Administrative Changes Could Strengthen IRS' Claims for Rewards Program

GGD-85-11: Published: Apr 19, 1985. Publicly Released: Apr 19, 1985.

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GAO reviewed the Internal Revenue Service's (IRS) administration of the Claims for Rewards Program to determine whether it was operating effectively in detecting unreported income.

GAO found that: (1) the program has helped IRS identify and collect taxes which might not have been realized without information provided by program participants; and (2) IRS personnel were not fully aware of the program's processing requirements and were not giving claims priority consideration. IRS has no time requirements for processing claims for rewards allegations; therefore, GAO formulated criteria based on the length of time IRS national and district officials said these processing functions should take. Using these criteria, GAO found that, in 79 percent of the reward claims filed in two large IRS district offices, it took longer than officials said it should take to perform one or more processing functions. GAO also found that: (1) in six cases, IRS collected taxes after declaring them uncollectible; (2) claims examiners did not routinely check corresponding delinquent account transcripts to ensure that claimants were paid any additional rewards due; (3) IRS disallowed 87 percent of the closed claims because the claimant did not provide sufficient information; and (4) if IRS had permitted partial awards more often, some program participants could have received rewards sooner. GAO also found that: (1) participants often received small rewards and had to wait a long time to receive them; and (2) if the minimum reward were raised, the effect on the program's revenue-yield-to-cost ratio would be negligible.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS revised its manual on July 25, 1985, to implement this recommendation.

    Recommendation: To help ensure that the Claims for Rewards Program's financial payments are sufficient and paid as soon as possible, the Commissioner of Internal Revenue should rescind the requirement that claimants submit separate claims for rewards applications after a partial reward has been paid, thereby eliminating burdensome paperwork.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: Publication 733 was revised as GAO recommended. It was given final approval and is now at the printers awaiting final issuance which is expected to be in March 1986.

    Recommendation: To help ensure that potential program participants know the kinds of information IRS needs to initiate and develop Claims for Reward Program cases, the Commissioner of Internal Revenue should revise IRS Publication 733 to include a section on the specific kinds of information IRS finds useful to make cases against taxpayers who do not comply with the tax laws.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS revised its manual on July 25, 1985, to implement this recommendation.

    Recommendation: To help ensure that reward claims are processed in a timely manner and that rewards are paid promptly and accurately, the Commissioner of Internal Revenue should implement procedures to ensure that program participants receive additional rewards when subsequent collections are made after an account has been declared uncollectible and a reward paid. Such procedures should ensure that claims for rewards cases are kept in suspense until the balances which were rendered uncollectible are liquidated. Subsequent collection activity should then be routinely reported by the IRS Collection Division to program claims examiners at the service centers so that additional rewards can be paid as warranted.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Not Implemented

    Comments: IRS disagreed with this recommendation and plans no action.

    Recommendation: To help ensure that reward claims are processed in a timely manner and that rewards are paid promptly and accurately, the Commissioner of Internal Revenue should require program claims examiners to check, at prescribed time intervals, the transcripts of taxpayers' accounts to determine the status of outstanding tax deficiencies on active claims in which deficiencies have been assessed but collections have not been realized.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  5. Status: Closed - Implemented

    Comments: IRS is taking action by drafting instructions to implement parts one and two of this recommendation. IRS disagreed with parts three and four and plans no action. IRS issued the instructions on July 26, 1985.

    Recommendation: To help ensure that reward claims are processed in a timely manner and that rewards are paid promptly and accurately, the Commissioner of Internal Revenue should institute specific time frames as a goal for: (1) acknowledging service center receipt of program participants' allegations; (2) referring worthy allegations to district offices for action; (3) submitting claims for rewards evaluation reports by case agents; and (4) issuing reward checks once the program's claims examiners are aware that assessed deficiencies have been paid. Such time frames will provide IRS management with benchmarks from which it can assess program administration and implementation.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  6. Status: Closed - Not Implemented

    Comments: The Commissioner did not agree with this recommendation because he did not want IRS perceived as emphasizing the rewards program.

    Recommendation: To help ensure that the Claims for Rewards Program is used more effectively in detecting taxpayer noncompliance, the Commissioner of Internal Revenue should require that national office management request regional office, district office, and service center managers and staff to refamiliarize themselves with the Claims for Rewards Program's operating guidelines and procedures.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  7. Status: Closed - Not Implemented

    Comments: IRS disagreed with this recommendation and plans no action.

    Recommendation: To help ensure that the Claims for Rewards Program's financial payments are sufficient and paid as soon as possible, the Commissioner of Internal Revenue should consider raising the minimum reward.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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