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    Federal Agency: "Department of the Treasury: Internal Revenue Service"

    68 publications with a total of 210 open recommendations including 16 priority recommendations
    Director: John E. Dicken
    Phone: (202) 512-7114

    1 open recommendations
    Recommendation: In implementing the age and gender adjustment, the Commissioner of Internal Revenue should consider taking steps to mitigate the limitations of the BCBS Standard plan premium cost data--such as by combining data from multiple FEHBP plans. If combining the costs of plans with different benefit structures, the Commissioner should consider whether an appropriate actuarial adjustment should be used. If the Commissioner interprets that the statute does not provide the flexibility to mitigate the limitations of the BCBS Standard plan premium cost data by combining data from multiple sources or by other means, the Commissioner should seek that authority from Congress.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Director: Wilshusen, Gregory C
    Phone: (202) 512-6244

    10 open recommendations
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should implement the audit plans for the 12 systems and applications that we reviewed in the production computing environment.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should ensure that system administrators and security operations analysts are alerted in the event of audit processing failures.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should update information contingency plan test procedures to include updating contingency plans to reflect changes to the current operating environment.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should ensure that approved risk-based decisions pertaining to database configurations are based on suitable justification.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should develop, document, and implement the use of detailed procedures to facilitate the periodic review and analysis of audit records for its financial systems.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should develop an enterprise-wide system owner procedural document to control critical mainframe operating system commands.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should regularly update configuration standards and guidelines for network devices to incorporate recommendations from industry leaders, security agencies, and key practices from IRS partners to address known vulnerabilities applicable to IRS's environment.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should implement a compliance verification application, or other appropriate process, to ensure configuration policies are comprehensively tested on the mainframe.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should ensure that all known significant audit findings and recommendations related to financial reporting, which includes those in GAO's public and limited official use only reports, that directly relate to the objective of A-123 internal control tests are reviewed and monitored.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To help strengthen information security controls over key financial and tax processing systems, and to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue, in addition to addressing previously made but still unresolved recommendations from our prior audits, should identify and review service organizations' listing of user controls that are deemed relevant and test those controls to appropriately draw conclusions about the operating effectiveness of controls.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Director: Beryl H. Davis
    Phone: (202) 512-2623

    5 open recommendations
    including 4 priority recommendations
    Recommendation: To comply with improper payments reporting requirements and improve procedures related to processing PTC information on tax returns, the Commissioner of Internal Revenue should direct the appropriate officials to assess the program against applicable IPIA-defined thresholds and conclude on its susceptibility to significant improper payments, and revise the scope of its improper payments susceptibility assessment for the PTC program to include instances in which advance PTC is greater than or equal to the amount of PTC claimed on the tax return. If the program meets the IPIA definition for being susceptible to significant improper payments based on this assessment, estimate and report improper payments associated with the PTC program consistent with IPIA requirements.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: The IRS partially agreed with this recommendation. IRS stated that instances in which the advance payment of the PTC is greater than or equal to the amount of the PTC claimed on the tax return do not result in the IRS increasing the outlay related to PTC, and so by definition these occurrences are not subject to IPIA, as amended. The IRS understands and shares the concern about the misreporting of items on tax returns, including cases where the taxpayer misreports excess advance PTC, but the IRS has many compliance programs that operate outside the scope of IPIA and that address taxpayer error and noncompliance. The IRS conducted its fiscal year 2016 PTC improper payment risk assessment consistent with guidance from the Office of Management and Budget (OMB), which concurred with our methodology. However, the IRS is committed to discussing with OMB a future change to the agreed-upon procedures to assessing PTC improper payments as part of our larger and ongoing discussions with OMB about the administration of refundable tax credits and the challenges of reporting those credits through the framework of improper payments legislation and guidance.
    Recommendation: To comply with improper payments reporting requirements and improve procedures related to processing PTC information on tax returns, the Commissioner of Internal Revenue should direct the appropriate officials to assess and document the feasibility of approaches for incorporating information from the marketplaces on individuals who did not demonstrate that they met the eligibility requirements for citizenship or lawful presence in the tax compliance process. If determined feasible, IRS should work with Treasury to require marketplaces to periodically provide such information on individuals and use such information to recover advance PTC made for those individuals.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The IRS agreed with this recommendation. IRS stated that it will evaluate the feasibility of receiving information from the marketplaces, and the value of using that information in its processes. If IRS determines that obtaining the data would be feasible and using it would be cost-effective, IRS will consult with Treasury on regulations or other guidance needed to obtain the information. Although eligibility determinations for the advance PTC are made outside the IRS's purview, the IRS has taken steps to ensure that the PTC is administered fairly and properly. For example, IRS has updated guidance in Publication 974, Premium Tax Credit, to clarify that any advance payment of the PTC made on behalf of individuals who did not meet the citizenship or lawful presence requirements must be repaid in full. Taxpayers are required to report the excess advance PTC on their tax returns. If they do not, IRS will address it through post-filing compliance. We will request and review supporting documentation for IRS's reported actions.
    Recommendation: To comply with improper payments reporting requirements and improve procedures related to processing PTC information on tax returns, the Commissioner of Internal Revenue should direct the appropriate officials to assess whether IRS should require its examiners to verify health care coverage of individuals to determine eligibility for PTC. To do this, IRS should complete its evaluation of the level of noncompliance related to duplicate health insurance coverage. Based on this evaluation and if cost effective, IRS should design and implement formal policies and procedures to routinely identify individuals inappropriately receiving PTC because of their eligibility for or enrollment in health care programs outside of the marketplaces and notify such individuals of their ineligibility for PTC.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS agreed with this recommendation. IRS stated that it developed an Affordable Care Act (ACA) Compliance Strategy in October 2016, which included post-filing checks for the PTC. The IRS must rely upon post refund checks to verify if taxpayers had other healthcare coverage and therefore were not eligible to claim the PTC. For tax year 2017 the IRS plans to implement additional capabilities to evaluate coverage. The IRS will continue to evaluate the results and design and implement cost effective policies and procedures that routinely identify individuals inappropriately receiving PTC, as warranted.
    Recommendation: To comply with improper payments reporting requirements and improve procedures related to processing PTC information on tax returns, the Commissioner of Internal Revenue should direct the appropriate officials to design and implement procedures in the Internal Revenue Manual (IRM) for examiners in the post-filing compliance units to review tax returns for health insurance coverage for the entire year, and to identify and assess individual shared responsibility payments (SRP) from those who are not appropriately reporting SRPs on their tax returns.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS disagreed with this recommendation. However, IRS stated that, among other things, it has drafted a new IRM section for examiners who are responsible for reviewing tax returns to determine whether health insurance is reflected for the taxpayer for the entire year, and for identifying and assessing SRP on taxpayers who are not appropriately reporting SRP on their tax returns. IRS stated that the IRM section is pending approval by Exam Policy. Although IRS stated that it disagreed with our recommendation, we believe that the actions that IRS described in its response to our draft report would sufficiently address our recommendation if implemented effectively.
    Recommendation: To comply with improper payments reporting requirements and improve procedures related to processing PTC information on tax returns, the Commissioner of Internal Revenue should direct the appropriate officials to design and implement procedures in the IRM to regularly notify nonfilers of the requirement to file tax returns in order to continue to receive advance PTC in the future.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: The IRS partially agreed with this recommendation. IRS stated that using a research-based approach to evaluate the 2015 tax filing season, it developed a post-compliance process for sending notices to individuals who received advance PTC paid on their behalf in the previous calendar year but failed to file a tax return and also to those who requested an extension to file. IRS stated that being flexible in its approach has allowed IRS to refine the process to improve efficiency and effectiveness. IRS further stated that based on the 2017 research analysis, IRS will determine whether the information should be included in an existing IRM. We agree that IRS should review its process to improve the efficiency and effectiveness of its operations. However, we continue to believe that designing and implementing procedures to regularly notify non-filers of the need to file to continue receiving advance PTC decreases the risk that the ad hoc notification process will not be followed consistently in each filing season.
    Director: Clark, Cheryl E
    Phone: (202)512-9377

    10 open recommendations
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to develop and implement a process to reasonably assure that IRS operating divisions and the information technology (IT) organization effectively coordinate with the Chief Financial Officer (CFO) organization when making programming changes to information systems affecting financial reporting.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by December 2017, the Information Technology (IT) organization, in collaboration with the Chief Financial Officer (CFO) organization, will develop and implement a process to reasonably assure that IRS operating divisions and the IT organization effectively coordinate with the CFO organization when making programming changes to information systems affecting financial reporting. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to research and determine the reason the IT organization did not follow IRS policy to thoroughly test programming changes related to the automation of specific penalty abatement procedures to reasonably assure that they worked as intended before implementation. Based on this determination, the IRS Commissioner should direct the appropriate IRS officials to establish a process to better ensure compliance with existing policies for testing programming changes, including the use and review of the Applications Development transmittal checklist when developing program changes and retention of test results.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by June 2018, the IT organization will research IRS policies and practices for testing programming changes to determine what modifications may be needed to reasonably assure programming changes work as intended before implementation. Based on this research, the IT organization will update the affected policies and implement any related process changes, as needed. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to strengthen the process for reasonably assuring that the Internal Revenue Manual (IRM) is reviewed annually to align with the current control procedures and guidance being implemented by agency personnel. This should include a mechanism for reasonably assuring that program owner directors (1) review their respective program control activities and related guidance annually and timely update the IRM as needed, (2) document their reviews, and (3) utilize interim guidance and supplemental guidance correctly for their intended purposes.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by March 2018, the Research, Applied Analytics and Statistics organization will strengthen the process to reasonably assure that all IRMs are reviewed annually to align with the current control procedures and guidance being implemented by IRS personnel. This will include a mechanism to reasonably assure that program owner directors (1) review their respective program control activities and related guidance annually, and update the IRM timely, if needed; (2) document their reviews; and (3) use interim guidance and supplemental guidance correctly for their intended purposes. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to ensure that the respective Agency-Wide Shared Services IRM and supplemental guidance related to the frequency of performing (1) emergency/alarm contact-list validation, (2) duress alarm inventory validation, and (3) federal security risk assessments are consistent.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation and considers it closed. IRS stated that in February 2017, the Agency-Wide Shared Services (AWSS) organization updated SOP-17-0002, Alarm Notification, Testing and Maintenance, to synchronize the frequency of performing (1) emergency/alarm contact-list validation; (2) duress alarm inventory validation; and (3) federal security risk assessments, with revised IRM 10.2.14.9, Methods of Providing Protection, Detection Equipment, and IRM 10.2.11.2.5 (3), Facility Security Risk Management. We will assess IRS's actions during our fiscal year 2017 financial statement audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to update the respective (1) Privacy, Governmental Liaison and Disclosure and (2) CFO IRM sections related to the definition of the tax gap to align with the current understanding followed by IRS personnel.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that in April 2017, the CFO organization updated IRM 1.34.1.2 (124) Revenue Accounting, Definitions and Acronyms, to align the tax gap definition with the current understanding followed by IRS personnel. Further, by February 2018, the Privacy, Governmental Liaison and Disclosure organization will remove the tax gap definition from IRM 11.4.1.3.1.2, Tax Gap Initiatives. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to revise the applicable IRM sections pertaining to manual refunds to require employees to verify the validity of the digital signatures on the manual refund request forms and the manual refund signature authorization forms.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by March 2018, the Wage and Investment (W&I) organization will revise the applicable IRM manual refund sections to require that employees validate the digital signatures on the manual refund request forms and the manual refund signature authorization forms. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to revise system access rights in Human Resources (HR) Connect to prevent HR assistants within the Employment Operations office from approving and releasing pay-related personnel actions to the National Finance Center (NFC).

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation and considers it closed. IRS stated that in February 2017, the Human Capital Office (HCO) revised system access rights in HR Connect to prevent the Employment Operations Office HR assistants from approving and releasing pay-related personnel actions to the National Finance Center (NFC). We will assess IRS's actions during our fiscal year 2017 financial statement audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to revise the HR Connect HR User Profiles Desk Guide to clearly indicate that HR assistants within the Employment Operations office should not be granted access to approve and release pay-related personnel actions to NFC.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation and considers it closed. IRS stated that in February 2017, HCO revised the HR Connect HR User Profiles Desk Guide to clearly indicate that the Employment Operations Office HR assistants should not be granted access to approve and release pay-related personnel actions to NFC. We will assess IRS's actions during our fiscal year 2017 financial statement audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish and implement procedures to periodically review the process for determining the intragovernmental costs and costs with the public for each major program reported in the notes to the financial statements to provide reasonable assurance that these amounts are reliable and fairly presented.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by February 2018, the CFO organization will establish and implement procedures to review periodically the process for determining intragovernmental and public costs for each major program reported in the notes to the financial statements, providing reasonable assurance that these amounts are reliable and presented fairly. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to provide clear guidelines as to what events constitute removal from IRS premises and the disposal date that should be recorded in its inventory system, either through an update of the IRM or other property and equipment-related desk guides.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with this recommendation. IRS stated that by December 2017, the AWSS organization will provide clear guidelines on events that constitute removal of trackable property and equipment assets from IRS premises, and the disposal date that should be recorded in its inventory system, either by updating the IRM or the property and equipment-related desk guides. We will follow-up during our audit of IRS's FY 2017 financial statements to determine the status of this recommendation.
    Director: Jessica Lucas-Judy
    Phone: (202) 512-9110

    5 open recommendations
    Recommendation: To help ensure that IRS leverages lessons learned from the NRP examinations and effectively completes operational employment tax examinations, the Commissioner of Internal Revenue should develop and document plans to analyze the results in 2017 of the NRP employment tax study to identify the major issues of noncompliance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In response to this recommendation, IRS said in July 2017 that it will develop and document plans to comprehensively analyze the National Research Program study results and identify major issues of noncompliance. IRS also said it will complete data perfection activities and deliver the updated data to its data warehouse system. IRS plans to complete these tasks by January 2018.
    Recommendation: To help ensure that IRS leverages lessons learned from the NRP examinations and effectively completes operational employment tax examinations, the Commissioner of Internal Revenue should develop and document plans for addressing the noncompliance identified in IRS's analysis of the NRP employment tax results.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In response to this recommendation, IRS said in July 2017 that it plans to research how the National Research Program (NRP) study results can be used to enhance workload selection programs and will develop and initiate an action plans based on studying the NRP results. IRS plans to complete this work by January 2019.
    Recommendation: To help ensure that IRS leverages lessons learned from the NRP examinations and effectively completes operational employment tax examinations, the Commissioner of Internal Revenue should develop and document plans for assessing the results of the NRP employment tax study to estimate the current state of the employment tax gap.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In response to this recommendation, in July 2017 IRS said it will update its tax gap estimates, which will include updating the employment tax gap estimates. IRS plans to complete this effort by January 2020.
    Recommendation: To help ensure that IRS leverages lessons learned from the NRP examinations and effectively completes operational employment tax examinations, the Commissioner of Internal Revenue should determine whether and when to provide the Information Return Analysis System upfront for Small Business/Self-Employed division operational examinations based on criteria such as whether it would help identify more noncompliance, reduce taxpayer burden, and improve audit efficiency by reducing overall IRS costs (examiner versus campus costs).

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In response to this recommendation, in July 2017 IRS said it will gather additional data and insights on the opportunities and challenges of incorporating Information Return Analysis System (IRAS) data into the classification process. IRS plans to complete these tasks by October 2018.
    Recommendation: To help ensure that IRS leverages lessons learned from the NRP examinations and effectively completes operational employment tax examinations, the Commissioner of Internal Revenue should regularly remind employment tax examiners how they can access and request the CP2100 and cash transaction data for operational employment tax examinations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In response to this recommendation, in July 2017 IRS said it will provide reminders to examiners regarding the cash transaction data and the CP2100, hold training sessions, and include information on both tools on its internal website for examiners. IRS planned to complete these tasks by October 2018.
    Director: James R. McTigue Jr.
    Phone: (202) 512-9110

    14 open recommendations
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including defining objectives to identify risk and defining risk tolerances.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including identifying, analyzing, and responding to risks to achieving the objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including designing control activities to achieve objectives and responding to risks.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including using quality information to achieve objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including communicating internally the necessary quality information about the objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: As LB&I finishes implementing its new approach and decides which selection methods will be used with the campaigns, the Commissioner of Internal Revenue should ensure that the documentation gaps in policies and procedures are addressed for six internal control principles for the selection methods that will be used, including evaluating issues and remediating identified internal control deficiencies on a timely basis.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: Also in accordance with federal internal control standards, the Commissioner should direct LB&I to adopt a standard process for monitoring audit selection decisions in the field, such as by modifying the existing quality control system.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should create a timetable with specific dates for implementing its new compliance approach.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should establish metrics to help determine whether the campaign effort overall meets LB&I's goals.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should finalize and document plans to evaluate the human resources expended on campaign activities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should document lessons learned from stakeholder input and past performance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should monitor overall performance across future campaigns, not just individual compliance projects, and in doing so ensure that the data used for monitoring accounts for the costs beyond the auditor's time can clearly be linked with specific selection methods, including the Discriminant Analysis System method, to the extent that the selection methods continue to operate.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should develop and document criteria to use in choosing selection methods for campaigns using audits.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Recommendation: To further ensure that the new campaigns under LB&I's new approach for addressing tax compliance are implemented successfully, the Commissioner should set a timetable to analyze and mitigate risks and document specific metrics for assessing mitigation of identified risks.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Director: Jessica Lucas-Judy
    Phone: (202) 512-9110

    3 open recommendations
    Recommendation: The Commissioner of Internal Revenue should develop and maintain an online dashboard to display customer service standards and performance information such that it is easily accessible and improves the transparency of its taxpayer service.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS reported that it is evaluating the data that it can make available online. IRS also indicated that it will include the service standards that taxpayers should expect when interacting with IRS. IRS expects to make this information available online by February 2018.
    Recommendation: The Commissioner of Internal Revenue should review its document retrieval and scanning processes to identify potential training or guidance needs or other potential efficiencies.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS reported that it issued guidance to employees in February 2017 reminding them to follow IRS procedures that require thorough research of information contained in IRS systems before requesting a hard copy of documents from file storage or archives. However, IRS has not completed a review of its document retrieval and scanning processes to identify potential efficiencies. Without this review, IRS is missing potential opportunities to retrieve and scan the documents that employees require in a timely manner.
    Recommendation: The Commissioner of Internal Revenue should revise IRS's notices to IDT refund fraud victims to include information such as (1) whether any dependents were claimed on the fraudulent return, (2) to the extent possible, if those dependents match any of those the taxpayer claimed the same tax year, and (3) how to request a redacted copy of the fraudulent return.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS reported that it will revise its notices to victims of identity theft to include information that will advise them to protect the personally identifiable information of their dependents. The notice will also direct them to revised information and guidance on irs.gov. IRS expects to complete the revisions by July 2018.
    Director: Charles Jeszeck
    Phone: (202) 512-7215

    3 open recommendations
    Recommendation: To assist IRA owners in addressing challenges associated with investing their retirement savings in unconventional assets, the Commissioner of Internal Revenue should provide guidance to IRA owners on the potential for IRA transactions involving certain unconventional assets to generate unrelated business taxable income subject to taxation in the current tax year and subsequent years. For example, IRS could consider adding an explicit caution in Publication 590 Individual Retirement Arrangements (IRAs) and include a link in Publication 590 to Publication 598 Tax on Unrelated Business Income of Exempt Organizations to provide examples demonstrating how certain unconventional assets in IRAs can generate unrelated business income tax for account owners.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS stated that it would add during the calendar year 2017 scheduled update, language to Publication 590-A, Contributions to Individual Retirement Arrangements (IRA), cautioning IRA owners about the possibility of unrelated business taxable income if the IRA owner engages in certain transactions or purchases certain assets. GAO will consider closing this recommendation when the agency has completed this effort.
    Recommendation: To assist IRA owners in addressing challenges associated with investing their retirement savings in unconventional assets, the Commissioner of Internal Revenue should provide guidance to IRA owners and custodians on how to determine and document fair market value (FMV) for certain categories of hard-to-value unconventional assets. For example, IRS could consider updating Form 5498 instructions to custodians on how to document FMV for hard-to-value assets (e.g., last-known FMV based on independent appraisal, acquisition price) and provide guidance directed at account owners that provides examples of how to ascertain FMV for different types of unconventional assets.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed that guidance should be provided to IRA owners and custodians and stated that the guidance could be provided as part of an item currently on the 2016-2017 Priority Guidance Plan. IRS will recommend to Treasury that the regulation project address this issue. We will consider closing this recommendation when the agency provides documentation that this effort has been completed.
    Recommendation: To assist IRA owners in addressing challenges associated with investing their retirement savings in unconventional assets, the Commissioner of Internal Revenue should clarify the content of the model custodial agreement to distinguish what has been reviewed and approved by IRS and what has not. For example, IRS could consider: (1) restricting custodians from stating that the form has been "preapproved by the IRS" on the form; (2) adding language to specify which articles have been preapproved by the IRS and which have not; and (3) limiting custodians from adding provisions to the model form other than those preapproved by the IRS.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS reported that it will change during the next scheduled update of the model agreements, the "pre-approved by IRS" statement to clarify that only the first seven articles of Form 5305, Traditional Individual Retirement Trust Account, and Form 5305-A, Traditional Individual Retirement Custodial Account, are approved by IRS. GAO will consider closing this recommendation when the agency has completed this effort.
    Director: James McTigue
    Phone: (202) 512-9110

    5 open recommendations
    Recommendation: To ensure that Field Collection program case selection processes support IRS's and the Collection program's mission, including applying tax laws with integrity and fairness to all, the Commissioner of Internal Revenue should develop, document, and communicate Field Collection program and case selection objectives, including the role of fairness, in clear and measurable terms sufficient for use in internal control.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and described actions it will take to address it, to include that the Small Business/Self-Employed Division (SB/SE) will develop fiscal year 2017 program objectives that align with the mission of SB/SE and that the Collection program will develop and document specific Field Collection and case selection activities that will support SB/SE objectives. However, it is not clear how these efforts will be fully responsive our recommendation to establish Field Collection (not division-level) program and case selection objectives sufficient for use in internal control. IRS said it planned to complete actions on this recommendation by July 2017. We will update the status of IRS's implementation of the recommendation after we complete review of any documents IRS provides on actions taken.
    Recommendation: To ensure that Field Collection program case selection processes support IRS's and the Collection program's mission, including applying tax laws with integrity and fairness to all, the Commissioner of Internal Revenue should develop, document, and implement performance measures clearly linked to the Field Collection program and case selection objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and outlined planned actions to address it. However, since it is not clear that IRS's planned actions to implement our first recommendation will result in Field Collection program and case selection objectives sufficient for internal control purposes, IRS's ability to address the related recommendation to establish performance measures may be limited. IRS said it planned to complete actions on this recommendation by August 2017. We will update the status of IRS's implementation of the recommendation after we complete review of any documents IRS provides on actions taken.
    Recommendation: To ensure that Field Collection program case selection processes support IRS's and the Collection program's mission, including applying tax laws with integrity and fairness to all, the Commissioner of Internal Revenue should incorporate program and case selection objectives into existing risk management systems or use other approaches to identify and analyze potential risks to achieving those objectives so that Field Collection can establish risk tolerances and appropriate control procedures to address risks.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and outlined planned actions to address it. However, since it is not clear that IRS's planned actions to implement our first recommendation will result in Field Collection program and case selection objectives sufficient for internal control purposes, IRS's ability to address the related recommendation to assess program risks may be limited. IRS said it planned to complete actions on this recommendation by July 2017. We will update the status of IRS's implementation of the recommendation after we complete review of any documents IRS provides on actions taken.
    Recommendation: To ensure that Field Collection program case selection processes support IRS's and the Collection program's mission, including applying tax laws with integrity and fairness to all, the Commissioner of Internal Revenue should develop, document, and communicate control procedures guidance for group managers to exercise professional judgment in the Field Collection program case selection process to achieve fairness and other program and collection case selection objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and described actions it will take to address it, to include review of current procedures and guidance and making changes, if necessary. IRS said it planned to complete actions on this recommendation by July 2017. We will update the status of IRS's implementation of the recommendation after we complete review of any documents IRS provides on actions taken.
    Recommendation: To ensure that Field Collection program case selection processes support IRS's and the Collection program's mission, including applying tax laws with integrity and fairness to all, the Commissioner of Internal Revenue should develop, document, and implement procedures to periodically monitor and assess the design and operational effectiveness of both automated and manual control procedures for collection case selection to assure their continued effectiveness in achieving program objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and outlined planned actions to address it. However, since it is not clear that IRS's planned actions to implement our first recommendation will result in Field Collection program and case selection objectives sufficient for internal control purposes, IRS's ability to address the related recommendation to monitor control procedures may be limited. IRS said it planned to complete actions on this recommendation by July 2017. We will update the status of implementation of the recommendation after we complete review of documents IRS provides on the actions taken.
    Director: Michelle Sager
    Phone: (202) 512-6806

    4 open recommendations
    Recommendation: The Commissioner of Internal Revenue should communicate more clearly the limitations of information not published in the IRB to taxpayers. Such action could include adding clarifying language to some pieces of information not published in the IRB, like FAQs, and amending policies and procedures, such as the Internal Revenue Manual (IRM), to clarify when IRS information should contain a statement regarding its legal authority and whether the item can be used or cited as precedent.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of May 2017, IRS has informed GAO that it has implemented the recommendation. GAO is in the process of verifying that the recommendation was successfully implemented.
    Recommendation: The Commissioner of Internal Revenue should amend current policies and procedures for drafting guidance to include factors to consider when deciding what type of guidance to issue and procedures for documenting those decisions internally.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of May 2017, IRS has informed GAO that it has implemented the recommendation. GAO is in the process of verifying that the recommendation was successfully implemented.
    Recommendation: The Commissioner of Internal Revenue should develop policies and procedures to help guidance-drafting teams assess whether non-regulatory guidance should be considered a rule for purposes of the Congressional Review Act (CRA) and in turn major, and document those assessments internally.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of May 2017, IRS has informed GAO that it has implemented the recommendation. GAO is in the process of verifying that the recommendation was successfully implemented.
    Recommendation: The Commissioner of Internal Revenue should take action to ensure that required steps are consistently documented during key phases of the non-regulatory guidance process, as defined in the Chief Counsel Directives Manual.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of May 2017, IRS has informed GAO that it has implemented the recommendation. GAO is in the process of verifying that the recommendation was successfully implemented.
    Director: Rebecca Shea
    Phone: (202) 512-2834

    1 open recommendations
    Recommendation: To maximize resources for the Inland Waterways Trust Fund, the Commissioner of Internal Revenue should consult with the U.S. Army Corps of Engineers to explore options to obtain proprietary data to enhance IRS's efforts to ensure taxpayer compliance with the inland waterways fuel tax.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: To enhance the budget process and to improve transparency, the Commissioner of Internal Revenue, to the extent feasible, should ensure that the CJ includes data by appropriation account on the amount of funding requested to maintain current services for each future state theme.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
    Director: David A. Powner
    Phone: (202) 512-9286

    4 open recommendations
    Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to document IRS's process for selecting and prioritizing operations support activities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its August 2016 statement of actions to address our recommendations, IRS reported that it was documenting the process for selecting and prioritizing all non-Business Systems Modernization activities, and noted that it expects to have draft documentation by September 2016, and finalized documentation no later than April 2017. We will be following-up with the agency to obtain documentation of actions taken to address this recommendation, and will update this status accordingly.
    Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to establish, document, and implement policies and procedures for selecting new and reselecting ongoing business systems modernization activities, consistent with IRS's process for prioritizing operations support priorities, which addresses (1) prioritization and comparison of IT assets against each other, (2) criteria for making selection and prioritization decisions, and (3) ensuring IRS executives' final funding decisions on IT proposals are based on IRS's prioritization process.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its August 2016 statement of actions to address our recommendations, IRS highlighted process improvements, which it noted would influence its efforts to address this recommendation. IRS committed to documenting the prioritization policies and procedures for its Business Systems Modernization activities as these new process improvements stabilize. We will be following-up with IRS to obtain documentation of actions taken to address this recommendation, and will update this status accordingly.
    Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to modify existing processes for Foreign Account Tax Compliance Act (FATCA) and Return Review Program (RRP) for measuring work performed by IRS staff to incorporate best practices, including accounting for actual work performed and using the level of effort measure sparingly.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its August 2016 statement of actions to address our recommendations, IRS stated it would evaluate the use of a more quantitative measure for work performed and thereby use the level of effort measure sparingly. IRS stated that it would meet with GAO to discuss the results of this evaluation by the end of January 2017. We plan to meet with IRS in the near future to discuss this recommendation, and will update this status accordingly.
    Recommendation: To help IRS improve its process for determining IT funding priorities and to provide timely information on the progress of its investments, the Commissioner of IRS should direct the Chief Technology Officer to report on actual costs and scope delivery at least quarterly for the Customer Account Data Engine 2 and the Affordable Care Act Administration. For these investments, IRS should develop metrics similar to FATCA and RRP.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its August 2016 statement of actions to address our recommendations, IRS stated that the Customer Account Data Engine 2 program management office is currently standing up processes to report on planned versus actual costs and scope delivery on a monthly basis. Additionally, IRS stated that it would consider the approach currently being used by the Foreign Account Tax Compliance Act and Return Review Program investments. The agency stated that development work for the Affordable Care Act Administration investment was minimal, and as a result, application of this recommendation would not be beneficial. We will be following-up with IRS to obtain documentation of actions taken to address this recommendation, and will update this status accordingly.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    4 open recommendations
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to, building on current efforts, develop a comprehensive operational strategy that includes all the RTCs for which RCPPM is responsible. The strategy could include use of error rates and amounts, evaluation and guidance on the proper use of indicators like no-change and default rates, and guidance on how to weigh trade-offs between equity and return on investment in resource allocations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of February 2017, IRS is taking steps toward developing a comprehensive compliance strategy that includes the three refundable tax credits GAO reviewed, as well as the PTC. These steps include initial planning meetings with Lean Six Sigma consultants and refundable credit policy and program managers and soliciting volunteers for the teams needed to develop the strategy. GAO will continue to monitor the progress of this effort.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to assess whether the data received from the Department of Education's Postsecondary Education Participants System (PEPS) database (a) are sufficiently complete and accurate to reliably correct tax returns at filing and (b) provide additional information that could be used to identify returns for examination; if warranted by this research, IRS should use this information to seek legislative authority to correct tax returns at filing based on PEPS data.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In February 2016, Refundable Credits Policy and Program Management asked Wage & Investment Strategy & Solutions (WISS) to test the Department of Education's Postsecondary Education Participants System database (PEPS) to match and validate the EINS reported on Form 8863, Education Credits. According to IRS, preliminary assessment of the PEPS database indicates that it is not a sufficiently complete database to confirm AOTC eligibility during return processing or post processing. GAO reviewed the study results and submitted several follow-up questions to IRS in May 2017. GAO followed-up with IRS on the status of that information request in June 2017.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to take necessary steps to ensure the reliability of collections data and periodically review that data to (a) compute a collections rate for post-refund enforcement activities and (b) determine what additional analyses would provide useful information about compliance results and costs of post-refund audits and document-matching reviews.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS raised concerns about the cost of studying collections data for post-refund enforcement activities. GAO recognizes that gathering collections data has costs. However, a significant amount of enforcement activity is occurring after refunds have been paid, and use of these data could better inform resource allocation decisions and improve the overall efficiency of enforcement efforts.
    Recommendation: To strengthen efforts to identify and address noncompliance with the EITC, ACTC, and AOTC, the Commissioner of Internal Revenue should direct Refundable Credits Policy and Program Management (RCPPM) to, as RCPPM begins efforts to track the number of erroneous returns claiming the ACTC or AOTC identified through pre-refund enforcement activities, such as screening filters and use of math error authority, it should develop and implement a plan to collect and analyze these data that includes such characteristics as identifying timing goals, resource requirements, and the appropriate methodologies for analyzing and applying the data to compliance issues.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of February 2017, IRS is taking steps toward developing a comprehensive compliance strategy that includes the three refundable tax credits GAO reviewed, as well as the PTC. These steps include initial planning meetings with Lean Six Sigma consultants and refundable credit policy and program managers and soliciting volunteers for the teams needed to develop the strategy. GAO will continue to monitor the progress of this effort.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    4 open recommendations
    Recommendation: To further deter noncompliance in the Taxpayer Protection Program, the Commissioner of Internal Revenue should, in accordance with Office of Management and Budget (OMB) and National Institute of Standards and Technology (NIST) e-authentication guidance, conduct an updated risk assessment to identify new or ongoing risks for TPP's online and phone authentication options, including documentation of time frames for conducting the assessment

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS is taking steps to assess the risks of TPP authentication options, as GAO recommended in its May 2016 report. In November 2016, IRS reported that it will implement the recommendation by October 2017. According to IRS, the agency assessed the e-authentication risk for the TPP web application based on OMB and NIST guidance. Based on the results of these assessments, the agency stated that officials are working to improve the level of assurance for the web application. In the interim, IRS reported that taxpayers will authenticate their identities by phone or in-person until the TPP web application has been sufficiently updated. In March 2017, officials stated that they recently completed a risk assessment for TPP's phone and in-person authentication. Additionally, according to officials, IRS has implemented a new authentication process for TPP's phone authentication that began in February 2017. GAO requested documentation on IRS's risk assessment and authentication process. Once GAO receives and reviews documentation of these actions, it will determine the extent to which IRS has implemented the recommendation. Conducting an updated risk assessment for TPP in accordance with e-authentication and risk management standards, enabled IRS to identify appropriate opportunities to strengthen TPP authentication and prevent IDT fraudsters from passing and potentially receiving millions of dollars in refunds. In addition, strengthening TPP could improve IRS's return on investment by ensuring that efforts to flag fraudulent returns result in fewer refunds paid to IDT fraudsters.
    Recommendation: To further deter noncompliance in the Taxpayer Protection Program, the Commissioner of Internal Revenue should, in accordance with OMB and NIST e-authentication guidance, implement appropriate actions to mitigate risks identified in the assessment.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS is taking steps to assess the risks of TPP authentication options, as GAO recommended in its May 2016 report. In November 2016, IRS reported that it will implement the recommendation by October 2017. According to IRS, the agency assessed the e-authentication risk for the TPP web application based on OMB and NIST guidance. Based on the results of these assessments, the agency stated that officials are working to improve the level of assurance for the web application. In the interim, IRS reported that taxpayers will authenticate their identities by phone or in-person until the TPP web application has been sufficiently updated. In March 2017, officials stated that they recently completed a risk assessment for TPP's phone and in-person authentication. Additionally, according to officials, IRS has implemented a new authentication process for TPP's phone authentication that began in February 2017. GAO requested documentation on IRS's risk assessment and authentication process. Once GAO receives and reviews documentation of these actions, it will determine the extent to which IRS has implemented the recommendation. Conducting an updated risk assessment for TPP in accordance with e-authentication and risk management standards, enabled IRS to identify appropriate opportunities to strengthen TPP authentication and prevent IDT fraudsters from passing and potentially receiving millions of dollars in refunds. In addition, strengthening TPP could improve IRS's return on investment by ensuring that efforts to flag fraudulent returns result in fewer refunds paid to IDT fraudsters.
    Recommendation: To improve the quality of the Taxonomy's IDT refund fraud estimates, the Commissioner of Internal Revenue should remove refund thresholds from criteria used to develop IRS's refunds-paid estimates.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In August 2016, IRS reported that the agency removed the lower limit threshold from the modeling dataset in March 2016, which will expand the population of returns considered for the 2015 Filing Season Taxonomy refund fraud estimates. Further, the agency noted that, to mitigate other thresholds, other returns receive manual reviews. GAO will analyze the 2015 Filing Season Taxonomy estimates, when available, to determine the extent to which GAO's recommendation has been implemented.
    Recommendation: To improve the quality of the Taxonomy's IDT refund fraud estimates, the Commissioner of Internal Revenue should utilize return-level data--where available--to reduce overcounting and improve the quality and accuracy of the refunds-prevented estimates.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In August 2016, IRS reported that the agency did not agree with GAO's recommendation and noted that the agency does not think that adopting a different methodology for Taxonomy estimates is an effective use of agency resources. According to IRS, the agency established the Global Identity Theft Report (Global Report) as a standardized report that uses return-level data for most of the identity theft protected categories and summary data elsewhere. Further, IRS reported that the agency will continue to improve the Global Report, which will flow into the Taxonomy. However, as we reported in May 2016, by using the Global Report to calculate Taxonomy estimates for refunds prevent, IRS may have overestimated the refunds protected or recovered. For example, electronically filed returns that are rejected are overcounted because the same return can be rejected multiple times. Additionally, IRS already has a count of known and potential identity theft returns in its modeling dataset that the agency could use to help calculate the refunds protected estimates. GAO will analyze the 2015 Filing Season Taxonomy estimates, when available, to determine the extent to which GAO's recommendation has been implemented.
    Director: Clark, Cheryl E
    Phone: (202) 512-9377

    12 open recommendations
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish a process to prevent Employment Operations staff from allowing potential employees to enter on duty without favorable determinations of suitability by Personnel Security adjudicators.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In December 2015, the HCO developed a process and revised procedures in an attempt to improve the monitoring of Employment Operations office decisions to reasonably assure that new employees do not enter on duty before prescreening adjudications are completed and approved by Personnel Security adjudicators. However, during our fiscal year 2016 audit, we identified IRS employees who entered on duty without completed or approved suitability adjudication determinations. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish a policy and procedures requiring IRS officials to review and address situations in which it is later discovered that an employee deemed unsuitable for employment during the prescreening process was erroneously allowed to enter on duty.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: While IRS responded that it established a policy and procedures, it did not provide documentation to sufficiently demonstrate that the policy and procedures were implemented. During our fiscal year 2016 audit, we identified an instance where an employee was allowed to enter on duty and it was subsequently discovered that this employee was deemed unsuitable for employment during the prescreening process. IRS did not provide additional documentation to demonstrate that its procedures had been carried out for this employee. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to develop and provide training, on a recurring basis, to all Facilities Management and Security Services specialists and managers involved in the duress alarm validation and testing process to reinforce the related policies and procedures.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: According to IRS, in February 2016, AWSS developed and provided training on duress alarm validation and testing to FMSS specialists and managers. However, during our June 2016 field office audit testing, we found that the FMSS specialists responsible for the physical security at the sites we visited had not received training on duress alarm validation and testing. Further, our testing identified instances where (1) duress alarm testing did not include all duress alarms, (2) documented validations of the duress alarm inventory were not completed timely or available to individuals (FMSS and non-FMSS staff) before each test was conducted, and (3) descriptions of the duress alarm inventory used by the security specialist to conduct testing were labeled incorrectly. During follow up discussions with IRS officials, we were informed that FMSS specialists were not fully evaluating alarm test results and adhering to established procedures for monitoring those tests. We will continue to evaluate IRS's efforts to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish and implement a policy requiring recurring training for TAC group and territory managers on their TSRRD responsibilities, including detailed instructions for completing responses to questions in TSRRD and for reviewing TSRRD submissions for accuracy and completeness. This training should be updated for changes in TSRRD questions over time and be provided to new TAC group and territory managers soon after they are hired or appointed.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS efforts to address this recommendation are ongoing. IRS stated that during fiscal year 2017, the Wage and Investment organization will incorporate into the IRM its new training policy requiring training for TAC group and territory managers on their TSRRD responsibilities, including specific instructions for completing questions in TSRRD and for reviewing TSRRD submissions. According to IRS, this training will be provided on a recurring basis to account for changes in TSRRD questions and newly hired or appointed TAC group and territory managers. As these actions occurred after the end of fiscal year 2016, we will evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to determine the reason(s) why staff did not always comply with IRS's established policies and procedures related to initiating, monitoring, and reviewing the monitoring of manual refunds and, based on this determination, establish a process to better enforce compliance with these requirements.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS efforts to address this recommendation are ongoing. IRS stated that by September 2017, it will determine the reasons for staff noncompliance with established policies and procedures related to initiating, monitoring, and reviewing the monitoring of manual refunds, and based on this determination, establish a process to better enforce compliance with these requirements. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to enhance the training program provided to COs to address all the job responsibilities related to certifying manual refunds for payment, including the required review of supporting documentation for manual refunds.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS stated that in February 2016, it provided a refresher course to COs as part of their annual training to address their responsibilities related to certifying manual refunds. However, based on our review of the refresher course materials, the course did not address our recommendation to enhance the training program. For example, the materials did not provide guidelines on how to perform the required reviews related to certifying manual refunds. As a result, during our fiscal year 2016 audit, we continued to find instances where the COs did not comply with the review requirements. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to identify the cause of and implement a solution for dealing with the periodic backlogs of ICO inventory that is hampering the performance of quality reviews.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS efforts to address this recommendation are ongoing. IRS stated that by September 2017, it will identify a cause of and implement a solution for dealing with the periodic backlogs of ICO inventory. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish policies for (1) how long an asset can remain in missing status before it is removed from P&E reported on the financial statements and (2) how long assets can go unverified during the annual inventory process before they are identified as missing in the property management system.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's IT organization issued AM064, Asset Management Policy Directive to Identify Uncertified Class A and Class B Assets as Missing in KISAM, effective October 1, 2016. The directive states that in accordance with the annual Hardware Asset Management Inventory Certification Plan, assets that are not verified or certified for more than two inventory cycles should be identified as missing in IRS's property management system. It further states that the property management system should be updated by the end of the first quarter of the fiscal year after an asset meets the "missing" criterion. In November 2016, IRS's CFO organization developed the Missing Assets Financial Reporting Assessment procedure, which states that assets in missing status for 1 year or more should be removed from the P&E reported on IRS's financial statements. As these actions occurred after the end of fiscal year 2016, we will evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish and implement procedures to reasonably assure that missing assets are timely removed from the financial statements when applicable.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In November 2016, IRS's CFO organization established the Missing Assets Financial Reporting Assessment procedure, which included procedures for identifying assets that have been in missing status in the property management system for 1 year or more and removing them from the P&E reported on the financial statements. As this procedure was established after the end of fiscal year 2016, we will evaluate IRS's implementation of this procedure during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate officials to establish and implement monitoring procedures designed to reasonably assure that the key detailed information for tangible capitalized P&E is properly recorded and updated in the KISAM system.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's IT organization established SOP FY17-01, Asset Management Program Monitoring and Review, effective October 1, 2016. The SOP details the IRS Asset Management Group's procedures for conducting a quarterly review on a sample of asset records and transactions in KISAM to verify the accuracy and completeness of key KISAM data elements and correct any discrepancies found. In September 2016, IRS issued AWSS-01-0916-0001, Interim Guidance for IRM 1.14.4, Personal Property Management, to require the FMSS territory manager or section chief to perform quarterly sample reviews of non-IT assets in KISAM to verify that key data elements are complete and updated. As these procedures were established after we conducted our internal control testing in fiscal year 2016, we will evaluate IRS's implementation of these procedures during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate officials to design a process to reasonably assure the adequacy of detailed supporting information for tangible P&E amounts recorded in the general ledger.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's actions to address this recommendation are ongoing. According to IRS, by September 2017, its CFO organization will implement a P&E subsidiary ledger, and will design and implement processes based on the subsidiary ledger that will reasonably assure the adequacy of detailed supporting information for tangible P&E amounts recorded in the general ledger. We will assess IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The IRS Commissioner should direct the appropriate IRS officials to establish and implement detailed written procedures for calculating future lease payments for noncancelable operating leases that are reported in the notes to the financial statements. The procedures should (1) include steps for considering any ad hoc clauses that may have specific termination dates and (2) include a requirement for supervisory review to provide reasonable assurance of the accuracy of future lease payment amounts for noncancelable operating leases.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In October 2016, IRS established procedures for calculating future lease payments for noncancelable operating leases that are reported in the notes to its financial statements. The procedures included (1) steps for considering any ad hoc clauses that may have specific termination dates and (2) a requirement for supervisor review to provide reasonable assurance of the accuracy of future lease payment amounts for noncancelable operating leases. As these actions occurred after the end of fiscal year 2016, we will evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: Daniel Garcia-Diaz
    Phone: (202) 512-8678

    2 open recommendations
    Recommendation: To receive more consistent information on LIHTC noncompliance, the IRS Commissioner should collaborate with the allocating agencies to clarify when allocating agencies should report such information on the Form 8823 (report of noncompliance or building disposition). The IRS Commissioner should collaborate with the Department of the Treasury in drafting such clarifications to help ensure that any new guidance is consistent with Treasury regulations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In August 2016, IRS stated it would review the Form 8823 Audit Technique Guide to determine whether additional guidance and clarification were needed for allocating agencies to report noncompliance information on the form. If published legal guidance is required, IRS stated that it will submit a proposal for such guidance for prioritization. IRS indicated an expected implementation date by November 2017. In addition, in March 2017, officials stated that IRS Counsel attended an industry conference with allocating agencies at which issues related to the Form 8823 were discussed. We will continue to monitor IRS's progress in implementing our recommendation to clarify when allocating agencies should report noncompliance.
    Recommendation: To improve IRS's processes for identifying the most significant noncompliance issues, the IRS Commissioner should evaluate how IRS could use HUD's Real Estate Assessment Center databases, including how the information might be used to reassess reporting categories on the Form 8823 and to reassess which categories of noncompliance information have to be reviewed for audit potential.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials stated that since HUD's database with property inspection data was not complete as of March 2017 and contained data from 30 states, it was unclear how the database could be used. IRS officials said they would continue exploring the HUD database if the data for all LIHTC properties were included and it was possible to isolate the LIHTC property data from other rental properties in the HUD database. We will continue to monitor IRS's progress in evaluating the use of HUD's database for reporting information on noncompliance.
    Director: Wilshusen, Gregory C
    Phone: (202) 512-6244

    2 open recommendations
    Recommendation: In addition to implementing our previous recommendations, to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue should update system and application audit plans based on the current version of referenced policies and guidelines and when significant changes are made to a system or application.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The IRS concurred with the recommendation and stated that it plans to implement it. Subsequent to IRS informing us that it has taken action on this recommendation, we plan to evaluate their implementation of this recommendation as part of the audit of IRS's FY 2017 financial statements.
    Recommendation: In addition to implementing our previous recommendations, to more effectively implement security-related policies and plans, the Commissioner of Internal Revenue should update the security plan for systems that provide network infrastructure services to IRS personnel and information systems to reflect changes to the operating environment.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: On March 28, 2017, IRS officials informed us of the actions they were taking to address this recommendation. Upon receiving information from IRS, we plan to evaluate IRS's implementation of this recommendation as part of the audit of IRS's FY 2017 financial statements.
    Director: Jessica Lucas-Judy
    Phone: (202) 512-9110

    7 open recommendations
    including 1 priority recommendation
    Recommendation: The Commissioner of Internal Revenue should establish, document, and implement an organizational structure identifying responsibility for defining objectives with an appropriate line of reporting for measuring costs and results for information referrals.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of January 2017, IRS has taken some action to implement this recommendation. IRS told us it established a cross-functional team in February 2016 to conduct a comprehensive review of IRS's referral programs, including the information referral process. IRS completed its review and plan for the organizational structure in December 2016. The Wage and Investment division will retain the intake and screening responsibilities. The Small Business and Self-Employed division will be responsible for defining objectives and monitoring results for information referrals. We continue to monitor IRS implementation of the planned cost and results measurement and reporting.
    Recommendation: The Commissioner of Internal Revenue should ensure that the IRM has internal controls for processing information referrals by establishing, documenting, and implementing supervisory review and segregation of duties for inventory management reporting procedures.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of January 2017, IRS has taken some action on this recommendation. IRS told us it established a cross-functional team in February 2016 to conduct a comprehensive review of IRS's referral programs, including the information referral process. IRS completed its review and plan for the organizational structure in December 2016. Once IRS approves the organizational structure, IRS will document new and updated screening and routing procedures in the Internal Revenue Manual as well as guidance for the Image Control Team and other IRS units receiving information referrals. IRS plans to implement this recommendation by September 2017.
    Recommendation: The Commissioner of Internal Revenue should ensure that the IRM has internal controls for processing information referrals by establishing, documenting, and implementing ongoing monitoring of information referrals retained for destruction, including a mechanism for tracking the reasons referrals were retained prior to destruction.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of January 2017, IRS has taken some action to implement this recommendation. IRS told us it established a cross-functional team in February 2016 to conduct a comprehensive review of IRS's referral programs, including the information referral process. IRS completed its review and plan for the organizational structure in December 2016. Once IRS approves the organizational structure, IRS will establish and document Internal Revenue Manual procedures, including criteria for retaining information referrals for destruction. IRS plans to implement this recommendation by September 2017.
    Recommendation: The Commissioner of Internal Revenue should ensure that the IRM has internal controls for processing information referrals by establishing, documenting, and implementing procedures for each IRS operating unit receiving information referrals to provide feedback on the number and types of referrals misrouted and on their disposition, and a mechanism to analyze patterns of misroute errors.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of January 2017, IRS has taken some action to implement this recommendation. IRS told us it established a cross-functional team in February 2016 to conduct a comprehensive review of IRS's referral programs, including the information referral process. IRS completed its review and plan for the organizational structure in December 2016. Once IRS approves the organizational structure, IRS will establish and document Internal Revenue Manual procedures, including guidelines for IRS units receiving information referrals. IRS plans to implement this recommendation by September 2017.
    Recommendation: The Commissioner of Internal Revenue should establish a coordination mechanism to facilitate communication and information sharing across IRS referral programs on crosscutting tax issues and ways to improve efficiency in the mechanisms for public reporting of possible tax violations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken some action to establish a coordination mechanism to help IRS referral programs communicate and share information, as GAO recommended in its February 2016 report. IRS established a cross-functional team in February 2016 to comprehensively review IRS's referral programs. Among other things, this team is to explore aligning all IRS referral programs within an organizational structure to more efficiently coordinate, communicate, and share information across the referral programs by December 2017. As of March 2017, the Deputy Commissioner of Services and Enforcement directed the largest recipient of referrals to facilitate quarterly meetings in order to improve communication and information sharing across multiple IRS referral programs. The meetings are scheduled to begin by summer 2017.
    Recommendation: The Commissioner of Internal Revenue should direct the referral programs to establish a mechanism to coordinate on a plan and timeline for developing a consolidated, online referral submission in order to better position IRS to leverage specialized expertise while exploring options to further consolidate the initial screening operations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: As of March 2017, IRS had taken some action to establish a mechanism to coordinate on a plan and timeline for developing a consolidated, online referral submission, as GAO recommended in its February 2016 report. IRS established a cross-functional team in February 2016 to comprehensively review IRS's referral programs. Among other things, the team has explored options to consolidate the initial screening operations and determine the scope and complexity for moving the referral process to an online format. According to IRS, an electronic submission process is expected to provide better access to the program and reduce the burden associated with making a written report or referral. In November 2016, the cross-functional team requested information technology resources for fiscal year 2019 to develop an online system which could potentially replace four separate referral forms, filter out incomplete referrals, and electronically route referrals for further IRS action. IRS assessed options for consolidating all forms for the various referral programs and determined that consolidating them to a single form was not feasible due to the technical nature and complexity of the various referral types. As of March 2017, the cross-functional team has worked with IRS On Line Services to develop an online application prototype and is also considering the cost-effectiveness of a commercial off-the-shelf product. According to the IRS, the online application will make it easier for the public to report possible tax violations. Also, the online system will improve efficiency in coordination and provide reports that will be incorporated into the quarterly coordination meetings, to achieve a broader collaborative mechanism across the multiple referral programs. IRS has said it will consider further consolidating the referral programs once the online application is in place.
    Recommendation: The Commissioner of Internal Revenue should ensure that the Internal Revenue Manual (IRM) has internal controls for processing information referrals by establishing, documenting, and implementing procedures for maintaining and communicating the information referral screening and routing guidelines to the Image Control Team (ICT) and IRS units receiving information referrals as well as procedures for ICT screening and routing operations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of January 2017, IRS has taken some action on this recommendation. IRS told us it established a cross-functional team in February 2016 to conduct a comprehensive review of IRS's referral programs, including the information referral process. IRS completed its review and plan for the organizational structure in December 2016. Once IRS approves the organizational structure, IRS will document new and updated screening and routing procedures in the Internal Revenue Manual as well as guidance for the Image Control Team and other IRS units receiving information referrals. IRS plans to implement this recommendation by September 2017.
    Director: Jessica Lucas-Judy
    Phone: (202) 512-9110

    7 open recommendations
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should clearly define and document: (1) key terms such as "fairness"; and (2) W&I program level objectives, performance measures, and indicators for audit selection to evaluate whether the audit selection process is meeting its mission of applying the tax law with integrity and fairness to all.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS told us its definitions of fairness were documented in a policy statement and reflected in the IRS Taxpayer Bill of Rights. IRS said it agrees with the value of incorporating these definitions into its guidance for examiners and that it was taking appropriate action to do so. In addition, IRS said guiding principles for ensuring fairness in tax return examinations had been communicated from the Deputy Commissioner for Services and Enforcement to all Service and Enforcement employees. However, IRS did not provide documentation of this communication. IRS said it will use its definition as the basis of guidance to be incorporated into the Internal Revenue Manual to ensure the audit process supports IRS's mission of applying the tax law with integrity and fairness. IRS did not indicate how it would develop program-level objectives for W&I, as we recommended. Additionally, IRS said many of its existing performance measures provide key indicators and insights as to program performance with respect to fairness, such as the rate of examinations resulting in changes proposed to the reported tax, cycle time for the examination, and yield from the examination. However, as we noted in our December 2015 report, these performance measures focus on audit results rather than audit selection and W&I has not created indicators to evaluate what no-change rate is good or bad, or what rate would indicate fair selections. We will continue to monitor IRS's actions, including reviewing any supporting documentation the agency provides, to determine whether its actions address our recommendation.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should clearly communicate these terms, objectives, measures, and indicators to all staff involved in the selection of returns for audit.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said it was writing expectations about the definition of fairness that would be communicated at the beginning of each annual audit selection planning meeting. IRS told us it plans to implement this in July 2017.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should incorporate the new objective(s) into W&I risk assessments done for audit selection processes.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said it would follow the risk process to officially report any risks associated with the outlined expectations identified during the review of the program level objectives, performance measures and indicators for audit selection. This recommendation will remain open until W&I develops program-level objectives--which would be related to its definition of fairness--and incorporates them into risk assessments for the audit selection process. IRS indicated it would implement our recommendation by October 2017.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should ensure that internal control responsibilities are communicated and documented for all employees, including non-managers, tasked with revising or applying W&I audit selection criteria for potential audits.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said that by July 2017, internal control information would be provided in the expectation document provided to each member of the annual audit selection planning meeting and that receipt would be documented.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should develop and implement procedures to ensure that all criteria or methods used in programs to select returns for audit are consistently documented and approved.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said procedures are in place to document and approve the criteria and methods used in the return selection program. It said it would review these procedures to ensure all criteria or methods used are consistently documented and approved by August 2017.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should develop and document a clear means for IRS staff members to promptly elevate to top management possible internal control issues related to audit selection in a timely manner.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said it would expand existing feedback mechanisms to specifically cover the audit selection process by July 2017. It is unclear what specific actions IRS plans to take to address the issues we reported in December 2015. For example, we found that the Internal Revenue Manual does not specify how non-managers should report a significant deficiency (such as a problem in the design or operation of an internal control) to the next level of management or that it should be reported in a timely manner. In addition, we reported that the form that W&I staff would use to report such deficiencies in the automated filters used for return selection does not include space for reporting internal control deficiencies that do not have a proposed solution. The form also states that the reason for modification should be self-explanatory, which may not appropriately highlight the deficiency the modification seeks to address.
    Recommendation: To help ensure W&I meets its mission and selects audits fairly and with integrity, the Commissioner of Internal Revenue should develop, document, and implement additional monitoring procedures to ensure audit selection controls and corrective actions are implemented in a timely manner.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In April 2017, IRS said it has modified Form 14747, Workload Identification Change Request Modification Approval, to document the request and approval for all changes to workload selection tools. Additionally, IRS said it now requires staff to follow the Unified Work Request process to request revisions/additions to certain audit selection rules. The work requests are documented in a database and require different levels of executive review and approval. IRS said the process has strict time frames outlining required submission dates to be followed for changes for the upcoming filing season. IRS also is developing a new section of the Internal Revenue Manual (IRM) to document all of the workload selection methods and to change and outline required approval processes used to revise/add selection criteria for correspondence audits -- including the Form 14747 procedures. IRS did not provide a timeframe when this new IRM section would be published.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    7 open recommendations
    Recommendation: To help ensure SB/SE's audit selection program meets its mission and selects returns fairly, the Commissioner of Internal Revenue should clearly define and document the key term "fairness" for return selection activities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to incorporate a definition of fairness into the Internal Revenue Manual (IRM), which serves as a single point of reference for guidance to IRS examiners. In February 2016, the Deputy Commissioner of Services and Enforcement (S&E) reiterated IRS's definition of fairness in the examination process to S&E employees. In January 2017, IRS issued interim guidance on fairness in examination case selection. IRS officials said that this guidance is considered "final" until the IRM is updated, no later than January 2019. In February 2017, IRS issued an article on its IRWeb and a message from the Deputy Commissioner S&E on defining fairness in the exam process. We are awaiting resolution of how this definition will be used in three other recommendations on communicating examples as well as developing both a related objective and measure.
    Recommendation: To help ensure SB/SE's audit selection program meets its mission and selects returns fairly, the Commissioner of Internal Revenue should clearly communicate examples of fair selections to staff to better assure consistent understanding.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to communicate examples of fairness to managers and examiners involved in selecting tax returns for examination. In March 2017, the Director of IRS Small Business/Self Employed (SB/SE) Examination-Headquarters issued a memo to SB/SE examination directors that included examples illustrating the fairness definition in return selection. The examples were to be shared with directors, management, and examiners involved in return selection. To close this recommendation, we are waiting for resolution of how the fairness definition will be implemented through related recommendations on developing program objectives and measures assessing fairness in return selection.
    Recommendation: To help ensure SB/SE's audit selection program meets its mission and selects returns fairly, the Commissioner of Internal Revenue should develop, document, and implement program-level objective(s) to evaluate whether the return selection process is meeting its mission of applying the tax law with integrity and fairness to all.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to review its current objectives for the SB/SE examination program and found that an additional program-level objective to evaluate fairness in the return selection was necessary. The new objective is "Ensure examinations are initiated based on indicators of noncomplicance. In addition, ensure a review of the decisions to survey a return (i.e., not initiate an examination) are based on upon factors outlined in the Internal Revenue Manual (IRM) and approved by an appropriate level of management." In March 2017, IRS issued interim guidance communicating the new objective, which was sent to Examination Directors. The guidance and objective were also posted on the IRweb, which is available to all IRS employees. IRS officials said that the interim guidance is considered final until it can be incorporated into the IRM, which should be done within 2 years of when the interim guidance is issued. We are awaiting IRS's response to a related recommendation on developing a measure for this selection objective before deciding to close this recommendation.
    Recommendation: To help ensure that SB/SE's audit selection objective(s) on fairness are used and met, the Commissioner of Internal Revenue should develop, document, and implement related performance measures that would allow SB/SE to determine how well the selection of returns for audit meets the new objective(s).

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to develop, document, and implement additional performance measures if new objectives related to fair return selection were implemented. In March 2017, IRS developed a new objective on fair return selection. In April 2017, IRS officials said that they were working on performance measures related to the new objective on fair return selection. They plan to meet with GAO in 1-2 months to obtain our feedback on the measures.
    Recommendation: To help ensure that SB/SE's audit selection objective(s) on fairness are used and met, the Commissioner of Internal Revenue should incorporate the new objective(s) for fair return selection into the SB/SE risk management system to help identify and analyze potential risks to fair selections.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to consider any new objectives related to fair return selection within SB/SE's current risk management process framework. In March and April 2017, SB/SE developed a tool (RAFT) to include the fair selection objective (and related activities) into its risk register, which is monitored quarterly. IRS provided documentation from the Exam Risk Council meeting that they have discussed and assessed these risks. IRS is still working on documentation to show they are addressing our recommendations and the associated risks. IRS officials said the documentation is due in August 2017.
    Recommendation: The Commissioner of Internal Revenue should develop and implement consistent documentation requirements to clarify the reasons for selecting a return for audit and who reviewed and approved the selection decision.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to evaluate the need to improve its documentation of return selection decisions and the review and approval process. In March 2017, various IRS functions completed templates showing the current status of return selection documentation requirements. As a result, they found that they could improve the consistency and clarity in documentation, approval and review requirements across workstreams by clearly defining procedures and ensuring they are formally documented in the IRM. The Director of Exam Case Selection issued a memo directing that documentation requirements be made consistent in the IRM. IRS officials said that revised documentation requirements are due in August 2017, with IRM incorporation at a later date.
    Recommendation: The Commissioner of Internal Revenue should develop, document, and implement monitoring procedures to ensure that decisions made and coding used to select returns for audit are appropriate.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed to review its current procedures for monitoring return selection decisions and coding used to select returns. In April 2017, IRS officials provided documentation showing they had reviewed campus examination selection dollar thresholds and campus source code definitions. They found that improvements could be made in clarifying source code definitions and reviewing dollar thresholds used to categorize and select, respectively, returns for examination. IRS has issued an IRM procedural update to implement these changes. During our meeting with IRS, we clarified that our recommendation covered monitoring selection decisions more broadly, which IRS acknowledged. Officials said that additional documentation on monitoring selection decisions will be due by August 2017.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: The Commissioner of Internal Revenue should direct the Whistleblower Office Director to establish a process to ensure whistleblower addresses are being properly updated in E-TRAK to ensure the WO does not send whistleblower mail to outdated or incorrect addresses. This process could include developing a change of address form specific to whistleblowers and including a blank copy of it in every correspondence with whistleblowers or referencing the importance of updating the WO with any address change in every correspondence with whistleblowers.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In a January 29, 2016 letter, the IRS Deputy Commissioner for Services and Enforcement said that the Whistleblower Office will emphasize in education materials, fact sheets, and other communications with whistleblowers the importance of whistleblowers providing updates to the IRS of any address changes, along with reminders of how to submit address changes to the Whistleblower Office. In August and September of 2016, IRS revised templates for standard letters sent to whistleblowers reminding them of the importance of updating their addresses with the Whistleblower Office and providing direction for how to do so. IRS also published a fact sheet for whistleblowers, which is available on www.irs.gov, that also provides information on how whistleblowers should notify the Whistleblower Office of any address change. As of February 2017, IRS had not taken action to establish a process to ensure that address changes are being properly updated in E-TRAK and that mail is being sent only to the correct address. We will continue to follow-up with IRS on this recommendation.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should establish, document, and implement objectives for the collection program and ACS, and define the key term of "fairness" as it applies to collection activities, which can be communicated to IRS staff.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In January 2017, IRS supplied documentation on how it had established a fairness policy statement, which is incorporated into the Internal Revenue Manual, communicated to staff in email, and provided via a powerpoint present to staff. IRS also established and documented collection program objectives as part of its FY2017 Collect Program Letter. However, IRS still needs to identify how these objectives have been implemented and how ACS contributes to specific objectives. IRS plans to provide this documentation by September 2017.
    Director: James R. McTigue, Jr.,
    Phone: (202) 512-9110

    3 open recommendations
    Recommendation: To strengthen oversight of the individual shared responsibility and premium tax credit provisions, the Commissioner of Internal Revenue should assess whether or not the data received from the health insurance marketplaces are sufficiently complete and accurate to enable effective correction of tax returns at-filing based on matching with the marketplace data and, if the assessment determines that such corrections would be effective, seek legislative authority to correct tax returns at-filing based on the marketplace data.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The Internal Revenue Service (IRS) agreed with GAO's recommendation. IRS reports that the quality of data submitted by health insurance marketplaces has improved since the 2015 return filing season, and it continues to use its correspondence process for resolving discrepancies between marketplace data and that reported by the taxpayer after the return has been filed. IRS has not considered requesting legislative authority to correct tax returns at the time of filing based specifically on discrepancies between the data submitted by the health insurance marketplace and reported by the taxpayer. Agency officials believe that would be premature at this time. They noted that a broader legislative initiative has already been proposed that would grant IRS with correctable error authority in cases where the information provided by the taxpayer does not match the information contained in government databases. Should this broad authority be granted in the future, IRS will then consider how to approach correction of tax returns at the time of filing based on discrepancies with health insurance marketplace data. Such authority was also included in the Administration's 2018 budget.
    Recommendation: To strengthen oversight of the individual shared responsibility and premium tax credit provisions, the Commissioner of Internal Revenue should work with CMS to get the total amount of advance PTC paid for the 2014 tax year and establish, as a baseline, the aggregate amount of the gap between advance PTC paid and advance PTC reported for the 2014 tax year, and track this aggregate gap for future tax years to help in evaluating the effectiveness of IRS's PTC education and compliance efforts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The Internal Revenue Service (IRS) agreed with GAO's recommendation in part. As one of the ongoing efforts by the IRS to evaluate the effectiveness of its implementation of the premium tax credit (PTC) provision for tax year 2014, IRS plans to perform as analysis of reporting of advance payments of the PTC by the Marketplaces. The results of this analysis and other efforts will help inform the IRS of potential areas for improvement in education, tax filing and compliance activities. IRS has been tracking the amount of advance PTC paid based on summary data provided by the Centers for Medicare & Medicaid Services (CMS) for 2014 and 2015 as well as the gap between the amounts paid compared to the amount reported by taxpayers. However, IRS has not yet resolved all issues with CMS related to properly allocating all payments to 2014 and 2015. Complete data for 2016 are not yet available.
    Recommendation: To strengthen oversight of the individual shared responsibility and premium tax credit provisions, the Commissioner of Internal Revenue should evaluate IRS efforts to collaborate and communicate with key external stakeholders to inform efforts related to implementation of the new 2015 PPACA requirements.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The Internal Revenue Service (IRS) agreed with GAO's recommendation but has not yet initiated an evaluation of collaboration and communication efforts with external stakeholders. IRS currently utilizes informal feedback processes to share information and identify opportunities for improvement with external stakeholders in implementing the shared responsibility payment and premium tax credit provisions. We continue to encourage IRS to evaluate its collaboration and communication efforts.
    Director: Mctigue Jr, James R
    Phone: (202) 512-9110

    5 open recommendations
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should establish, document, and implement clear objectives for the collection program and enterprise-wide case categorization and routing processes, and define key terms, such as "fairness" and "risk."

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation. In March 2017, IRS provided a document intended define the objectives and "fairness," but it did not clearly define objectives for the collection program and enterprise-wide case categorization and routing processes, but instead identified division-level objectives and fiscal year 2017 collection strategies. The document also did not clearly define and communicate objectives--to include fairness--to staff in measurable terms that would be easily understood. Further, the objectives definitions were not were not clear and sufficient to support the design of internal control for related risks, the development of performance measures to determine whether objectives were achieved, and control assessments to assure case selections effectively support the collection program mission over time, including fairness. In August 2017, we shared this assessment with IRS and asked whether or when Collection plans to develop or provide additional documents.
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should build upon existing Enterprise Risk Management (ERM) guidance to help managers identify internal and external risks to collection program objectives, and better understand how long-standing risk processes integrate with new ERM approaches; incorporate this guidance into existing or future ERM or collection program risk assessment processes.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and said it would continue to build upon existing risk management guidance by finalizing and making available training for managers, which would assist them in understanding their responsibilities for identifying internal and external risks to Collection program objectives. In November 2016, IRS provided documentation of risk management training for managers. However, since objectives for the collection program, enterprise-wide case categorization and routing processes, and fairness were not yet clearly defined, such guidance cannot be effectively incorporated into risk assessment processes to identify internal and external risks to collection program objectives. In August 2017, we shared this assessment with IRS and asked whether or when Collection plans to develop or provide additional documents.
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should clearly establish, document, and implement case categorization and routing procedures--such as those for IDS, high priority case selection, and any other important processes--to support collection program objectives and IRS goals.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with the recommendation and said it would review its case prioritization and selection processes and implement and communicate clear guidance and documentation to appropriate IRS staff. In November 2016, IRS provided documents on collection processes, but the information was either technical or covered Automated Collection System (ACS) or Field Collection processes rather than enterprise-wide processes to support collection program objectives and IRS goals. More specifically, the documents did not provide corrected guidance on the role of the Inventory Delivery System and modeling in shelving or routing cases to either ACS or the Field, or provide guidance on how management is to select priority area cases. In August 2017, we shared this assessment with IRS and asked whether or when Collection plans to develop or provide additional documents.
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should establish, document, and implement procedures for the periodic evaluation of the efficiency and effectiveness of collection-wide case categorization, routing rules, and case selection processes.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS said agreed that continually improving its performance is important and said that Collection would review and, if needed, update its internal management documents. In July 2017, IRS provided documents that identified and established responsibilities for periodic, regular review procedures to potentially update dollar thresholds used in routing collection inventory for potential selection, including IDS and its decision rules to route cases to one collections function instead of another (i.e., the Automated Collection System versus Field Collection. In August 2017, we asked IRS when it plans to conduct the first such evaluations and requested that it provide documentation of results of those implemented evaluations when available.
    Recommendation: To help ensure the IRS collection program meets its mission and selects cases fairly, the Commissioner of Internal Revenue should establish, document, and implement procedures for periodic updates of dollar thresholds for categorizing case selection, including those identified as "high risk."

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed that continually improving its performance is important and said that Collection would review and, if needed, update its internal management documents. In July 2017, IRS provided documents that identified and established responsibilities for periodic, regular review procedures to potentially update dollar thresholds used in systems that use a dollar threshold to prioritize Collection cases. In August 2017, we asked IRS when it plans to conduct the first such evaluations and requested that it provide documentation of results of those implemented evaluations when available.
    Director: Daniel Garcia-Diaz
    Phone: (202) 512-8678

    1 open recommendations
    Recommendation: To improve the utility of the credit allocation information contained in IRS's database, IRS should address weaknesses identified in data entry and programming controls to ensure reliable data are collected.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS acknowledged the need for improvements in its controls and procedures (including data entry and quality reviews). IRS officials agreed that these problems should be corrected and data quality reviews should be conducted on an ongoing basis. As of March 2017, in response to our recommendation, IRS officials said that they had explored possibilities to improve the database, which not only houses credit allocation information, but also data from noncompliance and building disposition forms. Specifically, IRS is working to move the database to a new and updated server, which will address weaknesses identified in data entry and programming controls. IRS expects to complete the data migration step by early fall of 2017. Until IRS implements its plan to improve the data, this recommendation will remain open.
    Director: Mctigue Jr, James R
    Phone: (202) 512-9110

    2 open recommendations
    Recommendation: To better ensure the EO unit's adherence to the TE/GE division's mission of "applying the tax law with integrity and fairness to all" in selecting exempt organizations to review or examine, the Commissioner of Internal Revenue should direct EO to develop, document, and implement additional monitoring procedures in order to ensure case selection controls, including ensuring that procedures for obtaining required signatures and documenting explanations for selection decisions, are being followed.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The Internal Revenue Service's Exempt Organizations (EO) unit issued a memo, in October 2015, to Area Managers requiring that they complete monthly sample reviews of closed and dismissed cases to ensure that proper managerial approvals are documented. EO also issued a memo, in April 2016, to examination staff and managers, emphasizing the importance of documenting justifications for examination dismissals. Additionally, operational reviews are conducted to ensure that the monitoring samples are being reviewed. In January 2017, EO's Exempt Organization Classification Area (EOCA) resumed quality reviews, which includes a review of documentation and EOCA database entries. As of May 2017, monitoring has not increased for EO referrals.
    Recommendation: In addition, the Commissioner of Internal Revenue should determine what additional controls may be needed to ensure that all closed examination files are tracked and maintained accurately.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In 2016, the Tax Exempt and Government Entities Unit (TE/GE) reviewed its internal processes and procedures and met with the Wage and investment (W&I) Files Unit to discuss procedures for requesting closed case files, according to Exempt Organizations Examinations (EOE) officials. TE/GE developed a desk guide for the Exempt Organizations Case Selection and Delivery Unit to document the procedures for requesting, tracking and monitoring closed case file requests. In addition, TE/GE provided recommendations to the W&I Files unit on modifications to the Internal Revenue Manual (IRM) that would facilitate coordination; as of June 2017, W&I has not implemented these recommendations. The EOE unit will also continue to expand electronic case management efficiencies.
    Director: Clark, Cheryl E
    Phone: (202) 512-9377

    6 open recommendations
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to develop and implement agency-wide procedures to routinely monitor the accuracy of penalties recorded in taxpayer accounts to timely detect and correct errors.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: During fiscal year 2015, IRS conducted a trial quality review to evaluate the accuracy of penalty assessments recorded in a sample of taxpayer accounts and took action to address the errors it identified. Based on its trial review, IRS developed procedures for performing this type of review in June 2016 and informed us that it would formalize procedures in the IRM to include routine monitoring and testing of the accuracy of penalty assessments in taxpayer accounts. However, as of September 30, 2016, IRS had not implemented these procedures or documented them in the IRM. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to determine the reason(s) why taxpayer assistance centers (TAC) managers and personnel did not consistently comply with existing Internal Revenue Manual (IRM) requirements that TAC managers and personnel (1) perform and document reviews of the Follow-Up Review Log by the last day of the following month, (2) maintain control copies of transmittal forms, and (3) ship taxpayer receipts and information via traceable overnight mail and, based on this determination, establish a process to better enforce compliance with these requirements.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that it has performed a study of the causes of noncompliance with the IRM requirements and will complete all related corrective actions by May 2017. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of IRS should update the IRM to require managers to reconcile transmittal forms with the Follow-Up Review Log to reasonably assure that personnel are properly entering transmittal forms into the log and are appropriately documenting follow-up on unacknowledged transmittals of taxpayer receipts and information.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: While IRS updated the IRM in April 2016 to require TAC managers to (1) perform a semiannual reconciliation of document transmittal forms to the associated Follow-Up Review Log to monitor employee compliance with IRM requirements and (2) document this reconciliation on Form 14698, Field Assistance Taxpayer Assistance Centers Remittance and Non-Remittance Log Reconciliation, our fiscal year 2016 audit testing identified instances where the use of the form was not fully implemented at the TACs we visited. Further, we continued to identify instances where TAC employees did not always (1) track document transmittals on the Follow-up Review Log and (2) follow up on late acknowledgments timely. In one instance, we found that TAC personnel did not document on the log the actions that were taken for a package that was lost; however, the manager had completed a review of the Follow-up Review Log. We will continue to evaluate the results of IRS's corrective actions during our fiscal year 2017 audit.
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to establish a process to ensure that the requirement for unauthorized access awareness training is explicitly communicated to non-IRS contractors who have unescorted access to IRS facilities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that by July 2017, it will partner with FPS and GSA to establish a process to help ensure that all contractors who require unescorted access are first approved for interim or final staff-like access and complete mandatory information protection and security awareness training within 10 business days of approved staff-like access. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to establish procedures to monitor whether non-IRS contractors with unescorted physical access to IRS facilities are receiving unauthorized access awareness training.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that by July 2017, it will send out a communication to its FMSS field offices that will include SOPs for monitoring training and acquiring unauthorized access awareness training documentation for each non-IRS contract employee. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to determine why staff did not consistently comply with IRS's existing requirements for the final candling of receipts at service center campuses and lockbox banks, including logging remittances found during final candling on the final candling log at the time of discovery, safeguarding the remittances at the time of discovery, transferring the remittances to the deposit unit promptly, and passing one envelope at a time over the light source, and based on this determination, establish a process to better enforce compliance with these requirements.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that by July 2017, it will identify and analyze the risks associated with candling at the SCCs and lockbox banks, along with any mitigating factors, to determine if further actions are warranted. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: Kingsbury, Nancy R
    Phone: (202) 512-2700

    3 open recommendations
    including 2 priority recommendations
    Recommendation: In addition to implementing our previous recommendations, to effectively implement key elements of the IRS information security program, the Commissioner of Internal Revenue should ensure contractors receive security awareness training within 5 business days of being granted access to an IRS information system.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: During the audit of IRS' FY 2017 financial statements, IRS indicated that it had not yet implemented this recommendation. When IRS indicates that it has implemented this recommendation, we will review its actions.
    Recommendation: In addition to implementing our previous recommendations, to effectively implement key elements of the IRS information security program, the Commissioner of Internal Revenue should ensure that control testing methodology and results fully meet the intent of the control objectives being tested.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: During the audit of IRS's FY 2017 financial statements, IRS indicated that it has not completed these actions. When IRS indicates that it has implemented the recommendation, we will evaluate the effectiveness of its actions.
    Recommendation: In addition to implementing our previous recommendations, to effectively implement key elements of the IRS information security program, the Commissioner of Internal Revenue should update the remedial action verification process to ensure actions are fully implemented.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: During the audit of IRS's FY 2017 financial statements, IRS indicated that it has not completed actions to implement the recommendation. When IRS indicates that it has implemented the recommendation, we will evaluate the effectiveness of its actions.
    Director: David Powner
    Phone: (202) 512-9286

    1 open recommendations
    Recommendation: To improve the reliability and reporting of investment performance information and management of selected major investments, the Commissioner of the IRS should direct the Chief Technology Officer to modify reporting of the Affordable Care Act Administration testing status to senior management to include a comprehensive report on all impacted systems--including an explanation for why impacted systems were not tested at a particular level--and ensure this reporting is aligned with the manner in which testing is being performed.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS disagreed with this recommendation at the time we made it stating that it followed a rigorous risk-based process for planning the tests of ACA-impacted systems, including the types and levels of testing, and that it had comprehensive reporting for the filing season 2015 release, which included ACA impacted systems. However, as noted in our report, our review of ACA Testing Review Checkpoint reports and filing season reports, which officials stated were used to provide comprehensive reports to senior managers, did not identify the status of testing for all systems impacted by ACA Releases 5.0 and 6.0. We therefore concluded that the recommendation was still valid. As of July 2017, IRS had not changed its position. We will be following up with the agency to discuss the recommendation.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    2 open recommendations
    Recommendation: To improve the reliability of Taxonomy estimates for future filing seasons, the Commissioner of Internal Revenue should follow relevant best practices outlined in the GAO Cost Guide by documenting the underlying analysis justifying cost-influencing assumptions.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of April 2017, IRS has taken steps to update its methodology for calculating and reporting its Taxonomy estimates. IRS provided GAO with updated Taxonomy estimates for 2015; GAO is reviewing these estimates to determine the extent to which IRS has implemented GAO's recommendation.
    Recommendation: To improve the reliability of Taxonomy estimates for future filing seasons, the Commissioner of Internal Revenue should follow relevant best practices outlined in the GAO Cost Guide by reporting the inherent imprecision and uncertainty of the estimates. For example, IRS could provide a range of values for its Taxonomy estimates.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of April 2017, IRS has taken steps to update its methodology for calculating and reporting its Taxonomy estimates. IRS provided GAO with updated Taxonomy estimates for 2015; GAO is reviewing these estimates to determine the extent to which IRS has implemented GAO's recommendation.
    Director: James R.McTigue, Jr.
    Phone: (202) 512-9110

    2 open recommendations
    Recommendation: To improve oversight of charitable organizations, the Commissioner of Internal Revenue should direct EO to develop quantitative, results-oriented compliance goals and additional performance measures and indicators that can be used to assess impact of exams and other enforcement activities on compliance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS reported it has taken a series of actions to implement this recommendation. First, in FY 2016, IRS implemented a new data-driven case selection model to identify the most non-compliant returns based upon what is reported. Starting in FY 2017, IRS plans to measure the effectiveness of these new data-analytic models and use that performance information as the basis for ongoing discussions with EO Examinations managers on which queries are yielding results and which need to be modified or deleted from the work plan. IRS also developed a weighted disposal code measure, which is intended to help examiners prioritize case selection according to criteria that give more weight to more consequential outcomes. For example, a data mining query generating a lot of revocations would take priority over a query that may only generate written advisories. IRS incorporated the new measure into its current and future work plan monitoring and projections. IRS also began discussions with TE/GE Research and SOI to figure out how to define compliance for the EO population, establish a compliance baseline, and how to develop methods to measure the impact of enforcement actions on voluntary compliance levels in the EO population. Once all these actions are fully implemented, IRS will be in a better position to use this information to develop quantitative, results-oriented compliance goals and additional performance measures and indicators that can be used to assess impact of exams and other enforcement activities on compliance.
    Recommendation: To improve oversight of charitable organizations, the Commissioner of Internal Revenue should continue to work with Treasury officials to do the following: review the flexibility afforded under the Pension Protection Act of 2006 consistent with statutory protections of taxpayer data, clarify what flexibility state regulators have in how they protect and use federal tax data, make modifications to guidance, policies, or regulations as warranted, and clearly communicate this information with state charity regulators.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In 2016, IRS reported taking three actions to implement this recommendation. First, IRS coordinated a training session for State Charity Regulators on safeguards. The training included a review of the Safeguards Security Report (SSR) and covered several topics including current period safeguard activities, changes to safeguarding procedures, and disposal of information. According to IRS, there were 53 participants representing 45 different states. IRS also revised the 6104 (c)Memorandum of Understanding (MOU) inserting a new paragraph that instructs state charity regulators to contact the Tax Exempt/Government Entities (TEGE) Liaison if there are questions about whether an administrative or judicial proceeding has been initiated. This puts in place a mechanism to provide assurance to the regulator if they have concerns. Third, TEGE officials met with the Department of the Treasury and Office of Chief Counsel to discuss the Priority Guidance Plan for 2015-2016. According to IRS, this meeting included a discussion about flexibility afforded under the PPA and how state regulators can protect and use federal tax data consistent with statutory protections of taxpayer data. More recently, IRS informed us that they made additional changes to the MOU to address concerns raised by state charity officials about re-disclosures. IRS also reported on information-sharing efforts to publicize these changes among state charity regulators including a presentation at the annual National Association of State Charity Officials conference and a virtual presentation that reached over 100 participants representing 33 states. IRS informed state charity regulators that the MOU had been revised to address their concerns about re-disclosures in proceedings had been addressed in the MOU. The TEGE Liaison made a presentation at the Annual NASCO Conference in Washington DC on October 6, 2015 and included this information in the presentation.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    3 open recommendations
    Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should conduct research using the new Form 5498 data to identify IRAs holding nonpublic asset types, such as profits interests in private equity firms and hedge funds, and use that information for an IRSwide strategy to target enforcement efforts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken some action to develop a research plan using the new information on types of nonpublic IRA assets reported on Form 5498. Previously, IRS searched terms in Form 5498 filings to identify IRAs holding assets with the greatest risk of noncompliance. In January 2016, IRS started a research project to examine a sample of tax returns based on certain nonpublic IRA asset types. IRS plans to use the research results due in June 2018 to develop an IRS-wide strategy to target enforcement efforts to those IRAs where the beneficiary of the IRA has caused his or her IRA to engage in a prohibited transaction. Once IRS completes electronically compiling the new Form 5498 information for tax year 2016 that is filed in 2017, IRS researchers plan to use the asset type data to streamline the process of identifying those IRAs. As of March 2017, IRS examination officials did not have a date on when the new IRA asset type data will be available for further analysis.
    Recommendation: To improve IRS's ability to detect and pursue noncompliance associated with undervalued assets sheltered in IRAs and prohibited transactions, the Commissioner of Internal Revenue should work in consultation with the Department of the Treasury on a legislative proposal to expand the statute of limitations on IRA noncompliance to help IRS pursue valuation-related misreporting and prohibited transactions that may have originated outside the current statute's 3-year window.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS agreed with GAO's October 2014 recommendation on IRAs with large balances and said it had discussed the recommendation with Treasury's Office of Tax Policy and Benefits Tax Counsel. Consequently, IRS said Treasury is aware of IRS's willingness to support legislative efforts in this area. However, Treasury and IRS have not drafted a legislative proposal as of March 2017.
    Recommendation: To help taxpayers better understand compliance risks associated with certain IRA choices and improve compliance, the Commissioner of Revenue should, building on research data on IRAs holding nonpublic assets, identify options to provide outreach targeting taxpayers with nonpublic IRA assets and their custodians, such as reminder notices that engaging in prohibited transactions can result in loss of the IRA's tax-favored status.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has taken some action to provide general outreach but has not yet compiled data to target outreach to taxpayers with nonmarketable IRA assets at greater risk of noncompliance, as GAO recommended in October 2014. In June 2016, IRS published information on IRS.gov outlining the new information to be reported for nonmarketable IRA assets and included a general caution that IRAs with nonmarketable investments or assets under direct taxpayer control may be subject to a heightened risk of committing prohibited transactions. This caution, similar to those that IRS added to its publications about IRA contributions and distributions, is a step toward helping taxpayers better understand which investments pose greater risks. IRS said results from an ongoing compliance research project may help in targeting outreach to taxpayers holding certain IRA assets at greater risk of noncompliance. IRS said it could refine its outreach to those taxpayers with nonpublic IRA assets using the new asset type data once compiled electronically. As of March 2017, IRS was compiling the IRA assets data for tax year 2016 that is filed in 2017, but IRS had not provided a date on when the new IRA asset type data will be available for further analysis.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    2 open recommendations
    including 2 priority recommendations
    Recommendation: The Commissioner of Internal Revenue should track the results of large partnerships audits: (a) define a large partnership based on asset size and number of partners; (b) revise the activity codes to align with the large partnership definition; and (c) separately account for field audits and campus audits.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: No executive action taken. IRS said that it plans to address parts of GAO's September 2014 recommendation about tracking the audit results on large partnerships but has not yet done so. In November 2014, IRS said that it plans to define large partnerships using asset size and the number of partners and to find an alternative method to account for field and campus large partnership cases using existing capabilities, but that revising IRS's activity codes to enable it to track large partnership audits would be dependent on future funding. In March 2017, IRS told GAO that it would need until September 2017 to address this recommendation as IRS continues to monitor efforts to implement the Bipartisan Budget Act (BBA). Section 1101 of the Bipartisan Budget Act of 2015 (Public law 114-74), which was enacted in November 2015, includes provisions that repeal TEFRA audit procedures and put in place audit procedures that would require partnerships with more than 100 partners to pay audit adjustments at the partnership level, among other changes. IRS explained that these changes significantly alter the procedural and administrative components of partnerships. IRS said it would need this additional time to analyze options and determine the most appropriate steps for effectively tracking the results of large partnership audits. Without changes to tracking partnership audit results, IRS cannot conduct analysis to identify ways to better plan and use IRS resources in auditing large partnerships as well as analyze whether large partnerships present a high noncompliance risk.
    Recommendation: The Commissioner of Internal Revenue should analyze the audit results by these activity codes and types of audits to identify opportunities to better plan and use IRS resources in auditing large partnerships.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: As of October 2016, the Internal Revenue Service (IRS) said that based on completion of GAO's recommendations on tracking results and after sufficient large partnership audit results have been obtained, it still plans to conduct a study to analyze these results and recommend any ways in which resource use can be improved. IRS still expects to complete this analysis by September 2018.
    Director: James R. White
    Phone: (202) 512-9110

    2 open recommendations
    Recommendation: To provide timely, accurate, and actionable feedback to all relevant lead-generating third parties, the Commissioner of Internal Revenue should provide aggregated information on (1) the success of external party leads in identifying suspicious returns and (2) emerging trends (pursuant to section 6103 restrictions).

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken steps to address GAO's August 2014 recommendation, including developing timeliness metrics for managing leads and holding six feedback sessions with financial institutions participating in the External Leads Program, but had not provided GAO with documentation that the agency is providing meaningful feedback to external parties. In November 2015, IRS reported that it had developed a database to track leads submitted by financial institutions and the results of those leads. IRS also stated that it had held six sessions with financial institutions to provide feedback on external leads provided to IRS. These quarterly feedback sessions contained various types of information, including overall statistics for the External Leads Program, individual statistics tailored to a specific external party, and solicitations for how to improve the program. In December 2015, IRS officials stated that the agency sent a customer satisfaction survey asking financial institutions for feedback on the external leads process and was considering other ways to provide feedback to financial institutions. In August 2016, an industry group representing financial institutions reported that IRS had not begun providing meaningful feedback to financial institutions that are providing leads to IRS. In March 2017, IRS officials told us they were holding more frequent, monthly, feedback sessions with financial institutions. GAO will follow up with financial institutions to understand the extent to which IRS's feedback has been timely and is actionable. Without accurate, timely, and actionable feedback, the more than 600 external parties participating in the External Leads Program do not know if the leads they provide to IRS are useful and they may not be able to assess their success in identifying IDT refund fraud or improve their detection tools.
    Recommendation: To provide timely, accurate, and actionable feedback to all relevant lead-generating third parties, the Commissioner of Internal Revenue should develop a set of metrics to track external leads by the submitting third party.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken steps to address GAO's August 2014 recommendation, including developing timeliness metrics for managing leads and holding six feedback sessions with financial institutions participating in the External Leads Program, but had not provided GAO with documentation that the agency is providing meaningful feedback to external parties. In November 2015, IRS reported that it had developed a database to track leads submitted by financial institutions and the results of those leads. IRS also stated that it had held six sessions with financial institutions to provide feedback on external leads provided to IRS. These quarterly feedback sessions contained various types of information, including overall statistics for the External Leads Program, individual statistics tailored to a specific external party, and solicitations for how to improve the program. In December 2015, IRS officials stated that the agency sent a customer satisfaction survey asking financial institutions for feedback on the external leads process and was considering other ways to provide feedback to financial institutions. In August 2016, an industry group representing financial institutions reported that IRS had not begun providing meaningful feedback to financial institutions that are providing leads to IRS. In March 2017, IRS officials told us they were holding more frequent, monthly, feedback sessions with financial institutions. GAO will follow up with financial institutions to understand the extent to which IRS's feedback has been timely and is actionable. Without accurate, timely, and actionable feedback, the more than 600 external parties participating in the External Leads Program do not know if the leads they provide to IRS are useful and they may not be able to assess their success in identifying IDT refund fraud or improve their detection tools.
    Director: Clark, Cheryl E
    Phone: (202) 512-9377

    2 open recommendations
    Recommendation: The Commissioner of Internal Revenue should direct the appropriate IRS officials to establish and implement policies and procedures requiring a review process to reasonably assure that the accounts related to deceased taxpayers are only reopened for valid refunds.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In January 2016, IRS automated the process of locking deceased taxpayer accounts during its year-end processing. However, during our fiscal year 2016 audit, we continued to find instances in which IRS employees reopened deceased taxpayer accounts and disbursed invalid refunds. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of Internal Revenue should direct the appropriate IRS officials to establish and implement policies and procedures that require monitoring to reasonably assure that accounts related to deceased taxpayers that have been reopened are timely closed after processing the refund.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In January 2016, IRS automated the process of locking accounts related to deceased taxpayers during its year-end processing. However, during our fiscal year 2016 audit, we continued to find instances in which IRS employees reopened deceased taxpayer accounts to process refunds and did not close them timely. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: James R. McTigue, Jr.
    Phone: (202) 512-9110

    3 open recommendations
    including 1 priority recommendation
    Recommendation: As a result of turnover in IRS's Senior Executive Team and in order to enhance budget planning and improve decision making and accountability, the Commissioner of Internal Revenue should develop a long-term strategy to address operations amidst an uncertain budget environment. As part of the strategy, IRS should take steps to improve its efficiency, including (1) reexamining programs, related processes, and organizational structures to determine whether they are effectively and efficiently achieving the IRS mission, and (2) streamlining or consolidating management or operational processes and functions to make them more cost-effective.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS agreed with our recommendation and is taking steps to implement it. For example, IRS has adopted a new, more strategic approach to identify and select budget program priorities. In its fiscal year 2017 budget justification, IRS introduced six themes of its Future State Initiative for tax administration, which in part aims to deliver service improvements across different taxpayer interactions such as individual account assistance, refunds, identity theft, and billings and payments. The budget also linked requested spending increases to the themes laid out in the initiative. The themes were derived from a subset of its 19 objectives identified in the IRS 2014-2017 Strategic Plan. In addition to the future state themes and strategic objectives, IRS has identified enterprise goals to guide the IRS toward the future state. As of December 2016, IRS has yet to set targets for meeting the goals but plans to have targets in place by June 2017. We acknowledge the steps IRS has taken and will continue to monitor its progress as the process is further developed.
    Recommendation: Because ROI provides insights on the productivity of a program and is one important factor in making resource allocation decisions, the Commissioner of Internal Revenue should calculate actual ROI for implemented initiatives, compare the actual ROI to projected ROI, and provide the comparison to budget decision makers for initiatives where IRS allocated resources.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: No executive action taken. While IRS agreed that having actual ROI data for implemented initiatives would be useful, it did not believe it was feasible to produce such estimates, as GAO recommended in June 2014. GAO maintains that IRS should be able to provide some information on past initiatives, such as whether funds requested were used in the manner originally proposed. As of December 2016, IRS officials reported there is no timeline for full implementation. In March 2017, IRS officials confirmed that they do not isolate the revenue attributable to a specific initiative, but pointed to other efforts to help manage IRS's budget, including establishing the Office of Planning, Programming and Audit Coordination and the Planning Community of Practice, which are intended to improve investment planning processes. While these efforts are intended to help IRS act more strategically, comparing projected ROI to actual ROI can help hold managers and IRS accountable for the funding received.
    Recommendation: Because ROI provides insights on the productivity of a program and is one important factor in making resource allocation decisions, the Commissioner of Internal Revenue should use actual ROI calculations as part of resource allocation decisions.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: No executive action taken as of March 2017. IRS's Research, Analysis, and Statistics Division has begun to estimate marginal direct revenues and marginal costs attributable to specific compliance projects. The estimates are necessary inputs to establish a measure of ROI, which in turn can guide resource allocation decisions. IRS plans to use these estimates to inform future examination plans, but considerable work remains in this long-term effort. In October 2016, IRS officials reported there is no timeline for full implementation, but that the work is on-going. In June 2016, IRS officials confirmed that projected revenue will be considered in investment decision making as part of fiscal year 2018 enterprise planning guidance, but did not report any progress in using actual ROI data. Until such action is taken, IRS may not be allocating its resources in the most effective way, thus potentially forgoing additional revenues.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    8 open recommendations
    including 1 priority recommendation
    Recommendation: If IRS delays are continuing, the Commissioner of the Internal Revenue Service should further revise the notices to provide more realistic response times based on the data and take other appropriate actions to ensure efficient use of IRS tax examiner resources. For example, IRS could choose to provide taxpayers who call IRS with a recorded message notifying them of delays in IRS responding and when to expected an IRS response.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS revised the automated telephone message that taxpayers hear when they call but has not revised its notices. The new message provides taxpayers information on the correspondence audit workload and time frames and asks that they allow a certain number of days before calling to check on the status of their audit. However, IRS has yet to further revise notices to provide more realistic time frames. In July 2016, IRS officials said they were in the process of revising the notices in order to allow individual correspondence audit offices to enter a customized response date based on their respective inventory levels at the time notices are sent. As of March 2017, IRS officials said additional programming changes will delay implementation until July 2017.
    Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should establish formal program objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS correspondence audit program officials planned a working group to develop formal program objectives. In November 2016, IRS officials provided documents intended to define the program objectives, but the objectives were unclear. As of March 2017, officials said they had no planned date by which to clearly document the objectives, but said they expect to describe them in program guidance changes anticipated in the next 12 to 18 months.
    Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should ensure that the program measures reflect those objectives.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials said that, among other actions, they plan to review and update program documentation and guidance as warranted to ensure a clear link between correspondence audit program objectives and related measures. IRS officials provided documentation in August 2016, but program measures could not be clearly linked to objectives because the objectives were not clear. As of March 2017, officials had no planned date by which to clearly document the program objectives and their links with program measures.
    Recommendation: To clarify the desired results of the correspondence audit program and its linkages to IRS-wide activities, the Commissioner of the Internal Revenue Service should clearly link those measures with strategic IRS-wide goals on ensuring compliance in a cost-effective way while minimizing taxpayer burden.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials said that, among other actions, they plan to review and update program documentation and guidance as warranted to ensure that program measures clearly link to IRS strategic goals. IRS officials provided documentation in August 2016, but measures for the program could not be clearly linked to either the program objectives or IRS goals because the objectives were not clear. As of March 2017, officials had no planned date by which to clearly document how the program measures link to the objectives and IRS strategic goals.
    Recommendation: To better inform decisions being made about the correspondence audit program, the Commissioner of the Internal Revenue Service should document how the decisions are to be made using the performance information (including criteria and tolerances used).

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials agreed with the recommendation and said they would thoroughly document the program plan development process but did not refer to documenting how program decisions are to be made using performance information. In April 2016, officials provided documents describing current correspondence audit planning processes, but the documents lacked specifics on the decisions and performance information, criteria, and tolerances used. IRS officials said they would provide documentation on these specific details in Spring 2017.
    Recommendation: To better inform decisions being made about the correspondence audit program, the Commissioner of the Internal Revenue Service should track and use other program data that have not been used to provide more complete performance information. Examples of data that could be tracked and used include how much of the recommended tax amounts is collected over time; taxpayer burden and experience such as how often audits are resolved in one contact, how often taxpayers correspond or call, and how long taxpayers wait for IRS to respond to their documents and for the audit to close; and costs beyond the direct audit time, such as the costs to answer taxpayer calls per audit, assess the recommended tax, and collect those tax assessments.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials said they would evaluate the methodology used in several existing studies to determine the most productive use of collectability data and evaluate the feasibility of collecting and using additional data. In April 2016, officials provided information on researching and testing of a new audit planning method during fiscal year 2016, using costs and collection results data. In November 2016, IRS officials said they had implemented the planning method to consider collection results for fiscal year 2017 but had not yet provided supporting documentation on how the method has used the collection results or on the status of efforts to use other program data, such as whether or when IRS will use performance information on costs and taxpayer burden related to audits. IRS officials said they will provide the documentation in Spring 2017.
    Recommendation: To better ensure an effective investment of resources in the CEAP efforts, the Commissioner of the Internal Revenue Service should clearly document the intended benefits of ongoing efforts to address identified problems, and the process for measuring and tracking actual benefits.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS Correspondence audit program officials said they would document the expected benefits of ongoing changes by June 2016. We have since asked IRS officials to provide related documents. As of April 2017, we are awaiting documents.
    Recommendation: To better ensure an effective investment of resources in the CEAP efforts, the Commissioner of the Internal Revenue Service should develop a plan and timeline for implementing the CEAP contractor's recommendations on possible ways to improve the (a) selection of correspondence audit workload and (b) allocation of resources between providing telephone assistance and reviewing taxpayer correspondence to resolve audits or develop justifications for not implementing the recommendations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials agreed with the recommendation and said they would continue to pursue efforts with research functions to further improve workload selection and maximize resource usage. However, they did not refer to any plan or timeline for implementing contractor recommendations to improve the selection of correspondence audit workload and allocation of examiner resources, or develop justifications for not implementing those recommendations. In March 2017, officials confirmed that IRS does not intend to implement the contractor's recommendations or to evaluate them, for example, by developing justifications for not implementing them.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    3 open recommendations
    including 2 priority recommendations
    Recommendation: The Commissioner of Internal Revenue should develop and implement a strategy to better estimate (1) the extent and nature of partnership misreporting, and (2) the effectiveness of partnership examinations in detecting this misreporting.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: As of April 2017, IRS had initiated the Partnership Research Study (PRS). PRS is a smaller scale version of IRS's originally planed National Research Program (NRP) study for partnerships. IRS decided to conduct the smaller scale study because of resource constraints (the NRP study would have required IRS to audit 10,000 partnership tax returns, which is more than all the partnership returns that IRS normally audits in the course of a year; through PRS IRS plans to audit about 2,000 returns). PRS will be similar to an NRP study in that there are mandatory issues that will be audited, and stringent requirements for surveying (dismissing) examinations. IRS has started auditing 1,750 returns and will begin auditing 500 more returns starting in November. IRS is hopeful that PRS will allow it to determine (1) whether the differences in examination rates across different types of business entities are justified, and (2) whether an improved tool for selecting partnerships for examination, such as an updated partnership discriminant function, should be developed.
    Recommendation: The Commissioner of Internal Revenue should use the better information on noncompliance and program effectiveness to determine (1) whether the differences in examination rates across different types of business entities are justified, and (2) whether an improved tool for selecting partnerships for examination, such as an updated partnership discriminant function, should be developed.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: As of April 2017, IRS had initiated the Partnership Research Study (PRS). PRS is a smaller scale version of IRS's originally planed National Research Program (NRP) study for partnerships. IRS decided to conduct the smaller scale study because of resource constraints (the NRP study would have required IRS to audit 10,000 partnership tax returns, which is more than all the partnership returns that IRS normally audits in the course of a year; through PRS IRS plans to audit about 2,000 returns). PRS will be similar to an NRP study in that there are mandatory issues that will be audited, and stringent requirements for surveying (dismissing) examinations. IRS has started auditing 1,750 returns and will begin auditing 500 more returns starting in November. IRS is hopeful that PRS will allow it to determine (1) whether the differences in examination rates across different types of business entities are justified, and (2) whether an improved tool for selecting partnerships for examination, such as an updated partnership discriminant function, should be developed.
    Recommendation: While IRS works to improve the quality of its Schedule K-1 data, the Commissioner of Internal Revenue should develop a plan for conducting testing or other analysis to determine whether the improved Schedule K-1 data, perhaps combined with other IRS information about businesses and taxpayers, could be used more effectively to ensure compliance with the reporting of flow-through income.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS stated that it understands the objective of this recommendation and, at such time that resources are available to enhance capabilities, it would consider the proposed methodology of advanced testing. However, based on current and anticipated budget constraints, it does not expect its plans to change in the near future.
    Director: Wilshusen, Gregory C
    Phone: (202) 512-6244

    1 open recommendations
    Recommendation: To effectively implement key components of the IRS information security program, the Commissioner of Internal Revenue should update access request policies and procedures to ensure that they contain sufficiently detailed information of access requests and access assignments to facilitate effective review and verification of appropriate access privileges.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: At the beginning of GAO's audit of IRS' FY 2017 financial statements, IRS indicated that it had not yet implemented this recommendation. When IRS indicates that it has implemented this recommendation, we will review its actions.
    Director: David A. Powner
    Phone: (202) 512-9286

    3 open recommendations
    Recommendation: To improve the reliability of reported cost and schedule variance information for major investments, the Commissioner of IRS should direct the Chief Technology Officer to report cumulative investment and investment segment cost and schedule information in the quarterly reports to Congress, consistent with the Office of Management and Budget (OMB) requirements for measuring progress towards meeting goals.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its fiscal year 2016 second quarter report to Congress, IRS included cumulative cost and schedule information for one of the five investments highlighted in the report. IRS stated that it was awaiting findings of our report issued in June 2016 to determine the future direction of the quarterly reporting to Congress. We will continue to monitor IRS's quarterly reporting to Congress to determine the extent to which this recommendation has been addressed.
    Recommendation: To improve the reliability of reported cost and schedule variance information for major investments, the Commissioner of IRS should direct the Chief Technology Officer to ensure that projected cost and schedule variances for in-process activities are updated monthly, for the six investments for which we reviewed monthly updates, consistent with OMB and Treasury reporting requirements, by ensuring investment staff have a consistent understanding of the information to be included in monthly reports.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: To address this recommendation, IRS provided training in October 2014, which focused on, among other things, the monthly update of investment performance information. As of July 2016, we are reviewing cost and schedule reporting for the six selected investments to determine the extent to which the training provided has improved the timeliness of cost and schedule performance reporting.
    Recommendation: To improve the reliability of reported cost and schedule variance information for major investments, until a quantitative measure of scope is developed, the Commissioner of IRS should direct the Chief Technology Officer to qualitatively report on how delivered scope compares to what was planned in its quarterly reports to Congress, for the seven investments for which we reviewed scope reporting.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In its fiscal year 2016 second quarter report to Congress, IRS proposed a quantitative measure of scope solution for one investment; specifically, it listed specific scope elements for the Return Review Program investment and identified the elements it had implemented to date. In addition, in our June 2016, report summarizing our review of IRS's major IT investments, we noted that IRS had developed a quantitative measure of scope for two investments, although we noted that the measure could be improved by accounting for the work performed by IRS staff in accordance with best practices (see GAO-16-545). The measure used in the quarterly report to Congress and the one we noted during our recent review are positive steps. We will continue to monitor IRS's actions to address our recommendation.
    Director: Jeszeck, Charles A
    Phone: (202) 512-7215

    2 open recommendations
    Recommendation: To ease the burden on plan sponsors, enhance compliance, and help ensure that disclosures to participants are written in a manner that can be understood by the average participant, Labor, IRS, and PBGC should work together to create and regularly update a comprehensive online tool for plan sponsors to search for the reports and disclosures they are required to provide based on plan type, design, and circumstances.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials initially noted that they are continuing their efforts to ensure that plan sponsors have access to comprehensive and up-to-date online resources. They said they had met with Labor and PBGC officials to discuss the value and feasibility of developing and maintaining a comprehensive online tool. However, with decreased resources, they believe it is unlikely for the agency to create and regularly update such a tool. However, they would continue to confer with Labor and PBGC colleagues to determine if it is possible to cross-reference existing agency resources online. As of September 2017, IRS has not provided an update on its efforts. GAO continues to believe that such a tool would be beneficial to plan sponsors of all sizes.
    Recommendation: To ease the burden on plan sponsors, enhance compliance, and help ensure that disclosures to participants are written in a manner that can be understood by the average participant, Labor, IRS, and PBGC should work together to define criteria for complying with the readability provisions in ERISA and the Internal Revenue Code (IRC), and apply the criteria to agency-generated model notices as well as those developed by plan sponsors. As part of these criteria, consider requiring clear, simple, brief highlights at the beginning of disclosures, reflecting federal plain language guidelines.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS officials said that they are committed to using the Federal Plain Language Guidelines as a resource in preparing model disclosures and that they will consider including brief highlights at the beginning of model disclosures. They said that it is unclear that imposing defined readability criteria on employer and plan communications is in the best interests of plan participants, administrators, sponsors, and the retirement system as a whole. However, they do see merit in directing employers and plan sponsors to the Guidelines as a resource for developing readable notices and disclosures, and are considering how best to communicate that resource to stakeholders. As of September 2017, IRS has not provided an update on these efforts.
    Director: White, James R
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: To ensure that IRS is meeting the stated goals of CAP, the Principal Deputy Commissioner of Internal Revenue and Deputy Commissioner for Services and Enforcement should track savings from Compliance Maintenance and CAP overall and develop a plan for reinvesting any savings.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had taken some steps to implement this recommendation, but is not fully tracking the amount of dollar savings from using CAP nor developing a plan to reinvest any savings, as GAO recommended in August 2013. IRS is tracking savings by analyzing and comparing the workload inventory of account coordinators who handle CAP cases against team coordinators who handle non-CAP cases. This caseload comparison is a part of IRS's annual CAP evaluation and was included in its June 2014 CAP evaluation plan. Based on GAO's review of the evaluation plan and results, IRS's caseload comparison did not show the amount of dollar savings from CAP. The comparison for tax years 2010 through 2012 showed that account coordinators handling CAP cases exclusively or in conjunction with non-CAP cases have a larger caseload than team coordinators handling non-CAP cases. In addition, IRS has not developed a plan for reinvesting any savings, as GAO recommended in August 2013. Such a plan could help IRS increase audit coverage. IRS stated that it cannot measure the CAP's impact on audit coverage because audit coverage is based on staffing and compliance priorities. Also, IRS said that while quantifying monetary savings would be difficult, it has reinvested its savings by expanding account coordinators' caseloads as shown in the average caseload of CAP and non-CAP cases worked. However, without a plan for tracking savings and using them to increase audit coverage, IRS cannot be assured that the savings are effectively invested in either CAP or non-CAP taxpayers with a high compliance risk. IRS is evaluating the CAP program to determine how it fits with IRS's future vision for examinations. It has no timetable for completing this evaluation. IRS did not accept new CAP applications for 2016, deciding that CAP would be limited to taxpayers who are in the program for 2017.
    Director: White, James R
    Phone: (202)512-5594

    1 open recommendations
    Recommendation: To increase the effectiveness of IRS's examinations individual tax returns, the Commissioner of Internal Revenue should transcribe data from paper-filed Form 1040 Schedules C and E that are not currently transcribed and make that data available to SB/SE examiners for classification. If IRS has evidence that the costs related to transcribing all such data on Schedules C and E are prohibitive, IRS could do one or both of the following actions: (1) transcribe less data by transcribing only the missing data for selected line items, such as certain, large expense line items, or (2) develop a budget proposal to fund an initiative for transcribing Schedule C and E.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had completed its study on whether to transcribe more data from paper-filed returns by comparing the benefits to classifying tax returns for audit from doing this transcription. They said the benefits to be derived from additional transcription are not significant and would not outweigh the added cost. However, IRS has not provided specific information about the costs and benefits from transcribing information from Schedules C and E that we mentioned in our recommendation. Having more data transcribed and electronically available from these areas likely will improve the classification of audits as well as the quality of the audits, according to examiners we spoke with for the report.
    Director: Clark, Cheryl E
    Phone: (202)512-9377

    3 open recommendations
    Recommendation: The Acting Commissioner of Internal Revenue should direct the appropriate IRS officials to perform a risk assessment to determine the appropriate level of Integrated Data Retrieval System (IDRS) access that should be granted to employee groups that handle hard-copy taxpayer receipts and related sensitive taxpayer information as part of their job responsibilities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: According to IRS, a risk assessment was performed to determine the appropriate level of IDRS access that should be granted to employee groups that handle hard-copy taxpayer receipts and related sensitive taxpayer information as part of their job responsibilities. However, during our fiscal year 2016 audit, we identified a group of employees at an SCC who handle hard-copy taxpayer receipts and related sensitive taxpayer information and can make adjustments to taxpayer accounts. Based on the information obtained, it is unclear whether the risks associated with these employees were considered in a risk assessment. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Acting Commissioner of Internal Revenue should direct the appropriate IRS officials to, based on the results of the risk assessment, update the Internal Revenue Manual (IRM) accordingly to specify the appropriate level of IDRS access that should be allowed for (1) remittance perfection technicians and (2) all other employee groups with IDRS access that handle hard-copy taxpayer receipts and related sensitive information as part of their job responsibilities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As a result of its risk assessment efforts thus far, IRS updated the IRM to restrict the use of certain IDRS command codes for remittance perfection technicians. In addition, in May 2016, IRS reassessed the risks at its TACs, including the specific risks and mitigating factors associated with allowing TAC employees to process taxpayer remittances and to adjust taxpayer accounts. However, IRS did not update the IRM to reflect the conclusions from the risk assessment related to TAC employees. Further, during our fiscal year 2016 audit, we identified a group of employees at an SCC who handle hard-copy taxpayer receipts and related sensitive taxpayer information and can make adjustments to taxpayer accounts. Based on the information obtained, it is unclear whether the risks associated with these employees were considered in a risk assessment. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Acting Commissioner of Internal Revenue should direct the appropriate IRS officials to establish procedures to implement the updated IRM, including required steps to follow to prevent (1) remittance perfection technicians and (2) all other employee groups that handle hard-copy taxpayer receipts and related sensitive information as part of their job responsibilities from gaining access to command codes not required as part of their designated job duties.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As a result of its risk assessment efforts thus far, IRS updated the IRM to include procedures to restrict the use of certain IDRS command codes for remittance perfection technicians. However, the IRM has not been updated based on the results of the risk assessment related to TAC employees and, if applicable, other employees who have access to sensitive command codes and handle hard-copy taxpayer receipts and related sensitive information as part of their job duties. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: Powner, David A
    Phone: (202)512-9286

    3 open recommendations
    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to improve the reliability of cost estimates by addressing the weaknesses we identified in this report so that each investment at least substantially meets each of the characteristics of a reliable cost estimate.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: We followed up on the status of IRS's actions to address this recommendation for the Customer Account Data Engine (CADE) 2, the Return Review Program (RRP), and IRS.gov, the three investments with significant planned expenditures for development in fiscal year 2017, according to data reported on the Federal IT dashboard (the remaining four investments in our 2013 review are primarily in operations and maintenance based on the same IT dashboard data). We selected CADE 2, RRP, and IRS.gov because they would benefit most from improvements to cost estimates given their life cycle stage. In the Summer of 2017, IRS provided documentation to demonstrate actions taken to address the weaknesses we had identified with the CADE 2, and RRP cost estimates. We are currently analyzing this information. For IRS.gov, IRS told us the investment had been in operations and maintenance for several years and was therefore not producing the cost documentation that is typically associated with development efforts. We requested documentation supporting this claim and as of September 2017 were waiting to receive it.
    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to improve the extent to which schedules are well-constructed and controlled by addressing the weaknesses we identified in this report so that each investment at least substantially meets each of these characteristics.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: We followed up on the status of IRS's actions to address this recommendation for the Customer Account Data Engine (CADE) 2, the Return Review Program (RRP), and IRS.gov, the three investments with significant expenditures planned for development in fiscal year 2017, according to data reported on the Federal IT dashboard (the remaining four investments in our 2013 review are primarily in operations and maintenance based on the same IT dashboard data). We selected CADE 2, RRP, and IRS.gov because they would benefit most from improvements to schedule estimates given their life cycle stage. In the Summer of 2017, IRS provided documentation to demonstrate actions taken to address the weaknesses we had identified with the CADE 2, and RRP schedule estimates. We are currently analyzing this documentation. For IRS.gov, IRS told us the investment had been in operations and maintenance for several years and was therefore not producing the schedule estimates that are typically associated with development efforts. We requested documentation supporting this claim and as of September 2017 were waiting to receive it.
    Recommendation: To improve the reliability of reported cost and schedule variance information for the seven major investments we reviewed, the Acting Commissioner of IRS should direct the Chief Technology Officer to develop and implement guidance that specifies best practices--such as including evaluating critical path (for projected schedule), using earned value management data, evaluating the performance of completed work and comparing it to the remaining budget, assessing commitment values for material needed to complete remaining work, and estimating future conditions--to consider when determining projected cost and schedule amounts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In June 2016, we reported on IRS's development and implementation of its Investment Performance Tool for tracking cost, schedule and scope metrics for its IT investments. At the time, IRS was using the tool for two investments. As of September 2017, we were reviewing the agency?s use of the tool as part of an ongoing review. We plan to further examine the use of the tool and the supporting guidance to determine the extent to which they address this recommendation.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    2 open recommendations
    including 1 priority recommendation
    Recommendation: The Acting Commissioner of the Internal Revenue Service should direct appropriate officials to develop a long-term strategy to improve web services provided to taxpayers, in accordance with Howto.gov and other federal guidance outlined in our report. To accomplish this, the IRS should establish a numerical or other measureable goal to improve taxpayer satisfaction and a timeframe for achieving it.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has made progress in improving its online services strategy, as we recommended, but as of March 2017, IRS has not yet completed its efforts. IRS's strategy has evolved from a singular focus on on-line services to a more comprehensive strategy of taxpayer interaction through all service channels. In February 2016, IRS announced an agency-wide Future State Initiative, which in part, aims to deliver service improvements across different taxpayer interactions such as individual online accounts assistance, exams, and collections. In July 2016, the official responsible for IRS's on-line office reported that the agency is working towards developing an overall customer service satisfaction goal as part of the IRS Future State Initiative. The official said that this goal is broadly meant to cover various ways the public interacts with IRS, including web, phone, correspondence and walk in. In November 2016, IRS provided documentation on the goals of the Future State Initiative. However, this documentation does not include specific numerical targets for the performance measures that IRS expects to achieve for each goal or a timeline to achieve those goals. As of March 2017, IRS is continuing to incorporate a customer service satisfaction goal in its upcoming strategic plan.
    Recommendation: The Acting Commissioner of the Internal Revenue Service should direct appropriate officials to develop a long-term strategy to improve web services provided to taxpayers, in accordance with Howto.gov and other federal guidance outlined in our report. To accomplish this, the IRS should develop business cases for all new online services, describing the potential benefits and costs of the project, and use them to prioritize future projects.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS has made progress in improving its online services strategy, as we recommended, but as of March 2017, IRS has not yet completed its efforts. IRS's strategy has evolved from a singular focus on on-line services to a more comprehensive strategy of taxpayer interaction through all service channels. In February 2016, IRS announced an agency-wide Future State Initiative, which in part, aims to deliver service improvements across different taxpayer interactions such as individual online accounts assistance, exams, and collections. In addition, IRS revised its business case template in 2014 to include, among other things, a discussion of costs, benefits, and risks of future projects, consistent with our recommendation. However, IRS did not use the template to develop its Online Account business case, which it provided to us as an example in September 2015. We reviewed IRS documentation and found that the business case contained some of the information we recommended, such as high level time frames, but was missing other information, such as the benefits and costs of the project. Further, it is unclear how IRS plans to use the business case to prioritize future projects. In March 2016, IRS reported they implemented a new process for online investments that requires details on expected benefits and costs to be reviewed by the senior executives for prioritization and follow-up. As of March 2017, we requested additional documentation concerning this process. Analyses of benefits and costs can help agencies decide which new projects to start in a manner that maximizes the benefits derived from agency resources.
    Director: Wilshusen, Gregory C
    Phone: (202)512-6244

    2 open recommendations
    Recommendation: To effectively implement key components of the IRS information security program, the Acting Commissioner of Internal Revenue should update policies and procedures to ensure that they address (1) both methods available for granting all users access to mainframe resources, (2) audit and monitoring of access from one processing environment to another, (3) use of appropriate accounts by multiple databases on a single server, (4) data storage shared between systems, (5) out-of-date security standards, and (6) reconciliation of access privileges.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: We are evaluating IRS's implementation of this recommendation as part of the audit of IRS's FY 2017 financial statements.
    Recommendation: To effectively implement key components of the IRS information security program, the Acting Commissioner of Internal Revenue should update mainframe test and evaluation processes to improve periodic monitoring of compliance with IRS policies.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: We are evaluating IRS's implementation of this recommendation as part of the audit of IRS's FY 2017 financial statements.
    Director: White, James R
    Phone: (202) 512-9110

    1 open recommendations
    Recommendation: The Acting Commissioner of Internal Revenue should take the following action outline a strategy that defines appropriate levels of telephone and correspondence service and wait time and lists specific steps to manage service based on an assessment of time frames, demand, capabilities, and resources.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has made progress in developing a customer service strategy with defined appropriate levels of service and steps needed to provide such service, as we recommended; however, as of March 2017, IRS has not completed its efforts. In December 2015, concerned that the Department of the Treasury and IRS did not believe they needed to develop a comprehensive customer service strategy, we suggested that Congress consider requiring Treasury to develop such a strategy in consultation with IRS that would, among other things, determine appropriate telephone and correspondence levels of service. This includes establishing a customer service standard and identifying the resources required to achieve that standard. Taking these steps would increase transparency and help IRS communicate its resource needs, while helping Congress make more informed decisions about IRS's budget. In February 2016, IRS announced a "Future State" vision for agency-wide operations, which aims to improve services across different taxpayer interactions such as individual online account assistance, exams, and collections. In December 2016, IRS reported that it had undertaken a study on benchmarking its telephone performance against the best in the business, which we are currently reviewing. It also reported that many of our taxpayer service-related recommendations will ultimately be incorporated into IRS's Future State initiative. In November 2016, IRS provided documentation on the goals of the initiatives, which included goals on improving taxpayer service. However, this documentation does not include specific numerical targets that IRS expects to achieve for those goals. We will continue to assess this initiative as IRS works to develop it. However, it is unclear the extent to which and when our recommendations will be fulfilled by IRS's initiative. We maintain that Treasury should develop a comprehensive strategy in consultation with IRS which would enable IRS to make a more informed request to Congress about resource requirements needed to deliver specific levels of service. Finalizing a long-term comprehensive strategy will help ensure IRS is maximizing the benefit to taxpayers and possibly reduce costs in other areas, such as for IRS's telephone operations.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    3 open recommendations
    including 1 priority recommendation
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year. As part of this review, IRS should develop estimates of the marginal direct revenue and marginal direct cost within each enforcement program and each taxpayer group.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: IRS agrees in principle to using ratios of direct revenue yield-to-cost to adjust its enforcement resource allocation, as GAO recommended in December 2012; however, IRS officials plan to wait until it has developed such ratios at the marginal level (e.g., for the last cases worked within specific categories of exams) before they make such adjustments. GAO maintains that IRS has a basis to adjust its allocation of enforcement resources each year and could improve resource allocation immediately (while it is still working to develop the marginal ratios) by using average yield-to-cost ratios for each category. IRS has developed a methodology for estimating marginal ratios for limited subsets of cases within their correspondence examination program. IRS officials are working to apply this methodology to other cases within that program; however, they expect this effort will be complex and time consuming and officials did not have a timeline for full implementation as of March 2017. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year. As part of this review, IRS should compile data on the amount of time that specific grades of examiners and downstream employees spend on specific categories of exams that can be identified in ERIS.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has developed a methodology to estimate for each closed correspondence audit the total cost to IRS to identify, assess, and collect whatever direct revenue is collected from that audit. These estimated take into account the actual time applied in Examination and Appeals, as well as the job series and grades of the Exam and Appeals employees who handled each return. Collections cost do not vary significantly across the population of correspondence audits, so an average cost factor is used for that portion of the costs. IRS anticipates that expanding this estimation effort to other enforcement programs, such as field examination will require a much larger effort. As of December 2015, officials did not yet have a timeline for full implementation. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.
    Recommendation: To better ensure that IRS's limited enforcement resources are allocated in a manner that maximizes the revenue yield of the income tax, subject to other important objectives of tax administration, such as minimizing compliance costs and ensuring equitable treatment across different groups of taxpayers, the Commissioner of Internal Revenue should review disparities in the ratios of direct revenue yield to costs across different enforcement programs and across different groups of cases within programs and determine whether this evidence provides a basis for adjusting IRS's allocation of enforcement resources each year.As part of this review, IRS should explore the potential of estimating the marginal influence of enforcement activity on voluntary compliance, potentially taking advantage of new NRP data.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has not yet found a way to use NRP data or other data sources to estimate the indirect effects of audits. While they continue to explore alternative ways to estimate these effects, they expect to continue to account for these effects subjectively as they develop their enforcement resource allocation plans. As of December 2015, officials did not yet have a timeline for full implementation. If IRS does not take into account some measure of revenue yield per dollar of cost when making allocation decisions, it will miss an opportunity to collect significant amounts of additional revenue.
    Director: Clark, Cheryl E
    Phone: (202)512-3000

    1 open recommendations
    Recommendation: The Commissioner of the Internal Revenue Service should direct the appropriate IRS officials to update the Internal Revenue Manual (IRM) to specify steps to be followed to prevent campus support clerks as well as any other employees who process payments through the electronic check presentment system from making adjustments to taxpayer accounts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: During fiscal year 2012, IRS updated the IRM to require managers to verify that all campus support employees who process payments through the electronic check presentment system have the appropriate command code restriction in their IDRS profiles to prevent them from making adjustments to taxpayer accounts. However, during our subsequent audits we found that in updating the IRM, IRS did not undertake a global review of the level of access provided to all employee groups who handle hard-copy taxpayer receipts and related sensitive information to ensure that their levels of IDRS access were appropriate. As a result, in May 2016, IRS reassessed the risks at its TACs, including the specific risks and mitigating factors associated with allowing TAC employees to process taxpayer remittances through the electronic check presentment system and to adjust taxpayer accounts. However, IRS did not update the IRM to reflect the conclusions from the risk assessment related to TAC employees needing access to certain sensitive command codes as part of their normal job duties. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: Mctigue Jr, James R
    Phone: (202) 512-7968

    1 open recommendations
    including 1 priority recommendation
    Recommendation: To continue to improve information on program cost and results that could aid in resource decision making, the Commissioner of Internal Revenue should develop a quantitative measure of scope, at a minimum for its major IT investments, to have complete information on the performance of these investments.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open
    Priority recommendation

    Comments: As of March 2017, IRS had taken actions to develop a quantitative measure of scope for its major information technology (IT) investments, as GAO recommended in June 2012. Specifically, starting in December 2015, IRS included planned "scope elements" for the Return Review Program investment and identified the elements it had delivered to date in its quarterly report on IT to Congress. IRS further enhanced this report in December 2016, by including the percentage of planned scope delivered for selected investments. IRS actions represent positive steps and GAO will continue to work with the agency to determine the reliability of the reported performance information and monitor efforts to expand the use of a quantitative measure of scope. These efforts will assist with providing IRS and other decision makers complete information on the performance of major IT investments.
    Director: White, James R
    Phone: (202) 512-9110

    2 open recommendations
    Recommendation: The Commissioner of Internal Revenue should develop a new refund timeliness measure and goal to more appropriately reflect current capabilities.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had not developed a new measure for refund timeliness. In August 2016, IRS reiterated that it has no plans to develop a new refund timeliness performance measure or goal, nor does it plan to revise its existing measure or goal to issue refunds due for tax returns filed on paper within 40 days. During the 2016 tax filing season, taxpayers filed nearly 90 percent of returns electronically, and, as a means to set taxpayer expectations, IRS publicly reports that about 90 percent of taxpayers owed a refund received it in less than 21 days. Accordingly, we continue to believe that IRS's sole performance measure of issuing paper-filed refunds within 40 days is outdated and does not acknowledge advances in technology that allow IRS to issue refunds faster. We agree with IRS that the environment has changed considerably since we made this recommendation--the growth in identity theft refund fraud has increased the need for additional scrutiny of tax refunds, which can add to the time needed to process tax returns. IRS can take into account its concerns and set a performance measure and goal that would be both challenging and obtainable. Without a measure and goal to assess refund timeliness that includes both paper and electronically filed returns and is reflective of IRS's current capabilities, IRS is missing opportunities to provide optimum levels of taxpayer service while also ensuring that taxpayers receive accurate refunds. As such, we believe that our recommendation remains valid.
    Recommendation: The Commissioner of Internal Revenue should complete an Internet strategy that (1) provides a justification for the implementation of online self-service tools and includes an assessment of providing online self-service tools that allow taxpayers to access and update elements of their account online; (2) acknowledges the cost and benefits to taxpayers of new online services; (3) sets the time frame for when the online service would be created and available for taxpayer use; and (4) includes a plan to update the strategy periodically.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has made progress in improving its online services strategy, as we recommended; however, as of March 2017 IRS has not yet completed its efforts. In February 2016, IRS announced its new "Future State" vision for agency-wide operations, which aims to improve services across different taxpayer interactions such as individual account assistance, exams, and collections. IRS requested funding in the fiscal year 2017 budget justification to enhance web applications, including the online account component of its Future State Initiative. In December 2016, IRS took a step forward with this by announcing that it had launched a new online tool that would allow taxpayers to view their IRS account balance, including the amount they owe for tax, penalties, and interest. However, the documentation IRS provided on the Future State Initiative did not fully address our recommendation. For example, it is missing the costs and benefits to taxpayers of the online services, and time frames for when the online services would be created and available for taxpayers. We will continue to assess the new initiative as IRS continues its development. A long-term comprehensive strategy for its online services will help ensure IRS is maximizing the benefit to taxpayers from this investment and reduce costs in other areas, such as for IRS's telephone operations.
    Director: Powner, David A
    Phone: (202)512-9286

    1 open recommendations
    Recommendation: The Commissioner of Internal Revenue should direct the appropriate officials to define and implement a process, including defined criteria, for reselecting ongoing projects.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: Since we made the recommendation, IRS has been working to redesign its investment management process. In June 2016, we reported that the agency had defined and implemented a repeatable process for selecting (and reselecting) operations support activities, though it had not fully documented the process, but did not have a similar process for its business systems modernization activities (GAO-16-545). We recommended that IRS document its process for operations support activities and establish, document, and implement policies and procedures for selecting new and reselecting ongoing business systems modernization activities. IRS agreed with our recommendations and, in January 2017, stated it expected to have an internal draft document of the operations support activities process completed by the end of February 2017 with a draft ready to share with GAO a month later. In addition, for the business systems modernization process, IRS noted several improvements underway and stated it would document the process as it improved by December 2017. We will continue to monitor IRS's efforts to define and implement processes, including criteria, for reselecting ongoing projects.
    Director: Clark, Cheryl E
    Phone: (202)512-9521

    3 open recommendations
    Recommendation: Based on a review of all existing contracts under $100,000 without an appointed COTR that should require contract employees to obtain favorable background investigation results, the Commissioner of the IRS should direct the appropriate IRS officials to amend those contracts to require that favorable background investigations be obtained for all relevant contract employees before routine, unescorted, unsupervised physical access to taxpayer information is granted.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: According to IRS, it has completed its contract review and made appropriate modifications as of July 2016. However, the modifications to the contracts were not made available for our review during the fiscal year 2016 audit. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of the IRS should direct the appropriate IRS officials to establish a policy requiring collaborative oversight between IRS's key offices in determining whether potential service contracts involve routine, unescorted, unsupervised physical access to taxpayer information, thus requiring background investigations, regardless of contract award amount. This policy should include a process for the requiring business unit to communicate to the Office of Procurement and the Human Capital Office the services to be provided under the contract and any potential exposure of taxpayer information to contract employees providing the services, and for all three units to (1) evaluate the risk of exposure of taxpayer information prior to finalizing and awarding the contract and (2) ensure that the final contract requires favorable background investigations as applicable, commensurate with the assessed risk.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that during fiscal year 2017, several internal organizations will partner to identify the remaining actions needed to address this recommendation. According to IRS, these actions include developing policies and procedures to reasonably assure that (1) oversight between IRS's key offices is conducted to determine whether potential service awards IRS enters into involve routine, unescorted, unsupervised physical access to taxpayer information by contractors, thus requiring background investigations, and (2) the resulting processes make clear who is responsible for completing the various steps, as well as who must maintain documentation of the approved access determination prior to the contractor being allowed to provide the services. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Recommendation: The Commissioner of the IRS should direct the appropriate IRS officials to revise the post orders for the service center campuses (SCC) and lockbox bank security guards to include specific procedures for timely reporting exterior lighting outages to SCC or lockbox bank facilities management. These procedures should specify (1) whom to contact to report lighting outages and (2) how to document and track lighting outages until resolved.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. IRS stated that during fiscal year 2017, it would update campus post orders to help ensure timely reporting, monitoring and repair of exterior lighting outages. In addition, AWSS engaged in discussions with personnel from FPS and GSA to coordinate responsibilities and suggested changes for post orders when security services are contracted by those entities. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: White, James R
    Phone: (202)512-5594

    1 open recommendations
    Recommendation: To improve reporting on the results of examinations on ATAT issues, the Commissioner of Internal Revenue should separately track the tax amounts recommended, assessed, and collected between ATAT issues and non-ATAT issues.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has taken steps to check whether taxpayers filed all required ATAT-related disclosure obligations, but has not taken steps to track examination results for ATAT versus non-ATAT issues, as GAO recommended in May 2011. In July 2012, IRS told GAO that although it agreed with GAO's May 2011 recommendation, resource and capability constraints preclude it from capturing information in this way. In February 2013, IRS implemented a new indicator and matching process to regularly review whether taxpayers are meeting their ATAT-related filing obligations. Additionally, IRS developed a procedure to evaluate the completeness of ATAT-related disclosure forms and follow up on incomplete forms as necessary and updated the Internal Revenue Manual to reflect these changes. Developing and implementing these new processes and procedures will provide IRS with additional information for determining whether the disclosures are made as required and are complete. However, as of March 2017, IRS did not plan on taking any further actions on tracking examination results.
    Director: White, James R
    Phone: (202)512-5594

    1 open recommendations
    Recommendation: To gain efficiencies and improve taxpayer service, the Commissioner of Internal Revenue should direct the appropriate officials, based on the quality of service provided by comparable organizations and on what matters most to the customer, to determine a customer service telephone standard, and the resources required to achieve this standard based on input from Congress and other stakeholders.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: In January 2017, IRS officials provided results of a benchmarking study that it completed in response to our recommendation. In that study, an IRS team compared IRS's service, measures and goals to comparable agencies and companies. For example, IRS compared the types of measures the companies used, including those that were primarily service-driven and resource-driven. As a result, the team recommended options for additional measures to indicate the level of access taxpayers have to service, including across channels. In addition, IRS concluded that the ideal level of service is 83 percent, which optimizes a balance between wait time, disconnects, and assistor availability. It also recommended exploring using new technology including email, online chat, and telephone call back features as well as to establish regularly scheduled follow-up benchmarking. However, IRS did not adopt the standard level of service goal of 83 percent. Furthermore, in its fiscal year 2018 performance measures and goals, IRS planned a 39 percent level of service, which is substantially lower than the prior 2 year targets, both of which IRS exceeded. In addition, IRS did not estimate the resources required to achieve the level of service standard that it identified in its 2016 benchmarking study. While these benchmarking results represent an important step toward delivering a certain standard of telephone service, without actually setting goals that are consistent with those results and determining and communicating the resources required to achieve them, IRS is unable to work effectively with Congress and other stakeholders to deliver desired levels of service.
    Director: White, James R
    Phone: (202)512-5594

    1 open recommendations
    Recommendation: The Commissioner of Internal Revenue should establish an IRS-wide strategy with goals, which may need to be developed incrementally, to coordinate and plan ongoing and future efforts to identify and pursue network tax evasion. The strategy should include: (1) assessing the effectiveness of network analysis tools, such as yK-1; (2) determining the feasibility and benefits of increasing access to existing IRS data, such as scanning additional data from Schedule K-1, or collecting additional data for use in its network analysis efforts; (3) putting the development of analytical techniques and tools that focus on networks as the unit of analysis, such as GraphQuery, on a specific time schedule; and (4) deciding how network efforts will be managed across IRS, such as whether a core program team or management group is needed.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS had not created a documented, agency-wide strategy to manage network noncompliance efforts. However, IRS has developed elements of the strategy, as GAO recommended in September 2010. For example, IRS has made and continues to focus on making iterative improvements to its network analysis tools. Although these improvements are not contained within an IRS-wide strategy, they relate to assessing effectiveness. For example, IRS has taken steps to assess its most predominantly used network analysis tool. As part of an annual survey, IRS asked users of this tool about its effectiveness and to suggest improvements. IRS also certified the tool as conforming to agency guidelines and requirements for usefulness. However, IRS has not created a strategic approach on managing network compliance efforts across IRS that includes time frames for network analysis tool development, and the agency has no plans to do so.
    Director: White, James R
    Phone: (202)512-5594

    2 open recommendations
    Recommendation: To understand the scope of the business nonfiler population, the Commissioner of Internal Revenue should estimate the magnitude of business nonfiling among businesses registered with IRS, using data from its operational files to select cases for further investigation. Based on the results of this work IRS should develop a tax gap estimate for the impact of business nonfiling insofar as doing so is cost-effective.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS said it did not plan to develop a partial estimate of the business nonfiler rate, as we recommended in August 2010. IRS reported that funding would likely be unavailable for it to do so using operational data. According to IRS, its existing operational data on business nonfilers are sufficient. However, even a partial estimate could give IRS additional information that would be useful in its strategic planning and help it determine what priority it should place on this type of noncompliance.
    Recommendation: To monitor the performance of business nonfiler activities, the Commissioner of Internal Revenue should set a deadline for developing data that can be used to measure the performance of the BMF CCNIP and its business nonfiler compliance activities overall.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS has determined that it does not have the necessary data that could be used to measure its business nonfiler efforts across the agency and that it therefore cannot set a deadline for developing such data, as GAO recommended in August 2010. According to IRS, developing such data would be prohibitively costly. Rather, as of March 2017, IRS plans to continue to use the data at the operating division level. Without going through the process of developing performance data, IRS is unable to know what data would aid in monitoring and evaluating its business nonfiler efforts. Absent cross-agency performance data, IRS is unable to fully understand the outcomes of its business nonfiler efforts.
    Director: White, James R
    Phone: (202)512-5594

    3 open recommendations
    Recommendation: To enhance IRS's ability to detect noncompliance with mortgage debt forgiveness provisions, the Commissioner of Internal Revenue should modify Form 982, Part 1 to segregate the total dollar amount of forgiven debt by exclusion type and capture the information in IRS's databases.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: As of March 2017, IRS has not yet revised the Form 982 consistent with our recommendation. Form 982 directs taxpayers to identify the type(s) of forgiven debt. For example, taxpayers check a box to indicate forgiven mortgage debt used to buy, build, or substantially improve a principal residence. However, the Form 982 is used to report other types of forgiven debt, such as debt related to real property used in a trade or business, and the form does not require taxpayers to report the dollar amounts for each exclusion type. This means that IRS does not necessarily know how much of the forgiven debt should be attributed to a taxpayer's principal residence. Section 151 of division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) extended the exclusion of forgiven mortgage debt to debt discharged before January 1, 2017. The Joint Committee on Taxation estimates the cost of this extension will be more than $5.1 billion for fiscal years 2016 and 2017 making it important for IRS to have more specific information from taxpayers concerning the amount of forgiven debt attributable to a taxpayer's principal residence.
    Recommendation: To enhance IRS's ability to detect noncompliance with mortgage debt forgiveness provisions, the Commissioner of Internal Revenue should modify the Form 982 and Form 1099-C so that filers disclose the address of the secured property for which the debt is being forgiven and capture the information in IRS's databases.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: While IRS has not revised the Forms 982 and 1099-C consistent with our recommendation, Congress directed IRS to collect additional information concerning mortgage interest payments, which prompted IRS to revise a related form. Congress in July 2015 enacted the Surface Transportation and Veterans Health Care Choice Improvement Act (Public Law 114-41). Section 2003 of the act requires taxpayers receiving mortgage interest payments to report the origination date of the mortgage, the amount of outstanding principal at the beginning of the calendar year, and the property's address. This new reporting requirement applies to returns that would be filed in 2017. In response to the legislation, IRS updated Form 1098 Mortgage Interest Statement. While IRS officials have told us that they believe the new data to be collected on this form have the potential to be helpful, they will not know the extent of any benefits from this new reporting requirement for several years. As of March 2017, IRS had not yet revised two other forms to the extent we recommended--the Forms 982 and 1099-C--to collect specific information from taxpayers and lenders concerning the amount of forgiven debt attributable to a principal residence and the location of the taxpayer's principal residence. Specifically, Form 982 does not direct taxpayers to identify the address for which debt is being forgiven nor does Form 1099-C direct lenders to report the address. Section 151 of division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) extended the exclusion of forgiven mortgage debt to debt discharged before January 1, 2017. The Joint Committee on Taxation estimates the cost of this extension will be more than $5.1 billion for fiscal years 2016 and 2017, making it important for IRS to have more specific information concerning the address of the properties for which debt is being forgiven.
    Recommendation: To enhance IRS's ability to detect noncompliance with mortgage debt forgiveness provisions, the Commissioner of Internal Revenue should use the additional data reported on the revised Form 982 and Form 1099-C to assess the extent to which taxpayers are compliant.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: While IRS has not fully revised the Forms 982 and 1099-C consistent with our recommendation, Congress directed IRS to collect additional information concerning mortgage interest payments which prompted IRS to revise a related form, and IRS officials are considering how to use the additional data. As of March 2017, the Form 982 does not direct taxpayers to identify the address for which debt is being forgiven. For the Form 1099-C, IRS began requiring lenders to provide more information about the type of event that resulted in the cancellation of the debt. However, as of March 2017, the Form 1099-C does not direct lenders to report the address of the property for which mortgage debt is being forgiven. In July 2015, Congress enacted the Surface Transportation and Veterans Health Care Choice Improvement Act (Public Law 114-41). Section 2003 of the act requires taxpayers receiving mortgage interest payments to report the origination date of the mortgage, the amount of outstanding principal at the beginning of the calendar year, and the property's address. This new reporting requirement applies to returns that would be filed in 2017. In response to the legislation, IRS updated Form 1098 Mortgage Interest Statement for the 2017 filing season. While IRS officials told us that they believe the new data to be collected on this form have the potential to be helpful, they will not know the extent of any benefits from this new reporting requirement for several years. Section 151 of division Q of the Consolidated Appropriations Act, 2016 (Public Law 114-113) extended the exclusion of forgiven mortgage debt to debt discharged before January 1, 2017. The Joint Committee on Taxation estimates the cost of this extension will be more than $5.1 billion for fiscal years 2016 and 2017, making it important for IRS to use the additional data we recommended they collect in enforcement efforts.
    Director: Clark, Cheryl E
    Phone: (202)512-9521

    1 open recommendations
    Recommendation: The Commissioner of IRS should direct the appropriate IRS officials to, once IRS identifies the control weaknesses that result in inaccuracies or errors that affect the financial reporting of unpaid tax assessments, implement control procedures to routinely prevent, or to detect and correct, such errors.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS created a long-term corrective action plan that contains specific actions to improve control procedures to prevent or detect errors. While IRS completed some actions during fiscal year 2016, it has not completed most of the actions in the plan or documented milestones or target completion dates for these remaining actions. In addition, during fiscal year 2016, GAO and IRS continued to identify misclassified unpaid assessments that resulted from inaccuracies or errors in taxpayer accounts. Thus, IRS's actions to date have not been effective at fully addressing the issues that continue to cause a lack of transaction traceability and material inaccuracies produced by the subsidiary ledger. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 audit.
    Director: White, James R
    Phone: (202) 512-9039

    2 open recommendations
    Recommendation: To better ensure the notice phase is achieving desired results at the lowest costs, the Commissioner of Internal Revenue should provide IRS collection managers and executives accessible, reliable information on what the business rules are.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS said in January 2016, that it planned to review current business rules and communicate clear guidance and documentation on business rules to appropriate IRS staff by July 2016. In October 2016, IRS provided documentation of some actions taken and planned, and noted it expects to provide additional business rules information in evaluations planned by June 2017. IRS confirmed this status in March 2017.
    Recommendation: To better ensure the notice phase is achieving desired results at the lowest costs, the Commissioner of Internal Revenue should periodically and regularly evaluate the business rules in terms of efficiency and effectiveness or other results and ensure the results are available to managers so the data and methodologies can be used or considered in future evaluations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS said in January 2016, that it would conduct periodic reviews, update business rules if needed, and ensure follow-up for ad hoc evaluations by June 2017. In October 2016, IRS provided documentation of planned actions to periodically evaluate the business rules and communicate evaluation results and business rules information to appropriate IRS staff by June 2017. IRS confirmed this status in March 2017.
    Director: White, James R
    Phone: (202)512-9110

    1 open recommendations
    Recommendation: In order to better assess whether changes are needed in the way IRS administers activities not engaged in for profit provisions, the Commissioner of Internal Revenue should take steps to estimate the extent of activities not engaged in for profit noncompliance from its ongoing research programs.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS is researching sole proprietor noncompliance, as GAO recommended in September 2009. It is focusing on those who improperly claim business losses (i.e., not profits). IRS's Office of Research, Analysis and Statistics is using the reporting compliance study of Form 1040 filers to gather the data on such noncompliant business losses. This research covered sampled tax returns filed for tax years 2009, 2010, and 2011 and used audits of the sampled tax returns that are filed for each tax year. In November 2016, IRS research officials provided the initial rough estimates of the percentage of disallowed losses and associated dollar amounts for all 3 tax years but as of March 2017, they had not yet indicated how these estimates helped IRS to understand the nature of the tax noncompliance. The officials cautioned that their ability to develop the estimates depends on the number of observations that can be applied from each tax year. This research, when completed, could help IRS to identify noncompliant sole proprietor issues and take action to reduce losses.
    Director: Clark, Cheryl E
    Phone: (202)512-9521

    1 open recommendations
    Recommendation: The IRS should direct the appropriate IRS officials to establish procedures requiring that each physical security analyst conduct a periodic documented review of the Emergency Signal History Report and emergency contact list for its respective location to ensure that (1) appropriate corrective actions have been planned for all incidents reported by the central monitoring station and (2) the emergency contact list for each location is current and includes only appropriate contacts.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS's efforts to address this recommendation are ongoing. In August 2016, IRS updated the IRM to require that (1) corrective actions are planned for all incidents reported by the central monitoring station and (2) the emergency contact list for each location is current and includes only appropriate contacts. IRS stated that in fiscal year 2017 it will update procedures and provide training to employees to help ensure that the updates to the guidance are communicated to affected employees. We will continue to evaluate IRS's corrective actions during our fiscal year 2017 audit.
    Director: White, James R
    Phone: (202)512-3000

    2 open recommendations
    Recommendation: In order to ensure the most efficient, fair, and consistent administration of civil tax penalties, and that penalties are achieving their purpose of encouraging voluntary compliance, the Commissioner of Internal Revenue should direct the Office of Servicewide Penalties (OSP) to evaluate penalty administration and penalties' effect on voluntary compliance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: The Office of Servicewide Penalties (OSP) initiated a plan to comprehensively evaluate penalty administration and the impact of penalties on voluntary compliance. They stated that they understand such a plan will be useful in identifying priorities and determining additional potential resource needs. However, OSP put this plan on hold while they developed a business case for obtaining more staff and resources. OSP is in the process of obtaining feedback to refine their business case for final submission. While they await approval of the business case they have not done any work on the comprehensive plan. As the comprehensive plan remains incomplete, OSP has not yet undertaken an evaluation of penalties' effect on voluntary compliance. In December 2011 OSP formed a Civil Penalties Administrative Improvement Initiative team that has the goal of making improvements to civil penalty administration. Activities underway as of February 2013 include developing measures to improve taxpayer consistency and taking actions to improve the Reasonable Cause Assistant computer system. We learned in February 2015 that the program is now under a new executive. When we met with the new agency officials in April 2015 they told us that they had a new effort underway to develop a comprehensive strategy that examines the impact of penalties on voluntary compliance while ensuring quality. IRS finalized a Penalty Performance Plan on March 6, 2017, which we are currently reviewing.
    Recommendation: In order to ensure the most efficient, fair, and consistent administration of civil tax penalties, and that penalties are achieving their purpose of encouraging voluntary compliance, the Commissioner of Internal Revenue should direct OSP to develop and implement a plan to collect and analyze penalty-related data. The plan should address the constraints officials have identified as impeding progress in analyzing penalties.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: Office of Servicewide Penalties (OSP) initiated a plan to comprehensively evaluate penalty administration and the impact of penalties on voluntary compliance. However, OSP put this plan on hold while they developed a business case for obtaining more staff and resources. As of February 2013 the business case has not progressed and OSP has taken no additional action to complete the comprehensive plan. We learned in February 2015 that the program is now under a new executive. When we met with the new agency officials in April 2015 they told us that they had a new effort underway to develop a comprehensive strategy that examines the impact of penalties on voluntary compliance while ensuring quality. IRS finalized a Penalty Performance Plan on March 6, 2017, which we are currently reviewing.
    Director: White, James R
    Phone: (202)512-5594

    2 open recommendations
    Recommendation: To gauge the extent of 1099-MISC payer noncompliance and its contribution to the tax gap, the Commissioner of Internal Revenue should, as part of future research studies, develop an estimate of 1099-MISC payer noncompliance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: According to IRS, developing such an estimate requires a multi-pronged approach and a large amount of coordinated effort. One prong is to determine the extent of filing compliance among employers. A second prong would determine the extent to which 1099-MISC payers properly report their payments. Starting with the Tax Year 2001 individual income tax reporting compliance study, the National Research Program (NRP) office has been collecting some data related to Form 1099-MISC compliance, from both the payer and payee perspectives. With the ongoing annual individual income tax reporting compliance studies, the IRS will gather more data on this issue. However, by themselves, these efforts will not provide a comprehensive picture of the scope of potential Form 1099-MISC non-compliance. Additional data will be generated by the NRP reporting compliance study for employment tax. As part of the NRP employment tax research, IRS examiners were to review taxpayers' Form 1099 filing compliance. Data collected from these studies should shed some light on whether employers are appropriately reporting required payments on Form 1099-MISC. As of July 2017, IRS had completed portions of its analysis of the NRP employment tax sample results and was working to resolve data issues. IRS estimates its analysis of the extent of Form 1099-MISC payer noncompliance will be complete by December 2017. We will continue to monitor IRS's progress.
    Recommendation: To gauge the extent of 1099-MISC payer noncompliance and its contribution to the tax gap, the Commissioner of Internal Revenue should, as part of future research studies, determine the nature and characteristics of those payers that do not comply with 1099-MISC reporting requirements so that this information can be factored into an IRS-wide strategy for increasing 1099-MISC payer compliance.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: IRS researchers are collecting data on 1099-MISC reporting as part of its National Research Program (NRP) study on employment taxes, a program that involves examinations of a sample of tax returns expected to culminate in 2015. The examinations include tax years 2008 through 2010. As part of the NRP employment tax research, IRS examiners were to review taxpayers' Form 1099 filing compliance. Collecting data on this issue will enable IRS to study the nature and characteristics of payers that do not comply with 1099-MISC reporting requirements. As of July 2017, IRS had completed portions of its analysis of the NRP employment tax sample results and was working to resolve data issues. IRS estimates its 1099-MISC payer reporting compliance analysis will be completed in December 2017.We will continue to monitor IRS's progress.
    Director: Clark, Cheryl E
    Phone: (202) 512-3000

    1 open recommendations
    Recommendation: To address other issues that may exist in IRS's master files that affect penalty calculations, the Commissioner of Internal Revenue should direct appropriate IRS officials to, in instances where programs are not functioning in accordance with the intent of the IRM, take appropriate action to correct the programs so that they function in accordance with the IRM.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: According to IRS, it had substantially completed its corrective actions to address 19 penalty programming issues it had identified from its internal assessment of penalty computation programs. However, as of September 30, 2016, IRS had not provided us with supporting documentation to validate that it completed the corrective actions. We will continue to evaluate IRS's actions to address this recommendation during our fiscal year 2017 financial statement audit.
    Director:
    Phone:

    1 open recommendations
    Recommendation: The Commissioner of Internal Revenue should match independent contractors' information returns with their tax returns to more systematically identify employers who are misclassifying employees as independent contractors and to better target audit resources for doing employment tax examinations.

    Agency: Department of the Treasury: Internal Revenue Service
    Status: Open

    Comments: Call 202/512-6100 for additional information.