Tax Administration:

Administrative Changes Could Lead to Earlier Resolution of Tax Disputes

GGD-86-75: Published: Jul 30, 1986. Publicly Released: Jul 30, 1986.

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GAO examined the U.S. Tax Court's case load to determine whether the number of cases filed with the court could be reduced by settling more cases through the Internal Revenue Service's (IRS) appeals process, at less cost to the taxpayers and the government.

GAO found that: (1) many taxpayers who initially bypassed the IRS internal appeals process and filed with the court eventually settled their cases out of court with the appeals division; (2) cases ultimately settled by IRS cost the government approximately $1.2 million in court processing costs and taxpayers $268,200 in filing fees; (3) some of the processing and filing costs could have been eliminated had the cases been filed with IRS; and (4) more than one-third of the taxpayers did not fully understand the dispute resolution process before filing with the tax court. GAO believes IRS could do more to involve the appeals division in resolving cases by better informing taxpayers about the process and encouraging them to go to the appeals division before filing with the court.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS revised Publication No. 556. Publication No. 5 has been revised to include an addendum on the Taxpayer Bill of Rights, which was issued on December 6, 1989.

    Recommendation: The Commissioner of Internal Revenue should revise the language of the 30-day letter, various IRS publications, and the information on the appeal procedures given to taxpayers by IRS auditors and revenue agents. These changes should: (1) emphasize the advantages of going to the appeals division before filing with the tax court; and (2) point out that, even if taxpayers bypass the appeals division, the cases will still be assigned to it for attempted settlement.

    Agency Affected: Department of the Treasury: Internal Revenue Service


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