IRS referrals get bogged down

The Internal Revenue Service's process for referring taxpayer inquiries to other business units can lead to delays and lost referrals, according to a new report.

The report, released Monday by the Treasury Inspector General for Tax Administration, found the IRS could improve the process it uses for referring taxpayer inquiries to other parts of the agency. If an IRS customer service representative can't resolve a taxpayer's inquiry, the representative typically makes a referral to another IRS business unit. CSRsin the Taxpayer Services Division uses Form 4442, Inquiry Referral, to send a referral. If a CSR determines, for example, that an Individual Taxpayer Identification Number needs to be rescinded since the taxpayer has a Social Security Number, the CSR will usually send a referral to the Taxpayer Services Division's Submission Processing function to address the issue.

The Taxpayer Services Division receives and works on hundreds of thousands of inquiry referrals each year within the Account Management Services system. In fiscal year 2024, Taxpayer Services employees created 516,000 referrals and sent 230,000 inquiries to other IRS business units to resolve. These referrals, captured on Form 4442, are removed from the AMS system 60 days after the CSR either resolves or refers the inquiry. Only the historical narrative remains to document referral actions. However, not all Taxpayer Services employees capture the information in the historical narrative as required. As a result, if a taxpayer calls the IRS again about the same issue, a CSR may need to retrace previous actions, increasing handling time and delaying responses.

"Taxpayers have the right to quality service, which requires the IRS to provide prompt and accurate answers to taxpayer questions," said the report. "However, if the IRS does not maintain complete and accurate information of the steps taken to resolve a taxpayer's inquiry, it is difficult to determine if taxpayers' inquiries were promptly and accurately resolved."

TIGTA reviewed the documentation for a statistical sample of 135 taxpayers who had an inquiry referred to another IRS business unit in 2024 in order to determine if employees included required information that helps ensure that inquiries are handled properly and routed to the correct business unit. TIGTA identified 45 taxpayers (33%) whose referral did not have the Internal Revenue Manual reference or electronic fax number included in the historical narrative. In addition, TIGTA identified 11 taxpayers (8%) whose referral didn't include a closing action code in the historical narrative. While some of this information (such as the Internal Revenue Manual reference) may be captured on Form 4442, the form is removed 60 days after closure.

In addition, TIGTA found there are 151 e-fax numbers for CSRs to choose from when sending a referral to the business units across 20 IRS different locations. This high volume of e-fax numbers increases the risk of customer service reps sending the taxpayer's referral to the wrong location, resulting in lost referrals or delayed resolutions. A centralized intake, tracking and resolution process for business units that work on referrals outside the tracking system would help taxpayers receive prompt and accurate assistance, TIGTA noted.

TIGTA made two recommendations in the report, suggesting the IRS should require CSRs to include the AMS case number in the historical narrative section of each case, and develop a centralized intake, tracking and resolution process for inquiry referrals processed outside of AMS. IRS management agreed with both of TIGTA's recommendations.

"To enhance accountability and reduce resolution delays, we strengthened internal controls by increasing oversight of Form 4442 referrals," wrote Kenneth Corbin, chief of the IRS's Taxpayer Services Division, in response to the report. "This includes directly communicating with staff when referral action dates pass without resolution and reinforcing expectations for timely follow-up."