IRS managers may start supervising tax audits more closely to help resolve disputes between taxpayers and tax examiners.

A report from the Treasury Inspector General for Tax Administration recommends managerial involvement to help reduce costs and disagreements. At a minimum, the report suggests that management involvement should help taxpayers or their representatives gain a clearer understanding of the federal government’s position.

The policy of the IRS is to resolve disagreements in audits at the lowest practical level. The initial step in the resolution process is for the group manager to contact the taxpayer to either resolve the disagreement or understand the basis for the disagreement. This step is considered to be critical because managerial involvement in disagreements can result in a taxpayer’s full or partial agreement with the audit, which can reduce additional costs to both the IRS and taxpayers by avoiding a protracted dispute resolution process.

TIGTA determined that in 24 (63 percent) of the 38 audits that it examined, the level of managerial involvement was insufficient because the group manager did not contact the taxpayer or taxpayer’s representative to reach agreement on the results of the audit.

Group managers consider their involvement in audits to be critical to the success of audit outcomes, but indicated that the administrative demands on their time hamper their ability to be more closely involved in audits. Another more fundamental cause may be the attitude of the group managers regarding the value of attempting to contact taxpayers to reach agreement on audit results, which apparently has not always been successful.

TIGTA recommended that IRS officials re-emphasize to group managers the importance and need to be actively involved in securing agreement on the results of audits when agreement could not be obtained by the examiners.

In response, IRS officials agreed with the recommendations and said they plan to publish an article in an internal publication detailing the importance of group manager involvement in securing agreement with audit results when an agreement cannot be obtained by the examiner. The IRS also plans to reemphasize the importance of managerial involvement during a conference call with the area technical analysts and to share TIGTA’s report with its Management Advisory Council and the Human Capital Office.

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