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United States General Accounting Office: 
GAO: 

Report to the Chairman and Ranking Minority Member, Committee on 
Finance, U.S. Senate: 

April 2002: 

Tax Administration: 

IRS's Innocent Spouse Program Performance Improved; Balanced 
Performance Measures Needed: 

GAO-02-558: 

Contents: 

Letter: 

Results in Brief: 

Background: 

Objectives, Scope, and Methodology: 

IRS Is Gaining Control over Its Innocent Spouse Workload but Has Not 
Developed Balanced Measures: 

IRS’s Procedures for Transferring Tax Liabilities Conform to 
Applicable Guidance: 

IRS Established an Innocent Spouse Web Site to Educate Taxpayers but 
Has Not Assessed Its Usefulness: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Few Innocent Spouse Cases Litigated in Federal Courts: 
Courts Generally Upheld All or Part of IRS’s Determinations: 

Appendix II: Innocent Spouse Cases Scheduled for Court That Were 
Settled by IRS’s Appeals Office and Treasury’s Counsel: 

Appendix III: IRS’s Innocent Spouse Eligibility Requirements: 

Appendix IV: Number and Types of Innocent Spouse Cases Not Meeting 
Eligibility Requirements, March 1999–September 2001: 

Appendix V: Average Days for Innocent Spouse Determinations, Fiscal 
Years 1999–2001: 

Appendix VI: Summary of Decided Innocent Spouse Cases, Fiscal Years 
1999–2001: 

Appendix VII: Comments from the Internal Revenue Service: 

Tables: 

Table 1: Innocent Spouse Program FTE Staffing, Fiscal Years 2000–2003: 

Table 2: IRS Inventory Model Projections for Fiscal Years 2002 and 
2003: 

Table 3: IRS’s Quality Review Results, Fiscal Years 2000–2001: 

Table 4: Innocent Spouse Cases Received and Decided, Fiscal Years 1999–
2001: 

Table 5: Cases Decided by Location and FTEs Applied, Fiscal Years 1999–
2001: 

Table 6: Average Days for IRS to Decide and Close an Innocent Spouse 
Case, Fiscal Years 1999–2001: 

Table 7: Number and Disposition of Innocent Spouse Cases Litigated in 
U.S. Tax Court, June 1996–June 2001: 

Table 8: Number and Disposition of Innocent Spouse Cases Litigated in 
the Federal Circuit Courts, June 1996–June 2001: 

Table 9: Number and Disposition of Docketed Innocent Spouse Cases 
Settled by IRS’s Office of Appeals and Treasury’s Office of Chief 
Counsel, Fiscal Years 1999–May 2001: 

Table 10: IRS’s Innocent Spouse Eligibility Requirements: 

Table 11: Number and Types of Innocent Spouse Cases Not Meeting 
Eligibility Requirements, March 1999–September 2001: 

Table 12: Average Days For Determinations Made in Fiscal Years 1999–
2001 (regardless of year that case was received): 

Table 13: Summary of Decided Innocent Spouse Cases, Fiscal Years 1999 
2001: 

Abbreviations: 

FTE: full-time equivalent: 

ICP: integrated case processing: 

IRS: Internal Revenue Service: 

ISTS: Innocent Spouse Tracking System: 

SB/SE: Small Business/Self-Employed: 

TIGTA: Treasury Inspector General for Tax Administration: 

TRR: taxpayer resolution representative: 

W&I: Wage and Investment 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

April 24, 2002 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

By law, married persons who file joint tax returns are each fully 
responsible for the accuracy of the tax return and for the full tax 
liability. This is true even though only one taxpayer may have earned 
the wages or income shown on the tax return. Under the Internal 
Revenue Service’s (IRS) Innocent Spouse Program, IRS can relieve 
taxpayers of tax debts on the basis of equity considerations, such as 
not knowing that their spouse failed to pay taxes due. 

Since passage of the IRS Restructuring and Reform Act (Restructuring 
Act) of 1998, IRS has received thousands of requests from taxpayers 
for innocent spouse relief. IRS’s inability to provide timely 
responses to such requests has generated concerns among taxpayers, 
Congress, and other stakeholders. It took IRS about a year, on 
average, to completely process an innocent spouse case in fiscal year 
2001. 

Because of your concerns about IRS’s growing inventory of unresolved 
innocent spouse cases and the timeliness of IRS’s case processing, you 
asked us to review IRS’s administration of the program. Specifically, 
this report assesses (1) IRS’s overall approach to ensure that 
innocent spouse cases were being processed in a timely, accurate, and 
consistent manner; (2) the adequacy of IRS’s procedures to transfer 
tax liabilities between taxpayers when relief was granted to one of 
the taxpayers; and (3) IRS’s efforts to evaluate the usefulness of its 
Innocent Spouse Program Web site to taxpayers. 

To address these objectives, we reviewed and analyzed Innocent Spouse 
Program data from IRS’s Innocent Spouse Tracking System (ISTS) and 
management reports, and we reviewed related policies, procedures, and 
guidance. We interviewed IRS officials responsible for managing the 
Innocent Spouse Program as well as officials in IRS’s National 
Taxpayer Advocate Service Office and Electronic Tax Administration 
Office and in the U.S. Department of the Treasury’s (Treasury) Office 
of Chief Counsel. We reviewed reports by the Treasury Inspector 
General for Tax Administration (TIGTA) and the taxpayer advocate that 
addressed innocent spouse issues. We focused on program operations 
that cover the period March 1999 through December 2001, because this 
period best reflected the program’s results after the Restructuring 
Act’s changes and because it covers the period for which performance 
data were most recently available. Our scope and methodology are 
discussed in more detail in a separate section of this report. 

You also asked us to provide information on the number and disposition 
of innocent spouse cases that federal courts recently litigated; 
appendix I provides this information. Appendix II provides similar 
information on cases that were scheduled to be tried in the federal 
courts but were settled by Treasury’s Office of Chief Counsel and 
IRS’s Office of Appeals. The data were the most currently available 
when we performed our review. 

Results in Brief: 

IRS’s efforts to process innocent spouse cases timely, accurately, and 
consistently have helped it to begin gaining control of the program 
and reducing its inventory of cases while maintaining or improving the 
quality of its decisions as measured by its quality review system. IRS 
reached decisions on about 21 percent more cases than it received in 
fiscal year 2001, reducing some of the backlog from previous years. 
The agency accomplished this through a variety of initiatives, 
including a substantial staffing commitment, centralization and 
specialization, automated tools, and routine estimating of future 
workload and staffing needs; it was also helped by a recent decline in 
the influx of new cases. Although these improvements did not reverse a 
trend of several years toward longer case-processing times, IRS 
appears poised to improve case timeliness as it shifts virtually all 
innocent spouse cases to its central processing site, which has the 
fastest case-processing times. In part through specialization and in 
part through development of an automated case-processing system, IRS 
has begun to improve the accuracy of its decisions to grant full, 
partial, or no relief in response to requests for innocent spouse 
relief. Data from IRS’s quality review system indicate that the 
accuracy of examiners’ decisions has increased as IRS’s initiatives 
have been implemented. Although program improvements are apparent, IRS 
lacks a balanced set of measures for the Innocent Spouse Program to 
help ensure that future performance does not inappropriately 
concentrate on one aspect of performance at the expense of others. 

IRS’s procedures conform to applicable guidance for transferring tax 
liabilities from joint tax accounts to individual tax accounts when 
innocent spouse relief has been granted. The procedures follow federal 
internal control guidelines by requiring a mix of checks, 
verifications, reconciliations, and documentation to support steps 
throughout the process. If IRS employees perform the required tasks, 
the tax liabilities should be accurately transferred from taxpayers’ 
joint tax accounts to their individual tax accounts. The taxpayer 
advocate’s staff said that IRS’s procedures appeared adequate and 
should resolve the past problems of monitoring taxpayers’ accounts 
after the liabilities were transferred. 

The Web site for IRS’s Innocent Spouse Program—part of IRS’s 
agencywide Web site—went on-line in December 1999 to help taxpayers 
determine their eligibility for innocent spouse relief. Because IRS 
has not evaluated the Web site, the agency does not know how useful 
the Web site has been to taxpayers in determining their eligibility 
for innocent spouse relief. In January 2002, IRS started upgrading its 
overall agency Web site, and program officials stated that the 
enhancements would allow it to collect data on use of the Web site and 
gather comments from taxpayers. 

We are recommending that the commissioner of internal revenue (1) 
establish balanced performance measures and targets for the Innocent 
Spouse Program and (2) evaluate the Innocent Spouse Program Web site’s 
usefulness to taxpayers. In commenting on a draft of our report, the 
commissioner agreed with our recommendations. 

Background: 

Under tax law, married couples who file joint tax returns are treated 
as a single unit, which means that each spouse becomes individually 
responsible for paying the entire amount of the tax associated with 
his or her joint return. Accordingly, an “innocent spouse” can be held 
liable for tax deficiencies assessed after a joint return was filed, 
even if those liabilities were solely attributable to the actions of 
the other spouse. However, if certain conditions are met, the innocent 
spouse may be able to obtain relief from the tax liability. Prior to 
the Restructuring Act, relief was available to taxpayers but under 
rather restrictive conditions, such as that certain dollar thresholds 
for tax underpayments first be met. The Restructuring Act revised the 
conditions for obtaining innocent spouse relief to make it easier for 
taxpayers to qualify. The act liberalized the former conditions and 
added new conditions. Simply stated, the three basic provisions 
related to innocent spouse relief are as follows: 

* When the innocent spouse had no knowledge that there was an 
understatement of tax attributable to erroneous items of the other 
individual filing the joint return, and considering all facts and 
circumstances, it would be unfair for IRS to hold the innocent spouse 
liable for the tax. 

* When the innocent spouse otherwise qualifies, he or she may request 
that the tax deficiency from a jointly filed return be recalculated to 
include only items allocable to him- or herself. 

* When the tax shown on a joint return was not paid with the return, 
the innocent spouse may obtain “equitable relief” if he or she did not 
know that the funds intended to pay the tax were not used for that 
purpose. Equitable relief is also available for understatements of tax 
for which relief under the above two conditions was not available. 

Each of these three conditions has different eligibility requirements 
and different types of relief. Appendix III describes in more detail 
the eligibility requirements for each condition and the factors that 
IRS is to weigh in deciding whether to grant or deny relief. Relief is 
generally available to taxpayers for liabilities arising after July 
22, 1998, the date that the law was enacted, and for liabilities that 
arose before that date but remained unpaid as of that date. 

Limited data exist to determine the trend in innocent spouse workload 
immediately following passage of the Restructuring Act. IRS did not 
systematically track innocent spouse cases until March 1999, about 8 
months after the act was passed.[Footnote 1] Prior to the 
Restructuring Act, IRS administered innocent spouse relief as part of 
its process for examining tax returns and did not keep statistics on 
the number of cases in which innocent spouse relief was requested or 
on the disposition of those requests. Nevertheless, according to IRS, 
because taxpayers were anticipating passage of the Restructuring Act, 
innocent spouse requests increased from a few cases to about 750 cases 
in each of the 4 months leading up to the act. During fiscal year 
2000, it received, on average, 4,800 cases per month. 

IRS processes innocent spouse cases on the basis of proposed 
regulations issued in January 2001, which set forth the basic 
guidelines that its examiners are to use in evaluating taxpayers’ 
cases to determine whether to grant or deny relief. IRS’s Wage and 
Investment (W&I) Division is responsible for managing this program. 
Under procedures adopted in fiscal year 2001, virtually all innocent 
spouse cases are to be processed by correspondence at IRS’s 
Centralized Innocent Spouse Operation (Cincinnati processing site) in 
Covington, Kentucky. Generally, only those cases needing face-to-face 
contact or that arise in the field are to be handled by field staff, 
generally tax compliance officers and revenue agents in IRS’s Small 
Business/Self-Employed (SB/SE) Division. As discussed later in this 
report, IRS is phasing in new W&I field staff to work cases needing 
face-to-face contact with taxpayers. 

Staff at the Cincinnati processing site screen the incoming cases to 
determine whether they meet the basic eligibility requirements for 
further processing. These requirements include, among other things, 
verifying that a joint tax return was filed, that an outstanding tax 
liability exists, and that the request is for the appropriate tax 
year. Any request that does not meet the basic requirements is to be 
judged ineligible for further review and closed through written 
notification to the taxpayer of the reasons for IRS’s decision. Any 
case that meets the basic eligibility requirements is to be assigned 
to an examiner to further review the merits of the taxpayer’s request 
for relief. IRS is required by law to attempt to contact the other 
taxpayer who signed the joint tax return, to give him or her an 
opportunity to participate in the case. IRS generally allows 30 days 
for the nonrequesting spouse to respond. If a taxpayer files a claim 
for innocent spouse relief covering more than one tax period or year, 
IRS evaluates the merits of the claim for each tax year individually 
to determine whether relief should be granted. Therefore, the claim 
for each tax year is counted as a separate case. Based on the merits 
of an individual claim, IRS grants a taxpayer full relief, partial 
relief, or no relief. 

The examiners evaluate the facts and circumstances of each case and 
ultimately decide whether full, partial, or no relief should be 
granted. IRS is required by the Restructuring Act to notify the 
requesting spouse of its decision on each case and to inform him or 
her of the right to file an appeal with IRS’s Office of Appeals within 
30 days.[Footnote 2] If the taxpayer does not file an appeal with IRS, 
or after the appeal is settled, IRS is to send a final determination 
letter to the requesting spouse and, as required by law, advise the 
individual of his or her right to appeal IRS’s decision to a federal 
court within 90 days.[Footnote 3] IRS’s decision on a case becomes 
final after the taxpayer exhausts all rights to an IRS appeal or a 
court review or waives these rights and accepts IRS’s decision. At 
that time, IRS is required to notify the nonrequesting spouse of the 
final result. 

To close a case after relief is finally approved, IRS must separate 
and transfer taxes from the taxpayers’ joint tax account in the amount 
of the approved relief. IRS procedures require that its staff 
establish a separate, individual tax account for the taxpayer who was 
judged responsible for the tax liability and transfer the tax 
liability to that account. Any joint tax liability that is not part of 
the relief granted remains a liability of both taxpayers that IRS may 
collect from either. 

Objectives, Scope, and Methodology: 

To assess IRS’s efforts to ensure that innocent spouse cases were 
being processed in a timely, accurate, and consistent manner, we 
reviewed W&I and SB/SE planning documents, ISTS data on the program’s 
performance, and data from the innocent spouse quality review program, 
which analyzes samples of closed cases for adherence to procedures and 
accuracy of decisions. We interviewed IRS’s innocent spouse project 
manager and staff to obtain information on how the program was 
managed, and we obtained relevant documentation on the program, 
including its procedures, policies, and guidance. To further assess 
the management of the program, we relied on our past reports on 
managing organizational performance, IRS’s guidance regarding 
performance management, and other management literature, including the 
Government Performance and Results Act.[Footnote 4] We reviewed 
reports by TIGTA and IRS’s taxpayer advocate that addressed innocent 
spouse management issues. We also analyzed the assumptions that IRS 
used in projecting inventory and staffing levels. 

To determine whether IRS’s efforts to process cases timely, 
accurately, and consistently were resulting in changes in program 
performance, we also obtained and analyzed ISTS data from March 1999 
to December 2001 regarding the number of innocent spouse cases that 
IRS received and resolved and their average case-processing times. We 
performed limited accuracy checks on the ISTS database. In September 
2001, TIGTA recommended that IRS strengthen its controls over data in 
the ISTS. IRS subsequently implemented corrective actions to help 
ensure the accuracy and validity of the ISTS data, including 
correcting data from prior years. The database that we used reflected 
these corrections. We did not test the reliability of the other IRS 
databases used in our analysis—-the Examination Case Reporting System 
and the Work Planning and Control System—-that maintain data on staff 
hours applied to examination programs, including innocent spouse case 
processing. We analyzed the direct staff hours[Footnote 5] that IRS 
staff charged to conduct case evaluations for fiscal years 2000 and 
2001. IRS did not have complete information for earlier periods. 

To assess the adequacy of IRS’s procedures to transfer liabilities 
between taxpayers when relief was granted, we reviewed the procedures 
and related guidance such as training materials and policy memoranda. 
We discussed the procedures and related guidance with the innocent 
spouse project manager, managers at the Cincinnati processing site, 
and Customer Account Services staff who are responsible for overseeing 
the process of transferring tax liabilities between tax accounts. We 
also compared our published guidance on internal control management 
for federal agencies with IRS’s procedures.[Footnote 6] We observed 
the process that IRS had in place at the Cincinnati processing site 
for transferring tax liabilities from taxpayers’ joint accounts to 
their individual accounts. We discussed IRS’s procedures with taxpayer 
advocate service staff to determine whether they received any 
complaints from taxpayers that IRS had incorrectly transferred 
liabilities in their innocent spouse cases. 

To assess IRS’s efforts to evaluate the usefulness of its Innocent 
Spouse Program Web site to taxpayers, we reviewed guidance from 
selected academic and industry experts on assessing Web sites and we 
interviewed IRS’s Electronic Tax Administration and Innocent Spouse 
Program officials. We also examined IRS’s Innocent Spouse Web site to 
determine the type and content of information available to the 
taxpayers. 

To determine the number and disposition of innocent spouse cases filed 
in U.S. federal courts, we obtained information from staff at 
Treasury’s Office of Chief Counsel that identified court decisions on 
innocent spouse cases compiled from the LexisNexis database[Footnote 
7] for the period June 1996 to June 2001. The compilation excluded 
those cases that addressed only procedural issues such as whether a 
court had jurisdiction to hear the case. We also obtained information 
that was complied from IRS’s Office of Appeals database on innocent 
spouse cases scheduled for trial that were settled by the Office of 
Appeals or Treasury’s Office of Chief Counsel from fiscal year 1999, 
when IRS began tracking these data, through May 2001. 

We performed our work with IRS’s W&I Division staff and the National 
Taxpayer Advocate Service’s office at IRS’s national headquarters in 
Washington, D.C. We also met with W&I Division staff at the innocent 
spouse Cincinnati processing site in Covington, Kentucky; IRS’s SB/SE 
Division office in Atlanta, Georgia; and Treasury’s Office of Chief 
Counsel in Washington, D.C. We did our work between May 2001 and 
February 2002 in accordance with generally accepted government 
auditing standards. 

We requested comments on a draft of this report from the commissioner 
of internal revenue. We received written comments from the 
commissioner in a letter dated April 18, 2002. The comments are 
reprinted in appendix VII and are discussed at the end of this letter. 

IRS Is Gaining Control over Its Innocent Spouse Workload but Has Not 
Developed Balanced Measures: 

To better ensure timely, accurate, and consistent processing of 
innocent spouse cases, IRS officials developed and implemented several 
initiatives. Although the specific contribution of each initiative to 
improved results is not clear, IRS’s initiatives, in total, have 
increased its ability to handle innocent spouse cases more quickly and 
at lower cost while maintaining or improving the accuracy of relief 
decisions as measured by IRS’s quality review program. The initiatives 
contributed, along with a decrease in cases received, to IRS’s 
reaching decisions on more cases than it received in fiscal year 2001. 
The average times to reach decisions and close cases continued to 
increase in fiscal year 2001 but should stabilize and then decline in 
future years. 

The principal initiatives that IRS undertook to improve its management 
of the innocent spouse case workload included: 

* centralizing case processing within one W&I location-—its Cincinnati 
site in Covington, Kentucky—-and bringing more of the program staff 
under the project manager’s direction; 

* developing an automated decision-making and case-building tool; 

* developing a model to estimate future workload and staffing needs 
and monitor program performance; and; 

* measuring the quality of case decision making, including adherence 
to procedures and the accuracy of decisions. 

Although these initiatives, taken as a group, have improved IRS’s 
ability to process cases and promote quality decision making, IRS has 
not established a set of balanced performance measures and performance 
targets for the program. Without such measures, IRS cannot be sure 
that these changes are having the desired results and are not creating 
unintended consequences. Balanced measures and performance targets are 
integral parts of IRS’s performance management system that are 
intended, in part, to better ensure that program performance does not 
overly focus on one area of program performance to the detriment of 
others. 

Centralized and Specialized Staffing: 

In anticipation of the Restructuring Act’s passage, IRS decided in 
April 1998 that innocent spouse cases should be handled in a central 
processing site. IRS officials believed that centralization would 
facilitate more rapid and consistent processing of cases because staff 
in the centralized processing site would specialize in innocent spouse 
cases and follow consistent procedures and processes in resolving 
them. Although IRS was unable to fully implement the decision to 
centralize processing in the years immediately following the act’s 
passage, over time IRS made considerable progress in doing so. 

IRS does not have good data on staff usage before fiscal year 2000, 
but in fiscal year 2000, staffing totaled 887 full-time equivalents 
(FTE)[Footnote 8] with 768 FTEs (about 86 percent) coming from SB/SE 
field staff and 119 FTEs coming from W&I staff in the centralized 
processing site. As table 1 shows, however, in fiscal year 2001, IRS 
increased the FTEs for W&I’s centralized processing and decreased the 
field staffing. IRS projects that by fiscal year 2003, about 70 
percent of the FTEs used in processing innocent spouse cases will be 
in W&I’s centralized processing site. 

Table 1: Innocent Spouse Program FTE Staffing, Fiscal Years 2000–2003: 

Small Business/Self-Employed Division: 
2000: 
FTE: 768; 
Percentage: 87%; 
2001: 
FTE: 593; 
Percentage: 80%; 
2002: 
FTE: 258; 
Percentage: 58%; 
2003: 
FTE: 72; 
Percentage: 30%. 

Wage and Investment Division: 
2000: 
FTE: 119; 
Percentage: 13%; 
2001: 
FTE: 152; 
Percentage: 20%; 
2002: 
FTE: 184; 
Percentage: 42%; 
2003: 
FTE: 165; 
Percentage: 70%. 

Total: 
2000: 
FTE: 887; 
Percentage: 100%; 
2001: 
FTE: 745; 
Percentage: 100%; 
2002: 
FTE: 442; 
Percentage: 100%; 
2003: 
FTE: 237; 
Percentage: 100%. 

Note: IRS did not collect data on FTEs for the Innocent Spouse Program 
in fiscal year 1999. Data for fiscal years 2002 and 2003 are for 
planned staffing levels. 

Legend: FTE = full-time equivalent. 

Source: IRS. 

[End of table] 

In addition to increasing its centralized staffing levels, IRS has 
improved the capability of the staff. IRS upgraded some examiner 
positions from grade level[Footnote 9] GS-7 to GS-8, owing to concerns 
about attrition, and trained some examiners to specialize in working 
complex cases that would previously have been sent to field offices. 
For instance, some of the Cincinnati examiners have been trained to 
handle cases involving bankruptcies. By the end of fiscal year 2001, 
IRS had 157 employees at the Cincinnati processing site, with 56 
employees examining cases and 30 employees screening cases to 
determine whether they met the basic eligibility requirements for 
relief. The remaining employees were supervisors, case quality 
reviewers, and clerical staff. 

In general, the staff assigned to process cases in the centralized 
processing site are at lower grades—-predominantly GS-8—-than are the 
SB/SE staff processing innocent spouse cases in the field. SB/SE staff 
have generally been graded as GS-9 through GS-13, with most field 
staff tending to be graded as GS-12. Thus, as IRS has shifted 
processing more cases in Cincinnati, it has also lowered the salary 
structure of the staff processing the cases. 

Beginning in fiscal year 2002, IRS is using W&I Division taxpayer 
resolution representatives (TRRs) to process field cases requiring 
face-to-face contact with the taxpayers. TRRs are to perform a variety 
of services at IRS field locations throughout the country. By using 
the W&I Division’s TRRs, the innocent spouse project manager hopes to 
further reduce reliance on the SB/SE Division’s field staff. Program 
officials said that their lack of control over SB/SE field staff was 
one reason why field cases take longer to resolve than cases processed 
centrally. IRS expects that TRR involvement in the program will be 
minimal, as the agency expects to process 95 percent of the cases 
centrally during fiscal year 2003. As of February 2002, IRS projected 
that 11 TRR FTEs will be used in the Innocent Spouse Program in fiscal 
year 2002 and only 3 FTEs in fiscal year 2003. 

Automated Decision-Making and Case-Building Tool: 

To increase the accuracy and consistency of examiners’ decisions about 
granting relief to innocent spouses, to better ensure that an adequate 
case file supports each decision, and to speed case processing, IRS 
developed an “integrated case processing” system (ICP) for innocent 
spouse cases. The ICP, which was implemented in January 2001 at the 
Cincinnati processing site, uses a computer program to direct 
examiners through a series of questions leading to a decision about 
what, if any, relief is due to the taxpayer. The algorithm was 
designed to capture all of the factors that must be considered in 
making these determinations. The ICP also automatically prompts the 
examiner to create a documented case file so that IRS can be better 
assured that examiners’ decisions are properly supported. The ICP is 
intended to increase the accuracy and consistency of determinations, 
since it is designed to help ensure that examiners consider all 
pertinent aspects of a taxpayer’s case in accordance with the law. The 
ICP was expected to increase the speed of case processing, because, 
among other reasons, examiners would have all of the criteria for 
decision making available on-line and the structured process for 
guiding decisions should result in fewer examiner errors. 

IRS is planning future enhancements to the ICP that would make it 
easier for examiners to access and update taxpayer data. IRS plans to 
make the ICP available to the field office TRRs to better ensure the 
accuracy and consistency of their determinations. 

Model for Estimating Future Workloads and Staffing Needs: 

IRS developed an inventory model in April 2000 to enhance its ability 
to manage staff resources and the inventory of innocent spouse cases. 
IRS uses the model to estimate the numbers of staff that it will need 
in the field and at the Cincinnati processing site to process enough 
cases to result in a targeted level of cases at the end of the fiscal 
year. The model helped IRS to gauge the amount of progress that it 
could make in reducing its inventory of cases, assuming differing 
mixes in the numbers of staff available in Cincinnati and the field. 

According to the innocent spouse project manager, the model provides a 
reasonable basis for planning and leads to improved staff allocations, 
but it is not expected to be precise. The project manager said that 
the projected case closures that are derived from the model estimates 
become part of the W&I Division’s business and operating plans for the 
given fiscal year. 

The model begins with the existing inventory, adds projections of new 
cases expected to be received during the period in question, and 
estimates the number of cases that will be in inventory at the end of 
the period, given assumptions about the number of staff who will be 
available and their productivity in handling cases. IRS’s estimates of 
new cases likely to be received are based largely on prior experience 
and professional judgment. Staff requirements are projected on the 
basis of the percentage of cases that IRS estimates will be processed 
centrally versus in the field and on the types, numbers, and 
productivity of staff at these locations. For example, in fiscal year 
2001, IRS estimated that the examiners at the centralized site could 
process about 14 cases per week, spending about 2.9 hours per case; 
this estimation was based in part on data from IRS’s Work Planning and 
Control System and assumed productivity increases. For cases processed 
in the field, IRS used actual time from IRS’s Examination Case 
Reporting System that showed that tax compliance officers were 
processing a case in about 5.6 hours and revenue agents were 
processing a case in about 13 hours. IRS estimated that the new TRRs 
would require about the same amount of time to process a case as do 
tax compliance officers. 

To test the functioning of the model, we analyzed the assumptions in IRS
’s model as of November 2001 against recent performance data to 
confirm whether IRS would be likely to reduce its inventory of cases 
and reach the inventory level that it had projected for the end of 
fiscal year 2003. Our analysis showed that examiners at the 
centralized site had not been as productive as IRS believed. We 
determined that IRS would have to add the equivalent of 16 FTEs or 
become about 17 percent more efficient to achieve its projected ending 
inventory level for fiscal year 2003. Our analysis did not consider 
the productivity levels of field staff who are projected to close 
about 5 percent of cases. We recognize that other factors may also 
affect IRS’s ability to meet its targeted inventory levels, such as 
unexpected changes in the volume of new cases, the proportion of cases 
processed centrally versus in the field, and the productivity of field 
staff. 

IRS revises the projections from its model routinely as new data show 
changes in the volume of cases being received and in the productivity 
of staff. Subsequent to our test of the model, IRS revised its 
inventory projection using lower assumptions about examiners’ 
productivity. Table 2 shows IRS’s inventory projections for fiscal 
years 2002 and 2003 as of February 2002. As shown in the table, the 
inventory is expected to drop 43 percent during fiscal year 2002—from 
52,093 cases to 29,810 cases. 

Table 2: IRS Inventory Model Projections for Fiscal Years 2002 and 2003 

IRS Projection: 

Beginning inventory; 
Fiscal Year 2002: 52,093; 
Fiscal Year 2003: 29,810. 

Plus receipts: 

Cincinnati processing site; 
Fiscal Year 2002: 50,141; 
Fiscal Year 2003: 50,141. 

Field offices; 
Fiscal Year 2002: 1,968; 
Fiscal Year 2003: 1,968. 

Cases to be worked; 
Fiscal Year 2002: 104,202; 
Fiscal Year 2003: 81,919. 

Less dispositions: 

Cincinnati processing site: 

Ineligible cases; 
Fiscal Year 2002: 23,244; 
Fiscal Year 2003: 23,244. 

Net Dispositions; 
Fiscal Year 2002: 34,061; 
Fiscal Year 2003: 27,570. 

Field: 

Net dispositions; 
Fiscal Year 2002: 17,087; 
Fiscal Year 2003: 1,974. 

Ending inventory; 
Fiscal Year 2002: 29,810; 
Fiscal Year 2003: 29,131. 

Notes: Net dispositions include cases such as those in the statutory 
30- and 90-day periods and in local review. IRS’s beginning inventory 
includes some cases that have been decided by IRS that have not yet 
completed the closing stage. 

IRS opens a case for each tax period for which relief is sought. IRS 
estimates that, on average, each taxpayer files 1.9 cases. Thus, the 
number of taxpayers involved is slightly less than half the number of 
cases shown in this table. 

Source: IRS’s Innocent Spouse Inventory Projections, FY 2002 and 2003, 
revised February 14, 2002. 

[End of table] 

Quality Review Process: 

In June 1999, IRS established a process for reviewing closed innocent 
spouse cases from all locations to help ensure that high-quality case 
decisions were being made. Beginning in July 2000, IRS’s research 
staff developed statistically valid sampling plans for each location 
on the basis of projected annual case receipts. Staff assigned to the 
quality review function assess the sampled cases using quality 
standards developed especially for the review. The standards are 
structured to evaluate whether examiners have followed all of the 
required processes for an innocent spouse case as well as whether the 
decision made by the examiner was correct. Adherence to process 
requirements is reviewed both to ensure compliance with legally 
required procedures, such as notifying the nonrequesting spouse and 
giving the individual an opportunity to participate in the case, and 
because the adherence to required process steps is expected to lead to 
better IRS decisions about the requested relief. The accuracy of 
decisions is reviewed to provide IRS data on the accuracy and 
consistency of decisions made in the diverse offices handling innocent 
spouse cases. 

Originally, the quality review staff included SB/SE Division revenue 
agents at grade levels GS-11 through GS-13. Starting in fiscal year 
2002, IRS relieved SB/SE of the quality review function and now staffs 
the review with experienced W&I Division grade-level GS-9 examiners, 
who are to periodically rotate to the quality review function from the 
Cincinnati Innocent Spouse Program staff. 

Overall, IRS’s innocent spouse case quality was maintained between 
fiscal years 2000 and 2001, as shown in table 3. In the first quarter 
of fiscal year 2002, however, the quality review results reflected 
better performance. During that quarter, the quality review staff 
agreed with 100 percent of the decisions to grant and deny relief made 
for the sample of cases from the centralized processing site. For all 
field locations combined, the reviewers agreed with 93 percent of the 
decisions made. However, owing to the small sample size, the quarterly 
results may not be indicative of results over a longer period. The 
results from the first quarter of fiscal year 2002 are the first 
quality review data that accounted for IRS’s use of automation in case 
processing and for the staffing enhancements at the centralized 
processing site. 

Table 3: IRS’s Quality Review Results, Fiscal Years 2000–2001: 

Fiscal year: 2000; 
Concurrence rate with granted cases: 75.6%; 
Concurrence rate with denied cases: 88.3%; 
Combined results: 82.3%. 

Fiscal year: 2001; 
Concurrence rate with granted cases: 75.8%; 
Concurrence rate with denied cases: 92.4%; 
Combined results: 82.5%. 

Source: IRS’s Quality Review Results. 

[End of table] 

Effect of IRS’s Initiatives on Timeliness, Accuracy, and Consistency 

The effect of each of the individual IRS initiatives to process 
innocent spouse cases more timely, accurately, and consistently is 
difficult to separate and quantify. However, taken as a whole, these 
initiatives have enabled IRS to reduce its inventory of undecided 
innocent spouse cases while maintaining or improving the quality of 
its decisions as measured by the quality review program. The decline 
in cases received during fiscal year 2001 also contributed to IRS’s 
ability to reduce its inventory of cases. 

Table 4 shows that for the first year since the Restructuring Act was 
passed, IRS reached a decision on more cases than it received. IRS 
decided 61,423 cases in fiscal year 2001, or about 21 percent more 
than the 50,840 cases it received, reducing some of the backlog from 
previous years. IRS received about 12 percent fewer cases in fiscal 
year 2001 than in fiscal year 2000, which contributed to its ability 
to reach decisions on more cases than it received. Appendix VI shows 
the disposition of resolved cases for fiscal years 1999 through 2001. 

Table 4: Innocent Spouse Cases Received and Decided, Fiscal Years 1999–
2001: 

Fiscal year: 1999; 
Cases received: 44,469; 
Cases decided[A]: 8,899; 
Cases not decided: 35,570. 

Fiscal year: 2000; 
Cases received: 57,633; 
Cases decided[A]: 53,431; 
Cases not decided: 39,772. 

Fiscal year: 2001; 
Cases received: 50,840; 
Cases decided[A]: 61,423; 
Cases not decided: 29,189. 

Total: 
Cases received: 152,942; 
Cases decided[A]: 123,753. 

Notes: Fiscal year 1999 data includes March 1999, when IRS implemented 
the Innocent Spouse Tracking System, through September 30, 1999. 

The table does not include approximately 7,000 cases that IRS had 
received before implementing the tracking system. 

IRS opens a case for each tax period for which relief is sought. IRS 
estimates that, on average, each taxpayer files 1.9 cases. Thus, the 
number of taxpayers involved is slightly less than half the number of 
cases shown in this table. 

[A] “Cases decided” includes IRS’s determinations of ineligibility and 
determinations to grant full, partial, or no relief. Cases decided 
include cases received in any year. 

Source: IRS’s Innocent Spouse Tracking System database as of December 
31, 2001. 

[End of table] 

However, the decline in cases received does not fully account for 
IRS’s progress in reducing its inventory of undecided cases. The 
resulting increase in productivity appears to be largely attributable 
to IRS’s strategy of centralizing case processing in Cincinnati, but 
it may be partly due to the use of the ICP and to general improvements 
in how IRS handles innocent spouse cases. 

As table 5 shows, IRS has shifted an increasing portion of cases to 
the Cincinnati processing site. Because Cincinnati staff reach 
decisions on cases about four times faster than field office staff, 
IRS has realized an overall gain in productivity, which rose, on 
average, from 60 cases per FTE to 82 cases per FTE, or by 37 percent, 
between fiscal years 2000 and 2001. In fiscal year 2000, field office 
examiners took, on average, about 11.7 hours to make a determination 
on a case, compared with about 3.1 hours per case for examiners at the 
Cincinnati processing site. Similarly, in fiscal year 2001, field 
office examiners took, on average, about 10.5 hours per case, compared 
with 2.5 hours per case at the Cincinnati processing site. 

Table 5: Cases Decided by Location and FTEs Applied, Fiscal Years 1999–
2001: 

Fiscal year: 1999; 
Location: Cincinnati processing site; 
Cases decided: 5,477; 
Percentage of cases decided: 62%; 
Cases decided per FTE: NA. 

Location: Field offices; 
Cases decided: 3,422; 
Percentage of cases decided: 38%; 
Cases decided per FTE: NA. 

Fiscal year: 2000; 
Location: Cincinnati processing site; 
Cases decided: 27,783;
Percentage of cases decided: 52%; 
Cases decided per FTE: 233. 

Location: Field offices; 
Cases decided: 25,648; 
Percentage of cases decided: 48%; 
Cases decided per FTE: 33. 

Average cases decided per FTE: 60. 

Fiscal year: 2001; 
Location: Cincinnati processing site; 
Cases decided: 40,516; 
Percentage of cases decided: 66%;
Cases decided per FTE: 267. 

Location: Field offices; 
Cases decided: 20,907; 
Percentage of cases decided: 34%; 
Cases decided per FTE: 35. 

Average cases decided per FTE: 82. 

Notes: NA means that data were not available. 

IRS opens a case for each tax period for which relief is sought. IRS 
estimates that, on average, each taxpayer files 1.9 cases. Thus, the 
number of taxpayers involved is slightly less than half the number of 
cases shown in this table. 

Source: GAO analysis of unpublished IRS data from IRS’s Innocent 
Spouse Tracking System. 

[End of table] 

Because IRS expects to shift 95 percent of innocent spouse cases to 
the Cincinnati processing site, where cases are processed faster, by 
the end of fiscal year 2003, additional gains in overall productivity 
are expected. These projected productivity gains, coupled with IRS’s 
expectation that new case receipts will remain fairly close to the 
volume received in 2001, result in the significant estimated reduction 
in total staffing for the Innocent Spouse Program shown in table 1. If 
this reduction is achieved, IRS will have reduced overall staffing for 
the Innocent Spouse Program by 75 percent between fiscal year 2000 and 
fiscal year 2003 and will have redirected hundreds of tax compliance 
officers and revenue agents to their traditional duties. 

To some extent, IRS also was able to reach decisions on more innocent 
spouse cases than it received in fiscal year 2001 because the portion 
of innocent spouse cases it receives that are not eligible for relief 
has been increasing. As a percentage of cases received, those 
determined to be ineligible rose from about 13 percent in fiscal year 
1999 to 45 percent in fiscal year 2000 and to 56.5 percent in fiscal 
year 2001. Most requests for innocent spouse relief that are not 
eligible—-for instance, because the taxpayers did not file a joint 
return in the year for which relief is requested-—are identified 
during screenings at the Cincinnati processing site. Officials 
estimated that, on average, staff who screen cases at the Cincinnati 
site need about 30 minutes per case to determine whether a taxpayer’s 
request meets the basic eligibility requirements. In general, 80 
percent or more of the cases found to be ineligible for relief are 
identified during case screening; the remainder are found to be 
ineligible during case processing either at the Cincinnati site or by 
field staff. 

Although, in general, determining whether a case is ineligible does 
not require a significant amount of IRS time, agency officials are 
concerned about the portion of cases received that do not meet basic 
eligibility requirements. As a result, they have made revisions to 
forms and attempted to better inform tax practitioners of the innocent 
spouse eligibility requirements. In addition, IRS’s Web site, which is 
discussed later in this report, includes information on the Innocent 
Spouse Program that is intended to help taxpayers determine their 
eligibility. Appendix IV provides more information on ineligible cases. 

The improvements that IRS has realized in handling innocent spouse 
cases and in reducing its inventory of undecided cases have occurred 
while the agency has maintained or increased the accuracy of relief 
decisions. As the data in table 3 illustrate, IRS’s reviewers have 
concurred with the case decision in a growing proportion of cases over 
time. Moreover, although this example reflects only the results during 
the first quarter of fiscal year 2002, the quality review staff agreed 
100 percent of the time with the sample of case decisions pulled from 
the centralized processing site. This was the first quality 
measurement that reflected use of the ICP system and staffing 
enhancements at the centralized site. 

IRS was not successful through fiscal year 2001 in reducing the 
average time to reach a decision on whether relief would be granted or 
to reach closure on cases, including all required notices, appeals, 
and transfers of taxpayers’ liabilities when full or partial relief 
was granted. Table 6 shows that average times to decide and close 
cases continued to increase in the field offices and at the Cincinnati 
processing site through fiscal year 2001. 

Table 6: Average Days for IRS to Decide and Close an Innocent Spouse 
Case, Fiscal Years 1999–2001 

Fiscal year: 1999; 
Location: Cincinnati processing site; 
Cases decided: 5,477; 
Average days from case receipt to decision: 88; 
Average days from case receipt to closure: 91. 

Location: Field offices; 
Cases decided: 3,422; 
Average days from case receipt to decision: 187; 
Average days from case receipt to closure: 183. 

Location: Locations combined; 
Cases decided: 8,899; 
Average days from case receipt to decision: 126; 
Average days from case receipt to closure: 107. 

Fiscal year: 2000; 
Location: Cincinnati processing site; 
Cases decided: 27,783; 
Average days from case receipt to decision: 110; 
Average days from case receipt to closure: 129. 

Location: Field offices; 
Cases decided: 25,648; 
Average days from case receipt to decision: 339; 
Average days from case receipt to closure: 409. 

Location: Locations combined; 
Cases decided: 53,431; 
Average days from case receipt to decision: 220; 
Average days from case receipt to closure: 242. 

Fiscal year: 2001; 
Location: Cincinnati processing site; 
Cases decided: 40,516; 
Average days from case receipt to decision: 176; 
Average days from case receipt to closure: 189. 

Location: Field offices; 
Cases decided: 20,907; 
Average days from case receipt to decision: 442; 
Average days from case receipt to closure: 604. 

Location: Locations combined; 
Cases decided: 61,423; 
Average days from case receipt to decision: 266; 
Average days from case receipt to closure: 363. 

Notes: The average number of days to closure in fiscal year 1999 is 
less than the average number of days to decision because a greater 
proportion of the decided cases were ineligible cases, compared with 
cases that were fully evaluated for relief. 

IRS opens a case for each tax period for which relief is sought. IRS 
estimates that, on average, each taxpayer files 1.9 cases. Thus, the 
number of taxpayers involved is slightly less than half the number of 
cases shown in this table. 

Source: IRS’s Innocent Spouse Tracking System database as of September 
30, 2001. 

[End of table] 

If IRS is successful in reducing the inventory of cases by 43 percent 
during fiscal year 2002 as shown in table 2, the average case-
processing time likely will stabilize or begin to decline. As a 
general rule, IRS processes the older cases in its inventory before it 
processes the newer cases. Thus, a significant reduction in inventory 
would disproportionately draw from the oldest cases. As these older 
cases are cleared out, and if IRS succeeds in processing as many cases 
as it receives in a year—that is, the maintenance level of inventory 
that the project manager would like to achieve—the average time for 
each case processed should decline. Further, because IRS estimates 
that 95 percent of the cases received will be processed at the 
Cincinnati processing site by the end of fiscal year 2003, and because 
Cincinnati’s times for deciding cases are less than half the times for 
cases decided in the field, as shown in table 6, case-processing times 
should begin to fall toward the shorter times that are used at the 
centralized site. Appendix V provides information on the average 
number of days for IRS to come to a decision on a case. 

Innocent Spouse Program Management Could Be Enhanced with More 
Balanced Performance Measures and Targets: 

As part of its strategic planning process, IRS has instructed 
divisions, operating units, and lower levels of the organization to 
implement management practices that will help IRS support its 
strategic goals of top-quality service to each taxpayer in every 
interaction, top-quality service to all taxpayers through fairness, 
and productivity through a quality work environment. IRS views 
balanced measures as its primary means for assessing organizational 
performance. The three balanced measures—-customer service, employee 
satisfaction, and business results-—are to be considered when setting 
objectives, establishing goals, assessing progress and results, and 
evaluating performance. Business results measures are to reflect both 
quantity and quality. 

W&I stated in its October 2001 business performance review guidance 
that one of the keys to meeting future division objectives is the use 
of balanced measures to achieve target levels of performance at lower 
levels within the division. The performance measures are to be aligned 
with the strategic goals that the programs support. Other IRS 
management guidance such as IRS’s Strategic Planning, Budgeting, and 
Performance Management Process Manager’s Guide[Footnote 10] instructs 
programs that report to operating units, such as divisions, to develop 
measures, with designated performance targets, for use in evaluating 
progress toward achieving IRS’s mission and long-term goals. 
Performance measures and associated target performance levels that are 
explicitly stated and that conform to IRS’s goals form the basis for 
communicating desired outcomes to program staff. Further, such 
measures and targets form the basis for assessing progress, 
identifying and addressing performance shortfalls, and holding 
managers and staff accountable for achieving results. 

The W&I strategic plan has only one explicit performance measure for 
the Innocent Spouse Program, the number of cases closed in a fiscal 
year, which reflects only the business results quantity component of 
IRS’s balanced approach to measuring performance. Data for the number 
of cases closed provides some useful information on the performance of 
the program. However, this one measure fails to address other 
dimensions of performance. For example, it does not address timeliness 
and quality, which relate both to business results and to the customer 
satisfaction component of IRS’s balanced approach. Striving to achieve 
a specific number of case closings in a year could come at the expense 
of higher-quality decisions, which is why IRS’s performance management 
system stresses the need for balanced performance measures. Although 
timeliness and quality measures and targets have not been adopted for 
the Innocent Spouse Program, the W&I strategic plan for fiscal years 
2001 to 2003 recognizes that a measure of timeliness is needed and 
states that IRS is to establish such a measure. 

Although IRS does not have performance measures or targets for 
timeliness and quality in the Innocent Spouse Program, the agency is 
gathering data that can be used in developing such measures and 
targets. Within its ISTS, IRS already flags innocent spouse cases that 
have remained unusually long in any processing stage. Beginning in 
fiscal year 2002, for all cases that are processed centrally, IRS will 
begin recording in ISTS the actual staff time used to close each case. 
In addition, IRS has developed estimates of the time to process a case 
under optimal circumstances. Program officials told us that the 
estimated times are used for benchmarking actual processing times but 
are not goals. The records of staff time to close each case and 
initial efforts to define benchmarks for case timeliness should 
therefore provide data that IRS can analyze in developing an 
appropriate performance measure, as well as a desired target level, 
for case-processing timeliness. 

IRS had a performance measure for case quality as well as target 
levels of acceptable quality, but the agency recently dropped its 
performance target. IRS collects information on the quality of 
innocent spouse case determinations that derives from its quality 
review process, which samples closed cases. In fiscal years 2000 and 
2001, IRS’s quality goals for the Innocent Spouse Program were that 
the reviewers would concur with the examiners’ decisions in 85 and 90 
percent, respectively, of the sampled cases. In January 2002, the 
project manager told us that their goal should be the attainment of 
each quality standard for all cases and that they would no longer 
specify a quality goal as a percentage of cases meeting the quality 
standards. Accordingly, although IRS will continue to measure case 
quality, it no longer plans to include a specific performance measure 
and performance target for the quality of innocent spouse cases in its 
strategic or operating plans. 

In discussing the program’s performance measures and targets, the 
project manager said that the Innocent Spouse Program is small in 
comparison with other IRS programs and that consideration needs to be 
given to how much effort should be expended in developing performance 
measures and targets. Because data are being collected that could be 
used in developing timeliness and case quality performance measures 
and targets, the required effort should not be too great. 

In March 2002, program officials told us that by the end of fiscal 
year 2003, IRS plans to have collected survey data relating to 
innocent spouse customer satisfaction that will enable it to develop 
related performance measures and targets. The officials said that 
these data on customer satisfaction, along with existing data on 
business results—-including case quality measures-—and employee 
satisfaction, would position IRS to develop a set of balanced 
performance measures and targets for the Innocent Spouse Program. 

IRS’s Procedures for Transferring Tax Liabilities Conform to 
Applicable Guidance: 

IRS procedures for transferring tax liabilities in innocent spouse 
cases conform to federal guidance for ensuring accurate and complete 
information processing. The procedures, if adhered to, should preclude 
erroneous transfers of liabilities between spouses as well as the 
sending of collection notices to the innocent spouse for liabilities 
that have been transferred to the other spouse. 

To ensure accurate and complete processing, federal guidance on 
internal controls for managing information processing advises agencies 
to include in their procedures a variety of controls tailored to their 
systems. The guidance advises agencies to employ a combination of 
actions such as edit checks for controlling data entry and 
reconciliation of account totals. For authorization control, the 
guidance advises agencies to use key source documents with authorizing 
signatures, batch control sheets, and independent reviews of data 
before the data are entered into the system. The guidance instructs 
agencies to design their data entry processes to provide for editing 
and validating data and for output reports.[Footnote 11] 

IRS’s procedures for transferring tax liabilities in innocent spouse 
cases employ a variety of processes to control for accuracy and 
completeness. For example, IRS requires that the document with the 
final authorizing signature approving the taxpayer’s request for 
relief be the key document used to start the transfer process. The 
procedures require that an employee who was not involved in deciding 
the case perform edit checks and verify the information on the 
approval document by comparing it with the taxpayer’s account 
information. Further, IRS procedures require that a worksheet be 
prepared to document, verify, review, and reconcile the accuracy of 
account adjustments before any changes are made to the tax accounts. 
The worksheet is required to include specific instructions for the 
data entry personnel to use when making the tax account adjustments, 
such as the exact dollar amount of tax liability to be transferred 
from the joint account to a separate, individual account and the 
specific transaction codes required by IRS’s information systems to 
enter the changes. Staff are required to include documentation in the 
case files as evidence that the required tasks were completed. The 
procedures require that Accounting staff from a separate unit verify, 
reconcile, and record tax account adjustments in a journal before they 
are made. After the adjustments are made, Customer Account Service 
staff are to certify that the adjustments were made in accordance with 
IRS’s guidelines. 

On the basis of our review of IRS’s procedures and our inspection of 
the process used at the Cincinnati processing site for transferring 
tax liabilities when innocent spouse relief was approved, we concluded 
that the procedures conform with the federal guidance for managing 
information processing. If IRS staff reconcile, edit, and verify the 
account information as they are required to do, the adjustments to 
transfer the tax liabilities should be made correctly. However, we did 
not independently test a sample of closed cases, and therefore we 
cannot determine the extent to which IRS staff actually performed the 
required control activities. The taxpayer advocate concurs that IRS’s 
procedures to transfer tax liabilities in innocent spouse cases appear 
to be adequate and should resolve the past problems of monitoring 
taxpayers’ accounts after the liabilities were transferred. 

IRS Established an Innocent Spouse Web Site to Educate Taxpayers but 
Has Not Assessed Its Usefulness: 

IRS has established a Web site for its Innocent Spouse Program but has 
not evaluated the site. As a result, IRS does not know how useful the 
site is to taxpayers or what effect, if any, it has had on lessening 
taxpayer confusion about innocent spouse eligibility. Program 
officials said that recent enhancements to the Web site would enable 
them to collect data that could help them assess whether the site is 
useful to taxpayers. 

In Developing Its Innocent Spouse Web Site, IRS Did Not Consider 
Assessing the Site’s Usefulness to Taxpayers: 

IRS officials in the Electronic Tax Administration and Innocent Spouse 
Program offices told us that in developing the Web site, they did not 
give any consideration to the benefits that taxpayers’ evaluations of 
the site might offer. Their immediate goal in developing the Web site 
was to give taxpayers an easy tool to help them determine their 
eligibility for the program. 

The Innocent Spouse Program Web site, which went on-line in December 
1999, was developed to help taxpayers determine their eligibility for 
innocent spouse relief. It is one of IRS’s initiatives to better 
educate taxpayers and tax practitioners about the Innocent Spouse 
Program’s eligibility requirements. By answering a series of yes-or-no 
questions, a taxpayer can generally determine whether he or she is 
eligible for innocent spouse relief. Called the Innocent Spouse Tax 
Relief Eligibility Explorer, the Web site takes the user through each 
of the innocent spouse eligibility factors via a series of questions. 
The Web site also allows the user to download the form used to apply 
to IRS for relief. 

IRS has taken steps to increase awareness of the Web site among 
members of the public and within the tax professional community. IRS 
officials say that they have advertised the Web site in several ways, 
such as by including the Web site’s address in IRS publications 
regarding the Innocent Spouse Program and linking the Web site to the 
Tax Professionals Web site within IRS’s agencywide Web site. 

Since officials had not considered evaluating the Innocent Spouse 
Program Web site when it was first created, they did not include 
features that would allow the collection of data for a meaningful 
evaluation. For example, IRS officials did not develop a capability 
for collecting information through Web-site-based customer surveys or 
customer feedback links. 

IRS’s Upgraded Innocent Spouse Web Site Will Provide Some, But Not 
Sufficient, Information: 

As part of the upgrading of its agencywide Web site, IRS is enhancing 
the data collection capabilities of the Innocent Spouse Program Web 
site. According to an official in IRS’s Electronic Administration 
Office, the upgrading is being done in phases and the implementation 
of the initial phase began in January 2002. With more powerful 
software applications and tools, IRS will have the capability to 
collect data on use of the Web site and gather comments from 
taxpayers. For example, IRS will be able to collect data on the number 
of times the Innocent Spouse Web site was accessed, the number of 
times users accessed the Web site’s eligibility questionnaire, and the 
number of times users completed the questionnaire and were found 
eligible or ineligible for consideration. As the new Innocent Spouse 
Web site evolves, IRS expects to develop standard performance reports 
and refine data collection by involving the stakeholders responsible 
for the contents of the various links on the agencywide Web site. IRS 
anticipates that project managers will have the opportunity to add 
additional customized enhancements and applications later. 

Although the Web site’s enhancements may provide IRS with more useful 
information than it currently has, the agency’s plans did not call for 
obtaining directly from taxpayers any information on the Web site’s 
usefulness. However, when we discussed the lack of such plans with 
Innocent Spouse Program officials in March 2002, they said that they 
would ask IRS’s Electronic Tax Administration officials to include a 
survey of taxpayers. They said that they would gather information on 
the usefulness of the Web site that then could be used in determining 
how to reduce the number of ineligible cases. They said that they 
would do this for six months and then evaluate the costs and benefits. 
According to some information management experts, customer comments, 
surveys, and focus groups can provide valuable information for 
managers to assess the usefulness of a Web site.[Footnote 12] 

Conclusions: 

Over the past three years, IRS designed and implemented a number of 
initiatives to improve its ability to process innocent spouse cases 
timely, accurately, and consistently. In fiscal year 2001, these 
initiatives and the reduction of new cases collectively contributed to 
IRS’s progress, for the first time since passage of the Restructuring 
Act, in reducing its inventory of innocent spouse cases while 
maintaining or increasing the quality of its case decisions. Absent 
unforeseen significant increases in the innocent spouse caseload, IRS 
appears to be positioned to make material additional improvements in 
reducing the inventory of cases at the same time that it redirects 
hundreds of employees to perform other work. To date, these 
improvements have not resulted in reduced average times for making 
case decisions and completing cases. However, improvement in the 
timeliness of case processing should be realized as inventory levels 
decrease and work is shifted to IRS’s centralized processing center. 

Although program improvements have been, and should continue to be, 
realized, IRS lacks a balanced set of measures for the Innocent Spouse 
Program that would help ensure that future performance does not 
inappropriately concentrate on one aspect of performance at the 
expense of others. IRS’s only performance measure for the Innocent 
Spouse Program focuses on business results—that is, the number of 
cases closed. Because IRS is collecting information relevant to other 
dimensions of its performance, such as timeliness and case quality, 
developing performance measures and target levels for performance 
should not be burdensome for this relatively small IRS program. 

IRS established its Innocent Spouse Program Web site to help educate 
taxpayers about eligibility requirements for the program. However, 
more than half of taxpayers’ requests for innocent spouse relief are 
judged to be ineligible by IRS. Although IRS officials are beginning 
to formulate plans to evaluate the Web site, unless and until those 
plans are implemented, the agency would continue to lack a basis for 
determining whether the Web site could be improved to lessen taxpayers’
 confusion about eligibility requirements. If IRS had information on 
taxpayers’ opinions about its Web site, it would be in a better 
position to adopt cost-effective strategies for further educating 
taxpayers and tax practitioners about the program. Better informed 
taxpayers will likely mean fewer ineligible cases and even further 
performance enhancements. 

Recommendations for Executive Action: 

We recommend that the commissioner of internal revenue: 

* establish balanced performance measures and targets for the Innocent 
Spouse Program and; 

* evaluate the Innocent Spouse Program Web site’s usefulness to 
taxpayers. 

Agency Comments and Our Evaluation: 

On April 18, 2002, we received written comments on a draft of this 
report from the commissioner of internal revenue (see app. VII). The 
commissioner concurred with our recommendations and stated that our 
report acknowledges the significant efforts taken by IRS to control 
the Innocent Spouse Program’s workload. 

The commissioner also said that our methodology for determining the 
average time from receipt of a case to a notification decision on 
cases closed over a yearlong period is disproportionately drawn from 
older cases in IRS’s inventory. He enclosed a table showing, 
alternatively, the average time that cases received in a fiscal year 
have taken IRS to process. Although the commissioner’s alternative 
calculation provides a useful perspective, we chose to reflect the 
average time that the taxpayers whom IRS notified of a decision during 
a fiscal year had to wait for that decision. Our methodology 
accurately reflects that average wait time. 

As we agreed with your office, unless you publicly announce the 
contents of this report earlier, we plan no further distribution of it 
until 30 days from its issue date. We will then send copies of the 
report to the commissioner of internal revenue and other interested 
parties. We will make copies available to others who request them. 

If you have any questions or would like additional information, please 
call me or Charlie Daniel at (202) 512-9110. Key contributors to this 
report are Michael S. Arbogast, Helen Branch, and John Gates. 

Signed by: 

Michael Brostek: 
Director, Tax Issues: 

[End of section] 

Appendix I: Few Innocent Spouse Cases Litigated in Federal Courts: 

Data obtained from IRS show that 73 innocent spouse cases were 
litigated in court from June 1996 through June 2001. These tried cases 
were from a large universe of innocent spouse cases; more than 130,000 
cases were decided between July 1998 and September 2001. Most cases 
were tried in the U.S. Tax Court, and federal courts generally upheld 
IRS’s determinations. 

According to officials at the U.S. Department of the Treasury’s 
(Treasury) Office of Chief Counsel, cases are sent to the courts for 
three primary reasons—-disagreements between the parties over the 
actual facts of the case, over the interpretation of the law, and over 
the application of the law to the facts of the case-—or some 
combination of these reasons. The officials also stated that courts 
weigh their decisions about cases by considering these reasons and 
other factors. Given this fact and the small number of innocent spouse 
cases that are tried, the officials do not regard the outcome of tried 
cases as a reliable measure of the quality of IRS’s innocent spouse 
decisions. 

Courts Generally Upheld All or Part of IRS’s Determinations: 

According to IRS data, from June 1996 through June 2001, 73 innocent 
spouse cases pertaining to issues of relief were litigated in federal 
courts. Of these, 54, or about 75 percent, were litigated in the U. S. 
Tax Court, which has primary jurisdiction to review IRS tax cases. In 
63 percent of the cases litigated in the Tax Court, the court 
concurred with IRS’s decision to deny taxpayers relief; in 24 percent 
of the cases, the court disagreed with IRS’s decision to deny relief. 
In the remaining 13 percent of the cases, the court granted taxpayers 
partial relief. The table below shows the number and disposition of 
cases litigated in the Tax Court from June 1996 through June 2001. 

Table 7: Number and Disposition of Innocent Spouse Cases Litigated in 
U.S. Tax Court, June 1996–June 2001: 

Calendar year: 1996; 
Number of cases: 12;
Disposition: 
Upheld denial of relief: 7;
Overturned denial of relief: 2;
Partial decisions[A]: 3. 

Calendar year: 1997; 
Number of cases: 21;
Disposition: 
Upheld denial of relief: 16;
Overturned denial of relief: 4;
Partial decisions[A]: 1. 

Calendar year: 1998; 
Number of cases: 6; 
Disposition: 
Upheld denial of relief: 3; 
Overturned denial of relief: 1; 
Partial decisions[A]: 2. 

Calendar year: 1999; 
Number of cases: 2; 
Disposition: 
Upheld denial of relief: 2; 
Overturned denial of relief: 0; 
Partial decisions[A]: 0. 

Calendar year: 2000; 
Number of cases: 6; 
Disposition: 
Upheld denial of relief: 3; 
Overturned denial of relief: 2; 
Partial decisions[A]: 1. 

Calendar year: 2001; 
Number of cases: 7; 
Disposition: 
Upheld denial of relief: 3; 
Overturned denial of relief: 4; 
Partial decisions[A]: 0. 

Calendar year: Total; 
Number of cases: 54; 
Disposition: 
Upheld denial of relief: 34; 
Overturned denial of relief: 13; 
Partial decisions[A]: 7. 

Percentage of total: 
Disposition: 
Upheld denial of relief: 63%; 
Overturned denial of relief: 24%; 
Partial decisions[A]: 13%. 

Note: Table excludes eleven cases that dealt only with innocent spouse 
procedural issues and not the merits of innocent spouse relief. 

[A] Partial decisions denote cases in which the U.S. Tax Court agreed 
with a portion of IRS’s preliminary determination of relief. 

Source: LexisNexis research results from Treasury’s Office of Chief 
Counsel. 

[End of table] 

Although the U.S. Tax Court has primary jurisdiction over innocent 
spouse cases, in some instances an innocent spouse case may be 
litigated in another federal court. Innocent spouse cases can be 
contested in federal district courts and the U.S. Court of Federal 
Claims if the taxpayer has already paid the tax liability and seeks a 
refund. Innocent spouse issues may also become part of any U.S. 
bankruptcy proceedings that the taxpayer initiates. In addition, all 
innocent spouse cases can be appealed to the U.S. Court of Appeals. 
According to IRS data, no cases were tried in either the U.S. District 
Courts or the Court of Federal Claims pertaining to issues of innocent 
spouse relief. However, 8 cases were decided in U.S. Bankruptcy Courts 
and 11 cases were decided in the U.S. Court of Appeals. 

As with cases tried in the Tax Court, for the 19 cases concluded in 
the other courts between July 1996 and June 2001, the courts usually 
sustained IRS’s determinations. IRS data show that the courts agreed 
with IRS’s decision to deny taxpayers’ relief in 11 cases and 
disagreed with IRS’s denial of relief in 6 cases. In 2 cases, the 
courts granted the taxpayers partial relief. The following table shows 
the number and disposition of cases litigated in the federal courts 
other than Tax Court. 

Table 8: Number and Disposition of Innocent Spouse Cases Litigated in 
the Federal Circuit Courts, June 1996–June 2001: 

Calendar year: 1996; 

Court: U.S. Bankruptcy Court, Northern District of Ohio; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 1; 
Partial decision: 0. 

Court: U.S. Bankruptcy Court, Eastern District of Tennessee; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 1; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Ninth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 1. 

Calendar year: 1997; 

Court: U.S. Bankruptcy Court, New Hampshire District; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 1; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Second District; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Fifth District; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 1; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Sixth District; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 1; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Ninth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Tenth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Calendar year: 1998; 

Court: U.S. Bankruptcy Court, Southern District of New York; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Calendar year: 1999; 

Court: U.S. Court of Appeals for the Fourth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Sixth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Bankruptcy Court, Northern District of Ohio; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Court of Appeals for the Tenth Circuit; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Calendar year: 2000; 

Court: U.S. Court of Appeals for the Ninth Circuit; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 0; 
Partial decision: 1. 

Court: U.S. Bankruptcy Court, Eastern District of Oklahoma; 
Disposition: 
Upheld denied relief: 1; 
Overturned denied relief: 0; 
Partial decision: 0. 

Court: U.S. Bankruptcy Court, Middle District of Florida; 
Disposition: 
Upheld denied relief: 0; 
Overturned denied relief: 1; 
Partial decision: 0. 

Total cases: 
Disposition: 
Upheld denied relief: 11; 
Overturned denied relief: 6; 
Partial decision: 2. 

Notes: Table excludes eight cases that dealt with innocent spouse 
procedural issues and not with merits of innocent spouse relief. No 
innocent spouse cases were litigated in federal courts in 2001. 

[A] Partial decisions denote cases in which the court agreed with a 
portion of IRS’s position on the issue of innocent spouse relief. 

Source: LexisNexis research results from Treasury’s Office of Chief 
Counsel. 

[End of table] 

[End of section] 

Appendix II: Innocent Spouse Cases Scheduled for Court That Were 
Settled by IRS’s Appeals Office and Treasury’s Counsel: 

According to IRS, most docketed[Footnote 13] innocent spouse cases are 
settled before going to trial. IRS’s Office of Appeals (Appeals) and 
Treasury’s Office of Chief Counsel (Counsel) work with taxpayers to 
resolve the cases out of court. IRS officials stated that the primary 
mission of Appeals is to resolve tax controversies, without 
litigation, on a basis that is fair and impartial to both the 
government and the taxpayer and in a manner that will enhance 
voluntary compliance and public confidence. 

When Appeals or Counsel settles a case, the outcome may reduce the 
amount of the taxpayer’s liability, absolve the taxpayer of any 
liability, or leave unchanged the liability as originally determined 
by IRS. Of the docketed cases that were settled by Appeals or Counsel, 
55 percent resulted in Appeals’ absolving the taxpayer of the 
liability, and 33 percent resulted in Appeals’ reducing the taxpayer’s 
liability; in 12 percent of the cases, the liability remained 
unchanged. However, when the liability is reduced or absolved on 
behalf of the requesting spouse, the spouse not requesting relief 
would still be liable for the tax liability related to the jointly 
filed tax return. 

The fact that Appeals or Counsel staff changed an examiner’s 
determination does not necessarily mean that the examiner was 
incorrect in the application of law or the analysis of the facts in 
the case. An Appeals officer has the authority to settle a case on the 
basis of the hazards of litigation. Revenue agents and tax examiners 
do not have this authority. Even though an examiner may be correct in 
the application of law and interpretation of the facts, Appeals 
officers may settle the case because of a concern that IRS might not 
prevail in court owing to the relative weaknesses and strengths of 
IRS’s case and the taxpayer’s positions. The table below shows the 
number and disposition of docketed innocent spouse cases from fiscal 
year 1999 through May 2001 that were settled before going to trial. 

Table 9: Number and Disposition of Docketed Innocent Spouse Cases 
Settled by IRS’s Office of Appeals and Treasury’s Office of Chief 
Counsel, Fiscal Years 1999–May 2001: 

Office: IRS Office of Appeals; 

Fiscal year: 1999; 
Settlement disposition: 
All settlements: 27; 
Liability reduced to zero: 14; 
Liability reduced: 10; 
Liability not changed: 3. 

Fiscal year: 2000; 
Settlement disposition: 
All settlements: 90; 
Liability reduced to zero: 49; 
Liability reduced: 31; 
Liability not changed: 10. 

Fiscal year: 2001; 
Settlement disposition: 
All settlements: 62; 
Liability reduced to zero: 37; 
Liability reduced: 18; 
Liability not changed: 7. 

Total: 
Settlement disposition: 
All settlements: 179; 
Liability reduced to zero: 100; 
Liability reduced: 59; 
Liability not changed: 20. 

Office: Treasury, Office of Chief Counsel; 

Fiscal year: 1999; 
Settlement disposition: 
All settlements: 5; 
Liability reduced to zero: 3; 
Liability reduced: 1; 
Liability not changed: 1. 

Fiscal year: 2000; 
Settlement disposition: 
All settlements: 17; 
Liability reduced to zero: 6; 
Liability reduced: 7; 
Liability not changed: 4. 

Fiscal year: 2001; 
Settlement disposition: 
All settlements: 15; 
Liability reduced to zero: 11; 
Liability reduced: 4; 
Liability not changed: 0. 

Total 
Settlement disposition: 
All settlements: 37; 
Liability reduced to zero: 20; 
Liability reduced: 12; 
Liability not changed: 5. 

Combined total: 
Settlement disposition: 
All settlements: 216; 
Liability reduced to zero: 120; 
Liability reduced: 71; 
Liability not changed: 25. 

Percentage of combined total: 
Settlement disposition: 
Liability reduced to zero: 55%; 
Liability reduced: 33%; 
Liability not changed: 12%. 

Note: The settlements in the table were from a large universe of 
innocent spouse cases; more than 130,000 cases were decided between 
July 1998 and September 2001. 

Source: IRS Office of Appeals innocent spouse data that IRS began 
collecting in FY 1999. 

[End of table] 

[End of section] 

Appendix III: IRS’s Innocent Spouse Eligibility Requirements 

Table 10: IRS’s Innocent Spouse Eligibility Requirements 

Factor: Type of return; 
Innocent spouse relief (Section 6015(b)[A]: Joint; 
Allocation of liability (Section 6015(c)[A]: Joint; 
Equitable relief (Section 6015(f)[A]: Joint[C]; 
Equitable relief in community property states[B](Section 66(c)[A]: 
Married filing separately. 

Factor: Type of liability; 
Innocent spouse relief (Section 6015(b)[A]: Deficiency; 
Allocation of liability (Section 6015(c)[A]: Deficiency; 
Equitable relief (Section 6015(f)[A]: Deficiency or underpayment; 
Equitable relief in community property states[B](Section 66(c)[A]: 
Deficiency or underpayment. 

Factor: Special requirements; 
Equitable relief (Section 6015(f)[A]: Relief under section 6015(b) and 
section 6015(c) not available[C]; 
Equitable relief in community property states[B](Section 66(c)[A]: 
Liability remains unpaid except for amounts meeting requirements for 
refunds listed here[C]. 

Factor: Refunds (Normal refund statute (RSED) controls); 
Innocent spouse relief (Section 6015(b)[A]: Refunds available; 
Allocation of liability (Section 6015(c)[A]: No refunds; 
Equitable relief (Section 6015(f)[A]: Refunds available for amounts 
paid between July 22, 1998, and April 15, 1999, and for amounts paid 
under an installment agreement (if not defaulted) after July 22, 1998, 
or date that Form 8857 was filed, whichever is later. 

Factor: Marital status; 
Innocent spouse relief (Section 6015(b)[A]: Marital status considered 
as an equitable factor;
Allocation of liability (Section 6015(c)[A]: Must be divorced or 
widowed, legally separated, or not living together for at least 12 
months prior to the election; 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Marital status considered as an equitable factor. 

Factor: Knowledge; 
Innocent spouse relief (Section 6015(b)[A]: Taxpayer must establish 
that he or she had no knowledge or reason to know;
Allocation of liability (Section 6015(c)[A]: IRS must establish that 
taxpayer had actual knowledge of deficiency items;
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Knowledge considered as an equitable factor. 

Factor: Equity; 
Innocent spouse relief (Section 6015(b)[A]: Inequitable to hold 
taxpayer liable: consider all facts and circumstances;
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Inequitable to hold taxpayer liable: consider all facts and 
circumstances. 

Factor: Required factors—-Tier I; 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Tier I cases: 
Relief ordinarily granted if all 4 factors met: 
1. Underpayment; 
2. Taxpayer is no longer married, is legally separated, OR has not 
lived with spouse for 12 months prior to request; 
3. Taxpayer had no knowledge of, or reason to know, when return was 
signed; 
4. Taxpayer will suffer economic hardship if relief not granted; 

Factor: List of partial factors—-Tier II: 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Tier II cases—underpayment and deficiency Factors weighing in favor of 
relief: 
1. Marital status (same as 6015(c)); 
2. Economic hardship (defined in Regs. § 301.6343-1(b)(4)); 
3. Abuse (but not duress); 
4. No knowledge or reason to know that liability would not be paid 
(for underpayment) or of item (for deficiency) 5. Nonrequesting 
spouse’s legal obligation (not positive factor if knowledge 
nonrequesting spouse would not pay when decree or agreement was 
signed); 
6. Liability solely attributable to nonrequesting spouse; 
Factors weighing against relief: 
1. Liability attributable to requesting spouse; 
2. Knowledge or reason to know (extremely strong factor); 
3. Significant benefit; 
4. Lack of economic hardship; 
5. Noncompliance with federal income tax laws; 
6. Requesting spouse’s legal obligation. 

Factor: Fraud; 
Innocent spouse relief (Section 6015(b)[A]: Fraud is a consideration 
in equity determination; 
Allocation of liability (Section 6015(c)[A]: Election invalid if IRS 
shows taxpayer transferred assets as part of a fraudulent scheme 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Relief not available if: 
1. return was fraudulent[C]; 
2. assets were transferred as part of fraudulent scheme[C]. 

Factor: Disqualified assets transferred for avoidance of tax or 
payment of tax; 
Innocent spouse relief (Section 6015(b)[A]: Transfer of disqualified 
assets is a consideration in equity determination; 
Allocation of liability (Section 6015(c)[A]: Amount of allocation is 
increased by value of disqualified assets; 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Relief not available to extent of value of any disqualified assets[C]. 

Factor: Time for filing; 
Innocent spouse relief (Section 6015(b)[A]: Two years from first 
collection activity after July 22, 1998[D]; 
Allocation of liability (Section 6015(c)[A]: 2 years from 1st 
collection activity after July 22, 1998[D]; 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Two years from first collection activity after July 22, 1998[C, D]. 

Factor: Consideration in courts; 
Innocent spouse relief (Section 6015(b)[A]: Tax Court; if liability 
fully paid, District Court or Court of Federal Claims; 
Allocation of liability (Section 6015(c)[A]: Tax Court; 
Equitable relief (Section 6015(f)[A]: 
Equitable relief in community property states[B](Section 66(c)[A]: 
Tax Court review under IRS’s “abuse of discretion” standard courts 
(Note: Section 66(c) cases may go to Tax Court only through deficiency 
proceedings). 

[A] Relief is available only for amounts unpaid as of July 22, 1998, 
and amounts arising after July 22, 1998. Section 6013(e) criteria that 
are similar but more restrictive than section 6015(b) criteria apply 
for amounts paid prior to July 22, 1998. 

[B] There are nine community property states—Arizona, California, 
Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 

[C] This criterion is part of seven threshold conditions for section 
6015(f) relief and part of 5 threshold conditions for section 66(c) 
relief. 

[D] Collection activities that put the taxpayer on notice that IRS 
intends to collect the tax from the taxpayer (e.g., levy, seizure, 
refund offset, judicial suit, claim). 

Source: IRS. 

[End of table] 

[End of section] 

Appendix IV: Number and Types of Innocent Spouse Cases Not Meeting 
Eligibility Requirements, March 1999–September 2001: 

Table 11: Number and Types of Innocent Spouse Cases Not Meeting 
Eligibility Requirements, March 1999–September 2001: 

Reason for not meeting eligibility requirements: Incorrect filing 
status—-no joint return 
Number: 18,456 
Percentage: 30.6 

Reason for not meeting eligibility requirements: Collection statute 
expired; 
Number: 8,004; 
Percentage: 13.3%. 

Reason for not meeting eligibility requirements: Tax paid in full—-no 
refund requested at filing; 
Number: 6,882; 
Percentage: 11.4%. 

Reason for not meeting eligibility requirements: Tax paid in full-—no 
refund requested while claim pending; 
Number: 4,839; 
Percentage: 8.0%. 

Reason for not meeting eligibility requirements: No return filed; 
Number: 4,808; 
Percentage: 8.0%. 

Reason for not meeting eligibility requirements: Unable to process; 
Number: 4,716; 
Percentage: 7.8%. 

Reason for not meeting eligibility requirements: Claim withdrawn; 
Number: 4,074; 
Percentage: 6.7%. 

Reason for not meeting eligibility requirements: Injured spouse; 
Number: 3,971; 
Percentage: 6.6%. 

Subtotal: 
Number: 55,750; 
Percentage: 92.5%. 

Reason for not meeting eligibility requirements: All other reasons; 
Number: 4,522; 
Percentage: 7.5%. 

Total: 
Number: 60,272; 
Percentage: 100.0%. 

Note: IRS opens a case for each tax period for which relief is sought. 
IRS estimates that, on average, each taxpayer files 1.9 cases. Thus, 
the number of taxpayers involved is slightly less than half the number 
of cases shown in this table. 

Source: IRS’s Innocent Spouse Tracking System. 

[End of table] 

[End of section] 

Appendix V: Average Days for Innocent Spouse Determinations, Fiscal 
Years 1999–2001: 

Table 12: Average Days For Determinations Made in Fiscal Years 1999–
2001 (regardless of year that case was received): 

All determinations: 

Number of cases: 
FY 1999[A]: 8,899; 
FY 2000: 53,431; 
FY 2001: 61,423. 

Average days: 
FY 1999[A]: 126; 
FY 2000: 220; 
FY 2001: 266. 

Cases not meeting eligibility requirements: 

Number of cases: 
FY 1999[A]: 5,552; 
FY 2000: 25,987; 
FY 2001: 28,733. 

Average days: 
FY 1999[A]: 86; 
FY 2000: 125; 
FY 2001: 157. 

Cases meeting eligibility requirements: 

Full relief granted: 

Number of cases: 
FY 1999[A]: 1,466; 
FY 2000: 11,739; 
FY 2001: 9,742. 

Average days[B]: 
FY 1999[A]: 193; 
FY 2000: 318; 
FY 2001: 382. 

Partial relief granted: 

Number of cases: 
FY 1999[A]: 201; 
FY 2000: 2,282; 
FY 2001: 3,058. 

Average days[B]: 
FY 1999[A]: 222; 
FY 2000: 324; 
FY 2001: 375. 

Denied relief: 

Number of cases: 
FY 1999[A]: 1,680; 
FY 2000: 13,423; 
FY 2001: 19,890. 

Average days[B]: 
FY 1999[A]: 188;
FY 2000: 300; 
FY 2001: 350. 

Note: IRS opens a case for each tax period for which relief is sought. 
IRS estimates that, on average, each taxpayer files 1.9 cases. Thus, 
the number of taxpayers involved is slightly less than half the number 
of cases shown in this table. 

[A] Fiscal year 1999 includes March 1999 through September 1999. 

[B] Average days represent the time that IRS takes to make a decision 
on a case and do not include all case closure times. 

Legend: FY = fiscal year. 

Source: IRS’s Innocent Spouse Tracking System database as of September 
30, 2001. 

[End of table] 

As shown in the table, the average days for IRS to reach a decision on 
a case differed based on the outcome of the case-—ineligible, full 
relief, partial relief, and denied relief-—but regardless of the 
outcome, the average days have increased yearly from fiscal year 1999 
through fiscal year 2001. 

[End of section] 

Appendix VI: Summary of Decided Innocent Spouse Cases, Fiscal Years 
1999–2001: 

Table 13: Summary of Decided Innocent Spouse Cases, Fiscal Years 1999-
2001: 

Decision by IRS: 

Ineligible; 
Cincinnati: 
Cases: 48,324; 
Percentage: 66%; 
IRS field offices: 
Cases: 11,948; 
Percentage: 24%; 
Total: 
Cases: 60,272; 
Percentage: 49%. 

Eligible; 
Cincinnati: 
Cases: 25,452; 
Percentage: 34%; 
IRS field offices: 
Cases: 38,029; 
Percentage: 76%; 
Total: 
Cases: 63,481; 
Percentage: 51%. 

Total decisions: 
Cincinnati: 
Cases: 73,776; 
Percentage: 100%; 
IRS field offices: 
Cases: 49,977; 
Percentage: 100%; 
Total: 
Cases: 123,753; 
Percentage: 100%. 

Disposition of eligible cases: 

Full relief; 
Cincinnati: 
Cases: 5,639; 
Percentage: 22%; 
IRS field offices: 
Cases: 17,308; 
Percentage: 46%; 
Total: 
Cases: 22,947; 
Percentage: 36%. 

Partial relief; 
Cincinnati: 
Cases: 2,365; 
Percentage: 9%; 
IRS field offices: 
Cases: 3,176; 
Percentage: 8%; 
Total: 
Cases: 5,541; 
Percentage: 9%. 

Denied relief; 
Cincinnati: 
Cases: 17,448; 
Percentage: 69%; 
IRS field offices: 
Cases: 17,545; 
Percentage: 46%; 
Total: 
Cases: 34,993; 
Percentage: 55%. 

Total: 
Cincinnati: 
Cases: 25,452; 
Percentage: 100%; 
IRS field offices: 
Cases: 38,029; 
Percentage: 100%; 
Total: 
Cases: 60,272; 
Percentage: 100%. 

Note: IRS opens a case for each tax period for which relief is sought. 
IRS estimates that, on average, each taxpayer files 1.9 cases. Thus, 
the number of taxpayers involved is slightly less than half the number 
of cases shown in this table. 

Source: IRS Innocent Spouse Tracking System. 

[End of table] 

[End of section] 

Appendix VII: Comments from the Internal Revenue Service: 

Department Of The Treasury: 
Internal Revenue Service: 
Commissioner: 
Washington, D.C. 20224: 

April 18, 2002: 

Mr. Michael Brostek: 
Director, Tax Issues: 
U.S. General Accounting Office: 
Washington, D.C. 20548: 

Dear Mr. Brostek: 

I reviewed your draft report titled "Tax Administration: IRS's 
Innocent Spouse Program Performance Improved; Balanced Performance 
Measures Needed." 

Your report acknowledges our significant efforts to control our 
workload by implementing the following principal initiatives: 

* Centralized the Innocent Spouse case processing at the Cincinnati 
Submission Processing Center. 

* Increased and specialized employee skills and assignments in working 
Innocent Spouse taxpayer claims. 

* Implemented an automated decision-making tool to assist examiners in 
making timely and accurate decisions. 

* Created a planning model to estimate and monitor workload and 
staffing patterns. 

* Enhanced our management information systems to provide process 
flowcharts. 

* Established a quality review process that enables us to monitor our 
workload for accuracy and make timely quality improvements. 

As a result of these activities, over the past year and a half, the 
number of taxpayers waiting for decisions on their Innocent Spouse 
claims has decreased 47 percent, from 21,136 as of September 30, 2000, 
to 11,295 as of March 31, 2002. 

Our processing time shows continuous improvement. As your report 
points out, we generally work our cases on a first-in, first-out 
basis. We have been working to reduce a backlog. Your methodology for 
determining average time from receipt of a case to notification of a 
decision on cases over a year-long period is disproportionately drawn 
from older cases in our inventory. In order to identify improvements 
in processing, we draw from a more balanced workload to determine the 
time it takes to process claims received in each fiscal year (FY). The 
enclosed table shows the reduction in our inventory and the reduction 
of lapsed time to notify a taxpayer of the decision regarding their 
claim. For example, in FY 2001 our centralized processing site 
processed non-qualifying claims 37 percent faster than in FY 1999. 
They processed qualifying claims 16 percent faster. We believe our 
improvement in service to taxpayers will continue. 

Our comments on both of your recommendations are as follows: 

Recommendation: 

Establish balanced performance measures and targets for the Innocent 
Spouse Program. 

Comment: 

We will use the information already available to establish additional 
performance measures and targets for timeliness and quality as part of 
the business results balanced measures in FY 2003. We are working with 
a vendor to develop a customer satisfaction survey from which we will 
determine baseline information. From this we will develop customer 
service measures and targets. We expect to complete the survey by the 
end of FY 2003 and develop new measures in the first quarter of FY 
2004. In the meantime, we will continue to monitor lapsed time and 
seek opportunities for improved customer service. 

Recommendation: 

Evaluate the Innocent Spouse Web Site's usefulness to taxpayers. 

Comment: 

The Innocent Spouse Web Site includes links to the interactive 
Eligibility Explorer that enables the taxpayer to do a preliminary 
self-determination on eligibility, order forms, and obtain other 
reference information. The Project Office will soon work with the new 
vendor for web site development to enhance both the contents of the 
site and our ability to capture data on its use and customer feedback. 
Once the data is available, we will evaluate the web site and make 
improvements as warranted. 

We will work with the vendor during the remainder of FY 2002, and 
expect enhancements in the third quarter of FY 2003. 

If you have any questions, please contact me or Jack G. Holstein, 
Innocent Spouse Project Manager, at (202) 622-6966. 

Sincerely, 

Signed by: 

Charles 0. Rossotti: 

Enclosure: 

[End of letter] 

Comparison Average Lapse Time Between Receipt Of Claim And 
Notification Letter By Determination Type: 

Table: Full History Of Receipts, FY 1999, 2000 2001 Receipts: 

Average Lapse Time: 

Type of Determination: Non Qualifying Claims; 
Full History, Days[A]: 
Cincinnati Processing: 81; 
Field Offices: 400; 
Locations Combined: 145; 
FY 999 Receipts, Days: 
Cincinnati Processing: 114; 
SBSE: 456; 
Locations Combined: 277; 
FY 2000 Receipts, Days: 
Cincinnati Processing: 96; 
Field Offices: 350; 
Locations Combined: 142; 
FY 2001 Receipts, Days: 
Cincinnati Processing: 72; 
Field Offices: 217; 
Locations Combined: 82. 

Type of Determination: Merit Claims; 
Full History, Days[A]: 
Cincinnati Processing: 258; 
Field Offices: 383; 
Locations Combined: 331; 
FY 999 Receipts, Days: 
Cincinnati Processing: 269; 
SBSE: 408; 
Locations Combined: 388; 
FY 2000 Receipts, Days: 
Cincinnati Processing: 248; 
Field Offices: 352; 
Locations Combined: 306; 
FY 2001 Receipts, Days: 
Cincinnati Processing: 226; 
Field Offices: 258; 
Locations Combined: 233. 

Modules: 

Type of Determination: Non Qualifying Claims; 
Full History, Modules[A]: 
Cincinnati Processing: 57,660; 
Field Offices: 14,305; 
Locations Combined: 71,965; 
FY 999 Receipts, Modules: 
Cincinnati Processing: 8,021; 
Field Offices: 7,521; 
Locations Combined: 15,542; 
FY 2000 Receipts, Modules: 
Cincinnati Processing: 21,081; 
Field Offices: 4,712; 
Locations Combined: 25,793; 
FY 2001 Receipts, Modules: 
Cincinnati Processing: 20,970;
Field Offices: 1,421; 
Locations Combined: 22,391. 

Type of Determination: Merit Claims; 
Full History, Modules[A]: 
Cincinnati Processing: 34,759; 
Field Offices: 43,428; 
Locations Combined: 78,187; 
FY 999 Receipts, Modules: 
Cincinnati Processing: 3,812; 
Field Offices: 23,158; 
Locations Combined: 26,970; 
FY 2000 Receipts, Modules: 
Cincinnati Processing: 14,082; 
Field Offices: 13,997; 
Locations Combined: 28,079; 
FY 2001 Receipts, Modules: 
Cincinnati Processing: 15,695; 
Field Offices: 4,069; 
Locations Combined: 19,764. 
                                                                        
[A] Full History includes FY 2002 receipts and small number of pre-FY 
99 receipts. 

7 day lapse time for mailing of computer-generated letters at 
Cincinnati Processing Site included above. 

An insufficient number of modules have reached a determination stage 
for FY 2002 to reflect valid information. 

Source: Innocent Spouse Tracking System 04/07/02. 

[End of table] 

[End of section] 

Footnotes: 

1. On March 6, 1999, IRS implemented its Innocent Spouse Tracking 
System (ISTS) to develop statistics on program workload and case 
dispositions. 

2. Generally, the appeal procedures would not apply when IRS fully 
approves the taxpayer’s request for relief from the tax liability. 

3. The requesting spouse may file a petition with the U.S. Tax Court 
for a review of the case or may pay the tax deficiency and file a 
claim for refund in the U.S. Court of Federal Claims or U.S. District 
Court. 

4. Government Performance and Results Act of 1993 (P.L. 103-62). 

5. Direct staff time does not include all time related to the Innocent 
Spouse Program. For example, it does not include time required for 
management, quality review staff, overhead, and training. 

6. U.S. General Accounting Office, Internal Control Management and 
Evaluation Tool, [hyperlink, http://www.gao.gov/products/GAO-01-1008G] 
(Washington, D.C.: Aug. 1, 2001). 

7. The LexisNexis group of databases provides various types of 
information, including legal, tax, and regulatory information, to 
legal, corporate, government, and academic markets. 

8. FTE means full time equivalent. An FTE generally consists of one or 
more employed individuals who collectively complete 2,080 work hours 
in a given year. Therefore, either one full-time employee or two half-
time employees equal one FTE. 

9. “Grade level” means the employee’s classification under a position 
classification system (i.e., referring to the duties, tasks, and 
functions he or she performs). 

10. Internal Revenue Service (Washington, D.C: September 2000). 

11. U.S. General Accounting Office, Internal Control Management and 
Evaluation Tool, [hyperlink, http://www.gao.gov/products/GAO-01-1008G] 
(Washington, D.C.: Aug. 1, 2001). 

12. Charles R. McClure, J. Timothy Sprehe, Sprehe, and Kristen 
Eschenfelder, Performance Measures for Federal Agency Web Sites: Final 
Report to Sponsoring Agencies (Washington, D.C: Defense Technical 
Information Center, Energy Information Administration, 2000). 

13. A petition filed with the court and accepted by the court for 
review becomes a docketed case. 

[End of section] 

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