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MSP #7: CORRESPONDENCE EXAMS

Taxpayers Encounter Unnecessary Delays and Difficulties Reaching an Accountable and Knowledgeable Contact for Correspondence Audits

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #7-1

Provide taxpayers responding to correspondence audit notices the name, telephone number, and unique identifying number of an IRS employee who can serve as their direct contact throughout the correspondence audit process, along with the employee’s secure email address or the TDC Secure messaging access needed to send and receive documents and communicate electronically with the assigned examiner.

IRS RESPONSE TO RECOMMENDATION: As outlined in our response included in the National Taxpayer Advocate’s report, and previously noted in IRS responses to the 2014 and 2018 National Taxpayer Advocate Annual Reports to Congress, it is impractical to assign one employee to handle all aspects of a taxpayer’s correspondence examination from beginning to end. When we receive a written response from a taxpayer, it is assigned to one tax examiner to review. When the tax examiner sends a letter in response, the letter identifies the tax examiner by name and includes Examination’s toll-free telephone number, since tax examiners do not have direct telephone lines. By calling the toll-free telephone number at their convenience, taxpayers reach the next available phone assistor. All phone assistors are trained and experienced tax examiners who have access to the taxpayer’s case history and can work with the taxpayer toward case resolution. However, if a taxpayer responds to an examination letter with correspondence and later calls the toll-free line and is not satisfied at the end of the call, they can request that the assigned tax examiner return their call.

In 2020, the IRS expanded secure messaging within Taxpayer Digital Communications (TDC) to all five of the Small Business/Self-Employed Division’s (SB/SE) campuses. In general, like with paper correspondence, these messages are directed back to the examiner who last worked their case.

We believe our current procedures appropriately balance taxpayer service with sound tax administration within our current resource constraints.

CORRECTIVE ACTION: N/A

TAS RESPONSE: While the IRS continues to advise that it is not practical to assign one employee to handle all aspects of the taxpayer’s correspondence examination, the described procedures suggest that correspondence audits are primarily assigned and worked by one employee. Correspondence examiners hold responsibility for both staffing the correspondence audit toll-free phone lines and for auditing the tax returns selected for correspondence audit. It remains unclear why these employees can audit returns and answer calls, yet it is impractical for correspondence examiners to answer calls from the taxpayers they are assigned to audit.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): 

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2.

TAS RECOMMENDATION #7-2

Ensure that the volume and timing of audits conducted are commensurate with the IRS’s ability to provide correspondence audit toll-free phone services, timely correspondence responses, and timely audit completion.

IRS RESPONSE TO RECOMMENDATION: Since 2014, SB/SE Correspondence Examination has used the Enterprise Planning Scenario Tool (EPST) to develop the Correspondence Examination Starts Plan, which utilizes comparative scenarios to optimize the mix of inventory and available resources. EPST provides a weekly plan by Campus for opening additional examinations, with projected weekly mail receipts, to maintain a balanced and manageable mail inventory based on available staffing throughout the fiscal year.

The plan is adjusted throughout the year to account for actual mail receipts, adding test inventory, changes in resources, program pauses/stoppage (e.g., COVID response), and system downtime and testing.

CORRECTIVE ACTION: Since 2014, SB/SE Correspondence Examination has used the Enterprise Planning Scenario Tool (EPST) to develop the Correspondence Examination Starts Plan, which utilizes comparative scenarios to optimize the mix of inventory and available resources. EPST provides a weekly plan by Campus for opening additional examinations, with projected weekly mail receipts, to maintain a balanced and manageable mail inventory based on available staffing throughout the fiscal year.

The plan is adjusted throughout the year to account for actual mail receipts, adding test inventory, changes in resources, program pauses/stoppage (e.g., COVID response), and system downtime and testing.

TAS feels that due to the continued impact of COVID (correspondence backlogs and reduced levels of service) it is not possible at this time to determine if IRS effectively adjusted the volume and timing of audits conducted to be commensurate with the IRS’s ability to provide sufficient phone service and timely correspondence responses.

TAS RESPONSE: TAS appreciates the IRS’s agreement to ensure that the volume and timing of audits conducted are commensurate with the IRS’s ability to provide correspondence audit toll-free telephone service, timely correspondence responses, and timely audit completion with the use of its EPST tool.  Acknowledging that this tool has been in use since 2014, TAS notes that the W&I and SB/SE correspondence audit toll-free telephone levels of service have consistently remained in the 40 and 60 percent ranges respectively, while significant overage correspondence responses continued throughout fiscal years 2016 through 2019. TAS looks forward to any recalibrations of the IRS’s EPST that will serve to increase the levels of service on the correspondence audit toll-free telephones and improve the timeliness of correspondence responses and audit completion.

Update: TAS is monitoring this until July 2023 to get a better picture as to the success of the initiatives in a normal post-COVID environment.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 7/1/2023

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3.

TAS RECOMMENDATION #7-3

Expand TDC Secure Messaging capabilities to all correspondence audit programs.

IRS RESPONSE TO RECOMMENDATION: In August 2020, SB/SE expanded TDC in Correspondence Examination to all five of its campuses. We plan to invite taxpayers from all TDC eligible audit types beginning in April 2021. Certain audit issues are not conducive to TDC (e.g. Non-filers, Criminal Investigation); therefore, those taxpayers will not be invited to participate. Due to budget constraints and continued challenges with taxpayers’ ability to authenticate, the IRS is not expanding TDC to all 10 campuses at this time.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS realizes that budget constraints and continued authentication challenges could hinder the IRS’s ability to immediately expand TDC at this time. The current initiatives to invite taxpayers from all eligible TDC audit types in April 2021 is a step in the right direction. TAS looks forward to TDC expanding to all eligible audit types when feasible.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): 

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