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“Amount You Owe” Section of Form 1040 as currently formatted Source: 2004 Form 1040. The problem occurred because IRS computers are programmed to include the amount of the estimated tax penalty (Line 75) in the calculation for Line 74. The return does not instruct taxpayers to include this line in their calculation. Because the amount calculated by IRS computers differed from the amount calculated by taxpayers (in accordance with instructions), an error notice was sent to them. Taxpayers received the notice even if they paid the proper amount (amount of tax owed plus estimated tax penalty). As of June 3, 2005, improper math error notices were sent to over 3,200 taxpayers who had completed their 2004 Forms 1040 and 1040A as instructed. Over 700 of these taxpayers had their returns prepared by paid tax preparers. review the process for revising notices to ensure that they are accurate and consistently formatted, and that taxpayers’ rights to appeal adjustments are clearly explained on all math error notices. IRS management generally agreed with the recommendations and initiated corrective actions. However, the IRS disagreed with the recommendations to make changes to Forms 1040 and 1040A, stating that there is not sufficient room on the forms to add text. TIGTA disagrees with the IRS’ decision and believes that without the additional text, the instructions are incomplete. Report Reference No. 2005-30-154 TIGTA recommended relocating the line for estimated tax penalty and adding better instructions to correct this problem. TIGTA also recommended that the IRS 18 April 1, 2005 to September 30, 2005
Taxpayer Protection and Rights The IRS recognizes the growing challenge of identity theft and its effect on tax administration. Two primary types of identity theft that relate to tax are: (1) an individual who files a return using another person’s name and Social Security Number (SSN) to steal a tax refund; and, (2) an individual using another person’s name, SSN, or both to obtain employment. The IRS has no corporate strategy to address identity theft issues. It does not have a consistent process to educate and assist taxpayers, and does not always take additional actions to deal with the individuals who have used another’s name and/or SSN to file fraudulent tax returns or obtain employment. In addition, the IRS does not have comprehensive or centralized data on identity theft to determine its effect on tax administration. IRS management agreed with the recommendations presented in the report and has developed an Enterprise Identity Theft Strategy. Report Reference No. 2005-40-106 Some concerns have been expressed by tax professionals and the National Taxpayer Advocate that new policies, programs, and structures initiated by the IRS since enactment of RRA 98 may be compromising the independence of the Office of Appeals. TIGTA found that the overall independence provided by the Office of Appeals’ structure and processes appears to comply with the intent of RRA 98. Survey results from taxpayers indicate that there has been an improvement in the overall perception of the Office of Appeals’ independence. In addition, representatives from the American Bar Association, the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, and the National Society of Accountants along with former IRS officials advised TIGTA that they believe the independence is generally very high. However, these tax professionals have concerns with independence of specific programs and initiatives – primarily to those involving high-dollar cases in which there appears to be coordination between the Office of Appeals and IRS compliance functions. TIGTA reviewed the programs and areas of concern. While there were some specific areas where clarification of procedures and guidance is needed, the actions taken to streamline processes and the coordination to ensure that taxpayers receive consistent treatment appear to be necessary for the Office of Appeals to effectively perform its function. TIGTA recommended that the IRS clarify certain procedures related to coordinated issues. In addition, TIGTA recommended that IRS officials, with the exception of the IRS Commissioner and the Chief, Office of Appeals, avoid discussing the impact of specific court cases on Appeals Settlement Guidelines and revise policies and procedures to promote consistency. IRS management agreed with the recommendations and will take corrective action. Report Reference No. 2005-10-141 April 1, 2005 to September 30, 2005 19
Page 4 and 5: "Taxes are what we pay for civilize
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Page 10 and 11: . TIGTA’s Organizational Structur
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Page 40 and 41: Congressional Testimony I nspector
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Page 64 and 65: 2005-40-137 2005-10-138 2005-30-140
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Report of Employee Misconduct for t
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Summary of Substantiated I.R.C. §
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