ordered to pay
restitution.
TIGTA recommended that the IRS (1) Develop procedures to ensure that Criminal Investigation
timely sends restitution closing investigative documents to the SB/SE Division Technical
Services Unit; (2) Review existing controls to ensure that restitution assessments are made in
a timely manner; (3) Establish monitoring procedures to provide reasonable assurance that all
interest and penalties incorrectly assessed are removed; and, (4) Ensure that review of
Criminal Investigation Management Information System information related to restitution and
the monitoring of probation and supervised release are included in existing quality reviews
mechanisms.
IRS management agreed with all of the recommendations.
12 Pub. L. No. 111-237, § 3, 124 Stat. 2497, 2497-98.
April 1, 2021 – September 30, 2021 │ 23
The IRS Continued Compliance Efforts for High-Income Taxpayers After Disbanding the
High Income High Wealth Strategy, but With Less Effective Outcomes
(Report Number 2021-30-041)
The High Income High Wealth (HIHW) strategy started in 2010, and the IRS defines
high-income taxpayers as those whose total positive income (TPI) was at least $200,000 on
Form 1040, U.S. Individual Income Tax Return. The HIHW strategy consisted of two
subcategories: filed returns for High Income Underreported (HIU) 13 taxpayers and High
Income Nonfiler (HINF). The HIHW strategy continued until it was disbanded at the end of
FY 2017. The primary focus of this review was specific to the HIHW strategy before and after
disbanding.
The SB/SE Division’s high-income examinations increased as a percentage of all closures
from 20 percent in FY 2015 to 26 percent in FY 2019. However, total closures continued to
drop during this time based on a reduction in available resources and resulted in actual
high-income return closures dropping from 47,024 for FY 2015 to 29,610 for FY 2019
resulting in potential lost assessments totaling $1.9 billion.
The HIHW strategy closures with TPI of less than $200,000 represented the majority
(73 percent) of the individual returns closed from the strategy for FYs 2015 through 2017.
The examination case selection and assignment process for HIHW strategy returns did not
appear to have been focused on the selection of returns with TPI of at least $200,000. HIHW
strategy examinations that did focus on high-income taxpayers resulted in more dollars per
hour on average than any of the other SB/SE Division strategies during FYs 2015 through
2017. Additionally, the overall HIHW strategy dollars per hour were diluted with the inclusion
of closures with TPI of less than $200,000. The examination plan for high-income taxpayers
with TPI over $1 million fell short of planned examinations for FYs 2016 and 2017.
When the HIHW strategy was disbanded, the SB/SE Division moved the HINF inventory to a
nonfiler strategy that started in FY 2018 and moved the HIU inventory to the Other Priority
Programs strategy. The dollars per hour for HINF remained steady after disbanding while the
HIU dollars per hour fluctuated. After disbanding the HIHW strategy, the IRS increased
examinations of high-income taxpayers using the discriminant function rather than
maintaining or increasing HIU examinations. This change resulted in $121.5 million in
potential lost assessments for FYs 2018 and 2019, affecting 1,534 tax returns. The outcome
of $121.5 million did not consider examiner attrition, resource limitations by location, or the
diminishing returns of examining additional tax returns. The IRS had requested three new
activity codes, but had no plans to create them.
TIGTA recommended that the IRS improve the monitoring of the results of high-income
taxpayer examinations by (1) Creating a dedicated work stream focused on high-income
taxpayer underreporting; (2) Increasing the monitoring of closures by income categories to
ensure that planned examination closures are met; (3) Developing Compliance Initiative
13 The HIU acronym referenced in this report was created by TIGTA for reporting purposes and represents
high-income filers within the HIHW strategy.
24 │ April 1, 2021 – September 30, 2021
Projects to address the high-income taxpayer underreporting segment of the Tax Gap; and, (4)
Adding additional activity codes similar to income categories for high-income taxpayers in the
IRS Data Book.
IRS management disagreed with three of the four recommendations because it believes the
current processes to monitor the examination results of high-income taxpayers are sufficient.
For the second recommendation, the IRS noted that planned changes were already made
independent of this review.
Improvements to the Correspondence Examination Process May Increase Taxpayer
Compliance and Collection Potential (Report Number 2021-30-061)
Correspondence examinations are generally narrower in focus than a traditional in-person
audit of a taxpayer’s return and they enable the IRS to reach more taxpayers at a lower cost.
The IRS relies heavily on correspondence examinations as a more economical means to
address taxpayers with suspected underreporting of tax liabilities.
From FY 2017 to FY 2019, the IRS conducted almost 2 million correspondence examinations
and recommended approximately $12.2 billion in additional taxes. During those fiscal years,
correspondence examinations accounted for nearly 80 percent of all IRS examinations
completed but accounted for less than one-half of the recommended additional tax after
examination.
TIGTA’s review of the SB/SE Division’s correspondence examination case selection process
found that the issues the IRS examined most frequently were not the most productive issues.
This was due in part to the IRS not prioritizing the annual workplan based on prior year results.
In addition, TIGTA’s analysis of 743,648 examinations closed from FY 2017 to FY 2019 found
that the IRS conducted 139,492 (19 percent) subsequent examinations identified by the
subsequent return process, and 23,741 (17 percent) of these examinations were closed with
the taxpayers agreeing to the additional tax assessed. However, the IRS did not open the
correspondence examination on the subsequent year return until after it closed the
examination on the current year. This increases the burden to the taxpayers, subjecting them
to two separate correspondence examinations instead of one examination for multiple tax
years.
According to the Internal Revenue Manual (IRM), IRS correspondence examiners are to
consider subsequent year returns containing the same issues as in the year examined.
However, TIGTA interviewed 15 tax examiners who stated that they are instructed only to
review the specific issue and year that was selected for the examination and not to expand
their work into the following year. TIGTA identified 53,969 correspondence examinations that
had an issue on an individual tax form or the taxpayer was identified as a nonfiler. Further
review showed that these examinations had a subsequent year tax return with the same
potential issue that had not been examined and met the IRS’s criteria for potential audit
selection.
April 1, 2021 – September 30, 2021 │ 25
TIGTA recommended that the IRS (1) Evaluate closed correspondence examination cases to
identify the issues that result in the most significant noncompliance and develop a workplan
to include most of these cases; (2) Change the subsequent return process to only address
returns about which the taxpayer did not respond; and, (3) Provide a reminder to ensure that
employees are following processes for subsequent year returns during the correspondence
examination process.
The IRS agreed with two of the three recommendations. However, the IRS disagreed with the
recommendation to evaluate closed correspondence examination cases to identify the issues
that result in the most significant noncompliance, stating that historical business results are
already utilized in the case selection process.
26 │ April 1, 2021 – September 30, 2021
Protect the Integrity of Tax Administration
TIGTA 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.
The Performance Model
TIGTA’s OI 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.
IRS employee misconduct undermines the IRS’s ability to deliver taxpayer services, to enforce
tax laws effectively, and to collect taxes owed to the Federal Government. 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 Department of Justice 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.
April 1, 2021 – September 30, 2021 │ 27
During this reporting period, employee integrity
investigations accounted for 27 percent of OI’s work.
OI conducted 381 employee misconduct investigations
that were referred to the IRS for action. The IRS took
action on 357, and closed 24 investigations without 27%
action. 14 of OI’s work was
employee
integrity
As part of its employee integrity focus, TIGTA also investigations
conducts proactive investigative initiatives to detect
misconduct in the administration of IRS programs.
During this reporting period, TIGTA initiated
12 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.
Identity Theft and the Insider Threat
The following cases represent OI’s efforts to address identity theft and the insider threat
during the reporting period: 15
IRS Special Agent Pleads Guilty to Identity Theft and Wire Fraud
On June 4, 2021, in the Eastern District of New York, IRS Criminal Investigations Special Agent
Bryan Cho pled guilty to aggravated identity theft, and wire fraud. Cho additionally consented
to a forfeiture money judgment in the amount of $394,374.63. Cho, who has been employed
with IRS Criminal Investigations since 2008, used information he obtained during the course
of his official duties to engage in various unlawful activities.
According to the court documents, in or around 2018, law enforcement agents in South Korea
learned that public officials who worked at South Korea’s National Intelligence Service and
National Tax Service paid Cho bribes in exchange for information Cho obtained through his
employment with IRS Criminal Investigations. In 2018, while Cho was visiting Asia for
personal reasons, law enforcement agents from South Korea contacted Cho and sought to
question him about his knowledge of and participation in the alleged bribery scheme.
During the course of his employment, Cho worked on an investigation through which he
obtained identifying information for an individual described as “John Doe.” The investigation
was eventually closed, but Cho retained items he obtained during the investigation and used
John Doe’s identifying information to create false identification documents and open a
corporate entity overseas in John Doe’s name. The fraudulent documents included purported
14 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.
15 The facts in the summarized case narratives come from court documents of the respective jurisdictions
named.
28 │ April 1, 2021 – September 30, 2021
identification cards for the Philippines and the Republic of the Marshall Islands in the name of
John Doe, but bearing photos of Cho, and a purported passport in the name of John Doe for
the Republic of Guinea-Bissau.
Cho later made false statements during a background investigation, including denying that he
possessed any foreign identification documents. Cho also denied any contact with foreign
officials, even though law enforcement officials from South Korea had communications with
him regarding allegations that South Korean government personnel had paid bribes to Cho in
exchange for information about ongoing U.S. criminal investigations.
Cho also submitted multiple false documents in connection with the purchase of a co-op
apartment on the Upper East Side of Manhattan, New York, including forged tax returns and
bank statements. These false documents inflated his income and assets to secure the co-op
board’s approval for the purchase, and funneled hundreds of thousands of dollars from a
foreign bank account associated with an entity he created using John Doe’s identity to fund
the purchase. Cho, deemed a potential flight risk, was remanded to custody.
At sentencing, Cho could receive more than 20 years’ imprisonment.
IRS Employee Sentenced for Impeding a Criminal Investigation
On July 23, 2021, in the Northern District of Texas, former IRS Revenue Officer Sonya Vivar
was sentenced for corruptly endeavoring to obstruct or impede the due administration of the
Internal Revenue laws. Vivar entered a plea of guilty on November 10, 2020.
According to the court documents, from in or around 1987 through 2019, Vivar’s duties as a
Revenue Officer included the collection of taxes from taxpayers. Beginning in or around
January 2009, and continuing through in or around September 2017, Vivar was assigned, or
at times requested that she be assigned, to employment tax collection cases that involved
various individual taxpayers and businesses. Vivar developed a personal friendship with one
taxpayer who owned several businesses, and prepared that taxpayer’s individual income tax
returns. During this time, the taxpayer failed to pay the IRS delinquent employment taxes
associated with their businesses.
In or around 2017, Vivar learned that IRS criminal investigators had opened an investigation
into the taxpayer she developed a personal friendship with and other taxpayers. In response,
Vivar contacted IRS employees with corrupt intent to impede and obstruct the investigation.
During these conversations with IRS employees, Vivar failed to identify herself as a Revenue
Officer. On or about September 18, 2017, during an interview with criminal investigators,
Vivar stated her association with the taxpayer was only professional. Furthermore, she denied
attending a meeting with, and on behalf of the taxpayer, which involved a U.S. Department of
Labor employee pay withholding matter.
Vivar received 36 months’ imprisonment, one year of supervised release, and was ordered to
pay a $100 assessment fee.
April 1, 2021 – September 30, 2021 │ 29
Employee Integrity
The following case represents OI’s efforts to address employee integrity during this six-month
reporting period: 16
Former Internal Revenue Service Employee Pleads Guilty in Fraudulent Tax Return Scheme
On June 4, 2021, in the Eastern District of California, former IRS employee Angela Milton pled
guilty to aiding and assisting in the preparation and presentation of false and fraudulent tax
returns. Milton knowingly added materially false information to Federal income tax returns
(FITRs) to increase the refund amount. Milton was indicted on April 12, 2018.
According to the court documents, between 2007 and 2014, as an IRS Tax Examining
Technician in Fresno, California, Milton reviewed amended FITRs. Between 2010 and 2013,
Milton prepared and filed numerous false and fraudulent FITRs for others and herself, for
which she received a preparation fee from the taxpayers. She included false or inflated wage
income, erroneous tax withholdings, false claims of dependents, and fabricated Schedule C
(Form 1040) Profit or Loss From Business with false income and expenses.
For some taxpayers, without their authorization, Milton filed FITRs and split the refund so a
portion was delivered to the taxpayer and the remainder to a bank account or prepaid debit or
credit card controlled by Milton. In other instances, Milton filed FITRs without the knowledge
or consent of the taxpayer, and caused the deposit of the entire refund amount to her bank
account or prepaid debit or credit card. Milton defrauded the IRS of more than $170,000.
As part of the plea agreement, Milton agreed to pay $101,475 in full restitution to the IRS,
and a special assessment of $100. At sentencing, Milton faces up to three years’
imprisonment and one year of supervised release.
Performance Area: Employee and Infrastructure Security
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. OI
receives referrals of all reports of threats, assaults, and forcible
interference against IRS employees in the course of performing their
official duties. TIGTA also actively pursues, investigates, and
mitigates emerging threats to the IRS’s ability to conduct Federal tax
administration in cyberspace.
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
16 The facts in the summarized case narrative comes from court documents of the jurisdiction named.
30 │ April 1, 2021 – September 30, 2021
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 10 armed escorts for IRS employees.
OI undertakes investigative initiatives to identify individuals who could commit violence
against, or otherwise pose a threat to, IRS employees, facilities, or infrastructure. OI 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 to identify “potentially
dangerous” taxpayers is one example of TIGTA’s
commitment to protecting IRS employees. Taxpayers who
meet certain IRS criteria receive a designation as 47%
potentially dangerous. Five years after this designation of OI’s work was
has been made, TIGTA conducts a follow-up assessment of investigations of
the taxpayer so that the IRS can determine if the taxpayer threats/assaults
still presents a potential danger to IRS employees.
During this six-month reporting period, employee and
infrastructure security investigations accounted for
47 percent of OI’s work.
The following cases represent OI’s efforts to ensure the safety of IRS employees during the
reporting period: 17
Texas Man Shoots at Federal Agents Attempting to Serve a Subpoena
On August 25, 2021, in the Southern District of Texas, Earnest Jerome Taylor, Jr. was charged
via criminal complaint, with assault on a Federal agent and felon in possession of a firearm.
Taylor, a convicted felon, fired a weapon at IRS Criminal Investigations Federal agents who
were attempting to serve a subpoena at his residence.
According to the court documents, on or about August 24, 2021, IRS Criminal Investigations
Federal agents attempted to serve a subpoena issued through the U.S. District Court for the
Eastern District of Kentucky. Federal agents went to an address in Houston, Texas that was
associated with Taylor. As they attempted to make contact with Taylor, he fired several
gunshots at the Federal agent’s vehicle.
Taylor’s criminal history includes a conviction for a crime punishable by imprisonment for a
term exceeding one year. As a convicted felon, Taylor was unlawfully in possession of a
firearm.
17 The facts in the summarized case narratives come from court documents of the respective jurisdictions
named.
April 1, 2021 – September 30, 2021 │ 31
If convicted, Taylor could receive up to 20 years’ imprisonment and potentially pay a fine.
Internal Revenue Service Employee Charged with Threatening Colleagues
On June 3, 2021, in the Southern District of Texas, IRS Revenue Officer Ammar Bhatti was
charged by criminal complaint for stalking numerous U.S. Government officials. Bhatti used
electronic media to communicate his intent to kill, injure, harass, and intimidate Government
officials.
According to the court documents, Bhatti has been employed with the IRS since March 2020,
at the IRS office located in Corpus Christi, Texas. In March 2021, Bhatti began sending
threatening e-mails and text messages to his co-workers, supervisor, and the National
Treasury Employees Union. On May 31, 2021, Bhatti received an IRS management directive
prohibiting his return to the IRS building. Subsequently, Bhatti sent a text to an IRS employee
that stated, “Omw [On my Way] to POD [Post of Duty]. David Stay on site or die [sic].” Shortly
thereafter, Bhatti was arrested at the IRS office in Corpus Christi for criminal trespassing.
On June 11, 2021, based on evidence presented at the preliminary examination, the court
ordered that Bhatti be placed in an appropriate medical facility for a period not to exceed
30 days to have a competency examination by a psychiatrist or licensed clinical psychologist.
If convicted, Bhatti could receive a maximum sentence of five years’ imprisonment.
Performance Area: External Attempts to Corrupt Tax Administration
TIGTA also investigates external attempts to corrupt or
impede tax administration. Individuals may attempt to
corrupt or impede tax administration in many ways. For
example, they may impersonate IRS employees or misuse
IRS seals and symbols; file false or frivolous documents 26%
against IRS employees; use fraudulent IRS documentation of OI’s work was
to perpetrate criminal activity; offer bribes to IRS employees investigating
attempts to corrupt
to influence their tax cases; commit fraud in contracts the or impede tax
IRS awards to contractors; or commit cybercrimes. In administration
addition, unscrupulous tax preparers can impede tax
administration by including errors or false information on a
customer’s return.
During this reporting period, investigations into attempts to corrupt or impede tax
administration accounted for 26 percent of OI’s work.
32 │ April 1, 2021 – September 30, 2021
Impersonation Scams and Schemes
Individuals may corrupt tax administration by impersonating IRS employees in an effort to
obtain personally identifiable information 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 taxpayers are tricked
into providing their personally identifiable information, 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 tax
filing season, as people prepare their returns or use the services of paid preparers.
Between October 2013 and September 2021, TIGTA logged more than 2.5 million contacts
from taxpayers who reported that they had communicated with 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, 2021, 16,012 victims have reported to TIGTA that they had lost more than
$83 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.
April 1, 2021 – September 30, 2021 │ 33
Financial Losses by State
Source: TIGTA’s Office of Investigations.
Since the IRS scam’s inception, 284 individuals have been charged in Federal court for their
role, 37 of which were charged during this reporting period. In addition, 105 of those
individuals have been sentenced and collectively received a total of more than 415 years’
imprisonment. This effort has resulted in more than 877 impersonation scam-related
investigations, and financial restitutions totaling more than $168 million.
The following cases are representative of OI’s efforts to investigate IRS impersonation scams
during this six-month reporting period: 18
Man Pleads Guilty to Internal Revenue Service Impersonation Scheme
On April 6, 2021, in the Western District of Pennsylvania, Michael Galanis pled guilty to wire
fraud conspiracy. Galanis conspired with others to automatically forward calls to numbers
used by individuals impersonating IRS employees who then extorted money from victims
within the United States. Galanis was indicted on January 16, 2020.
According to the court documents, from March 2016, and continuing thereafter until August
2017, Galanis conspired with others to activate Subscriber Identity Module cards and
18 The facts in the summarized case narratives come from court documents of the respective jurisdictions
named.
34 │ April 1, 2021 – September 30, 2021
program prepaid cell phones to automatically forward calls to Voice over Internet Protocol
phone numbers. These calls were routed to IRS impersonators who left voicemails instructing
victims to contact the IRS at specific phone numbers. When victims called these numbers,
their calls were automatically forwarded to the Voice over Internet Protocol phone numbers
then routed to the IRS impersonators. Victims were directed to wire money or purchase
iTunes and retail store gift cards to pay their alleged tax debt. Galanis and his coconspirators
defrauded victims of approximately $89,000.
If convicted, Galanis could receive not more than 20 years’ imprisonment, three years of
supervised release, a fine of $250,000, and a $100 assessment.
Man Involved in Internal Revenue Service Impersonation Scheme Indicted for Wire Fraud
On June 23, 2021, in the Southern District of Florida, Matthew Shackell was indicted for wire
fraud and conspiracy to commit wire fraud. The object of the conspiracy was for Shackell and
his coconspirators to unjustly enrich themselves by calling individuals and falsely telling them
they owed money to the IRS. Shackell and his coconspirators then directed these individuals
to make payments, for these false IRS debts, to bank accounts controlled by Shackell.
According to the court documents, sometime in or about June or July 2017, the
coconspirators, posing as IRS employees, contacted victims via phone and falsely stated there
were arrest warrants for their arrest for unpaid Federal taxes. Victims were instructed to
deposit money into two different bank accounts controlled by Shackell. For the purpose of
executing this scheme to defraud victims by means of materially false and fraudulent
pretenses, Shackell knowingly caused the transmittal of $31,300 through interstate
commerce.
If convicted, Shackell could receive a maximum of twenty years’ imprisonment, three years of
supervised release, and potentially pay a fine of up to $250,000.
Tax Preparer Outreach
In addition to promoting employee integrity, TIGTA also 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 integrity presentations to more
than 8,150 tax preparers at various locations nationwide. The presentations detailed
TIGTA’s role in protecting the integrity of Federal tax administration; the differences between
the respective jurisdictions of TIGTA and the IRS; how to identify various forms of preparer
misconduct; and common IRS impersonation scams.
April 1, 2021 – September 30, 2021 │ 35
The following case represent OI’s efforts to protect tax administration from unscrupulous tax
preparers during this six-month reporting period: 19
Tax Preparer Sentenced for Defrauding Clients Out of Approximately $4,000,000
On May 3, 2021, in the Central District of California, Edgardo Montalban was sentenced for
conspiracy to commit wire fraud. Montalban devised a scheme to defraud taxpayers of their
money. On November 13, 2020, Montalban was charged with aggravated identity theft and
conspiracy to commit wire fraud, and pled guilty to conspiracy to commit wire fraud.
According to the court documents, beginning in or before 2013 and continuing through
September 2020, Montalban presented himself as an accountant and tax preparer and
instructed his clients to invest in a nonexistent Federal grant program. Montalban told his
clients that if they paid him in cash the amount of taxes their dormant companies owed, the
Federal Government would issue to them grants many times larger. Montalban used
counterfeit U.S. Treasury checks as props to entice and obtain cash from his clients. After
Montalban had his clients pay him, he made up excuses as to why their Treasury checks had
been delayed, and tricked clients into paying him more money to receive the nonexistent
checks. Montalban defrauded his clients out of approximately $4,000,000.
Montalban was sentenced to seven years’ imprisonment, ordered to pay $4,710,400 in
restitution, a $100 assessment fee, and three years of supervised release.
19 The facts in the summarized case narrative comes from court documents of the jurisdiction named.
36 │ April 1, 2021 – September 30, 2021
Advance Oversight of America’s Tax System
TIGTA’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.
I&E’s publicly issued reports during this reporting period are included in the Pandemic Relief
Oversight section on page 17.
April 1, 2021 – September 30, 2021 │ 37
Congressional Testimony
On May 11, 2021, the Inspector General testified before the U.S. Senate Finance
Subcommittee on Taxation and The Internal Revenue Service during a hearing titled: “Closing
The Tax Gap: Lost Revenue From Noncompliance And The Role Of Offshore Tax Evasion.”
In his testimony, the Inspector General discussed the challenges faced by the IRS in reducing
the Tax Gap, which is the difference between the estimated amount taxpayers owe and the
amount they voluntarily and timely pay for a tax year.
The IRS’s challenges include a decline in the number of employees tasked with conducting
audits and examinations between 2010 and 2018. During the same period, the number of
examinations of taxpayers dropped by about 40 percent, even as the number of returns filed
grew by 5 percent. The percentage decline in the examination rate was larger for higher
income returns. For returns with more than $1 million in total income, the examination rate
dropped from 8 percent in 2010 to 3 percent in 2018, a 63 percent decline.
The Inspector General also discussed a series of reports issued by TIGTA in recent years
identifying opportunities for the IRS to increase the amount of revenue collected and the
commensurate decline in the Tax Gap. These reports concluded that the IRS could more
effectively prioritize high-income taxpayers who owed delinquent taxes but do not pay.
Another TIGTA report expressed concerns that in 2015 the SB/SE Division of the IRS
terminated its High Income High Wealth strategy, which was designed to address high-income
taxpayers who had not reported all of their earned income.
In his testimony, the Inspector General also described TIGTA reports that studied the gig
economy’s 20 impact on tax compliance and the increasing use of virtual currency, also called
cryptocurrency. These reports concluded that the IRS is not working cases with billions of
dollars in potential tax discrepancies involving taxpayers who earn income in the gig economy.
Many cases were not selected to be worked by the IRS due to resource constraints and the
large volume of discrepancies identified. Many taxpayers who earn income in the gig
economy do not receive a Form 1099-K, Payment Card and Third Party Network Transactions,
so their income is not reported to the IRS. In addition, TIGTA concluded 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 & International and SB/SE Divisions’ examination
functions have started a small number of examinations of taxpayers based on potential virtual
currency issues, and the SB/SE Division’s examination function has few known open
examinations of virtual currency exchanges.
20 The gig economy allows individuals and groups to use technology advancements to arrange transactions to
generate revenue from assets they possess (such as ride sharing and apartment or home rentals) or services
they provide (such as on demand household chores or demand technology services).
38 │ April 1, 2021 – September 30, 2021
Audit Statistical Reports
Reports with Questioned Costs
TIGTA issued one audit report 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.
Unsupported
Amount Costs
Report Category Number
(in thousands) (in thousands)
1. Reports with no management decision at the
0 $0 $0
beginning of the reporting period
2. Reports issued during the reporting period 1 $894 $0
3. Subtotals (Item 1 plus Item 2) 1 $894 $0
4. Reports for which a management decision was
made during the reporting period:
a. Value of disallowed costs 0 $0 $0
b. Value of costs not allowed 1 $894 $0
5. Reports with no management decision at the
end of the reporting period (Item 3 minus 0 $0 $0
Item 4)
6. Reports with no management decision within
0 $0 $0
six months of issuance
April 1, 2021 – September 30, 2021 │ 39
Reports With Recommendations That Funds Be Put to Better Use
TIGTA issued seven audit reports during this semiannual reporting period with the
recommendation that funds be put to better use. 21 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.
Report Category Amount
Number
(in thousands) 22
1. Reports with no management decision at the beginning of the reporting
0 $0
period
2. Reports issued during the reporting period 7 $4,591,387
3. Subtotals (Item 1 plus Item 2) 7 $4,591,387
4. Reports for which a management decision was made during the reporting
7 23 $4,591,387
period (Item a plus Item b)
a. Value of recommendations to which management agreed 6 $2,731,684
i. Based on proposed management action 6 $2,731,684
ii. Based on proposed legislative action 0 $0
b. Value of recommendations to which management did not agree 4 $1,859,703
5. Reports with no management decision at the end of the reporting
0 $0
period (Item 3 minus Item 4)
6. Reports with no management decision within six months of issuance 0 $0
21 See Appendix II for identification of audit reports involved.
22
Taxpayer information is redacted in underlying report(s) because TIGTA has determined that it is tax return
information related to taxpayer privacy.
23 Two reports included several outcome measures where IRS agreed with some and disagreed with others.
40 │ April 1, 2021 – September 30, 2021
Reports With Additional Quantifiable Impact on Tax Administration
In addition to questioned costs and funds put to better use, OA 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 OA’s
products and services. Including this information also promotes adherence to the intent and
spirit of the Government Performance and Results Act. 24
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.
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.
24 Pub. L. No. 103-62, 107 Stat. 285 (codified as amended in scattered sections of 5, 31, and 39 U.S.C.).
April 1, 2021 – September 30, 2021 │ 41
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.
Number of
Number of Dollar Value
Outcome Measure Category 25 Taxpayer
Reports 26 (in thousands)
Accounts
Increased Revenue 4 3,764 $599,432
Revenue Protection 5 18,641 $3,786,474
Reduction of Burden on Taxpayers 5 111,200 $66,670
Taxpayer Rights and Entitlements at Risk 6 7,459 $929
Taxpayer Privacy and Security 2 634,314 $0
Inefficient Use of Resources 0 0 $0
Reliability of Management Information 1 2,443,042 $0
Protection of Resources 0 0 $0
Management did not agree with the outcome measures in the following reports:
• Increased Revenue: Reference Numbers 2021-40-030 and 2021-30-041;
• Revenue Protection: Reference Number 2021-40-030, 2021-46-035, and
2021-40-045;
• Taxpayer Rights and Entitlements: Reference Number 2021-30-069;
• Reduction of Burden on Taxpayers: Reference Number 2021-30-069
The following reports contained quantifiable impacts other than the number of taxpayer
accounts and dollar value:
• Taxpayer Burden: Reference Number 2021-30-068;
• Taxpayer Rights and Entitlements: Reference Numbers 2021-10-047 and
2021-30-068;
25 Taxpayer information is redacted in underlying report(s) because TIGTA has determined that it is tax return
information related to taxpayer privacy.
26 See Appendix II for identification of audit reports involved.
42 │ April 1, 2021 – September 30, 2021
• Reliability of Information: Reference Numbers 2021-10-037, 2021-20-024,
2021-20-046, 2021-30-068, 2021-20-056, 2021-10-071, 2021-20-065, and
2021-25-058;
• Protection of Resources: Reference Numbers 2021-10-039, 2021-20-065, and
2021-20-063;
• Taxpayer Privacy and Security: Reference Number 2021-20-056.
.
April 1, 2021 – September 30, 2021 │ 43
Investigations Statistical Reports 27
Significant Investigative Achievements (April 1, 2021 through September 30, 2021)
Complaints/Allegations Received by TIGTA
Complaints Against IRS Employees 1,993
Complaints Against Non-Employees 2,055
Total Complaints/Allegations 4,048
Status of Complaints/Allegations Received by TIGTA
Investigations Initiated 893
In Process Within TIGTA 28 261
Referred to IRS for Action 456
Referred to IRS for Information Only 1134
Referred to a Non-IRS Entity 29 0
Closed With No Referral 527
Closed Associated With Prior Investigation 409
Closed With All Actions Completed 368
Total Complaints/Allegations 4,048
Investigations Opened and Closed
Total Investigations Opened 1,364
Total Investigations Closed 1,430
Financial Accomplishments
Embezzlement/Theft Funds Recovered $8,441,486
Contract Fraud and Overpayments Recovered $22,950
Court-Ordered Fines, Penalties, and Restitution $33,311,924
Out-of-Court Settlements 0
Potentially Compromised by Bribery $901,863
Tax Liability of Taxpayers Who Threaten and/or Assault IRS Employees $6,640,065
IRS Assets and Resources Protected Against Malicious Loss $392,491
Total Financial Accomplishments $49,710,779
27 Includes the reporting requirements under the Inspector General Empowerment Act of 2016, Pub. L. No. 114-
317, 130 Stat. 1595 (codified in 5 U.S.C. App. (2018)).
28 Complaints for which final determination had not been made at the end of the reporting period.
29 A non-IRS entity includes other law enforcement entities or Federal agencies.
44 │ April 1, 2021 – September 30, 2021
Status of Closed Criminal Investigations
Criminal Referral Employee Non-Employee Total
Referred – Accepted for Prosecution 5 142 147
Referred – Declined for Prosecution 125 246 371
Referred – Pending Prosecutorial Decision 7 64 71
Total Criminal Referrals 30 137 452 589
No Referral 220 545 765
Criminal Dispositions 31
Criminal Disposition Employee Non-Employee Total
Guilty 4 87 91
Nolo Contendere (no contest) 0 0 0
Pretrial Diversion 0 0 0
Deferred Prosecution 32 0 0 0
Not Guilty 5 0 5
Dismissed 1 2 3
Total Criminal Dispositions 10 89 99
Administrative Dispositions on Closed Investigations 33
Removed/Terminated 22
Suspended/Reduction in Grade 56
Resigned/Retired/Separated Prior to Adjudication 88
Oral or Written Reprimand/Admonishment 86
Clearance Letter/Closed, No Action Taken 47
Alternative Discipline/Letter With Cautionary Statement/Other 74
Non-Employee Actions 34 714
Total Administrative Dispositions 1087
30 Criminal referrals include both Federal and State dispositions.
31 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.
32 Generally, in a deferred prosecution, the defendant accepts responsibility for his/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.
33 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.
34 Administrative actions taken by the IRS against non-IRS employees (e.g., contractors).
April 1, 2021 – September 30, 2021 │ 45
Summary of Investigative Reports and Criminal Referrals
Criminal Referral Breakdown
Number of Investigative Reports Issued 518
Referred to the Department of Justice for Criminal Prosecution 498
Referred to State/Local Prosecuting Authorities 20
Number of Indictments and Criminal Informations 150
Indictments 122
Criminal Informations 28
Source: TIGTA OI’s Criminal Results Management System.
Interference
During the reporting period, there was no attempt 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 was one investigation regarding whistleblower retaliation.
46 │ April 1, 2021 – September 30, 2021
Closed Investigations Involving IRS Senior Government Employees 36
35
If Declined,
Detailed Description of the Facts and Criminal Date
Disposition: Date of
Circumstances of the Investigation: Status: Referred:
Declination:
A senior Government employee displayed
their credentials to a State Trooper in Training
Declined 10/28/2020 4/1/2021
order to exert influence and avoid a Administered/Reprimanded
speeding ticket.
A senior Government employee allegedly
improperly removed a manager due to Other N/A N/A N/A
retaliation.
A senior Government employee’s official
laptop and other electronic device were
stolen from their personal vehicle. The
stolen devices were reported to local Other N/A N/A N/A
police and added to the State’s crime
database for possible identification and
recovery.
A senior Government official allegedly
Other N/A N/A N/A
extorted contractors.
A senior Government official allegedly
Other N/A N/A N/A
laundered money.
A senior Government official admitted to
engagement in inappropriate behavior Other N/A N/A N/A
with a subordinate employee.
35 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.
36 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).
April 1, 2021 – September 30, 2021 │ 47
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).
Reference Issued Projected
Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
OVERSIGHT OF REPORTED SEXUAL HARASSMENT ALLEGATIONS NEEDS
IMPROVEMENT
12/15/21 F-2, R-1: Update guidance to ensure that management consistently
administers appropriate offenses and penalties when misconduct is
substantiated.
12/15/21 F-2, R-2: Implement procedures to ensure that management
March adequately documents the reasons and circumstances for selecting
2021-IE-R001
2021 the appropriate offenses and penalties suggested in the IRS Penalty
Guide to ensure consistency. In addition, ensure that the Labor
Relations electronic case record is updated to accurately reflect final
disciplinary decisions.
09/30/22 F-2, R-3: Review all relevant policies and procedures and ensure that
guidance on how to address sexual harassment allegations is
available to all employees.
48 │ April 1, 2021 – September 30, 2021
Appendix I
Other Statistical Reports
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 from the Treasury Department’s Joint
Audit Management Information System (JAMES).37,38
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
INEFFICENCIES IN PROCESSING OPERATIONS ASSISTANCE REQUESTS CAUSED
TAXPAYERS UNNECESSARY DELAYS
May 12/15/21 F-3, R-1: Revise Form 12412, Operations Assistance Request, to allow
2007-10-068
2007 requests to be closed as completed or as misrouted only if they had been
sent to the wrong Operations liaison.
THE OFFICE OF RESEARCH, ANALYSIS, AND STATISTICS NEEDS TO ADDRESS
COMPUTER SECURITY WEAKNESSES
September
2008-20-176 02/09/22 F-1, R-5: Ensure that audit and accountability controls are sufficient by
2008
requiring audit logs to be maintained a minimum of six years and to be
periodically reviewed by the security officer.
CONTINUED CENTRALIZATION OF THE WINDOWS ENVIRONMENT WOULD
IMPROVE ADMINISTRATION AND SECURITY EFFICIENCIES
September 11/15/21 F-2, R-2: Ensure that scanning tools, such as the Business DNA software,
2011-20-111
2011 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.
AN ENTERPRISE APPROACH IS NEEDED TO ADDRESS THE SECURITY RISK
OF UNPATCHED COMPUTERS
2012-20-112 September 11/15/21 F-1, R-1: Ensure that the IRS completes the deployment of an automated
2012 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.
37 This summary data does not include recommendations that are specifically prohibited from disclosure by any
provision of law, such as I.R.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.
38 The Office of Audit has previously designated two reports with unimplemented recommendations as Sensitive
But Unclassified. These Sensitive But Unclassified 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, 2021 – September 30, 2021 │ 49
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
REVISING TAX DEBT IDENTIFICATION PROGRAMMING AND CORRECTING
PROCEDURAL ERRORS COULD IMPROVE THE TAX REFUND OFFSET
PROGRAM
On Hold39 F-1, R-1: Revise identification processes to include sole proprietor
March information from Form SS-4, Application for Employer Identification Number,
2016-40-028
2016 to identify individual tax refunds to offset to business tax debt.
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.
EMPLOYEES SOMETIMES DID NOT ADHERE TO E-MAIL POLICIES WHICH
INCREASED THE RISK OF IMPROPER DISCLOSURE OF TAXPAYER
October INFORMATION
2017-30-010
2016
12/15/21 F-3, R-1: Update the Enterprise Electronic Fax system to allow encrypted
messages to be sent to the system server.
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 Employee Identification
May Number (EIN).
2017-40-037
2017 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
INFORMATION TECHNOLOGY: IMPROVEMENTS ARE NEEDED IN
ENTERPRISE-WIDE DISASTER RECOVERY PLANNING AND TESTING
June
2017-20-024
2017 07/15/22 F-2, R-1: Reach consensus regarding the maximum tolerable downtime or
recovery time objective for each mission-essential function.
CASE SELECTION PROCESSES RESULT IN BILLIONS OF DOLLARS IN
POTENTIAL EMPLOYER UNDERREPORTED TAX NOT BEING ADDRESSED
July
2017-40-038
2017 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.
39 Except for two reports, recommendations designated as “On Hold” were agreed to by the IRS, but action was
deferred pending the availability of funds. The recommendation for Report Number 2017-40-085 was agreed to
by the IRS, but was placed on “On Hold” because the IRS is awaiting input from another agency. The
recommendation for Report Number 2020-30-066 was agreed to by the IRS, but was placed on “On Hold”
because the process by which guidance is developed is not within the IRS’s sole control.
50 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
ADDITIONAL CONTROLS ARE NEEDED TO HELP ENSURE THAT
NONRESIDENT ALIEN INDIVIDUAL PROPERTY OWNERS COMPLY WITH TAX
LAWS
August
2017-30-048
2017 On Hold F-1, R-1: Request that a revision be made to Form 1040-NR 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.
FURTHER ACTIONS ARE NEEDED TO REDUCE THE RISK OF EMPLOYMENT
TAX FRAUD TO BUSINESSES THAT USE THE SERVICES OF PROFESSIONAL
EMPLOYER ORGANIZATIONS
September
2017-40-085 On Hold F-3, R-1: Establish processes and procedures to reduce unnecessary
2017
resources expended notifying employers of an address change when
programming incorrectly identifies an address change resulting from minor
formatting revisions.
PROCESSES NEED TO BE IMPROVED TO IDENTIFY INCOMPLETE AND
FRAUDULENT APPLICATIONS FOR INDIVIDUAL TAXPAYER IDENTIFICATON
NUMBERS
January
2018-40-010 On Hold F-3, R-2: Ensure that programming changes are made to require mandatory
2018
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 TIN (ITIN).
ACTIONS ARE NEEDED TO REDUCE THE RISK OF FRAUDULENT USE OF
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
February applications when IRS data indicate that the sole proprietor is deceased.
2018-40-013
2018 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 Social
Security Number 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.
ACTIVE DIRECTORY OVERSIGHT NEEDS IMPROVEMENT AND CRIMINAL
INVESTIGATION COMPUTER ROOMS LACK MINIMUM SECURITY CONTROLS
09/15/23 F-2, R-1: Complete a cost analysis to: 1) determine the efficacy of relocating
June
2018-20-034 Criminal Investigation (CI) assets in each of the field offices to existing IRS
2018
computer rooms versus upgrading CI computer rooms to ensure that assets
are protected in accordance with Federal and IRM security requirements and
2) implement the most cost-effective solution.
IMPROVEMENTS ARE NEEDED IN THE WITHHOLDING COMPLIANCE
PROGRAM
September On Hold F-3, R-2: Analyze the current selection criteria used by the Withholding
2018-30-072 Compliance System to determine if the taxpayers identified for systemic
2018
lock-in letter issuance are the best use of limited resources. This would
include potentially identifying taxpayers with multiple years of
under-withholding and the percentage of inventory that includes nonfilers.
April 1, 2021 – September 30, 2021 │ 51
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
ELECTRONIC AUTHENTICATION SECURITY CONTROLS HAVE IMPROVED, BUT
CONTINUED PROGRESS IS NEEDED TO ENSURE THE PROTECTION OF
PUBLIC-FACING APPLICATIONS
April 02/15/23 F-1, R-1: Ensure that public-facing legacy applications are complying with
2019-20-017
2019 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.
IMPLEMENTATION OF THE TAX CUTS AND JOBS ACT DEEMED REPATRIATION
TAX PRESENTED SIGNIFICANT CHALLENGES
2019-34-033 May 2019 On Hold F-2, R-1: Take steps to ensure that Section 965 payments are recorded with
the correct designated payment code.
BILLIONS OF DOLLARS OF POTENTIALLY ERRONEOUS CARRYFORWARD
CLAIMS ARE STILL NOT BEING ADDRESSED
10/15/21 F-1, R-1: Ensure that criteria is added to the Research Credit selection risk
August tool to identify high-risk carryforward Research Credit discrepancy claims on
2019-40-044
2019 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.
ADDITIONAL ACTIONS ARE NEEDED TO REDUCE ALIMONY REPORTING
DISCREPANCIES ON INCOME TAX RETURNS
On Hold F-2, R-1: Include the validation of the alimony recipient TIN as part of the
August
2019-40-048 IRS’s tax return processing systemic TIN validation process.
2019
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.
THE BRING YOUR OWN DEVICE PROGRAM’S SECURITY CONTROLS NEED
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:
September 1) providing malware prevention training to users; 2) updating the
2019-20-046 documentation for device operating system and technical baseline
2019
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.
52 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
ADDITIONAL ACTIONS ARE NEEDED TO FURTHER REDUCE 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
September taxpayers that have an undelivered mail indicator on their account; suppress
2019-40-074 the issuance of correspondence when a taxpayer’s address of record is an
2019
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.
THE USE OF SCHEDULE K-1 DATA TO ADDRESS TAXPAYER NONCOMPLIANCE
CAN BE IMPROVED
September 11/15/21 F-1, R-3: Establish a process to use more e-filed Schedule K-1 data for
2019-30-078
2019 noncompliance identification and determine the feasibility of transcribing
more data from paper Schedule K-1.
IMPROVEMENTS ARE NEEDED TO ENSURE THAT CONSISTENT SUITABILITY
CHECKS ARE PERFORMED FOR PARTICIPATION IN INTERNAL REVENUE
SERVICE PROGRAMS
November On Hold F-4, R-2: Develop processes and procedures to ensure that continuous
2020-40-005
2019 criminal background checks are conducted on all program participants as
part of the Federal Bureau of Investigations Records of Arrests and
Prosecutions Back Program.
MANY ORGANIZATIONS ARE NOT NOTIFYING THE INTERNAL REVENUE
SERVICE OF THEIR INTENT TO OPERATE UNDER INTERNAL REVENUE CODE
SECTION 501 (c)(4) AS REQUIRED BY LAW
10/29/21 F-1, R-2: Use internal sources of information, e.g., applications for
January tax-exempt status filed after July 8, 2016, to assist with detecting I.R.C.
2020-10-001
2020 § 501(c)(4) organizations that have not filed Forms 8976, Notice of Intent to
Operate Under Section 501(c)(4), and update the Exempt Organizations
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.
RESULTS OF THE 2019 FILING SEASON
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
January an entry for the spouse but checks one or more of the checkboxes that
2020-44-007 indicate that the spouse was age 65 or older and/or was blind.
2020
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.
April 1, 2021 – September 30, 2021 │ 53
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
ACTIVE DIRECTORY OVERSIGHT NEEDS IMPROVEMENT
12/15/21 F-1, R-3: Prioritize all computer rooms housing Integrated Submission and
Remittance Processing domain controllers for access control upgrades to
February ensure that these rooms are compliant with Federal multifactor
2020-20-006
2020 authentication requirements.
12/15/24 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.
AUTHORITIES PROVIDED BY THE INTERNAL REVENUE CODE ARE NOT
EFFECTIVELY USED TO ADDRESS ERRONEOUS REFUNDABLE CREDIT AND
WITHHOLDING CREDIT CLAIMS
On Hold F-2, R-2: Develop processes and procedures to manually set a
recertification indicator on tax accounts associated with refundable credit
February claims that were disallowed through the Automated Questionable Credit
2020-40-008
2020 program until a systemic process is implemented.
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 Automated Questionable Credit
program.
COMPLEXITY AND INSUFFICIENT OVERSIGHT OF THE FREE FILE PROGRAM
RESULT IN LOW TAXPAYER PARTICIPATION
February
2020-40-009 10/15/21 F-1, R-2: Require Free File, Inc. members to fully disclose all criteria on the
2020
IRS.gov Free File web page that taxpayers must meet to e-file their Federal
tax return for free.
WHILE PROGRESS IS BEING MADE ON DIGITAL IDENTITY REQUIREMENTS,
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
March Innovation Branch performs the planned tests; completes a go/no-go
2020-20-012
2020 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.
MILLIONS OF DOLLARS IN DISCREPANCIES IN TAX WITHHOLDING REQUIRED
BY THE FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT ARE NOT BEING
IDENTIFIED OR ADDRESSED
On Hold F-2, R-1: Implement processes and procedures to ensure that tax examiners
March accurately determine and assess the proper amount of Foreign Investment
2020-40-014 in Real Property Tax Act withholding tax a buyer should report and pay when
2020
the application for the Withholding Certificate attached to the Form 8288,
U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real
Property Interests, was not filed on or before the date of transfer of the
property.
54 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
THE GROWTH OF THE MARIJUANA INDUSTRY WARRANTS INCREASED TAX
COMPLIANCE EFFORTS AND ADDITIONAL GUIDANCE
March 10/15/21 F-3, R-1: Leverage publically available State tax information and expand use
2020-30-017
2020 of Federal/State agreements to identify nonfilers and unreported income in
the marijuana industry.
Potential Increased Revenue: $19,345,235
IMPROPER PAYMENT REPORTING HAS IMPROVED; HOWEVER, THERE HAVE
BEEN NO SIGNIFICANT REDUCTIONS TO THE BILLIONS OF DOLLARS OF
IMPROPER PAYMENTS
April
2020-40-025 09/15/22 F-1, R-1: Work with the Department of Health and Human Services to
2020
develop a comprehensive risk assessment of improper Premium Tax Credit
payments, including the risk of Advanced Premium Tax Credit improper
payments.
UNDERCOVER TRAVEL EXPENSES WERE GENERALLY SUPPORTED;
HOWEVER, CONTROLS COULD BE IMPROVED
10/15/21 F-1, R-1: Ensure that management’s approval is obtained when reserving
hotel rooms exceeding the applicable temporary duty location rate and the
use of luxury vehicles and require agents to include management’s prior
May
2020-10-030 approval in their travel voucher documentation.
2020
10/15/21 F-2, R-1: Periodically assess undercover travel on a function-wide basis to
identify potential areas for improved efficiency, to identify best practices to
ensure agents’ safety, and to ensure that the investigative imprest fund is
only used for travel costs when needed to maintain the security of
undercover operations.
SOME CORRECTIVE ACTIONS TO ADDRESS REPORTED INFORMATION
TECHNOLOGY WEAKNESSES WERE NOT FULLY AND EFFECTIVELY
IMPLEMENTED AND DOCUMENTED
June
2020-20-022 06/15/22 F-1, R-3: Verify through testing that the IRS Information Technology
2020
organization is able to recover mission-essential functions identified by the
Cybersecurity function within the maximum tolerable downtimes or recovery
time objectives.
PERFORMANCE MEASURES ARE NEEDED TO EVALUATE THE RESULTS OF
DIRECT PAY BOND PROCESSING CHARGES
11/15/21 F-1, R-1: Develop performance measures that track the efficiency of subsidy
June
2020-10-032 payment request processing, including processing time, employee's total
2020
direct time, the number of subsidy payment requests that require error
resolution and correspondence, the number of payments that are rejected,
and the amount of interest paid.
STRATEGIES AND PROTOCOLS TO AUTHENTICATE NETWORK USER
IDENTITIES ARE EFFECTIVE; HOWEVER, MORE ACTION IS NEEDED TO VERIFY
THE IDENTITY OF DEVICES
August
2020-20-036 02/15/22 F-1, R-1: Require the User and Network Services and Cybersecurity
2020
functions to coordinate with AT&T to implement certificate-based
authentication for devices connecting to the internal network through a
Virtual Private Network.
April 1, 2021 – September 30, 2021 │ 55
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
LEGACY SYSTEMS MANAGEMENT NEEDS IMPROVEMENT
August
2020-20-044 06/15/22 F-2, R-1: Capture operations and maintenance costs for its current
2020
information technology infrastructure at the subsystem level.
CONTROLS OVER THE MANAGEMENT AND SECURITY OF OFFICIAL
PASSPORTS NEED IMPROVEMENT
August 03/10/22 F-3, R-1: Consider including a requirement for independent periodic or
2020-10-051
2020 annual surprise security reviews of the passport offices to ensure that
passport personnel are adhering to updated guidelines for securing and
safeguarding passports.
THE ACCURACY OF CURRENCY TRANSACTION REPORT DATA IN IRS
SYSTEMS SHOULD BE IMPROVED TO ENHANCE ITS USEFULNESS FOR
COMPLIANCE PURPOSES
September
2020-30-055
2020 11/15/21 F-1, R-1: Improve the case identification and selection process by using
currency transaction reports data to systemically identify potentially
noncompliant taxpayers and nonfilers.
THE ENTERPRISE CASE MANAGEMENT SOLUTION DEVELOPMENT IS
DELAYED, AND ADDITIONAL ACTIONS ARE NEEDED TO DEVELOP A
DECOMMISSIONING STRATEGY
September
2020-20-061 09/15/23 F-3, R-1: Coordinate with the business operating divisions to perform the
2020
fit-gap analysis on all case management systems to maximize the Enterprise
Case Management solution's functionality and ensure that the majority of
legacy case management systems are consolidated.
IMPROVEMENTS ARE NEEDED TO ENSURE THAT WIRELESS NETWORKS ARE
SECURE
12/15/21 F-1, R-1: Ensure that the 25 wireless network security-related weaknesses
are resolved and that the evidence supporting the weakness closures is
updated in the Treasury Federal Information Security Modernization Act of
2014 Inventory Management System for subsequent testing and closure
September approval.
2020-20-063 12/15/21 F-2, R-1: Correct the wireless access point inventory issues that TIGTA
2020
identified and shared with management.
11/15/21 F-2, R-3: Improve the current inventory management system and platform to
ensure that all changes to wireless access point components are updated
simultaneously.
12/15/21 F-3, R-2: Ensure that the User and Network Services function disables and
locks the wireless capability in multifunction printers to comply with IRM
policy.
56 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
PROCESSES DO NOT ENSURE THAT INDIVIDUAL TAXPAYER IDENTIFICATION
NUMBERS ARE ISSUED ONLY TO QUALIFYING INDIVIDUALS WITH A TAX
ADMINISTRATION NEED
12/15/21 F-3, R-4: Review the 2,239 ITINs with duplicate documents that TIGTA
identified and take appropriate actions to revoke or deactivate the ITINs.
12/15/21 F-3, R-6: Review the 89 ITINs identified as revoked and still active and the
September 51 ITINs assigned to deceased individuals that are not locked that TIGTA
2020-40-064
2020 identified and take appropriate action to deactivate the ITINs or add a
deceased lock on the tax account.
On Hold F-7, R-1: Develop processes and procedures to identify retroactive claims
erroneously paid and erroneously disallowed due to tax examiner errors.
Once these claims are identified, take steps to recover erroneous credit
payments or ensure that taxpayers receive the benefits to which they are
entitled.
FISCAL YEAR 2020 STATUTORY REVIEW OF COMPLIANCE WITH LEGAL
GUIDELINES WHEN ISSUING LEVIES
02/15/22 F-1, R-1: Ensure that corrective programming is implemented so that, when
a revenue officer generates a disqualified employment tax levy, the
Integrated Collection System (ICS) properly posts in the case history and
notifies employees to send the post-levy Collection Due Process (CDP)
notice.
September 02/15/22 F-1, R-2: Ensure that corrective programming is implemented so that, when
2020-30-065 a revenue officer levies a tax module that is not in Field Collection status,
2020
they are notified to verify the proper time has passed since the CDP notice
issuance.
02/15/22 F-1, R-3: Ensure that corrective programming is implemented so that, when
a jeopardy levy is issued, the ICS posts in the case history and notifies
employees to send the post-levy CDP notice.
02/15/22 F-1, R-4: Ensure that corrective programming is implemented so that, when
a revenue officer levies an ICS-only balance due module in the ICS, they are
notified to verify the CDP notices were properly issued.
THE INTERNAL REVENUE SERVICE CAN IMPROVE TAXPAYER COMPLIANCE
FOR VIRTUAL CURRENCY TRANSACTIONS
September
2020-30-066 On Hold F-1, R-1: Continue efforts to close the virtual currency information gap by
2020
issuing guidance clarifying the proper information reporting associated with
virtual currency transactions.
April 1, 2021 – September 30, 2021 │ 57
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
MORE ENFORCEMENT AND A CENTRALIZED COMPLIANCE EFFORT ARE
REQUIRED FOR EXPATRIATION PROVISIONS
01/15/22 F-1, R-2: Update the Letter 2399C, Failure to File – Initial Form 8854, and
Letter 4135C, Failure to Respond to Initial Form 8854 Request, for
compliance under the Heroes Earnings Assistance and Relief Tax Act and
develop IRM procedures to use these letters to obtain Form 8854, Initial and
Annual Expatriation Statement, when a Form DS-4083, Certificate of Loss of
September Nationality of the United States, is received and no Form 8854 is received.
2020-30-071 01/15/22 F-2, R-1: Evaluate the information reported on Form 8854 and determine
2020
what data fields should be added to the expatriate database to ensure tax
compliance of taxpayers who expatriate, e.g., Form 8854, Part IV, Section B,
Property Owned on Date of Expatriation.
01/15/22 F-2, R-2: Develop IRM procedures for transcribing Form 8854 data, correct
Form 8854 data when information as filed by expatriates is missing or
incomplete, and prepare analysis as needed to determine if the expatriate is
a covered expatriate and subject to tax under I.R.C. § 877A.
BILLIONS IN POTENTIAL TAXES WENT UNADDRESSED FROM UNFILED
RETURNS AND UNDERREPORTED INCOME BY TAXPAYERS THAT RECEIVED
FORM 1099-K INCOME
02/15/22 F-1, R-2: Evaluate the Start Date criteria for business nonfilers to determine
whether it can be eliminated or revised, so that these cases will have the
December opportunity to be identified and worked.
2021-30-002
2020 Potential Increased Revenue: $9,927,653
10/15/22 F-1, R-3: Define high-income business nonfilers and create a strategy to
work these cases so that all high-income business nonfiler cases will
have the opportunity to be selected and worked. Include the business
high-income strategy in the IRS Nonfiler Strategy plan.
Potential Increased Revenue: $1,197,629,572
CONSOLIDATION OF EXAMINATION CASE SELECTION AND ASSIGNMENT IN
THE TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION CREATED
BENEFITS, BUT ADDITIONAL IMPROVEMENTS ARE NEEDED
December 02/15/22 F-2, R-2: Explore the feasibility of reassigning resources from compliance
2021-10-005
2020 functions to the Compliance Planning and Classification function to improve
the efficiency of identifying, classifying, and monitoring productive
examination workloads related to all Tax Exempt and Government Entities
functions.
IMPROVEMENTS HAVE BEEN MADE, BUT CONTROLS NEED TO BE
STRENGTHENED TO DETECT IMPROPER SELF-EMPLOYED RETIREMENT
DEDUCTIONS
On Hold F-1, R-1: Revise procedures for determining eligibility for the self-employed
December
2021-10-007 retirement deduction to include Schedule SE, Self-Employment Tax, as
2020
evidence of self-employment.
10/15/22 F-2, R-1: Consider for examination the 16 tax returns with retirement
contribution deductions over $400,000 for which TIGTA identified only as an
associated Defined Contribution Plan.
58 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
EXPANSION OF SELF-CORRECTION FOR ELECTRONIC FILERS AND OTHER
IMPROVEMENTS COULD REDUCE TAXPAYER BURDEN AND COSTS
ASSOCIATED WITH TAX RETURN ERROR RESOLUTION
On Hold F-1, R-1: Develop processes and procedures that provide taxpayers with the
opportunity to self-correct errors on accepted e-filed returns that are
suspended from processing for manual error resolution in an effort to reduce
unnecessary burden on taxpayers and processing costs incurred by the IRS.
Funds Put to Better Use: $2,438,358
12/15/21 F-2, R-1: Expand processes and procedures for developing error resolution
criteria to include an assessment of the potential reduction in taxpayer
burden and cost savings to the IRS that can be gained by using additional
tax return data to develop systemic error resolution processes.
Funds Put to Better Use: $961,196
12/15/21 F-2, R-2: Review existing error codes to identify opportunities to expand the
use of available tax return data to systemically resolve the error condition for
both paper and e-filed tax returns and reduce the number of e-filed tax
returns from unnecessarily being identified for manual review.
08/15/22 F-3, R-1: Develop processes to systemically suspend and reactivate tax
returns when processing must be suspended until computer programming or
other actions necessary to ensure the accurate processing of these returns
December can be completed.
2021-40-008 Funds Put to Better Use: $176,277
2020
On Hold F-4, R-1: Develop processes to systemically monitor the Error Resolution
program, including processes to monitor error code volumes real-time as
well as in comparison to historical data.
On Hold F-4, R-2: Develop processes and procedures to retain and provide access to
historical Error Resolution System data, including actions taken by tax
examiners.
On Hold F-5, R-1: Develop processes and procedures to identify and correct tax
examiner entries in verified fields that exceed statutory limits, including a
process to ensure that tax returns with verified amounts are systemically
reprocessed through Error Resolution System programming before being
released for processing.
10/15/21 F-5, R-2: Review the 8,397 tax returns that TIGTA identified in which
taxpayers received more in the Child Tax Credit or the Additional Child Tax
Credit than they were entitled to receive and take actions to recover the
erroneous credits.
Funds Put to Better Use: $8,033,779
10/15/21 F-5, R-3: Review 12,147 tax returns TIGTA identified in which taxpayers did
not receive the amount of the Child Tax Credit or the Additional Child Tax
Credit to which they were entitled and ensure that they receive their
allowable credit amount.
PROCESSES EXIST TO ASSIST TAXPAYERS WITH MISDIRECTED REFUNDS,
BUT ADDITIONAL CONTROLS COULD FURTHER HELP TO PREVENT THEM
January
2021-40-012 On Hold F-2, R-1: Create a closing code to be entered onto a tax account when a
2021
refund inquiry is closed that denotes the cause of the refund being
misdirected, i.e., IRS error, taxpayer error, or bank error.
April 1, 2021 – September 30, 2021 │ 59
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
EMPHASIS ON UNRELATED BUSINESS INCOME TAX ENFORCEMENT SHOULD
BE ENHANCED
10/15/21 F-1, R-3: Require that examiners request any missing Forms 990-T, Exempt
Organization Business Income Tax Return, and inform taxpayers of the
potential risks if they do not comply with their filing requirements in
accordance with Treasury Regulation § 1.6012-2(e).
February 04/15/22 F-3, R-1: Implement safeguards to ensure the accuracy of the Reporting
2021-30-016 Compliance Case Management System Closing Record to avoid material
2021
errors that affect information reports based on these inputs, which are relied
upon by internal and external stakeholders.
04/15/22 F-3, R-2: Replace the respective IRM sections that provide instructions on
the Form 5599, TE/GE Examined Closing Record, with the revised Reporting
Compliance Case Management System Closing Record, and clarify any
differences in how examiners should complete this process for appealed
examinations.
60 │ April 1, 2021 – September 30, 2021
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
ADDITIONAL SECURITY PROCESSES ARE NEEDED TO PREVENT
UNAUTHORIZED RELEASE OF TAX INFORMATION THROUGH THE INCOME
VERIFICATION EXPRESS SERVICE PROGRAM
10/15/21 F-1, R-1: Ensure that sufficient resources are allocated to the Income
Verification Express Service (IVES) Program to timely identify and suspend
IVES participants that do not complete the electronic signature certification
and submit the annual independent audit report as required.
10/15/21 F-1, R-2: Maintain a current list of all IVES participants approved to submit
electronically signed requests and that are meeting all electronic signature
program requirements.
10/15/21 F-1, R-3: Update the transcript request form to include a box indicating
whether the form was signed electronically by the taxpayer, or require IVES
participants to submit electronically signed transcript requests in a separate
batch from those that are not electronically signed.
On Hold F-1, R-4: Implement a process to compare electronically signed transcript
requests received from IVES participants to a current list of all IVES
participants allowed to submit electronically signed requests to prevent the
processing of any requests submitted by IVES participants that are not
approved to participate in the electronic signature program.
10/15/21 F-1, R-5: Provide clear guidance on the content of the annual independent
audit report to be submitted by IVES participants using electronic signatures.
10/15/21 F-2, R-1: Ensure that the project schedule and cost estimate are finalized
February and the user fee increase amount is adjusted as necessary to cover the
2021-45-017 development cost.
2021
10/15/21 F-3, R-1: Update the transcript request form to include a separate line to
identify the client, such as the client's business name, address, and
telephone number.
10/15/21 F-3, R-2: Update the transcript request form instructions to require
identifying information for the client in cases in which the transcript request
is submitted by an IVES participant on behalf of their client that will
ultimately receive the taxpayer’s transcript.
10/15/21 F-3, R-4: Allocate sufficient resources to the IVES Program to ensure that
compliance reviews of participants are timely and consistently performed
each fiscal year.
On Hold F-4, R-1: Allocate sufficient resources to the IVES Program to perform
suitability checks that are consistent with other IRS programs at the time of
enrollment and implement a continuous tax compliance check to ensure
that they remain suitable for the program.
10/15/21 F-4, R-2: Perform suitability assessment checks on the 319 IVES
participants that did not undergo suitability checks prior to acceptance and
are still active in the IVES Program.
10/15/21 F-5, R-2: Develop processes and procedures to ensure that clerks are
rejecting transcript requests for accounts identified with an Identity Theft
marker.
01/15/22 F-6, R-1: Ensure that IVES Program internal guidelines are updated in the
IRM to include key processes and procedures.
April 1, 2021 – September 30, 2021 │ 61
Report Projected
Issued Report Title and Recommendation Summary
Number Completion
(F = Finding No., R = Recommendation No.)
Date
HIGH-INCOME TAXPAYERS WHO OWE DELINQUENT TAXES COULD BE MORE
EFFECTIVELY PRIORITIZED
01/15/22 F-2, R-1: Evaluate the predictive model to determine whether refinements
could improve the correlation of the predicted recovery rate and actual
March
2021-30-015 recovery rate for the highest income individual taxpayers with a balance due.
2021
11/15/21 F-3, R-1: Consider conducting Revenue Officer Compliance Sweeps that
focus on high-income Taxpayer Delinquent Account cases in locations where
high-income taxpayer cases far outweigh the number of revenue officers
assigned to those areas.
COMPLIANCE SERVICES COLLECTION OPERATIONS SHOULD IMPROVE THE
TIMELINESS OF RESPONDING TO TAXPAYER CORRESPONDENCE
01/15/22 F-1, R-1: Review Compliance Services Collection Operations (CSCO)
over-aged inventory that has not been assigned to be worked or has not had
any actions taken on or before the 45th day after the IRS received date and
determine what steps can be taken to minimize the over-aged inventory
status, taking into consideration available resources to timely resolve
taxpayer requests.
11/15/21 F-1, R-2: Create clear time frame criteria for CSCO Embedded Quality
March
2021-30-018 Review System Attribute 913 against which employees should be measured
2021
for adherence to this timeliness quality standard and clarify the IRM for any
difference in dates used to evaluate employee versus organizational
compliance with timeliness requirements.
01/15/22 F-1, R-3: Analyze and address issues preventing CSCO correspondence from
being batched within the current three-business-day requirement and
encourage the timely assignment of incoming correspondence so that
resolution to taxpayer issues are not further delayed.
01/15/22 F-2, R-1: Conduct a study to determine options for timelier processing of
CSCO undelivered mail.
62 │ April 1, 2021 – September 30, 2021
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: 40
Issue Result for TIGTA
Interference/Access to Information
Report any attempt to interfere with the independence of
TIGTA, including: budget constraints designed to limit the As of September 30, 2021, there were no
capabilities of TIGTA; and incidents of resistance or attempts to interfere with the independence
objection to oversight activities of TIGTA. of TIGTA or any instances of restricted or
significantly delayed access to information.
Report restricted or significantly delayed access to
information, including the justification of the
establishment for such action.
Disputed Recommendations
As of September 30, 2021, there were no
Provide information on significant management decisions instances in which significant
in response to recommendations with which the Inspector recommendations were disputed.
General disagrees.
Revised Management Decisions
Provide a description and explanation of the reasons for As of September 30, 2021, there were no
any significant revised management decisions made significant revised management decisions.
during the reporting period.
Reports Issued in the Prior Reporting Period With No
Management Response As of September 30, 2021, there were no
Provide a summary of each report issued before the prior reports for which management’s
beginning of the current reporting period for which no response was not received within 60 days of
management response was received within 60 days of issuance.
the report issuance date.
Disclosure
As of September 30, 2021, there were no
Provide detailed descriptions of the circumstances of reports that had been closed and were not
each inspection, evaluation, and audit that was closed by disclosed to the public.
the agency and was not disclosed to the public.
Review of Legislation and Regulations
TIGTA’s Office of Chief Counsel reviewed 175
Review existing and proposed legislation and regulations, proposed regulations and legislative requests
and make recommendations concerning the impact of during this reporting period.
such legislation or regulations.
40 Results listed are for this reporting period only.
April 1, 2021 – September 30, 2021 │ 63
Appendix II
Audit Products (issued from April 1, 2021 and through September 30, 2021)
Report
Report Title Outcome Measure(s)
Number
April 2021
Revenue Protection: $24,423
Actions Were Taken to Improve the Identification of impacting 8 taxpayer accounts; Cost
2021-40-027
Prisoner Tax Returns Savings (Funds Put to Better Use):
$4,839,871
Assessment of the Effects of the Coronavirus
2021-46-029
Pandemic on Customer Service Operations
The Internal Revenue Service Faces Challenges in
2021-30-022 Addressing the Growth of Peer-to-Peer Payment
Application Use
May 2021
Fiscal Year 2019 Statistical Trends Review of the Tax
2021-10-031
Exempt and Government Entities Division
Internal Controls and Oversight in Criminal
Cost Savings (Funds Put to Better
2021-30-021 Investigation’s Fleet Management Program Can Be
Use): $3,603,231
Improved
Interim Report - Status of Coronavirus Response
2021-16-026
Funding
2021-40-038 Interim Results of the 2021 Filing Season
Improper Payment Rates for Refundable Tax Credits
2021-40-036
Remain High
Revenue Protection:
Backup Withholding Noncompliance and $3,375,430,338; Increased
2021-40-030 Underreported Employment Taxes Continue to Revenue: $133,071,799; Reliability
Contribute Billions of Dollars to the Tax Gap of Information: 2,443,042
information returns impacted
Cost Savings (Funds Put to Better
2021-46-034 Implementation of Economic Impact Payments
Use): $4,452,240,419
The Indian Tribal Government Function Needs to
2021-10-040 Strengthen Internal Controls and Performance
Measures
64 │ April 1, 2021 – September 30, 2021
Streamlined Critical Pay Authority for Information
2021-25-032 Technology Positions Is Being Successfully
Implemented
Improvements Are Needed to Identify Contractors
Reliability of Information: 26 contract
2021-10-037 Meeting the Criteria for Potential Suspension or
records impacted
Debarment
Taxpayer First Act: Data Security in the Identity Theft
Taxpayer Privacy and Security:
2021-25-025 Tax Refund Fraud Information Sharing and Analysis
634,314 taxpayers impacted
Center
June 2021
Opportunities Exist to Improve Hiring and Retaining
2021-20-028
Employees With Information Technology Expertise
Revenue Protection: $186,462,114;
Assessment of Processes to Verify Tentative
2021-46-035 Cost Savings (Funds Put to Better
Carryback Refund Eligibility
Use): $32,295,762
Improvements Are Needed to More
2021-20-024 ************************** the Virtual Host Reliability of Information: 41
Infrastructure Platform
Increased Revenue: $344,817,010
Criminal Restitution Assessment Procedures Need impacting 720 taxpayer accounts;
2021-30-033
Improvement Taxpayer Burden: $66,670,106
impacting 676 taxpayer accounts
Controls Over the Internal Revenue Service Protection of Resources: 2,435
2021-10-039
Contractor Tax Check Process Need to Be Improved contract awards impacted
July 2021
The IRS Continued Compliance Efforts for
High-Income Taxpayers After Disbanding the High Increased Revenue: $121,543,122
2021-30-041
Income High Wealth Strategy, but With Less Effective impacting 1,534 taxpayer accounts
Outcomes
Taxpayer Rights and Entitlements:
Fiscal Year 2021 Mandatory Review of Compliance
2021-10-047 330 responses to FOIA requests
With the Freedom of Information Act
impacted
Implementation of Tax Year 2020 Employer Tax
Cost Savings (Funds Put to Better
2021-46-043 Credits Enacted in Response to the COVID-19
Use): $10,668,440 42
Pandemic
41 Information is redacted because TIGTA has determined that it is related to law enforcement
techniques/procedures and guidelines for law enforcement investigations or prosecutions.
42 Taxpayer information is redacted from the underlying report because TIGTA has determined that it is tax return
information related to taxpayer privacy.
April 1, 2021 – September 30, 2021 │ 65
Casualty and Theft Loss Deductions Continue to Be
Revenue Protection: $206,770,795
2021-40-045 Erroneously Processed Without a Valid Federal
impacting 11,902 taxpayer accounts
Emergency Management Agency Number
Taxpayers Were Notified About the CARES Act
Retirement Plan Provisions; However, Additional
2021-16-044
Actions Could Be Taken to Identify Potential
Noncompliance
Review of the Internal Revenue Service’s Purchase
2021-10-053
Card Violations Report
August 2021
Taxpayer Rights and Entitlements:
Review of the Independent Office of Appeals
2021-10-049 3,623 taxpayers impacted; Increased
Collection Due Process Program
Revenue: 1,510 taxpayers impacted
Reliability of Information: 6,502
invoice payments impacted;
Select Post-Award Financial Management and
Reliability of Information:
2021-20-046 Documentation Controls for Information Technology
$7,469,962 misreported contract
Service Contracts Need Improvement
award amounts; Question Costs:
$893,804
Efforts to Address the Compliance Risk of
Underreporting of S Corporation Officers’
2021-30-042
Compensation Are Increasing, but More Action Can
Be Taken
Taxpayer Burden: 29 taxpayers
Fiscal Year 2021 Statutory Review of Disclosure of
2021-30-050 impacted; Taxpayer Privacy and
Collection Activity With Respect to Joint Returns
Security: 43
Fiscal Year 2021 Statutory Audit of Compliance With
2021-30-048 Legal Guidelines Prohibiting the Use of Illegal Tax
Protester and Similar Designations
Fiscal Year 2021 Statutory Review of Restrictions on Taxpayer Rights and Entitlements:
2021-30-054
Directly Contacting Represented Taxpayers 1,043 taxpayers impacted
Fiscal Year 2021 Statutory Audit of Compliance With
2021-30-062 Notifying Taxpayers of Their Rights When Requested
to Extend the Assessment Statute
Fiscal Year 2021 Statutory Audit of Compliance With
2021-30-052 Legal Guidelines Restricting the Use of Records of
Tax Enforcement Results
43 Taxpayer information is redacted from the underlying report because TIGTA has determined that it is tax return
information related to taxpayer privacy.
66 │ April 1, 2021 – September 30, 2021
September 2021
Effects of the COVID-19 Pandemic on Business Tax Taxpayer Rights and Entitlements:
2021-46-064 $921,572 impacting 1,467 taxpayer
Return Processing Operations
accounts
The Earned Income Tax Credit Examination
2021-30-051
Compliance Strategy Can Be Improved
Fiscal Year 2021 Review of Compliance with Legal
Taxpayer Rights and Entitlements: 8
2021-30-055 Guidelines When Conducting Seizures of Taxpayers’
taxpayers impacted
Property
Taxpayer Burden: 87,542 taxpayers
People First Initiative Actions Helped Taxpayers
impacted; Taxpayer Rights and
2021-36-060 During the Pandemic; However, Many Taxpayers
Entitlements: $7,487 impacting 14
Received Inaccurate Collection Notices
taxpayer accounts
Steps Were Taken to Protect Employee Health and
Safety, but Additional Efforts Are Needed to Ensure
2021-16-073
Compliance With Federal Guidelines During
Pandemics
Taxpayer Privacy and Security: 45
Laptop and Desktop Sanitization Practices Need
2021-20-056 computers impacted; Reliability of
Improvement
Information: 89 computers impacted
Cost Savings (Funds Put to Better
Enhanced Controls Are Needed to Ensure Compliance Use): $1,449,337; Reliability of
2021-10-071
With Federal Travel Regulations and IRS Travel Policy Information: $9,576,098 impacting
25,268 travel claims
Taxpayer Rights and Entitlements:
Fiscal Year 2021 Statutory Review of Potential Fair 40 cases impacted; Reliability of
2021-30-068
Tax Collection Practices Violations Information: 27 cases impacted;
Taxpayer Burden: 10 cases impacted
Revenue Protection: $17,786,343
Improvements Are Needed to Identify Potentially
impacting 6,731 tax returns; Cost
2021-40-057 Fraudulent Individual International Tax Returns
Savings (Fund Put to Better Use):
During Processing
$86,289,755
Fiscal Year 2021 Statutory Review of Compliance
2021-30-067 With Notice of Federal Tax Lien Filing Due Process
Procedures
Addressing Complex and Inconsistent Earned Income
Tax Credit and Additional Child Tax Credit Rules May
2021-40-070
Reduce Unintentional Errors and Increase
Participation
Taxpayer Rights & Entitlements:
Fiscal Year 2021 Statutory Review of Compliance 1,304 taxpayer accounts
2021-30-069
With Legal Guidelines When Issuing Levies impacted; 44 Taxpayer Burden:
1,186 taxpayer accounts impacted
44 Taxpayer information is redacted from the underlying report because TIGTA has determined that it is tax return
information related to taxpayer privacy.
April 1, 2021 – September 30, 2021 │ 67
The Data at Rest Encryption Program Has Made
2021-20-066 Progress With Identifying Encryption Solutions, but
Project Management Needs Improvement
The Endpoint Detection and Response Solution Has Reliability of Information: 7,032
Been Deployed to Most Workstations and Is workstations impacted; Protection of
2021-20-065
Operating As Intended, but Improvements Are Resources: 91 workstations
Needed impacted
****************Platform Management Needs Protection of Resources:
2021-20-063
Improvement 45 746 servers impacted
Fiscal Year 2021 IRS Federal Information Security
2021-20-072
Modernization Act Evaluation
Efforts to Implement Taxpayer First Act Section 2101 Reliability of Information:
2021-25-058
Have Been Mostly Successful 25 shopping carts impacted 46
Improvements to the Correspondence Examination
Taxpayer Burden: 21,767 taxpayers
2021-30-061 Process May Increase Taxpayer Compliance and
impacted
Collection Potential
Enterprise Case Management Deployed Its Initial
2021-20-059 Release, but Process Improvements Are Needed for
Future Releases
45 Information is redacted because TIGTA has determined that it is related to law enforcement
techniques/procedures and guidelines for law enforcement investigations or prosecutions.
46 IRS business units use “shopping carts” in the Procurement for Public Sector application to request external
products and services and to secure the necessary approval and funding for those products and services prior to
their acquisition.
68 │ April 1, 2021 – September 30, 2021
Appendix III
TIGTA’s Statutory Reporting Requirements
The following table reflects the FY 2021 statutory reviews.
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Rep. No. 2021-30-052; Aug. 2021
TIGTA identified instances of
noncompliance with RRA 98 § 1204
requirements. Specifically, TIGTA
identified the following noncompliance:
Requires TIGTA to evaluate the IRS’s four instances in which a Record of Tax
Enforcement Statistics compliance with restrictions under Enforcement Results was used to
RRA 98 § 1204 on the use of evaluate an employee § 1204(a)); and
I.R.C. § 7803(d)(1)(A) enforcement statistics to evaluate IRS six instances in which IRS management
employees. failed to either maintain the retention
standard documentation or ensure that
it was appropriately signed (§ 1204(b)).
Additionally, the IRS self-reported one
instance of § 1204(a) noncompliance
and 14 instances of § 1204(b)
noncompliance.
Rep. No. 2021-30-054; Aug. 2021
TIGTA determined that the IRM section
covering Earned Income Tax Credit
Requires TIGTA to evaluate the IRS’s examinations does not provide clear
Restrictions on Directly Contacting compliance with restrictions under guidance on who the examiner should
Taxpayers I.R.C. § 7521 on directly contacting contact when a valid power of attorney
taxpayers who have indicated they is on file. Further, TIGTA found that in
I.R.C. § 7803(d)(1)(A)(ii) prefer their representatives be 18 of 75 cases reviewed, taxpayer
contacted. rights were infringed upon because the
IRS did not send notices and letters to
authorized representatives as required
by the IRM.
April 1, 2021 – September 30, 2021 │ 69
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Rep. No. 2021-30-067; Sept. 2021
Tests of a statistically valid sample of
116 Notice of Federal Tax Liens (NFTL)
determined that the IRS timely and
correctly mailed the NFTL filings and
Collection Due Process appeal rights to
the taxpayers’ last known addresses.
Requires TIGTA to evaluate the IRS’s However, tests of a judgmental sample
Filing of a Notice of Lien compliance with required procedures of 69 returned (i.e., undelivered,
under I.R.C. § 6320(a) upon the filing of unclaimed, or refused) lien notices
I.R.C. § 7803(d)(1)(A)(iii)
a notice of lien. identified 10 cases for which the
address on the original lien notice and
the address on the IRS computer
system did not agree. In three of these
cases, the address on the IRS
computer system was updated before
the cycle (week) on which the NFTL was
prepared, and the IRS resent the
notices.
Rep. No. 2021-30-062; Aug. 2021
TIGTA’s review of a statistical sample of
40 closed taxpayer audit files with
Requires TIGTA to include information assessment statute extensions found
Extensions of the Statute of regarding extensions of the statute of that the IRS was substantially
Limitations for Assessment of Tax limitations for assessment of tax under compliant with I.R.C. § 6501(c)(4)(B).
I.R.C. § 6501 and the provision of However, TIGTA found instances in
I.R.C. § 7803(d)(1)(C)
notice to taxpayers regarding the right to which the audit files did not contain
I.R.C. § 6501(c)(4)(B) refuse or limit the extension of particular documentation to support that the IRS
issues or a particular period of time. complied with procedures requiring
notification of a taxpayer’s
representative when an authorization
for third-party representation exists.
Report No. 2021-30-069; Sept. 2021
TIGTA reviewed levies issued for over
2 million taxpayers by IRS Collection
functions during the period
October 1, 2019, through
Levies Requires TIGTA to evaluate the IRS’s September 30, 2020, and found that
compliance with required procedures the IRS generally complied with legal
I.R.C. § 7803(d)(1)(A)(iv) under I.R.C. § 6330 regarding levies. and administrative requirements.
However, there were some instances of
noncompliance in which an estimated
1,306 taxpayers’ rights were potentially
violated and 1,186 taxpayers were
potentially burdened.
70 │ April 1, 2021 – September 30, 2021
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Rep. No. 2021-10-049; Aug. 2021
Requires TIGTA to evaluate the IRS’s Similar to prior audits, TIGTA identified
Collection Due Process compliance with required procedures processing errors in 16 (20 percent) of
under I.R.C. §§ 6320 and 6330 81 sampled taxpayer cases.
I.R.C. §§ 7803(d)(1)(A)(iii) and (iv) regarding taxpayers’ rights to appeal lien Processing errors related to proper
or levy actions. classification of hearing requests and
incorrect Collection Statute Expiration
Dates on the taxpayers’ accounts.
Rep. No. 2021-30-055; Sept. 2021
TIGTA reviewed 90 of the 145 seizures
the IRS conducted from July 1, 2019,
through June 30, 2020. The IRS
Requires TIGTA to evaluate the IRS’s generally adhered to procedures that
Seizures compliance with required procedures help ensure compliance with
I.R.C. § 7803(d)(1)(A)(iv) under I.R.C. §§ 6330 through 6344 I.R.C. §§ 6330 through 6344.
when conducting seizures. However, TIGTA identified some
instances in which the IRS did not
comply with a particular I.R.C. section
or internal procedure and identified
ways to strengthen internal procedures.
Rep. No. 2021-30-048; Aug. 2021
TIGTA’s review of taxpayer accounts on
both the Individual and Business
Master Files showed that the IRS did
not reintroduce past Illegal Tax
Protester codes or similar designations
Taxpayer Designations – Illegal Tax on taxpayer accounts during FY 2020.
Protester Designation and Similar An evaluation of the IRS’s compliance However, TIGTA’s review of nearly 3
Designations with restrictions under RRA 98 § 3707 million records from cases closed
on designation of taxpayers. during FY 2020 in the Correspondence
I.R.C. § 7803(d)(1)(A)(v) Examination Automation Support
system identified 32 instances of the
use of Illegal Tax Protester or similar
designations on 14 taxpayers’
accounts. Fourteen of these instances
were potential violations of § 3707,
and 18 instances were procedural
violations.
Rep. No. 2021-30-050; Aug. 2021
Disclosure of Collection Activity With Requires TIGTA to review and certify TIGTA reviews determined that
Respect to Joint Returns whether the IRS is complying with disclosure requirements were not
I.R.C. § 6103(e)(8), which requires the followed in 26 (21 percent) of 124
I.R.C. § 7803(d)(1)(B) (TIGTA Accounts Management customer
IRS to disclose information to an
requirement) service representatives’ history files
individual filing a joint return on
I.R.C. § 6103(e)(8) (IRS collection activity involving the other and three (15 percent) of 20 Field
requirement) individual filing the return. Assistance individual taxpayer advisory
specialists’ history files in the Wage
and Investment Division.
April 1, 2021 – September 30, 2021 │ 71
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Requires TIGTA to include in each
Semiannual Report to Congress the
number of taxpayer complaints received
Taxpayer Complaints Statistical results on the number of
and the number of employee
taxpayer complaints received are
I.R.C. § 7803(d)(2)(A) misconduct and taxpayer abuse
shown on page 44.
allegations received by the IRS or TIGTA
from taxpayers, IRS employees, and
other sources.
Rep. No. 2021-30-068; Sept. 2021
Administrative or Civil Actions With Requires TIGTA to include information TIGTA’s review of the 21 Fair Tax
Respect to the Tax Collection regarding any administrative or civil Collection Practices (FTCP) violations
Practices Act of 1996 actions with respect to violation of identified that one of the 18
I.R.C. § 7803(d)(1)(G) the fair debt collection provision of unsubstantiated violations should have
I.R.C. § 6304, including a summary of been substantiated. In addition,
I.R.C. § 6304 such actions and any resulting TIGTA’s review of the 167 issues coded
judgments or awards granted. as non-FTCP violations identified two
RRA 98 § 3466 cases that should have been coded as
FTCP violations.
Rep. No. 2021-10-047; July 2021
TIGTA reviewed a statistical sample of
73 of the 2,768 FY 2020 Freedom of
Information Act (FOIA) requests for
which the IRS: denied the requested
information either partially or fully
Requires TIGTA to include information based on exemption (b)(7), replied that
regarding improper denial of requests no responsive records were available,
Denials of Requests for Information for information from the IRS, based on a or closed the request as imperfect.
statistically valid sample of the total TIGTA also reviewed all 62 FY 2020
I.R.C. § 7803(d)(1)(F)
number of determinations made by the I.R.C. § 6103(c) and (e) requests
I.R.C. § 7803(d)(3)(A) IRS to deny written requests to disclose documented in the Automated FOIA
information to taxpayers on the basis of and FOIAXpress systems for which the
I.R.C. § 6103 or 5 U.S.C. § 552(b)(7). 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 12
(16 percent) cases.
72 │ April 1, 2021 – September 30, 2021
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
IT Reviews:
Rep. No. 2021-20-001; Oct. 2020
Rep. No. 2021-IE-R002; Mar. 2021
Rep. No. 2021-25-032; May 2021
Rep. No. 2021-20-028; June 2021
Rep. No. 2021-20-046; Aug. 2021
Rep. No. 2021-20-059; Sept. 2021
Rep. No. 2021-25-058; Sept. 2021
Security Reviews:
Adequacy and Security of the
Requires TIGTA to evaluate the IRS’s Rep. No. 2021-20-003; Dec. 2020
Technology of the IRS
adequacy and security of its technology. Rep. No. 2021-26-006; Dec. 2020
I.R.C. § 7803(d)(1)(D)
Rep. No. 2021-30-010; Dec. 2020
Rep. No. 2021-45-017; Feb. 2021
Rep. No. 2021-25-025; May 2021
Rep. No. 2021-20-024; June 2021
Rep. No. 2021-20-056; Sept. 2021
Rep. No. 2021-20-065; Sept. 2021
Rep. No. 2021-20-066; Sept. 2021
Rep. No. 2021-20-072; Sept. 2021
Rep. No. 2021-20-063; Sept. 2021
Rep. No. 2021-10-014; Jan. 2021
TIGTA’s review of the IRS’s purchase
card program found that controls were
generally effective, and the number of
purchase card violations identified by
Government Charge Card Abuse the IRS Credit Card Services Branch
Prevention Act of 2012 were minimal and generally for nominal
Requires TIGTA to report on the IRS’s amounts.
Pub. L. No. 112-194, 126 Stat. progress in implementing purchase and
1445 (codified as amended at 5 travel card audit recommendations. Rep. No. 2021-10-053; July 2021
U.S.C. § 5701 note, 10 U.S.C. §
2784, and 41 § U.S.C. 1909) 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.
April 1, 2021 – September 30, 2021 │ 73
Reference to
Explanation of the Provision Comments/TIGTA Audit Status
Statutory Coverage
Rep. No. 2021-40-036; May 2021
The IRS has not reduced overall
improper payment rates for the Earned
Income Tax Credit, the Additional Child
Tax Credit, or the American Opportunity
Improper Payments Elimination and Requires TIGTA to assess the IRS’s Tax Credit to less than 10 percent;
Recovery Act of 2010 compliance with improper payment however, an exception to the annual
requirements. reduction target reporting requirement
31 U.S.C. § 3321
has been approved. The IRS provided
all required improper payment
information for these refundable tax
credits to the Treasury Department for
inclusion in its Agency Financial Report
FY 2020.
Digital Accountability and
Transparency Act of 2014 Requires TIGTA to assess the
(DATA Act) completeness, timeliness, quality, and
Fieldwork currently in process.
Pub. L. No. 113-101, 128 Stat. accuracy of data that the IRS submits to
1124 (codified at 31 U.S.C. §§ comply with the Act.
3512, 3716, and 6101 note)
Rep. No. 2021-30-010; Dec. 2020
TIGTA identified a risk that too many
private collection agency employees
Fixing America’s Surface have access to taxpayer banking
Transportation Act Requires TIGTA to perform an information, which increases the risk of
independent biannual assessment of fraud. Additionally, TIGTA determined
Pub. L. No. 114-94, 129 Stat. 1312 that the methodology being used by the
private collection agency performance.
(2015) IRS to exclude low-income taxpayers at
or below 200 percent of the Federal
Poverty Level may not prevent all of
these taxpayers from being assigned to
private collection agencies.
74 │ April 1, 2021 – September 30, 2021
Appendix IV
Inspector General Peer Review Activity
This appendix implements § 989C of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. 47
For the period April 1, 2021 – September 30, 2021:
Peer Reviews Conducted of TIGTA by Another Office of Inspector General
During the reporting period, the Department of Energy Office of Inspector General began a
peer review of TIGTA’s OA. This review should be completed by December 31, 2021.
Outstanding Recommendations From Peer Reviews of TIGTA
There are no outstanding recommendations from peer reviews of TIGTA.
Peer Reviews Conducted by TIGTA
During this reporting period, OA completed a peer review of the Environmental Protection
Agency Office of Inspector General. The final report for this peer review was issued on April
15, 2021.
During this reporting period, TIGTA OI conducted a qualitative assessment review of
investigative operations at the Department of Justice Office of the Inspector General. TIGTA
OI reviewed their system of internal safeguards and management procedures in effect from
April 1, 2019 through March 31, 2020. The final report was issued on July 16, 2021.
Outstanding Recommendations From Peer Reviews Conducted by TIGTA
There are no outstanding recommendations from peer reviews conducted by TIGTA.
47 Pub. L. 111-203, 124 Stat. 1376, 1945-46 (2010) (codified at 5 U.S.C. App. §5(a)(14)-(16)).
April 1, 2021 – September 30, 2021 │ 75
Appendix V
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, 2021 through September 30, 2021. Also, data concerning
substantiated RRA 98 § 1203 allegations for the same period are included. See Appendix VI
for § 1203 Standards. IRS management conducted inquiries into the cases reflected in these
tables.
Internal Revenue Service Memorandum
The Following Tables Are Provided by the IRS
76 │ April 1, 2021 – September 30, 2021
Report of Employee Misconduct by Disposition Groups
TIGTA Report Employee Tax Employee
Administrative
Disposition of Compliance Character Totals
Case
Investigation Case Investigation
REMOVAL (PROBATION PERIOD COMPLETE) 23 48 9 - 80
REMOVAL AT OPM DIRECTION - - - 12 12
PROBATION/SEPARATION 4 194 5 7 210
SEPARATION OF TEMPORARY EMPLOYEE - 5 0 - 5
RESIGNATION, RETIREMENT, ETC.
12 23 13 0 48
(REASON NOTED ON SF50)
RESIGNATION, RETIREMENT, ETC. (REASON
16 84 21 4 125
NOT NOTED ON SF50)
SUSPENSION, 14 DAYS OR LESS 46 88 82 0 216
SUSPENSION, MORE THAN 14 DAYS 20 17 16 0 53
INDEFINITE SUSPENSION 0 0 - - 0
REPRIMAND 44 107 51 5 207
ADMONISHMENT 27 109 161 7 304
WRITTEN COUNSELING 27 73 128 31 259
ORAL COUNSELING - 8 0 - 8
ALTERNATIVE DISCIPLINE: IN LIEU OF
3 8 3 - 14
REPRIMAND
ALTERNATIVE DISCIPLINE: IN LIEU OF
9 9 12 0 30
SUSPENSION
CLEARANCE LETTER 28 34 32 - 94
CLOSED WITHOUT ACTION CAUTIONARY
47 114 87 155 403
LETTER
CLOSED WITHOUT ACTION LETTER 23 47 20 19 109
TERMINATION FOR ABANDONMENT OF
- 25 - - 25
POSITION
CASE SUSPENDED PENDING EMPLOYEE - - - - -
RETURN TO DUTY
- - - - -
PROSECUTION PENDING FOR TIGTA’S ROI
- - - - -
CLOSED - SUPPLEMENTAL REQUESTED
FORWARDED TO TIGTA - 0 - - 0
TOTAL 329 993 640 240 2,202
Source: ALERTS (extract date: October 1, 2021). Columns containing numbers of two or less and protected by
I.R.C. § 6103 are notated with a zero and are not reflected in the column and row totals.
April 1, 2021 – September 30, 2021 │ 77
Report of Employee Misconduct National Summary
Cases Closed
Cases
Inventory Open Conduct Non- Ending
Conduct Merged
Case Type Inventory Cases Conduct Inventory
Issues With Other
Received Issues
Cases
Administrative
432 1,174 1,123 27 58 398
Case
Employee
Character 90 354 293 9 - 142
Investigation
Employee Tax
Compliance 804 500 686 34 - 584
Case
TIGTA Report of
410 371 417 6 - 358
Investigation
Total 1,736 2,399 2,519 76 58 1,482
Source: ALERTS (extract date: October 1, 2021).
Administrative Case - Any matter involving an employee in which management conducted an inquiry
into alleged misconduct.
Employee Character Investigations - 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.
78 │ April 1, 2021 – September 30, 2021
Summary of Substantiated I.R.C. Section 1203
Inquiries Recorded in ALERTS
Removed In
Resigned/ Probation Penalty
§ 1203 Violation Removals On Other Personnel Total
Retired Separation Mitigated
Grounds Process
1203(b)(2): FALSE - - - - - - -
STATEMENT UNDER OATH
1203(b)(3): CIVIL - - - - - - -
RIGHTS/CONSTRUCTIVE
VIOLATION
1203(b)(4): CONCEALED 0 - - - - 0 0
WORK ERROR
1203(b)(6): - - - - - - -
I.R.C/IRM/REG
VIOLATION-RETALIATION
1203(b)(8): WILLFUL 7 14 - - 15 106 142
UNTIMELY RETURN
1203(b)(9): WILLFUL 7 13 - 0 6 85 101
UNDERSTATED TAX
1203(b)(10): THREAT OF - - - - - 0 0
AUDIT FOR PERSONAL
GAIN
Total 14 17 - 0 21 191 243
Source: ALERTS (extract date: October 1, 2021). 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.
April 1, 2021 – September 30, 2021 │ 79
Appendix VI
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 Constitution of the United States, or any civil right established
under Title VI or VII of the Civil Rights Act of 1964; Title IX of the Education Amendments
of 1972; Age Discrimination in Employment Act of 1967; Age Discrimination Act of 1975;
Section 501 or 504 of the Rehabilitation Act of 1973; or Title I of the Americans With
Disabilities Act of 1990;
• Falsifying or destroying documents to conceal mistakes made by any employee with
respect to a matter involving a taxpayer or taxpayer representative;
• Committing assault or battery on a taxpayer, taxpayer representative, or another
employee of the IRS, but only if there is a criminal conviction or a final judgment by a
court in a civil case with respect to the assault or battery;
• Violating the 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 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.
80 │ April 1, 2021 – September 30, 2021
Glossary of Acronyms
ALERTS Automated Labor and Employee Relations Tracking System
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CDP Collection Due Process
COVID-19 Coronavirus Disease 2019
CY Calendar Year
EIP Economic Impact Payment
FTE Full-Time Equivalent
FY Fiscal Year
HIHW High Income High Wealth
HIU High Income Underreported
I&E Office of Inspections and Evaluations
I.R.C. Internal Revenue Code
IRM Internal Revenue Manual
IRS Internal Revenue Service
OI Office of Investigations
RRA 98 Restructuring and Reform Act of 1998
SB/SE Small Business/Self-Employed
TAC Taxpayer Assistance Center
TIGTA Treasury Inspector General for Tax Administration
TIN Taxpayer Identification Number
TPI Total Positive Income
TY Tax Year
U.S.C. United States Code
April 1, 2021 – September 30, 2021 │ 81
Call our toll-free hotline
to report waste, fraud or abuse:
1-800-366-4484
By Web:
www.tigta.gov
By Fax:
202-927-7002
Or Write:
Treasury Inspector General for Tax Administration
P.O. Box 589
Ben Franklin Station
Washington, DC 20044-0589
Information you provide is confidential and you may remain anonymous.
82 │ April 1, 2021 – September 30, 2021
Department of the Treasury
Office of the Inspector General for Tax Administration
1401 H Street, NW., Suite 469
Washington, DC 20005
This report and complete copies of TIGTA audit reports
are available online at: www.tigta.gov
April 1, 2021 – September 30, 2021 │ 83
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