A new report from the Treasury Inspector General For Tax Administration has found that evidence was sometimes not available to support increasing IRS assessments against business taxpayers that have not filed required returns.

J. Russell George

In addition, in some instances, the taxpayers were not provided sufficient time to respond to proposed assessments, according to TIGTA.

The IRS has the ability to prepare returns and assess taxes under IRS Code Section 6020(b) when business taxpayers do not file required returns or file false or fraudulent returns. TIGTA conducted its audit to evaluate the impact of the IRS Collection Field function’s use of IRC Section 6020(b) authority on taxpayer compliance and to determine whether employees are using the proper procedures to assess tax liabilities. TIGTA’s review of a statistical sample of 96 Section 6020(b) assessments found that revenue officers followed many of the required procedures.

In one in five cases, however, TIGTA found no evidence for the basis of assessments. Also, in 10 percent of the cases revenue officers did not allow, or there was no evidence to support the allowance of, the required 30 calendar days for taxpayers to respond to proposed assessments prior to the IRS processing the 6020(b) returns.

“Since FY 2009, the number of these assessments entering the collection stream has increased by 58 percent,” noted Inspector General J. Russell George.

TIGTA recommended that the director of enterprise collection strategy in Small Business/Self-Employed Division develop internal controls to help ensure that ROs properly document a complete explanation for the basis of 6020(b) assessments, and allow taxpayers 30 calendar days to respond to proposed assessments before submitting returns for processing.

TIGTA also recommended that the IRS establish a methodology to compare actual results with management’s anticipated benefit of improving filing compliance when Section 6020(b) authority is used for business taxpayers.

IRS officials agreed with TIGTA’s recommendations and plan to initiate changes to the Integrated Collection System to comply. The IRS also plans to request a research project to measure the effectiveness of its Section 6020(b) program on future filing compliance of business taxpayers and weigh the results against ultimate case resolutions to determine if any program changes are warranted.