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Research Study #2: Study of Two-Year Bans on the Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit

 

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #2-1

Revise procedures for imposing two-year bans to require IRS employees to speak with the taxpayer in every case before imposing a ban.

IRS RESPONSE TO RECOMMENDATION: None given.

CORRECTIVE ACTION: N/A

TAS RESPONSE: It is unclear why the IRS proposes to replicate the 2013 and 2019 TAS studies by reviewing a sample of two-year ban cases rather than adopting this recommendation.   Perhaps the results of the IRS’s study    will lead it to conclude, as TAS did, that every two-year ban case should be reviewed. The IRS’s proposed review of its existing guidance to “determine if revisions are warranted to ensure the reviews consider prior-year audits” will not reduce the types of inappropriate bans identified by this study.  The IRS is   already considering prior-year audits and imposing EITC bans solely because the taxpayer was previously audited.  In such cases, the ban may be inappropriate, and this automated process seems inconsistent  with the statutory requirements. TAS looks forward to the study’s results.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION #2-2

Suspend the practice of automatically imposing two-year bans.

IRS RESPONSE TO RECOMMENDATION: None given.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The IRS’s narrative does not address the recommendation set forth in RS 2-2. The IRS response acknowledges that it automatically imposes two-year bans on claiming EITC (and not on CTC/ACTC or AOTC).

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

3
3.

TAS RECOMMENDATION #2-3

Conduct quality reviews for at least three years of every case in which the IRS proposes to impose the two-year ban.

IRS RESPONSE TO RECOMMENDATION: None given.

CORRECTIVE ACTION: IRS did not agree to a specific due date. TAS is holding this recommendation open to see the results of the reviews.

TAS RESPONSE: It is unclear why the IRS proposes to replicate the 2013 and 2019 TAS studies by reviewing a sample of two-year ban cases rather than adopting this recommendation.   Perhaps the results of the IRS’s study    will lead it to conclude, as TAS did, that every two-year ban case should be reviewed. The IRS’s proposed review of its existing guidance to “determine if revisions are warranted to ensure the reviews consider prior-year audits” will not reduce the types of inappropriate bans identified by this study.  The IRS is   already considering prior-year audits and imposing EITC bans solely because the taxpayer was previously audited.  In such cases, the ban may be inappropriate, and this automated process seems inconsistent  with the statutory requirements. TAS looks forward to the study’s results.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 1/31/2023, TAS is monitoring this recommendation.

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