IRS may have skirted rules on directly contacting represented taxpayers

Internal Revenue Service employees weren’t always following the proper rules when it came to directly contacting taxpayers instead of their representatives like CPAs, enrolled agents and attorneys. 

The IRS is supposed to avoid directly contacting represented taxpayers under provisions of the law, but hasn’t developed a system to identify IRS employee violations of those provisions, according to a report released Monday by the Treasury Inspector General for Tax Administration. 

Sections of the Tax Code provide taxpayers the right to representation during interviews and protect taxpayers’ rights by prohibiting IRS contact of a taxpayer if it knows they’re represented. However, TIGTA’s effort to determine whether the IRS was complying with the law was complicated by the fact that the IRS doesn’t have a system to identify IRS employee violations of the law. Complaints about violations are rare, though, and the report acknowledged that TIGTA’s Office of Investigations did not receive any specific complaints alleging that an IRS employee bypassed taxpayer representatives and contacted taxpayers directly during the period covered by the annual report, from Oct. 1, 2021, to June 30, 2022. 

Nevertheless, there are some problems, according to the report. It found that revenue officers potentially violated taxpayers’ rights concerning directly contacting taxpayers who are represented before the IRS. TIGTA reviewed a sample of 132 taxpayers out of a population of 1,613 taxpayers who had collection actions documented in case history narratives by revenue officers between Oct. 1, 2021, and June 30, 2022. It found eight taxpayers (12 instances) for whom revenue officers did not comply with the Tax Code sections pertaining to direct contact provisions and the right to fair collection practices. 

TIGTA also reviewed data from the IRS’s Embedded Quality Review System pertaining to field collection last fiscal year and found 129 cases in which the quality element “right to representation not observed,” reported as a potential exception and the reviewer included a narrative explaining the specific nature of the violation. TIGTA found that for the 129 potential violations, the IRS did not comply with the law regarding the right to representation for 48 taxpayers. IRS procedures require the reporting of potential Fair Tax Collection Practices violations to a labor relations specialist at the agency for investigation, but the 48 potential violations identified by TIGTA weren’t reported. 

“TIGTA concluded that the IRS has significant gaps in both its reporting of potential employee misconduct and in disciplining employees for potential taxpayer violations,” said the report. This is likely to become more of a problem as the IRS steps up its hiring to replace the wave of retiring employees. TIGTA found that training for new revenue officers lacks case scenarios to show employees the different ways that taxpayers can ask to consult with a representative. TIGTA recommended that the IRS make sure its group managers discuss the potential violations identified during the review of Integrated Collection System case narratives with the employees responsible and report potential violations to the labor relations people. They should also report the potential Fair Tax Collection Practices violations identified in the Embedded Quality Review System’s reviews to the labor relations specialists for investigation, the report suggested, and set up controls to make certain that all potential violations of Fair Tax Collection Practices identified in the case reviews are reported for investigation. TIGTA also recommended the IRS put in place procedures that require EQRS reviewers to include a narrative detailing a potential violation relating to the “right to representation not observed” quality element. The report also suggested the IRS should improve its training of new revenue officers by adding direct contact scenarios pertaining to taxpayers’ statements concerning their right to representation. The IRS agreed with all five recommendations in the report.

“We are committed to protecting taxpayer rights and work hard to ensure our employees are aware of and protect those rights through guidance, training and regular reviews of their work,” wrote Lia Colbert, commissioner of the IRS’s Small Business/Self-Employed Division, in response to the report. “Nonetheless, we agree that further steps can be taken to continue improvement of taxpayer rights. As the IRS hires new employees, we will continue to focus on providing appropriate training to educate employees on protection of taxpayer’s rights to representation. The findings in this audit reinforce the importance of such training.”