IRS appeals process needs improvement, says GAO
The Internal Revenue Service’s process for resolving tax appeals needs to be more timely and transparent, according to a report from the Government Accountability Office.
The GAO report found that information on the length of the appeals process wasn’t readily available, making it difficult for taxpayers to know what to expect. While the IRS Office of Appeals solicits customer feedback, it doesn’t receive input before making policy changes. The report recommended the IRS Office of Appeals have more transparency about the time it takes to resolve appeals and a way for the IRS to solicit input on the process, among other suggestions.
The GAO said the Appeals office should have staff with expertise in all areas of the tax law to review taxpayer appeals. However, the office’s staffing levels have declined nearly 40 percent in recent years, going from 2,172 in fiscal year 2010 to 1,345 in fiscal year 2017. The Appeals office is expecting to suffer a continuing loss of subject matter experts, as approximately one-third of its workforce became eligible for retirement at the end of last fiscal year.
While the IRS’s Appeals office monitors the number of days to resolve taxpayer appeals of examination, collection and other tax disputes, the IRS doesn’t monitor the timeliness of the transfers of all incoming appeal requests. The GAO’s analysis indicated that the time to transfer appeal requests from compliance units varied depending on the type of case.
The Internal Revenue Manual, which is the IRS’s main source of staff instructions, requires transfer to the Appeals office within 45 days for the largest collection workstream. However, with manager approval, the collection staff can get an extra 45 days to work with a taxpayer. Nearly 90 percent of collection appeals closed in fiscal years 2014 to 2017 were transferred to the Appeals office within 90 days.
Nevertheless, the IRS doesn’t have a requirement in the manual providing guidelines and procedures for timely transfer of examination appeals. That means more than 20 percent of the examination appeals closed in fiscal years 2014 to 2017 took more than 120 days to be transferred to the Appeals office. The GAO noted that delays in transferring appeals can lead to larger interest costs for taxpayers.
In the report, the GAO made a number of recommendations for improving the appeals process, including establishing timeframes and monitoring procedures for transferring taxpayer appeals requests to the Office of Appeals from the examination compliance units, and providing more transparency to taxpayers on the historical average total appeal resolution times. The report also recommended the Appeals office should be directed to regularly report and share data with each compliance unit about the amount of time that elapses between when a taxpayer requests an appeal to when it is received in the Appeals office.
The IRS and the Treasury Department generally agreed with the recommendations and intend to provide detailed corrective action plans to address the report.
“The mission of Appeals is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the government and the taxpayer in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the IRS,” wrote the IRS’s former acting commissioner, David Kautter, who continues to hold the role of Assistant Secretary of the Treasury for Tax Policy. “To fulfill this mission, we are constantly innovating our processes and procedures.”