Tax Administration: IRS's Innocent Spouse Program Performance	 
Improved; Balanced Performance Measures Needed (24-APR-02,	 
GAO-02-558).							 
                                                                 
By law, married persons who file joint tax returns are each fully
responsible for the accuracy of the tax return and for the full  
tax liability. This is true even though only one taxpayer may	 
have earned the wages or income shown on the tax return. Under	 
the Internal Revenue Service's (IRS) Innocent Spousal Program,	 
IRS can relieve taxpayers of tax debts on the basis of equity	 
considerations, such as not knowing that their spouse failed to  
pay taxes due. Since passage of the IRS Restructuring and Reform 
Act of 1998, IRS has received thousands of requests from	 
taxpayers for innocent spouse relief. IRS's inability to provide 
timely responses to such requests has generated concerns among	 
taxpayers, Congress, and other stakeholders. IRS reached	 
decisions on 21 percent more cases than it received in fiscal	 
year 2001, reducing some of its backlog from previous years. The 
agency accomplished this through a variety of initiatives,	 
including a substantial staffing commitment, centralization and  
specialization, automated tools, and routine estimating of future
workload and staffing needs. IRS's procedures conform to	 
applicable guidance for transferring tax liabilities from joint  
tax accounts to individual tax accounts when innocent spouse	 
relief has been granted. The procedures follow federal internal  
control guidelines by requiring a mix of checks, verifications,  
reconciliations, and documentation to support steps throughout	 
the process. The Web site for IRS's Innocent Spouse Program--part
of IRS's agency wide Web site--went on-line in December 1999 to  
help taxpayers determine their eligibility for innocent spouse	 
relief. Because IRS has not evaluated the Web site, the agency	 
does not know how useful the Web site has been to taxpayers in	 
determining their eligibility for innocent spouse relief.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-558 					        
    ACCNO:   A03140						        
  TITLE:     Tax Administration: IRS's Innocent Spouse Program	      
Performance Improved; Balanced Performance Measures Needed	 
     DATE:   04/24/2002 
  SUBJECT:   Income taxes					 
	     Internal controls					 
	     Program evaluation 				 
	     Tax administration 				 
	     Tax law						 
	     Tax returns					 
	     Taxpayers						 
	     Web sites						 
	     IRS Examination Case Reporting System		 
	     IRS Innocent Spouse Program			 
	     IRS Innocent Spouse Tax Relief			 
	     Eligibility Explorer Web Site			 
                                                                 
	     IRS Innocent Spouse Tracking System		 
	     IRS Work Planning and Control System		 
	     IRS Integrated Case Processing System		 


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GAO-02-558
     
Report to the Chairman and Ranking Minority Member, Committee on Finance, U.
S. Senate

United States General Accounting Office

GAO

April 2002 TAX ADMINISTRATION

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

GAO- 02- 558

Page i GAO- 02- 558 Innocent Spouse Program Letter 1

Results in Brief 2 Background 3 Objectives, Scope, and Methodology 6 IRS Is
Gaining Control over Its Innocent Spouse Workload but Has

Not Developed Balanced Measures 8 IRS?s Procedures for Transferring Tax
Liabilities Conform to

Applicable Guidance 21 IRS Established an Innocent Spouse Web Site to
Educate

Taxpayers but Has Not Assessed Its Usefulness 22 Conclusions 24
Recommendations for Executive Action 25 Agency Comments and Our Evaluation.
25

Appendix I Few Innocent Spouse Cases Litigated in Federal Courts

27 Courts Generally Upheld All or Part of IRS?s Determinations 27

Appendix II Innocent Spouse Cases Scheduled for Court That Were Settled by
IRS?s Appeals Office and Treasury?s Counsel30

Appendix III IRS?s Innocent Spouse Eligibility Requirements 32

Appendix IV Number and Types of Innocent Spouse Cases Not Meeting
Eligibility Requirements, March 1999- September 2001 34

Appendix V Average Days for Innocent Spouse Determinations, Fiscal Years
1999- 2001 35

Appendix VI Summary of Decided Innocent Spouse Cases, Fiscal Years 1999-
2001 36 Contents

Page ii GAO- 02- 558 Innocent Spouse Program Appendix VII Comments from the
Internal Revenue Service 37

Tables

Table 1: Innocent Spouse Program FTE Staffing, Fiscal Years 2000- 200310
Table 2: IRS Inventory Model Projections for Fiscal Years 2002 and

200313 Table 3: IRS?s Quality Review Results, Fiscal Years 2000- 2001 14
Table 4: Innocent Spouse Cases Received and Decided, Fiscal

Years 1999- 2001 15 Table 5: Cases Decided by Location and FTEs Applied,
Fiscal Years

1999- 2001 16 Table 6: Average Days for IRS to Decide and Close an Innocent

Spouse Case, Fiscal Years 1999- 2001 18 Table 7: Number and Disposition of
Innocent Spouse Cases

Litigated in U. S. Tax Court, June 1996- June 2001 28 Table 8: Number and
Disposition of Innocent Spouse Cases

Litigated in the Federal Circuit Courts, June 1996- June 200129 Table 9:
Number and Disposition of Docketed Innocent Spouse

Cases Settled by IRS?s Office of Appeals and Treasury?s Office of Chief
Counsel, Fiscal Years 1999- May 2001 31 Table 10: IRS?s Innocent Spouse
Eligibility Requirements 32 Table 11: Number and Types of Innocent Spouse
Cases Not

Meeting Eligibility Requirements, March 1999- September 200134 Table 12:
Average Days For Determinations Made in Fiscal Years

1999- 2001 (regardless of year that case was received) 35 Table 13: Summary
of Decided Innocent Spouse Cases, Fiscal

Years 1999 2001 36

Page iii GAO- 02- 558 Innocent Spouse Program Abbreviations

FTE full- time equivalent ICP integrated case processing IRS Internal
Revenue Service ISTS Innocent Spouse Tracking System SB/ SE Small Business/
Self- Employed TIGTA Treasury Inspector General for Tax Administration TRR
taxpayer resolution representative W& I Wage and Investment

Page 1 GAO- 02- 558 Innocent Spouse Program

April 24, 2002 The Honorable Max Baucus Chairman The Honorable Charles E.
Grassley Ranking Minority Member Committee on Finance United States Senate

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

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

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

To address these objectives, we reviewed and analyzed Innocent Spouse
Program data from IRS?s Innocent Spouse Tracking System (ISTS) and
management reports, and we reviewed related policies, procedures, and
guidance. We interviewed IRS officials responsible for managing the Innocent
Spouse Program as well as officials in IRS?s National Taxpayer Advocate
Service Office and Electronic Tax Administration Office and in the U. S.
Department of the Treasury?s (Treasury) Office of Chief Counsel. We reviewed
reports by the Treasury Inspector General for Tax

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 558 Innocent Spouse Program

Administration (TIGTA) and the taxpayer advocate that addressed innocent
spouse issues. We focused on program operations that cover the period March
1999 through December 2001, because this period best reflected the program?s
results after the Restructuring Act?s changes and because it covers the
period for which performance data were most recently available. Our scope
and methodology are discussed in more detail in a separate section of this
report.

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

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

IRS?s procedures conform to applicable guidance for transferring tax
liabilities from joint tax accounts to individual tax accounts when innocent
spouse relief has been granted. The procedures follow federal internal
control guidelines by requiring a mix of checks, verifications, Results in
Brief

Page 3 GAO- 02- 558 Innocent Spouse Program

reconciliations, and documentation to support steps throughout the process.
If IRS employees perform the required tasks, the tax liabilities should be
accurately transferred from taxpayers? joint tax accounts to their
individual tax accounts. The taxpayer advocate?s staff said that IRS?s
procedures appeared adequate and should resolve the past problems of
monitoring taxpayers? accounts after the liabilities were transferred.

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

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

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

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

Page 4 GAO- 02- 558 Innocent Spouse Program

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

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

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

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

IRS processes innocent spouse cases on the basis of proposed regulations
issued in January 2001, which set forth the basic guidelines that its
examiners are to use in evaluating taxpayers? cases to determine whether to
grant or deny relief. IRS?s Wage and Investment (W& I) Division is
responsible for managing this program. Under procedures adopted in fiscal
year 2001, virtually all innocent spouse cases are to be processed by
correspondence at IRS?s Centralized Innocent Spouse Operation (Cincinnati
processing site) in Covington, Kentucky. Generally, only those

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

Page 5 GAO- 02- 558 Innocent Spouse Program

cases needing face- to- face contact or that arise in the field are to be
handled by field staff, generally tax compliance officers and revenue agents
in IRS?s Small Business/ Self- Employed (SB/ SE) Division. As discussed
later in this report, IRS is phasing in new W& I field staff to work cases
needing face- to- face contact with taxpayers.

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

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

2 Generally, the appeal procedures would not apply when IRS fully approves
the taxpayer?s request for relief from the tax liability. 3 The requesting
spouse may file a petition with the U. S. Tax Court for a review of the case
or may pay the tax deficiency and file a claim for refund in the U. S. Court
of Federal Claims or U. S. District Court.

Page 6 GAO- 02- 558 Innocent Spouse Program

waives these rights and accepts IRS?s decision. At that time, IRS is
required to notify the nonrequesting spouse of the final result.

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

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

To determine whether IRS?s efforts to process cases timely, accurately, and
consistently were resulting in changes in program performance, we also
obtained and analyzed ISTS data from March 1999 to December 2001 regarding
the number of innocent spouse cases that IRS received and resolved and their
average case- processing times. We performed limited accuracy checks on the
ISTS database. In September 2001, TIGTA recommended that IRS strengthen its
controls over data in the ISTS. IRS subsequently implemented corrective
actions to help ensure the accuracy and validity of the ISTS data, including
correcting data from prior years. The database that we used reflected these
corrections. We did not test the reliability of the other IRS databases used
in our analysis- the Examination Case Reporting System and the Work Planning
and Control

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

and Methodology

Page 7 GAO- 02- 558 Innocent Spouse Program

System- that maintain data on staff hours applied to examination programs,
including innocent spouse case processing. We analyzed the direct staff
hours 5 that IRS staff charged to conduct case evaluations for fiscal years
2000 and 2001. IRS did not have complete information for earlier periods.

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

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

To determine the number and disposition of innocent spouse cases filed in U.
S. federal courts, we obtained information from staff at Treasury?s Office
of Chief Counsel that identified court decisions on innocent spouse cases
compiled from the LexisNexis database 7 for the period June 1996 to June
2001. The compilation excluded those cases that addressed only

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

6 U. S. General Accounting Office, Internal Control Management and
Evaluation Tool,

GAO- 01- 1008G (Washington, D. C.: Aug. 1, 2001). 7 The LexisNexis group of
databases provides various types of information, including legal, tax, and
regulatory information, to legal, corporate, government, and academic
markets.

Page 8 GAO- 02- 558 Innocent Spouse Program

procedural issues such as whether a court had jurisdiction to hear the case.
We also obtained information that was complied from IRS?s Office of Appeals
database on innocent spouse cases scheduled for trial that were settled by
the Office of Appeals or Treasury?s Office of Chief Counsel from fiscal year
1999, when IRS began tracking these data, through May 2001.

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

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

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

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

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

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

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

 measuring the quality of case decision making, including adherence to
procedures and the accuracy of decisions. IRS Is Gaining Control

over Its Innocent Spouse Workload but Has Not Developed Balanced Measures

Page 9 GAO- 02- 558 Innocent Spouse Program

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

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

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

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

Specialized Staffing

Page 10 GAO- 02- 558 Innocent Spouse Program

Table 1: Innocent Spouse Program FTE Staffing, Fiscal Years 2000- 2003 2000
2001 2002 2003 FTE Percentage FTE Percentage FTE Percentage FTE Percentage

SB/ SE 768 87 593 80 258 58 72 30 W& I 119 13 152 20 184 42 165 70

Total 887 100 745 100 442 100 237 100

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

Legend: FTE = full- time equivalent; SB/ SE = Small Business/ Self- Employed
Division; W& I = Wage and Investment Division.

Source: IRS.

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

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

Beginning in fiscal year 2002, IRS is using W& I Division taxpayer
resolution representatives (TRRs) to process field cases requiring face-
toface contact with the taxpayers. TRRs are to perform a variety of services
at IRS field locations throughout the country. By using the W& I Division?s
TRRs, the innocent spouse project manager hopes to further reduce

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

Page 11 GAO- 02- 558 Innocent Spouse Program

reliance on the SB/ SE Division?s field staff. Program officials said that
their lack of control over SB/ SE field staff was one reason why field cases
take longer to resolve than cases processed centrally. IRS expects that TRR
involvement in the program will be minimal, as the agency expects to process
95 percent of the cases centrally during fiscal year 2003. As of February
2002, IRS projected that 11 TRR FTEs will be used in the Innocent Spouse
Program in fiscal year 2002 and only 3 FTEs in fiscal year 2003.

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

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

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

and Case- Building Tool

Model for Estimating Future Workloads and Staffing Needs

Page 12 GAO- 02- 558 Innocent Spouse Program

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

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

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

Page 13 GAO- 02- 558 Innocent Spouse Program

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

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

Beginning inventory 52,093 29,810 Plus receipts Cincinnati processing site
50,141 50,141 Field offices 1,968 1,968 Cases to be worked 104,202 81,919
Less dispositions Cincinnati processing site Ineligible cases 23,244 23,244
Net Dispositions 34,061 27,570 Field Net dispositions 17,087 1,974 Ending
inventory 29,810 29,131

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

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

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

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

Page 14 GAO- 02- 558 Innocent Spouse Program

required process steps is expected to lead to better IRS decisions about the
requested relief. The accuracy of decisions is reviewed to provide IRS data
on the accuracy and consistency of decisions made in the diverse offices
handling innocent spouse cases.

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

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

Table 3: IRS?s Quality Review Results, Fiscal Years 2000- 2001 Fiscal year
Concurrence rate

with granted cases, % Concurrence rate with denied cases, % Combined

results, %

2000 75.6 88.3 82.3 2001 75.8 92.4 82.5

Source: IRS?s Quality Review Results.

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

Table 4 shows that for the first year since the Restructuring Act was
passed, IRS reached a decision on more cases than it received. IRS Effect of
IRS?s Initiatives

on Timeliness, Accuracy, and Consistency

Page 15 GAO- 02- 558 Innocent Spouse Program

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

Table 4: Innocent Spouse Cases Received and Decided, Fiscal Years 1999- 2001
Fiscal year Cases received Cases decided a Cases not decided

1999 44,469 8, 899 35,570 2000 57,633 53,431 39,772 2001 50,840 61,423
29,189

Total 152,942 123,753

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

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

IRS opens a case for each tax period for which relief is sought. IRS
estimates that, on average, each taxpayer files 1.9 cases. Thus, the number
of taxpayers involved is slightly less than half the number of cases shown
in this table. a ?Cases decided? includes IRS?s determinations of
ineligibility and determinations to grant full, partial, or no relief. Cases
decided include cases received in any year. Source: IRS?s Innocent Spouse
Tracking System database as of December 31, 2001.

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

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

Page 16 GAO- 02- 558 Innocent Spouse Program

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

decided Percentage

of cases decided

Cases decided per FTE

Average cases decided per FTE

1999 Cincinnati processing site

5,477 62 NA Field offices 3, 422 38 NA 2000 Cincinnati

processing site

27,783 52 233 Field offices 25,648 48 33

60 2001 Cincinnati

processing site

40,516 66 267 Field offices 20,907 34 35

82 Notes: NA means that data were not available. IRS opens a case for each
tax period for which relief is sought. IRS estimates that, on average, each
taxpayer files 1.9 cases. Thus, the number of taxpayers involved is slightly
less than half the number of cases shown in this table.

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

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

To some extent, IRS also was able to reach decisions on more innocent spouse
cases than it received in fiscal year 2001 because the portion of innocent
spouse cases it receives that are not eligible for relief has been
increasing. As a percentage of cases received, those determined to be
ineligible rose from about 13 percent in fiscal year 1999 to 45 percent in
fiscal year 2000 and to 56.5 percent in fiscal year 2001. Most requests for
innocent spouse relief that are not eligible- for instance, because the
taxpayers did not file a joint return in the year for which relief is
requested- are identified during screenings at the Cincinnati processing

Page 17 GAO- 02- 558 Innocent Spouse Program

site. Officials estimated that, on average, staff who screen cases at the
Cincinnati site need about 30 minutes per case to determine whether a
taxpayer?s request meets the basic eligibility requirements. In general, 80
percent or more of the cases found to be ineligible for relief are
identified during case screening; the remainder are found to be ineligible
during case processing either at the Cincinnati site or by field staff.

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

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

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

Page 18 GAO- 02- 558 Innocent Spouse Program

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

Fiscal year Location Cases decided

Average days from case

receipt to decision

Average days from case

receipt to closure

1999 Cincinnati processing site 5,477 88 91 Field offices 3,422 187 183
Locations combined 8,899 126 107 2000 Cincinnati

processing site 27,783 110 129 Field offices 25,648 339 409 Locations
combined 53,431 220 242 2001 Cincinnati

processing site 40,516 176 189 Field offices 20,907 442 604 Locations
combined 61,423 266 363

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

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

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

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

Page 19 GAO- 02- 558 Innocent Spouse Program

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

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

The W& I strategic plan has only one explicit performance measure for the
Innocent Spouse Program, the number of cases closed in a fiscal year, which
reflects only the business results quantity component of IRS?s balanced
approach to measuring performance. Data for the number of cases closed
provides some useful information on the performance of the program. However,
this one measure fails to address other dimensions of performance. For
example, it does not address timeliness and quality, which relate both to
business results and to the customer satisfaction component of IRS?s
balanced approach. Striving to achieve a specific number of case closings in
a year could come at the expense of higherquality decisions, which is why
IRS?s performance management system

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

Management Could Be Enhanced with More Balanced Performance Measures and
Targets

Page 20 GAO- 02- 558 Innocent Spouse Program

stresses the need for balanced performance measures. Although timeliness and
quality measures and targets have not been adopted for the Innocent Spouse
Program, the W& I strategic plan for fiscal years 2001 to 2003 recognizes
that a measure of timeliness is needed and states that IRS is to establish
such a measure.

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

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

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

Page 21 GAO- 02- 558 Innocent Spouse Program

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

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

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

IRS?s procedures for transferring tax liabilities in innocent spouse cases
employ a variety of processes to control for accuracy and completeness. For
example, IRS requires that the document with the final authorizing signature
approving the taxpayer?s request for relief be the key document used to
start the transfer process. The procedures require that an employee who was
not involved in deciding the case perform edit checks and verify the
information on the approval document by comparing it with the taxpayer?s
account information. Further, IRS procedures require that a worksheet be
prepared to document, verify, review, and reconcile the accuracy of account
adjustments before any changes are made to the tax accounts. The worksheet
is required to include specific instructions for

11 U. S. General Accounting Office, Internal Control Management and
Evaluation Tool,

GAO- 01- 1008G (Washington, D. C.: Aug. 1, 2001). IRS?s Procedures for

Transferring Tax Liabilities Conform to Applicable Guidance

Page 22 GAO- 02- 558 Innocent Spouse Program

the data entry personnel to use when making the tax account adjustments,
such as the exact dollar amount of tax liability to be transferred from the
joint account to a separate, individual account and the specific transaction
codes required by IRS?s information systems to enter the changes. Staff are
required to include documentation in the case files as evidence that the
required tasks were completed. The procedures require that Accounting staff
from a separate unit verify, reconcile, and record tax account adjustments
in a journal before they are made. After the adjustments are made, Customer
Account Service staff are to certify that the adjustments were made in
accordance with IRS?s guidelines.

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

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

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

Innocent Spouse Web Site to Educate Taxpayers but Has Not Assessed Its
Usefulness

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

Page 23 GAO- 02- 558 Innocent Spouse Program

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

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

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

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

Spouse Web Site Will Provide Some, But Not Sufficient, Information

Page 24 GAO- 02- 558 Innocent Spouse Program

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

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

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

12 Charles R. McClure, J. Timothy Sprehe, Sprehe, and Kristen Eschenfelder,
Performance Measures for Federal Agency Web Sites: Final Report to
Sponsoring Agencies

(Washington, D. C: Defense Technical Information Center, Energy Information
Administration, 2000). Conclusions

Page 25 GAO- 02- 558 Innocent Spouse Program

measures and target levels for performance should not be burdensome for this
relatively small IRS program.

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

We recommend that the commissioner of internal revenue

 establish balanced performance measures and targets for the Innocent
Spouse Program and

 evaluate the Innocent Spouse Program Web site?s usefulness to taxpayers.

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

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

As we agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from its issue date. We will then send copies of the report to the
Recommendations for

Executive Action Agency Comments and Our Evaluation.

Page 26 GAO- 02- 558 Innocent Spouse Program

commissioner of internal revenue and other interested parties. We will make
copies available to others who request them.

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

Michael Brostek Director, Tax Issues

Appendix I: Few Innocent Spouse Cases Litigated in Federal Courts

Page 27 GAO- 02- 558 Innocent Spouse Program

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

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

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

Litigated in Federal Courts Courts Generally Upheld All or Part of IRS?s
Determinations

Appendix I: Few Innocent Spouse Cases Litigated in Federal Courts

Page 28 GAO- 02- 558 Innocent Spouse Program

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

Disposition Calendar year Number of

cases Upheld

denial of relief

Overturned denial of

relief Partial decisions a

1996 12 7 2 3 1997 21 16 4 1 1998 6 3 1 2 1999 2 2 0 0 2000 6 3 2 1 2001 7 3
4 0

Total 54 34 13 7 Percentage of total 63 24 13

Note: Table excludes eleven cases that dealt only with innocent spouse
procedural issues and not the merits of innocent spouse relief. a Partial
decisions denote cases in which the U. S. Tax Court agreed with a portion of
IRS?s preliminary

determination of relief. Source: LexisNexis research results from Treasury?s
Office of Chief Counsel.

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

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

Appendix I: Few Innocent Spouse Cases Litigated in Federal Courts

Page 29 GAO- 02- 558 Innocent Spouse Program

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

Disposition Calendar year/ court Upheld

denied relief Overturned

denied relief Partial

decision 1996

U. S. Bankruptcy Court, Northern District of Ohio 1 1 U. S. Bankruptcy
Court, Eastern District of Tennessee 1 U. S. Court of Appeals for the Ninth
Circuit 1 1

1997

U. S. Bankruptcy Court, New Hampshire District 1 U. S. Court of Appeals for
the Second District 1 U. S. Court of Appeals for the Fifth District 1 U. S.
Court of Appeals for the Sixth District 1 U. S. Court of Appeals for the
Ninth Circuit 1 U. S. Court of Appeals for the Tenth Circuit 1

1998

U. S. Bankruptcy Court, Southern District of New York 1

1999

U. S. Court of Appeals for the Fourth Circuit 1 U. S. Court of Appeals for
the Sixth Circuit 1 U. S. Bankruptcy Court, Northern District of Ohio 1 U.
S. Court of Appeals for the Tenth Circuit 1

2000

U. S. Court of Appeals for the Ninth Circuit 1 U. S. Bankruptcy Court,
Eastern District of Oklahoma 1 U. S. Bankruptcy Court, Middle District of
Florida 1

Total cases 11 6 2

Notes: Table excludes eight cases that dealt with innocent spouse procedural
issues and not with merits of innocent spouse relief.

No innocent spouse cases were litigated in federal courts in 2001. a Partial
decisions denote cases in which the court agreed with a portion of IRS?s
position on the issue of innocent spouse relief. Source: LexisNexis research
results from Treasury?s Office of Chief Counsel.

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

Page 30 GAO- 02- 558 Innocent Spouse Program

According to IRS, most docketed 1 innocent spouse cases are settled before
going to trial. IRS?s Office of Appeals (Appeals) and Treasury?s Office of
Chief Counsel (Counsel) work with taxpayers to resolve the cases out of
court. IRS officials stated that the primary mission of Appeals is to
resolve tax controversies, without litigation, on a basis that is fair and
impartial to both the government and the taxpayer and in a manner that will
enhance voluntary compliance and public confidence.

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

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

1 A petition filed with the court and accepted by the court for review
becomes a docketed case. Appendix II: Innocent Spouse Cases

Scheduled for Court That Were Settled by IRS?s Appeals Office and Treasury?s
Counsel

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

Page 31 GAO- 02- 558 Innocent Spouse Program

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

Settlement disposition Office/ fiscal year All

settlements Liability

reduced to zero Liability

reduced Liability

not changed IRS Office of Appeals

FY 1999 27 14 10 3 FY 2000 90 49 31 10 FY 2001 62 37 18 7

Total 179 100 59 20 Treasury, Office of Chief Counsel

FY 1999 5 3 1 1 FY 2000 17 6 7 4 FY 2001 15 11 4 0

Total 37 20 12 5 Combined total 216 120 71 25 Percentage of combined total
55% 33% 12%

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

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

Appendix III: IRS?s Innocent Spouse Eligibility Requirements

Page 32 GAO- 02- 558 Innocent Spouse Program

Table 10: IRS?s Innocent Spouse Eligibility Requirements Factors

Innocent spouse relief (Section 6015( b) a ) Allocation of liability

(Section 6015( c) a ) Equitable relief

(Section 6015( f) a ) Equitable relief in

community property states b (Section 66( c) a )

Type of return Joint Joint Joint c Married filing separately Type of
liability Deficiency Deficiency Deficiency or underpayment Deficiency or

underpayment Special requirements Relief under section 6015( b) and

section 6015( c) not available c Liability remains unpaid except for amounts
meeting requirements for refunds listed here c Refunds (Normal refund
statute (RSED) controls)

Refunds available No refunds Refunds available for amounts paid between July
22, 1998, and April 15, 1999, and for amounts paid under an installment
agreement (if not defaulted) after July 22, 1998, or date that Form 8857 was
filed, whichever is later Marital status Marital status

considered as an equitable factor

Must be divorced or widowed, legally separated, OR not living together for
at least 12 months prior to the election

Marital status considered as an equitable factor Knowledge Taxpayer must

establish that he or she had no knowledge OR reason to know

IRS must establish that taxpayer had actual

knowledge of deficiency items

Knowledge considered as an equitable factor Equity Inequitable to hold

taxpayer liable: consider all facts and circumstances

Inequitable to hold taxpayer liable: consider all facts and circumstances

Required factors- Tier I

Tier I cases Relief ordinarily granted if all 4 factors met: 1. Underpayment
2. Taxpayer is no longer married, is legally separated, OR has not lived
with spouse for 12 months prior to request 3. Taxpayer had no knowledge of,
or reason to know, when return was signed 4. Taxpayer will suffer economic
hardship if relief not granted List of partial factors- Tier II Tier II
cases- underpayment and deficiency

Factors weighing in favor of relief: 1. Marital status (same as 6015( c)) 2.
Economic hardship (defined in Regs. sect. 301.6343- 1( b)( 4)) 3. Abuse (but not
duress) 4. No knowledge or reason to know that liability would not be paid
(for underpayment) or of item (for deficiency) 5. Nonrequesting spouse?s
legal obligation (not positive factor if knowledge nonrequesting spouse
would not pay when decree or agreement was signed) 6. Liability solely
attributable to nonrequesting spouse

Appendix III: IRS?s Innocent Spouse Eligibility Requirements

Appendix III: IRS?s Innocent Spouse Eligibility Requirements

Page 33 GAO- 02- 558 Innocent Spouse Program

Factors Innocent spouse

relief (Section 6015( b) a ) Allocation of liability

(Section 6015( c) a ) Equitable relief

(Section 6015( f) a ) Equitable relief in

community property states b (Section 66( c) a )

Factors weighing against relief: 1. Liability attributable to requesting
spouse 2. Knowledge or reason to know (extremely strong factor) 3.
Significant benefit 4. Lack of economic hardship 5. Noncompliance with
federal income tax laws 6. Requesting spouse?s legal obligation

Fraud Fraud is a consideration in equity determination

Election invalid if IRS shows taxpayer transferred assets as part of a
fraudulent scheme

Relief not available if 1. return was fraudulent c 2. assets were
transferred as part of fraudulent scheme c

Disqualified assets transferred for avoidance of tax or payment of tax

Transfer of disqualified assets is a consideration in equity determination

Amount of allocation is increased by value of disqualified assets

Relief not available to extent of value of any disqualified assets c Time
for filing Two years from

first collection activity after July 22, 1998 d

2 years from 1st collection activity after July 22, 1998 d

Two years from first collection activity after July 22, 1998 c, d
Consideration in courts Tax Court; if

liability fully paid, District Court or Court of Federal Claims

Tax Court Tax Court review under IRS?s ?abuse of discretion? standard (Note:
Section 66( c) cases may go to Tax Court only through deficiency
proceedings)

a Relief is available only for amounts unpaid as of July 22, 1998, and
amounts arising after July 22, 1998. Section 6013( e) criteria that are
similar but more restrictive than section 6015( b) criteria apply for
amounts paid prior to July 22, 1998. b There are nine community property
states- Arizona, California, Idaho, Louisiana, Nevada, New

Mexico, Texas, Washington, and Wisconsin. c This criterion is part of seven
threshold conditions for section 6015( f) relief and part of 5 threshold
conditions for section 66( c) relief. d Collection activities that put the
taxpayer on notice that IRS intends to collect the tax from the

taxpayer (e. g., levy, seizure, refund offset, judicial suit, claim).
Source: IRS.

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

Page 34 GAO- 02- 558 Innocent Spouse Program

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

Reason for not meeting eligibility requirements Number Percentage

Incorrect filing status- no joint return 18,456 30.6 Collection statute
expired 8, 004 13.3 Tax paid in full- no refund requested at filing 6, 882
11.4 Tax paid in full- no refund requested while claim pending 4,839 8.0 No
return filed 4, 808 8.0 Unable to process 4, 716 7.8 Claim withdrawn 4, 074
6.7 Injured spouse 3,971 6.6

Subtotal 55,750 92.5

All other reasons 4, 522 7.5

Total 60,272 100.0

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

Source: IRS?s Innocent Spouse Tracking System.

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

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

Page 35 GAO- 02- 558 Innocent Spouse Program

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

FY 1999 a FY 2000 FY 2001 All determinations

Number of cases 8, 899 53,431 61,423 Average days 126 220 266

Cases not meeting eligibility requirements

Number of cases 5, 552 25,987 28,733 Average days 86 125 157

Cases meeting eligibility requirements Full relief granted

Number of cases 1, 466 11,739 9, 742 Average days b 193 318 382

Partial relief granted

Number of cases 201 2,282 3,058 Average days b 222 324 375

Denied relief

Number of cases 1, 680 13,423 19,890 Average days b 188 300 350 Note: IRS
opens a case for each tax period for which relief is sought. IRS estimates
that, on average, each taxpayer files 1.9 cases. Thus, the number of
taxpayers involved is slightly less than half the number of cases shown in
this table. a Fiscal year 1999 includes March 1999 through September 1999.

b Average days represent the time that IRS takes to make a decision on a
case and do not include all case closure times. Legend: FY = fiscal year.
Source: IRS?s Innocent Spouse Tracking System database as of September 30,
2001.

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

Spouse Determinations, Fiscal Years 1999- 2001

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

Page 36 GAO- 02- 558 Innocent Spouse Program

Table 13: Summary of Decided Innocent Spouse Cases, Fiscal Years 1999 2001
Cincinnati IRS field offices Total Cases Percentage Cases Percentage Cases
Percentage

Decision by IRS Ineligible 48,324 66 11,948 24 60,272 49 Eligible 25,452 34
38,029 76 63,481 51 Total decisions 73,776 100 49,977 100 123,753 100
Disposition of eligible cases Full relief 5,639 22 17,308 46 22,947 36
Partial relief 2, 365 9 3, 176 8 5,541 9 Denied relief 17,448 69 17,545 46
34,993 55

Total 25,452 100 38,029 100 60,272 100

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

Source: IRS Innocent Spouse Tracking System .

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

Appendix VII: Comments from the Internal Revenue Service

Page 37 GAO- 02- 558 Innocent Spouse Program

Appendix VII: Comments from the Internal Revenue Service

Appendix VII: Comments from the Internal Revenue Service

Page 38 GAO- 02- 558 Innocent Spouse Program

Appendix VII: Comments from the Internal Revenue Service

Page 39 GAO- 02- 558 Innocent Spouse Program (440058)

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