Taxpayer Advocate Service: Caseload Has Grown and Taxpayers	 
Report Being Satisfied, but Additional Measures of Efficiency and
Effectiveness Are Needed (22-FEB-07, GAO-07-156).		 
                                                                 
Congress created the Taxpayer Advocate Service (TAS) to assist	 
taxpayers in resolving problems with the Internal Revenue Service
(IRS) and to propose changes to IRS's practices to mitigate	 
problems affecting taxpayers in general. TAS uses case advocacy  
and systemic advocacy, respectively, to address these two goals. 
GAO was asked to address (1) why TAS's caseload has increased	 
since 2004, (2) how well TAS conducted its case advocacy	 
activities in terms of measures such as customer satisfaction and
quality, and (3) how well TAS measures and reports its systemic  
advocacy efforts. GAO interviewed TAS and IRS managers and other 
staff, reviewed TAS and IRS documents, and analyzed TAS and IRS  
data.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-156 					        
    ACCNO:   A66104						        
  TITLE:     Taxpayer Advocate Service: Caseload Has Grown and	      
Taxpayers Report Being Satisfied, but Additional Measures of	 
Efficiency and Effectiveness Are Needed 			 
     DATE:   02/22/2007 
  SUBJECT:   Customer service					 
	     Federal taxes					 
	     Income taxes					 
	     Performance measures				 
	     Program evaluation 				 
	     Reporting requirements				 
	     Standards						 
	     Surveys						 
	     Tax administration 				 
	     Tax administration systems 			 
	     Tax law						 
	     Tax refunds					 
	     Taxpayers						 
	     Work measurement					 
	     Policies and procedures				 
	     IRS Low-Income Taxpayer Clinic Program		 
	     IRS Taxpayer Advocate Management			 
	     Information System 				 
                                                                 

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GAO-07-156

   

     * [1]Results in Brief
     * [2]Background
     * [3]Growth in TAS's Caseload since Fiscal Year 2004 Correlates w

          * [4]TAS's Caseload Increased Significantly in Fiscal Years 2005
          * [5]Growth in TAS's Caseload since Fiscal Year 2004 Was Correlat
          * [6]Other Factors Have Also Been Cited as Contributing to TAS's

     * [7]Taxpayers Report Being Satisfied, and Quality Improved in Mo

          * [8]Taxpayers Report Being Satisfied, and Case Quality Improved
          * [9]TAS Does Not Measure True Case Advocacy Efficiency or Cost
          * [10]TAS and IRS Are Working Jointly to Improve Coordination

     * [11]TAS Does Not Measure the Effectiveness of Systemic Advocacy,

          * [12]TAS Is Piloting Process to Measure the Effectiveness of Syst
          * [13]Annual Report to Congress Omits Important Information about

               * [14]Report Does Not Include the Status of All Legislative
                 Recomm
               * [15]IRS Actions in Response to TAS Recommendations Are
                 Unclear
               * [16]TAS Does Not Explain Why Most Serious Problems Are
                 Different

     * [17]Conclusions
     * [18]Recommendations for Executive Action
     * [19]Agency Comments and Our Evaluation
     * [20]Appendix I: Objectives, Scope, and Methodology
     * [21]Appendix II: Process for Creating Immediate Interventions an

          * [22]Immediate Interventions
          * [23]Systemic Advocacy Projects

     * [24]Appendix III: Information to Be Included in the National Tax
     * [25]Appendix IV: Taxpayer Advocate Service Process for Selecting
     * [26]Appendix V: Low-Income Taxpayer Clinic (LITC) Grant Program
     * [27]Appendix VI: Number of Taxpayer Advocate Service Cases by Pr
     * [28]Appendix VII: Types of Taxpayer Advocate Service (TAS) Cases
     * [29]Appendix VIII: Taxpayer Advocate Service Customer Satisfacti
     * [30]Appendix IX: Comments from the National Taxpayer Advocate

          * [31]Order by Mail or Phone

Report to the Committee on Finance, U.S. Senate

United States Government Accountability Office

GAO

February 2007

TAXPAYER ADVOCATE SERVICE

Caseload Has Grown and Taxpayers Report Being Satisfied, but Additional
Measures of Efficiency and Effectiveness Are Needed

GAO-07-156

Contents

Letter 1

Results in Brief 3
Background 4
Growth in TAS's Caseload since Fiscal Year 2004 Correlates with Increases
in IRS Enforcement Activity 12
Taxpayers Report Being Satisfied, and Quality Improved in Most Years, but
TAS Lacks Measures of Efficiency and Cost 22
TAS Does Not Measure the Effectiveness of Systemic Advocacy, and Reporting
on Systemic Issues Is Not as Useful as It Could Be 30
Conclusions 35
Recommendations for Executive Action 36
Agency Comments and Our Evaluation 36
Appendix I Objectives, Scope, and Methodology 38
Appendix II Process for Creating Immediate Interventions and Systemic
Advocacy Projects 41
Appendix III Information to Be Included in the National Taxpayer
Advocate's Annual Report to Congress 45
Appendix IV Taxpayer Advocate Service Process for Selecting Problems to
Include in the Annual Report to Congress 46
Appendix V Low-Income Taxpayer Clinic (LITC) Grant Program 47
Appendix VI Number of Taxpayer Advocate Service Cases by Primary Issue
Code, Fiscal Years 2002-6 49
Appendix VII Types of Taxpayer Advocate Service (TAS) Cases That Increased
by More than 1,000 in Fiscal Years 2005 and 2006 53
Appendix VIII Taxpayer Advocate Service Customer Satisfaction Survey
Results 55
Appendix IX Comments from the National Taxpayer Advocate 56

Tables

Table 1: TAS Budget and FTE Staff Years, Fiscal Years 2001-6 12
Table 2: Number of TAS Cases by Categories of Issues, Fiscal Years 2002-6
17
Table 3: Increase in Non-Criterion-7 TAS Caseload Compared to Increase in
Criterion-7 Cases 21
Table 4: TAS Performance Measure Goals and Results 22
Table 5: TAS Quality Standards and Point Values 23
Table 6. Overview of Our Assessment of TAS's Case Advocacy Measures 25
Table 7: TAS 2005 Annual Report to Congress Table Summarizing Status of
the Advocate's Legislative Recommendations; Actions Taken by the 109th
Congress 32
Table 8: Comparison of the Most Serious Problems Included in 2005 Annual
Report to Those in Previous Reports 34
Table 9: Types of TAS Cases That Increased by More than 1,000 Cases in
Fiscal Year 2005 53
Table 10: Types of TAS Cases That Increased by More than 1,000 Cases in
Fiscal Year 2006 54
Table 11: Summary of Taxpayer Advocate Service (TAS) Customer Satisfaction
Scores: Fiscal Year 2005 55

Figures

Figure 1: Primary TAS Functions 7
Figure 2: Overview of Case Advocacy Process 9
Figure 3: TAS Case Receipts and Cases Closed, Fiscal Years 2002-6 13
Figure 4: Individual IRS Examinations 16
Figure 5: Enforcement Revenue Collected 16
Figure 6: Changes in IRS and TAS CI Cases 18
Figure 7: Changes in IRS and TAS Levy Cases 19
Figure 8: Changes in IRS and TAS Lien Cases 20

Abbreviations

ACS Automated Collection System
AMT Alternative Minimum Tax
CI Criminal Investigation
EITC Earned Income Tax Credit
ESL English as a Second Language
FTE Full-time Equivalent
IRM Internal Revenue Manual
IRS Internal Revenue Service
LITC Low Income Taxpayer Clinic
OAR Operations Assistance Request
OMB Office of Management and Budget
PART Program Assessment Rating Tool
PRP Problem Resolution Program
QRP Questionable Refund Program
SAMS Systemic Advocacy Management System
SB/SE Small Business/Self Employed Division
TAMIS Taxpayer Advocate Management Information System
TAO Taxpayer Assistance Order
TAP Taxpayer Advocacy Panel
TAS Taxpayer Advocate Service
the Advocate National Taxpayer Advocate
TIGTA Treasury Inspector General for Tax Administration
W&I Wage and Investment Division

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separately.

United States Government Accountability Office
Washington, DC 20548

February 22, 2007

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

In response to concerns about the Internal Revenue Service's (IRS)
handling of taxpayers' problems, Congress created the Taxpayer Advocate
Service (TAS). TAS was designed to be largely independent of the rest of
IRS and able to promptly and fairly handle taxpayer problems not resolved
through normal IRS channels. TAS divides its work into two primary
functions: assisting taxpayers in resolving individual problems with IRS,
called case advocacy, and proposing administrative and legislative changes
to mitigate problems affecting groups of taxpayers, called systemic
advocacy.

TAS deals with a range of taxpayer problems including delays in cases,
lost payments, and economic hardship (for example, when a refund check
needs to be expedited). In fiscal year 2006 TAS assisted over 240,000
taxpayers, or about 0.2 percent of all individual tax return filers.
Between fiscal years 2004 and 2006, TAS's case advocacy caseload has grown
substantially, increasing by 43 percent. Such growth matters for at least
two reasons. First, it may be an indicator of TAS and IRS performance at
preventing and resolving taxpayer problems. Second, it is relatively
costly for TAS to get involved in resolving taxpayers' problems--TAS's
budget was about $170 million^1 and TAS employed 1,894 staff, or about 2
percent of IRS's workforce, in 2006.

Because of Congress's concerns about whether taxpayers' issues are
addressed and the resources devoted to TAS, you asked us to review TAS's
performance. Specifically, you asked us to determine

           o why TAS's caseload has increased since 2004,
           o how well TAS conducted its case advocacy activities in terms of
           measures such as customer satisfaction and quality, and
           o how well TAS measures and reports its systemic advocacy efforts.

           To address our objectives, we reviewed and analyzed relevant
           documents including federal legislation and related legislative
           histories; sections of the Internal Revenue Manual (IRM); the
           National Taxpayer Advocate's 2002-5 annual reports to Congress on
           TAS activities and 2002-7 annual objectives reports to Congress;
           Treasury Inspector General for Tax Administration (TIGTA) reports;
           TAS guidance related to handling individual and systemic advocacy
           activities and the criteria for accepting individual cases,
           creating systemic advocacy projects, and for reporting systemic
           issues; TAS documents related to its performance measures; and TAS
           documents related to the Taxpayer Advocate Management Information
           System (TAMIS) and the Systemic Advocacy Management System (SAMS),
           the TAS information systems used to track individual and systemic
           advocacy activities, respectively.^2 We assessed the reliability
           of TAMIS data and determined the data were sufficiently reliable
           for our purposes. We compared the existing TAS performance
           measures to attributes of successful performance measures using
           criteria we have previously developed.^3 In terms of reporting
           systemic advocacy efforts, we focused on the annual reports to
           Congress since they are the primary method used by TAS to report
           on systemic advocacy efforts. We interviewed the National Taxpayer
           Advocate (the head of TAS, hereafter referred to as the Advocate)
           and TAS officials involved with both case and systemic advocacy in
           both headquarters and TAS field offices. We also interviewed
           officials in the Wage and Investment Division (W&I), Small
           Business/Self Employed Division (SB/SE), and Criminal
           Investigation (CI) office to obtain their views about coordinating
           and collaborating with TAS in order to address taxpayers' problems
           and why TAS's caseload has increased. We performed our work from
           September 2005 through December 2006 in accordance with generally
           accepted government auditing standards. Our scope and methodology
           are described in greater detail in appendix I.
			  
			  Results in Brief

           TAS's caseload increased 43 percent from fiscal year 2004 to
           fiscal year 2006--17 percent in 2005 and 23 percent in 2006--and,
           while the growth in the caseload was distributed over both
           enforcement- and non-enforcement-related cases, the overall
           increase correlated with increases in IRS's overall enforcement
           activities since fiscal year 2004, as well as increases in
           particular IRS enforcement programs and the corresponding type of
           TAS case. For example, changes in the number of refunds frozen by
           IRS correlated with the number of refund-freeze-related cases
           coming into TAS. However, such a correlation between TAS cases and
           IRS activity was not always present for other types of TAS cases.
           IRS officials and others identified other factors that could also
           have influenced the increase in TAS cases, in particular changes
           to TAS guidance for accepting cases. However, our analysis of TAS
           data does not indicate that the TAS case acceptance guidance
           changes were a factor in the caseload increase. For example, TAS
           created two new criteria for accepting cases in fiscal year 2006,
           yet of the almost 244,000 cases received by TAS in fiscal year
           2006, the new criteria resulted in just over 500 cases.

           Satisfaction among taxpayers who were served by TAS remained
           steady from fiscal year 2002 to 2006, consistently measuring
           between 4 and 5 on a 5-point scale, while case quality improved
           from fiscal year 2002 to 2004 (moving from below 80 to over 90 on
           a 100-point scale), it stayed about the same in fiscal year 2005
           and 2006. While two of TAS's four measures are sound in terms of
           their clarity, reliability, and several other factors, TAS's
           current efficiency measure, defined as the percentage of TAS cases
           involving a procedural burden, is not a true measure of efficiency
           and provides no information on case advocacy efficiency. A more
           meaningful measure of efficiency would look at the ratio of cases
           closed to the time spent on those cases and take into account the
           quality of the work and the complexity of the cases. Also, to
           allow interpretation of efficiency information in light of cost
           effectiveness and to permit, for example, TAS to identify types of
           cases that are taking up an inordinate share of case advocacy
           resources, TAS would also need to develop a case advocacy unit
           cost measure. TAS officials have plans under way to capture case
           complexity and to begin tracking time in a way that will permit
           TAS to develop case advocacy unit cost information.

           TAS's systemic advocacy function is very important because it is
           the means for TAS to eliminate taxpayer problems before they
           arise, and though TAS can point to many successes in this area,
           TAS's systemic advocacy performance measurement does not provide
           important information to Congress on systemic advocacy
           effectiveness. In August 2006, TAS began a pilot program to
           ascertain if progress is being made in correcting a few systemic
           issues. The pilot is a worthwhile initiative to identify progress
           in a few important areas, but it will not measure the
           effectiveness of systemic advocacy on a broad basis. Also, TAS's
           public reporting makes it difficult for Congress to determine what
           actions were taken to address systemic issues TAS has raised in
           the past.

           We are recommending that the Advocate add to TAS's case and
           systemic advocacy performance measures and improve its reporting
           on systemic issues. Additional measures include case advocacy
           efficiency and systemic advocacy effectiveness. TAS should also
           take several steps to improve what it reports about systemic
           advocacy in the annual report to Congress such as describing
           actions taken to address taxpayers' serious problems. The Advocate
           agreed with our recommendations and noted that TAS has already
           implemented part of one recommendation related to reporting about
           systemic advocacy and is taking steps to implement the other
           recommendations. For example, the Advocate reported that TAS has
           submitted work requests to collect information on the complexity
           of cases and time spent on cases to develop cost information. This
           will be added to the data TAS collects to measure case quality.
           This information will then be used to develop a case advocacy
           efficiency measure. We have included the Advocate's letter in
           appendix IX. TAS also provided technical comments which we
           incorporated as appropriate.

           The Commissioner of Internal Revenue was provided a draft of this
           report for review and comment. The IRS Office of Legislative
           Affairs provided technical comments, and we incorporated them as
           appropriate.
			  
			  Background

           TAS is an independent office within IRS created to assist
           taxpayers in resolving problems with IRS, identify areas in which
           taxpayers have problems in dealing with IRS, and propose
           administrative and legislative changes to mitigate such problems.
           TAS is the successor to the Problem Resolution Program (PRP) which
           IRS founded in 1976 to provide an independent means of helping
           taxpayers solve problems that they encountered in dealing with
           IRS. Initially, PRP units were established in IRS district
           offices. In 1979, IRS expanded PRP to its service centers and
           created the position of Taxpayer Ombudsman to head PRP. Generally,
           PRP personnel were district or service center employees who did
           not report directly to the Ombudsman. The Ombudsman was appointed
           by and reported to the Commissioner of Internal Revenue.

           Congress has since renamed the Ombudsman the "National Taxpayer
           Advocate" and taken steps to enhance the independence of the
           Advocate. While the Advocate continues to report to the
           Commissioner of Internal Revenue, the Advocate is now appointed by
           the Secretary of the Treasury after consultation with the
           Commissioner of Internal Revenue and the IRS Oversight Board.^4 In
           the IRS Restructuring and Reform Act of 1998, Congress required
           that the individual not be an IRS employee for 2 years preceding
           his or her appointment and that the individual agrees to not
           accept a position elsewhere in IRS for 5 years following his or
           her tenure as the Advocate.^5 In addition, Congress replaced the
           prior PRP organization with an independent reporting structure of
           taxpayer advocates who report directly to the Advocate and
           mandated that a local taxpayer advocate be available to taxpayers
           in each state. TAS currently has 65 local offices with at least
           one in each state, Puerto Rico, and the District of Columbia. TAS
           also has 10 offices located at IRS campuses. The current Advocate
           was appointed in 2001.

           Section 7803 of the Internal Revenue Code, as amended by the
           Restructuring Act of 1998, provides that the National Taxpayer
           Advocate is entitled to compensation at the same rate as the
           highest rate of basic pay established for the Senior Executive
           Service under 5 U.S.C. Section 5382 or, if the Secretary of the
           Treasury so determines, at a rate fixed under the streamlined
           critical pay authority set out in 5 U.S.C. S 9503 (up to the
           equivalent of the Vice President's salary, or $212,100 in 2006).^6
           The Advocate is also eligible to receive bonuses. On January 10,
           2001, the Secretary of Treasury approved the appointment of Nina
           Olson as the National Taxpayer Advocate under section 7803 and
           chose to set her pay using the streamlined critical pay
           authority.^7 The Advocate's salary was $162,100 and her bonus was
           $22,900 in 2006.

           TAS has two primary functions--case advocacy and systemic
           advocacy, although it is also responsible for administering the
           Low Income Taxpayer Clinic (LITC) Grant Program and overseeing the
           Taxpayer Advocacy Panel (TAP). Figure 1 shows TAS's primary
           functions as well as sources of work.

^1TAS's fiscal year 2006 budget included $8 million for Low Income
Taxpayer Clinic grants.

^2To conduct our analyses, we associated cases with the fiscal year in
which they were opened. Also, for cases that TAS closed and subsequently
reopened, all of our analyses relate to the original case.

^3GAO, Tax Administration: IRS Needs to Further Refine Its Tax Filing
Season Performance Measures, [32]GAO-03-143 (Washington, D.C.: Nov. 22,
2002).

^426 U.S.C. 7803(c).

^5Pub. L. No. 105-206 (July 22, 1998). Service as an officer or employee
of the Advocate's Office is not taken into account for purposes of the
2-year and 5-year rules.

^6Section 9503, added to Title 5 by the Restructuring Act, provides that
the Secretary of the Treasury may, for a period of 10 years after the date
of enactment of the section, fix the compensation of and appoint
individuals to designated critical administrative, technical, and
professional positions needed to carry out the functions of the Internal
Revenue Service, if certain criteria are met. Specifically, the relevant
positions must require expertise of an extremely high level in an
administrative, technical, or professional field. The positions must also
be critical to the Internal Revenue Service's successful accomplishment of
an important mission.

^7The terms of appointments made under section 9503 are limited to no more
than 4 years. However, since the National Taxpayer Advocate was appointed
under IRC Section 7803, which simply allows the compensation to be fixed
under the streamlined critical pay authority of section 9503, IRS
determined that the term limit does not apply.

Figure 1: Primary TAS Functions

TAS receives case advocacy cases through several sources including
referrals from IRS, direct taxpayer contact via walk-in, phone calls, or
mail, and the National Taxpayer Advocate toll-free line. The acceptance
criteria for case advocacy fall into four general categories: economic
burden, systemic burden, best interest of the taxpayer, and public policy.
Economic burden cases involve a tax-related issue that has caused
financial difficulty for the taxpayer. Procedural burden cases involve an
IRS process, system, or procedure that has failed to operate as intended
and, as a result, IRS has failed to resolve or respond to the taxpayer
issue. Best interest of the taxpayer cases are those that raise questions
of equity or taxpayer's rights in how the tax laws are administered.
Finally, public policy cases are those that the Advocate decided should be
worked based on specific issues or areas of public concern. TAS uses TAMIS
to track its case advocacy activities.

In some cases, TAS is able to use its statutory or delegated authorities
to take the necessary steps to resolve a case. When TAS does not have
statutory or delegated authority to take action, TAS issues an Operations
Assistance Request (OAR) to the function within IRS that can take the
needed action to resolve the taxpayer's problem. If IRS and TAS are unable
to agree on the proper course of action, TAS might use a Taxpayer
Assistance Order (TAO) to require IRS to take a certain action as
permitted by law, cease an action currently being taken, review an action,
refrain from taking any action, or release property previously levied.^8
In fiscal year 2006, TAS issued 46 TAOs. Figure 2 provides an overview of
the case advocacy process.

^8IRC S 7811 authorizes the Advocate to issue a TAO when a taxpayer is
suffering or about to suffer a significant hardship as a result of IRS's
administration of the tax laws. Any TAO issued by the Advocate may be
modified or rescinded by the Advocate, the Commissioner of Internal
Revenue, or the Deputy Commissioner of Internal Revenue if a written
explanation of the reasons for the modification or rescission is provided
to the Advocate.

Figure 2: Overview of Case Advocacy Process

Currently, TAS and IRS are renegotiating the procedures TAS and IRS
functions will follow to process an OAR. Also, officials told us that the
Advocate has reviewed TAS's delegated authorities with Office of Chief
Counsel, Appeals, Tax Exempt/Government Entities, W&I, and SB/SE officials
and plans to make recommendations to the Commissioner on possible changes.

TAS receives suggestions for systemic advocacy projects from TAS and IRS
employees and the public. Systemic advocacy officials evaluate each
suggestion to determine if it meets the definition of an immediate
intervention--an administrative issue which could cause immediate,
significant harm to multiple taxpayers that needs quick resolution. For
those issues that do not become immediate interventions, systemic advocacy
officials apply the general criteria described in figure 1 in order to
score each issue. TAS creates a systemic advocacy project for those issues
that meet or exceed the current threshold for converting an issue into a
systemic advocacy project. This threshold can change depending on
available resources to work on systemic advocacy projects. For immediate
interventions and advocacy projects, systemic analysts research the issue
and develop recommendations for IRS. For additional details about creating
immediate interventions and systemic advocacy projects including a
complete list of the criteria used to score systemic issues, see appendix
II.

TAS also conducts systemic advocacy through participation in TAS and IRS
research initiatives and task forces, hosting town hall meetings,
conducting focus groups, and through TAS's two required annual reports to
Congress. One of the two reports, the annual report to Congress, hereafter
referred to as the annual report, is due by December 31, and summarizes
TAS's activities during the prior fiscal year. It must include, among
other things, a discussion of at least 20 of the most serious problems
encountered by taxpayers and administrative and legislative
recommendations for resolving taxpayer problems.^9 For details about how
the most serious problems are selected, see appendix IV. The other report,
due by June 30 of each year, must identify the objectives of the Office of
the Taxpayer Advocate for the fiscal year beginning in that calendar year.

Responsibility for the LITC Grant Program was transferred from W&I to TAS
in May 2003. The IRS Restructuring and Reform Act of 1998 established the
LITC Grant Program to help accredited academic institutions and nonprofit
organizations represent low-income taxpayers in controversies with IRS and
operate programs to inform individuals for whom English is a second
language about their rights and responsibilities. TAS has responsibility
for selecting LITC grant recipients and conducting site visits to ensure
that LITCs are fulfilling their obligations. See appendix V for more
information on the LITC Grant Program. TAS also has responsibility for
overseeing the TAP, which was established in October 2002 under the
Federal Advisory Committee Act as a way of improving IRS responsiveness to
taxpayers' needs. The panel, consisting of approximately 104 volunteers
nationwide including every state, Puerto Rico, and the District of
Columbia, provides input on IRS's strategic initiatives and provides a
venue for raising issues identified by citizens.

^9See app. III for a list of what must be included in the annual report.

TAS's budget is part of the overall IRS appropriation and does not have a
separate line item in the budget. TAS resources are spread across three
appropriations: processing, assistance, and management; tax law
enforcement; and information systems.

TAS's budget increased from about $135.4 million in fiscal year 2001 to
about $170.3 million in fiscal year 2006.^10 Over 86 percent of TAS's
fiscal year 2006 budget was for its case advocacy function, while the rest
was split between systemic advocacy, the LITC Grant Program,^11 TAP, and
other expenses such as training, travel, and support. TAS's full-time
equivalent (FTE) staff years decreased slightly from 2,064 in fiscal year
2001 to 1,894 in fiscal year 2006. Table 1 summarizes TAS's budget and
staffing.

^10In fiscal year 2006, Congress directed IRS to provide a specified
minimum level of funding for TAS. House and Senate versions of the fiscal
year 2007 appropriations bills continue this practice.

^11TAS serves as a conduit for channeling grants to LITC recipients. In
fiscal year 2006, the amount of the grants was $8 million. TAS was
responsible for paying the expenses of administering the LITC Grant
Program out of its operating funds.

Table 1: TAS Budget and FTE Staff Years, Fiscal Years 2001-6

                                               Fiscal year
                                  2001   2002   2003   2004   2005   2006 
Budget (dollars in millions)                                           
Case advocacy                $123.9 $134.4 $138.3 $140.3 $142.7 $146.0 
Systemic advocacy^a             3.4    5.1    5.7    5.8    3.7    4.0 
LITC^b                           --     --     --    8.4    9.2    9.4 
TAP                             1.5    1.4    2.3    2.5    2.5    2.5 
Other^c                         6.6    9.5   10.4    8.8    9.1    8.5 
Totald                       $135.4 $150.3 $156.7 $165.8 $167.3 $170.3 
FTEs                                                                   
Case advocacy                 1,953  1,971  1,974  1,908  1,829  1,766 
Systemic advocacy^a              38     53     58     56     32     32 
LITC^b                           --     --     --      7     10     11 
TAP                              16     16     17     21     21     21 
Other^c                          57     72     77     73     71     64 
Totald                        2,064  2,112  2,126  2,065  1,963  1,894 

Source: TAS.

aSome staff in categories other than systemic advocacy also spend some of
their time on systemic advocacy activities, such as preparing the annual
report to Congress.

bThe responsibility for the LITC Grant Program was transferred to TAS in
May 2003; however, dollars and FTEs were not allocated to TAS until fiscal
year 2004.

cOther includes training, travel, and support for TAS headquarters
management activities. These activities include strategic planning,
communications and liaison, finance, equal employment opportunity and
diversity, business systems planning, and employee development.

dTotals do not add due to rounding.

Growth in TAS's Caseload since Fiscal Year 2004 Correlates with Increases in IRS
Enforcement Activity

The growth in TAS's caseload was not uniform over types of taxpayer
problems, but was correlated with increases in IRS enforcement activity.

TAS's Caseload Increased Significantly in Fiscal Years 2005 and 2006

After decreasing from fiscal years 2002 through 2004, TAS's case receipts
increased 43 percent from fiscal year 2004 to 2006, as shown in figure 3.
Case receipts increased by 28,660 cases or 17 percent in fiscal year 2005
over fiscal year 2004 and another 45,021 cases or 23 percent in fiscal
year 2006. Since fiscal year 2004, by comparison, TAS staffing decreased
by 171 FTEs as was shown in table 1.

Figure 3 also shows that the number of cases that TAS closed each year
followed a similar pattern as case receipts, with declines in fiscal years
2002-4 and increases in fiscal years 2005 and 2006. In the earlier years
the closure rate exceeded the number of cases coming in, so TAS was
decreasing its backlog of cases. In fiscal years 2005 and 2006, however,
TAS closed fewer cases than it received, and its backlog of cases
increased by around 7,500 cases in each of those years. TAS officials said
that the growing number of cases is posing a challenge to staff, but that
the challenge has not become overwhelming.

Figure 3: TAS Case Receipts and Cases Closed, Fiscal Years 2002-6

The growth in TAS's caseload after fiscal year 2004 varied across types of
taxpayer problems. (TAS tracks taxpayer problems by assigning one of 114
primary issue codes to each case. Specific issue codes include processing
an original or amended return, lien release, and stolen identity. See app.
VI for a full breakdown of cases by issue code for fiscal years 2002
through 2006.) Furthermore, the percentage of each type of issue, in terms
of total caseload, varied over time. Data on taxpayer issues showed the
following:

           o The growth in caseload was distributed across many issues with 7
           issues increasing by more than 1,000 cases in fiscal year 2005 and
           17 doing so in fiscal year 2006. (See app. VII for a breakdown of
           issues that increased by more than 1,000 cases in fiscal years
           2005 and 2006.)
           o The growth in caseload was not uniformly distributed by issue
           over time. None of the 5 issues with the greatest growth in fiscal
           year 2005 were among the top 5 in fiscal year 2006. Also, the most
           common issue in both fiscal year 2005 and 2006, criminal
           investigation (CI), increased substantially in fiscal year 2005,
           but declined in fiscal year 2006.^12 
           o Total caseload was distributed over many issues with no single
           issue accounting for more than 8 percent of the total in fiscal
           year 2006. For example, although CI was the largest issue in
           fiscal years 2005 and 2006, it accounted for only 14 percent of
           cases in fiscal year 2005 and 8 percent in fiscal year 2006.
           o The issues with the highest number of cases varied from year to
           year. Of the 5 issues with the highest number of cases in fiscal
           year 2002, only 2 remained in the top 5 in fiscal year 2006.
			  
			  Growth in TASï¿½s Caseload since Fiscal Year 2004 Was Correlated
			  with Increases in IRS Enforcement Activities and Specific
			  Enforcement Programs

           According to the Advocate, the majority of the increase in TAS's
           caseload in fiscal years 2005 and 2006 was due to an increase in
           IRS enforcement activities. For example, the National Taxpayer
           Advocate's 2007 Objectives Report to Congress states that "The
           impact of the IRS's substantial increases in enforcement
           activities is evident in the corresponding increase in TAS
           Taxpayer Delinquent Investigation, Levy, and Automated
           Underreporter case receipts." Data from TAS and IRS are consistent
           with this argument, showing a correlation between increases in
           TAS's caseload and increases in IRS's overall enforcement
           activities since fiscal year 2004.^13 The data also show
           correlations between the growth in particular IRS enforcement
           programs and the corresponding TAS issues.

           However, IRS's enforcement programs were also growing between
           fiscal years 2002 and 2004, a time when TAS's caseload was
           shrinking. A senior TAS official said that increases in IRS
           enforcement were leading to new TAS cases in fiscal years 2002-4,
           but that the increases in caseload were more than offset by
           declines for other reasons. For example, the official stated that
           in 2000-1, TAS was still clearing out a backlog of taxpayer
           problems from the late 1990s and new problems were also arising
           from confusion stemming from the major reorganization of IRS from
           divisions based on processes to divisions based on types of
           taxpayers being served. As TAS dealt with the backlog of cases and
           as the IRS reorganization was completed, the number of cases fell.
           Data for testing this explanation were not available.

           Overall, IRS enforcement activities have been increasing, as shown
           by the number of individual examinations in figure 4 and the
           amount of enforcement revenue collected in figure 5.

           Figure 4: Individual IRS Examinations

           aFiscal year 2006 results are preliminary.

           Figure 5: Enforcement Revenue Collected

           At the same time, the majority of the growth in TAS's caseload was
           due to issues that are enforcement related, as shown in table 2.
           Table 2 combines TAS's 114 types of taxpayer issues into a few
           broad categories. Categories that consist largely of enforcement
           issues, as shown by the shaded rows in the table, accounted for
           over half of the growth in TAS caseload between fiscal years 2004
           and 2006. Moreover, there are also enforcement-related issues in
           other categories. For example, a case that TAS classifies as
           "document processing" may involve a taxpayer having trouble filing
           an amended return after an audit.

^12According to the National Taxpayer Advocate 2005 Annual Report to
Congress, the vast majority of TAS's CI cases related to Questionable
Refund Program (QRP) freezes. The QRP is a nationwide multifunctional
program established in January 1977. The purpose of this program is to
detect fraudulent returns and stop the payment of false refunds claimed on
income tax returns. If CI does not validate the taxpayer's entitlement to
a refund, it may "freeze" the refund until IRS assures itself there is no
fraud.

^13We did not test for statistical correlation, rather we looked for
positive associations between IRS enforcement activity and related TAS
cases.

Table 2: Number of TAS Cases by Categories of Issues, Fiscal Years 2002-6

                                              Fiscal year
Category of issue               2002    2003    2004    2005    2006 
Document processing           57,143  39,289  32,646  36,815  52,850 
Examination                   52,452  51,335  38,051  40,213  47,951 
Collection                    28,833  25,274  23,887  29,210  43,625 
Refunds                       31,852  22,702  19,247  20,048  27,710 
Appeals/other                 11,397  19,691  19,903  31,936  24,770 
Technical/procedural/statute   8,942   7,683   9,496  12,032  13,251 
Penalty                       14,700  10,155   9,133  10,032  12,397 
Entity                         9,337   7,270   8,176   9,760  11,617 
Payments/credits              12,746   7,666   6,804   7,089   8,175 
Interest                       1,638   1,179   1,052   1,042   1,033 
Not coded                         95   3,925   1,734     612     431 
Total                        229,135 196,169 170,129 198,789 243,810 

Source: GAO analysis of TAMIS data.

Note: Shaded rows indicate issue categories that are primarily enforcement
related.

The correlation between TAS caseload growth and IRS enforcement increases
can also be seen for particular enforcement actions. The two types of TAS
cases that increased the most--CI cases in fiscal year 2005 and levy cases
in fiscal year 2006--are examples.^14 While we could not verify that there
was a causal relationship between IRS activity and TAS caseload, for CI
and levy cases, we found a positive correlation. The number of CI refund
freezes increased by 23 percent in fiscal year 2005 over fiscal year 2004
and at the same time the number of TAS CI cases increased by roughly 71
percent, as shown in figure 6. In December 2005, the Advocate issued a
report critical of the number of taxpayers whose refunds were frozen and
then later released, as well as the lack of information given to taxpayers
about the status of their refund in these cases and the number of years
that freezes are in effect. CI officials said that they subsequently made
significant changes to the program in early 2006, freezing fewer refunds
in 2006 and issuing fewer multiyear freezes. TAS and CI officials said
that this likely caused the number of taxpayers seeking TAS assistance for
refund freezes to decrease. While data on the number of CI refund freezes
for fiscal year 2006 were not yet available when we completed our work,
the number of TAS CI cases decreased by 25 percent that year.

^14We did not compare the increase in TAS's fiscal year 2006 caseload to
fiscal year 2006 IRS enforcement activities because fiscal year 2006 IRS
data were not yet available.

Figure 6: Changes in IRS and TAS CI Cases

Note: Number of CI refund freezes is reported by processing year and is an
estimate.

Similarly, as shown in figure 7, the number of IRS levy cases increased
between fiscal years 2002 and 2005, including a 35 percent increase in
fiscal year 2005 over fiscal year 2004.^15 The number of TAS levy cases
also increased by 27 percent in fiscal year 2005 over fiscal year 2004.

Figure 7: Changes in IRS and TAS Levy Cases

Although there is a correlation between growth in overall IRS enforcement
activity and growth in TAS caseload, as well as a correlation between
growth in some specific IRS programs and corresponding TAS issues, the
correlation does not always hold. For example, as shown in figure 8, the
number of TAS lien cases increased by 27 percent in fiscal year 2005 while
the number of IRS liens decreased by 2 percent.^16

15Under the Internal Revenue Code, "levy" is defined as the seizure of a
taxpayer's assets to satisfy a tax delinquency. IRS differentiates between
the levy of assets in the possession of the taxpayer (referred to as a
"seizure") and the levy of assets, such as bank accounts and wages, which
are in the possession of third parties, such as banks or employers
(referred to as a "levy").

Figure 8: Changes in IRS and TAS Lien Cases

Other Factors Have Also Been Cited as Contributing to TAS's Increased Caseload

As previously shown in table 2, non-enforcement-related TAS cases also
increased since fiscal year 2004. TAS officials said that increased TAS
outreach and external factors, such as taxpayers with problems related to
the disruptions caused by Hurricane Katrina and changes in the overall
economy, contributed to the caseload increase.

IRS officials and others also said that changes made to TAS's case
acceptance guidance may have contributed to TAS's caseload increase.
However, our analysis of TAS data does not support this. The Advocate made
changes to TAS's case acceptance guidance twice since fiscal year 2004,
which is when TAS's caseload started to increase. On January 13, 2005, the
Advocate issued an internal memorandum to all TAS staff called "Common
Sense and Good Judgment in Case Processing." According to the Advocate,
the memo did not change the criteria but sought to clarify the criteria
and ensure that staff were not creating unnecessary obstacles for
taxpayers seeking TAS assistance. In January 2006, TAS implemented an
expanded version of its case acceptance criteria. The revisions included
slight modifications to some of the existing criteria and the creation of
criteria 8 and 9.^17

16A lien is a legal claim, filed in accordance with state property law,
that attaches to property to secure payment of a debt. The effect of a
lien may not be felt until the taxpayer sells the property or tries to
obtain credit.

The January 2005 memorandum clarified that TAS should accept all cases (1)
where a taxpayer specifically requests TAS assistance and (2) that were
referred from IRS even if the case does not meet TAS's case acceptance
criteria to avoid sending the taxpayer back to IRS.^18 According to the
memorandum, in these situations, the case should be classified as meeting
criteria 7--a system or procedure failed to operate as intended or failed
to resolve the taxpayer's problem. Therefore, if following the memorandum
contributed to the increase in TAS's caseload, we would expect to see a
disproportionate increase in criterion-7 cases. However, criterion-7 cases
did not increase disproportionately in 2005 and 2006, rather the number of
these cases grew at a slower rate than other cases, as shown in table 3.
Furthermore, the changes made by TAS in January 2006 did not significantly
affect TAS's caseload given that the two added criteria resulted in just
over 500 of the approximately 244,000 cases received in fiscal year 2006.

Table 3: Increase in Non-Criterion-7 TAS Caseload Compared to Increase in
Criterion-7 Cases

               All non-criterion-7 cases     Criterion-7 cases
Fiscal year  Number Percentage change  Number Percentage change 
2004        109,462                    60,667                   
2005        128,134                17  70,655                16 
2006        161,177                26  82,633                17 

Source: GAO analysis of TAS data.

^17See fig. 1 for a list of TAS's current case acceptance criteria.

^18IRS officials told us that IRS has taken steps to reduce the error rate
for referrals to TAS from IRS campuses.

Taxpayers Report Being Satisfied, and Quality Improved in Most Years, but TAS
Lacks Measures of Efficiency and Cost

TAS tracks its case advocacy performance in several dimensions. Two of
TAS's performance measures, customer satisfaction and case quality, meet
all of the criteria that GAO developed as attributes of successful
performance measures. However, its employee satisfaction survey suffers
from a declining response rate and TAS does not measure some important
dimensions of performance such as cost per case.

Taxpayers Report Being Satisfied, and Case Quality Improved since Fiscal Year
2002 with a Slight Decline in Fiscal Year 2006

TAS case advocacy performance measures include measures of customer
satisfaction, case quality, and employee satisfaction. Table 4 shows TAS's
performance against its goals for fiscal years 2002-6.

Table 4: TAS Performance Measure Goals and Results

                                          Fiscal year
                     2002        2003        2004        2005        2006
Measure        Goal Actual Goal Actual Goal Actual Goal Actual Goal Actual 
Customer          a   4.33    a   4.30    a   4.30 4.35   4.39 4.40   4.34 
satisfaction                                                               
(scores out of                                                             
a possible 5                                                               
points)                                                                    
Case quality   80.0   78.5 90.0   84.7 90.0   90.5 91.0   91.6 91.5   89.7 
(scores out of                                                             
a possible 100                                                             
points)                                                                    
Employee         70     56   61     60   65     65   68     70   73     64 
satisfaction                                                               
(percent)                                                                  

Source: TAS.

Notes: Customer satisfaction figures are from a survey with a maximum
score of 5.0 and confidence intervals of +-0.006 in 2002 and 2003, +-0.007
in 2004, +-0.006 in 2005, and +-0.005 in 2006, all at a confidence level
of 95 percent. Case quality figures are from a survey of completed cases
with confidence intervals of +-0.9 in 2002, +-0.7 in 2003, +-0.5 in 2004,
and +-0.7 in 2005 and 2006, all at a confidence level of 90 percent.
Employee satisfaction figures are from a survey of all employees, with
response rates of 80-82 percent in 2002-4, 48 percent in 2005, and 33
percent in 2006.

aTAS did not have a customer satisfaction goal in that time period.

Taxpayers who have used TAS have consistently reported being satisfied to
very satisfied since fiscal year 2002, as shown by the customer
satisfaction survey results in table 4. TAS determines customer
satisfaction through an independent and confidential telephone survey
process to gauge the opinions of a random selection of taxpayers and their
representatives who had recently closed cases. The survey uses a
five-point scale where 5 represents "very satisfied" and 4 represents
"somewhat satisfied." TAS's customer satisfaction scores varied only
slightly from fiscal years 2002 to 2006 with customers remaining on
average somewhere between somewhat satisfied and very satisfied. As shown
in table 4, there was only a small amount of change in this measure from
year to year, and only a small difference between actual performance and
the goals for fiscal years 2005 and 2006. For additional information on
TAS's customer satisfaction results, see appendix VIII.

TAS's case quality improved between fiscal years 2002 and 2004 (the
changes are statistically significant) and then leveled off, also shown in
table 4. The slight increase in 2005 and the slight decline in 2006 are
not different in a statistically significant sense from the 2004 results.
As shown in table 4, TAS met its case quality goals for 2004 and 2005 but
did not do so in 2006. To calculate the quality index, TAS randomly
selects cases each month and measures them against eight quality
standards. These standards are meaningful in that they cover aspects of
quality--timeliness and technical correctness, for example--that IRS has
found important to measure in other contexts, such as telephone service.
The eight standards and their point values are shown in table 5.

Table 5: TAS Quality Standards and Point Values

Quality standard                                               Point value 
Did TAS make timely contact with the taxpayer?                           5 
Did TAS take initial action/request information within the                 
specified time frame?                                                   10 
Did TAS take all subsequent actions timely from the time                   
action could have been taken?                                           10 
Did TAS resolve all taxpayer issues?                                    25 
Did TAS address all related issues?                                     10 
Were all actions taken by TAS and the IRS                                  
operations/functional divisions technically and procedurally               
correct?                                                                15 
Did TAS give the taxpayer a clear, complete, correct                       
explanation at closing?                                                 20 
Did TAS educate the taxpayer regarding any of his/her actions              
that contributed to the problem?                                         5 

Source: TAS.

In the past, TIGTA has raised issues with TAS's timeliness and has made
recommendations that TAS take additional steps to improve timeliness.^19
TIGTA based its findings on a review of a sample of cases. Although the
Advocate disagreed with TIGTA's conclusions on specific cases, the
Advocate agreed to make changes to improve timeliness by introducing two
types of case management reviews. The first type is an early intervention
review where a TAS manager must be involved in a minimum of 25 percent of
open cases within 10 calendar days from the received date for criteria 1-4
cases and within 30 calendar days for criteria 5-9 cases.^20 The second
type of review is a 100-day review where a manager must review all cases
that have been open for 100 days within 15 days of reaching the 100-day
mark, and a minimum of once every 60 days thereafter. According to the
Advocate, these reviews help ensure that cases are resolved in a timely
manner. TAS's efforts to improve timeliness are reflected in three
timeliness standards that are part of the TAS quality standards shown in
table 5. For example, the score for timeliness standard number 3, "Did TAS
take all subsequent actions timely?" increased from 81.5 percent in fiscal
year 2004 to 86.5 percent in fiscal year 2005. Also, TAS improved on the
average number of days it takes to close a case, which declined from 67.6
in fiscal year 2003 to 51.2 in fiscal year 2006.

Employee satisfaction increased from fiscal year 2002 to 2004 but the
results for 2005 and 2006 (all shown in table 4) may not be accurate
because of declining survey response rates. TAS determines employee
satisfaction through an annual IRS-wide survey conducted by an independent
organization using a five-point scale where 5 represents "extremely
satisfied." In fiscal years 2002 through 2004, 80 percent or more of TAS
employees responded to the survey while only 48 percent and 33 percent
responded in fiscal years 2005 and 2006 respectively. Survey response
rates also declined throughout IRS during this period. Response rates this
low may bias the results if nonrespondents have different opinions than
respondents.

^19Treasury Inspector General for Tax Administration, The National
Taxpayer Advocate Has Improved the Quality of Casework, but Continued
Vigilance is Needed to Increase Compliance with the Quality Standards,
Reference No. 2003-10-074 (Washington, D.C.: Mar. 10, 2003) and The
Taxpayer Advocate Service Needs to Improve Case Management to Ensure
Taxpayer Problems Are Resolved Timely, Reference No. 2004-10-166
(Washington, D.C.: Sept. 29, 2004).

^20See fig. 1 in Background section for a list of the case criteria.

The measures of customer satisfaction and case quality on which the
previous description of case advocacy performance is based are sound,
according to criteria we have previously used for assessing IRS's
performance measures.^21 These two measures have all the attributes of
successful measures as shown in table 6, including clarity, objectivity,
and reliability. While it is conceptually sound to measure employee
satisfaction with a survey, as already discussed, the employee
satisfaction measure does not satisfy the objectivity and reliability
criteria because of the possibility of nonresponse bias in the survey in
recent years.

Table 6. Overview of Our Assessment of TAS's Case Advocacy Measures

                                       GAO assessment of TAS measure
Attributes of successful   Customer          Employee          Case        
measures                   satisfaction      satisfaction      quality     
Linkage--aligned with                                                      
goals and mission and                                                      
clearly communicated                                                       
Clarity--clearly stated                                                    
and name and definition                                                    
are consistent with                                                        
methodology used to                                                        
calculate it                                                               
Governmentwide                                                             
priorities^a--covers a                                                     
priority such as quality,                                                  
timeliness, and cost of                                                    
service                                                                    
Measurable target--has a                                                   
numerical goal                                                             
Objectivity and                                                            
Reliability--free from                                                     
significant bias and                                                       
reliable and produces same                                                 
result under similar                                                       
conditions                                                                 
Core Program                                                               
Activities--cover                                                          
activities entity is                                                       
expected to perform to                                                     
support intent of program                                                  
Limited Overlap--should                                                    
provide new information                                                    
Balance--suite of measures This attribute applies to the overall suite of
covers an organization's   measures. IRS considers these measures to be
priorities                 balanced since they address priorities such as
                              employee and customer satisfaction and business
                              results. However, additional measures such as
                              cost of service could improve the balance of
                              TAS priorities.   

Source: GAO.

Note: A checkmark denotes that the measure has the attribute.

aWhile the current measures cover governmentwide priorities, TAS does not
have a cost of service measure, which is another governmentwide priority.

^21In previous work, we identified the eight attributes listed in table 6
as elements of successful measures. (See [33]GAO-03-143 ).

TAS Does Not Measure True Case Advocacy Efficiency or Cost

TAS has an additional case advocacy measure called "efficiency" but it
does not measure efficiency as conventionally defined. Nor does TAS have a
measure of cost per case. The efficiency measure, which TAS defines as the
percentage of total case receipts that are procedural burden cases (cases
accepted under criteria 5-7) is missing important attributes of a
successful performance measure, including linkage and clarity. TAS is
working to develop processes to capture components of a meaningful case
advocacy efficiency measure, which will be useful for the development of a
useful efficiency measure in the future.

TAS's case advocacy efficiency measure is not linked to TAS's case
advocacy mission. According to the Advocate, TAS developed its efficiency
measure with the thought that the percentage of procedural burden case
receipts should eventually decrease as IRS fixes systemic problems in
response to TAS's systemic advocacy efforts. However, the current TAS
measure is really a measure of systemic advocacy effectiveness rather than
case advocacy efficiency. The Office of Management and Budget (OMB)
agrees. OMB's Program Assessment Rating Tool (PART) review described TAS's
efficiency measure as a proxy measure for TAS's success in helping IRS fix
systemic problems. However, it provides only limited information on the
success of TAS's systemic advocacy mission because it is sensitive to a
number of outside factors unrelated to TAS activities. For example, the
number of procedural burden cases could increase because of an increase in
new IRS errors, regardless of how well TAS had identified corrections for
earlier systemic problems.

In addition, TAS's efficiency measure lacks clarity because it is not a
true measure of efficiency. Simply put, efficiency is the ratio of the
outcome or output to the input of any program.^22 TAS's efficiency measure
includes no information on inputs into the program, such as time, and does
not adequately measure output.

To develop a true measure of case advocacy efficiency, TAS would need
information on case advocacy outputs, such as the number of cases closed,
and inputs--primarily the amount of time spent on those cases. Currently,
TAS managers do not have information on inputs because TAS does not track
the amount of time spent working each case; however, TAS plans on
implementing a method to track time in January 2007. TAS would also need
to adjust the number of cases closed for the complexity of the cases and
the quality of the work. In a past report, we said that efficiency
measures that are not adjusted for quality and complexity could yield
misleading information.^23 For example, an increase in cases closed per
case advocate would not be a true increase in efficiency if cases were
becoming less complex.

^22While productivity and efficiency are often used interchangeably and
are closely related, they are not always synonymous. Productivity is a
descriptive term defining what is actually produced relative to the inputs
used. Efficiency sometimes is a normative term evaluating productivity in
relation to the maximum amount of output that could be produced with a
given level of input. For consistency, throughout this report we will use
efficiency to represent both concepts in discussing TAS's efficiency
measure.

According to TAS officials, cases have been becoming more complex in
recent years; however, we could not verify this because TAS only has a
limited way to measure complexity. At this time, TAS classifies cases as
routine or complex. However, TAS is in the process of developing a more
sophisticated method for determining case complexity. TAS is currently
testing a model for determining the complexity of a case and plans on
making changes to TAMIS in order to collect complexity data. A more
sophisticated complexity index should provide the ability to adjust case
output to reflect changes in complexity over time.

TAS also does not have information on the cost of working each case,
preventing interpretation of efficiency information in light of cost
effectiveness. Having data on the cost of each case would allow TAS
managers, and external stakeholders, to make better decisions about where
to allocate both TAS's case advocacy resources and systemic advocacy
efforts. Without such data, TAS managers do not know if some categories of
taxpayer issues are noticeably more costly to resolve than others. The
high cost of case advocacy might become a factor in deciding how to
prioritize systemic advocacy efforts. OMB also recommended in its PART
report that TAS introduce a case advocacy unit cost measure. TAS officials
indicated that they will start collecting unit cost data once they
implement a method for tracking time on case.

^23GAO, Tax Administration: Planning for IRS's Enforcement Process Changes
Included Many Key Steps but Can Be Improved, [34]GAO-04-287 (Washington,
D.C.: Jan. 20, 2004).

TAS and IRS Are Working Jointly to Improve Coordination

As discussed in the Background section, TAS has limited authorities to
take action on some cases. When TAS does not have authority to take action
on a case, it must request that IRS take the action through an Operations
Assistance Request (OAR).^24 TAS and IRS operating divisions have
agreements in place that govern the OAR process. Several IRS and TAS
officials identified coordination problems regarding the OAR process that
could delay the resolution of taxpayer problems. Some of the problems that
IRS officials identified include the following:

           o TAS sends OARs when TAS could have resolved the case using their
           authorities or conversely TAS takes the action when they should
           have sent an OAR.
           o TAS does not always do the necessary research or collect the
           necessary documentation before sending an OAR.
           o OARs have to either be mailed or faxed.
           o TAS routes OARs to the incorrect area.^25 
           o TAS accepts cases that do not meet its criteria or where the
           taxpayer has not taken the necessary steps to resolve his or her
           problem with IRS, which increases OAR volume and circumvents
           normal case processing.

           Some TAS officials also reported some confusion over the OAR
           process. For example, officials stated that it is not always clear
           what documentation is required and the procedures for taking
           certain actions in the Internal Revenue Manual are vague, leaving
           room for interpretation. The Advocate's 2007 Objectives Report to
           Congress stated that it is a challenge for TAS employees to
           identify when an OAR should be sent, given the continuing state of
           change in IRS operating division personnel and procedures. These
           types of issues could lead to IRS rejecting more OARs, which
           causes delays for the taxpayer and unnecessary rework for TAS and
           IRS.

           The Advocate plans to take actions to reduce the number of
           rejected OARs, including identifying TAS and IRS operating
           division training needs, improving the clarity of the IRM, and
           working with IRS operating divisions to ensure TAS routes OARs to
           the right place. TAS is also working with IRS operating divisions
           to develop a method to send OARs electronically.

           TAS has taken actions to deal with past issues related to TAS-IRS
           coordination. In 2002, TIGTA found that TAS employees were taking
           actions on taxpayer cases that were outside of their authority.^26
           In response to TIGTA's findings, the Advocate agreed that there
           was confusion about the scope of TAS authorities and outlined
           corrective actions TAS had taken. As part of those actions, TAS
           provided additional training and modified the case quality review
           to include an accuracy standard that ensures actions taken are
           technically and procedurally correct and within TAS's authorities.
           TAS is looking for ways to improve the quality review and one of
           the proposals is to isolate the OAR process during the review so
           that they can better identify gaps in the OAR process. Senior TAS
           officials have provided the Advocate with recommendations for
           improving the quality review.

           IRS and TAS are also currently reviewing the need to change TAS's
           authorities. The Advocate said that she supports certain
           additional authorities, but only those that do not undermine the
           unique responsibility of TAS, namely, advocating for the taxpayer
           inside the IRS. The Advocate said that she is concerned that her
           role may become blurred if she is asking IRS to take an action
           while simultaneously possessing authority to take the same action
           directly. Furthermore, the Advocate said that there are benefits
           to having the IRS confront taxpayer issues and become aware of
           recurring issues, which may not happen if TAS had the authority to
           make the changes itself without IRS involvement.
			  
			  TAS Does Not Measure the Effectiveness of Systemic Advocacy, and
			  Reporting on Systemic Issues Is Not as Useful as It Could Be

           TAS's systemic advocacy efforts have the potential to benefit
           large numbers of taxpayers. However, since TAS is just beginning
           to pilot a process to measure the effectiveness of its systemic
           advocacy efforts, TAS, IRS, Congress, and other stakeholders do
           not know how successful TAS is at accomplishing its systemic
           advocacy mission.
			  
			  TAS Is Piloting Process to Measure the Effectiveness of Systemic
			  Advocacy

           TAS is piloting a process to analyze a few systemic issues in
           depth to assess progress in correcting underlying problems, but
           does not have a process for measuring systemic advocacy
           effectiveness more broadly. TAS worked with W&I to develop a
           process for using information from TAMIS and SAMS, feedback from
           TAS case workers on new problems observed in TAS cases, and input
           from the TAP to identify top systemic issues. TAS and the
           operating divisions will then collaborate to identify the root
           causes of those issues, implement needed changes to IRS procedures
           and systems, and assess whether progress is being made in
           correcting the underlying problems. If TAS management decides that
           the number of occurrences has been sufficiently reduced, the
           issues will be replaced by others. TAS is now piloting this
           process.

           In August 2006, TAS used TAMIS data to identify the top issues.
           TAS and W&I officials agreed to address the issue of problems
           related to processing amended returns. If the pilot is successful,
           TAS plans to concurrently apply the process to three additional
           issues, replacing each one as the incidence of the issue has been
           sufficiently reduced. By using data to identify issues, testing to
           determine progress in addressing issues, and piloting the new
           process before determining if it should become standard procedure,
           TAS has taken the first steps towards developing a system to
           measure the effectiveness of its systemic advocacy activities.

           While gathering in-depth information about a few systemic advocacy
           issues is important, this approach will not provide TAS managers,
           IRS, or Congress with an assessment of TAS's systemic advocacy
           efforts more broadly. Using information from TAMIS on the types of
           new issues coming in from individual taxpayers and the systemic
           projects being suggested through SAMS, TAS managers could develop
           measures of the extent to which systemic issues are recurring,
           which would in turn, provide a measure of TAS success in
           identifying and addressing the root causes of these problems. Past
           reports by the IRS Oversight Board, TIGTA, and GAO have also noted
           the need for TAS to have better information about systemic
           advocacy effectiveness.^27
			  
			  Annual Report to Congress Omits Important Information about
			  Whether Systemic Issues Were Addressed

           The National Taxpayer Advocate's annual report to Congress does
           not include adequate information about steps taken to address
           systemic issues, either new issues or issues raised in the past.
           IRS managers and other interested parties, including Congress,
           need this information to know whether issues have been addressed
           to TAS's satisfaction and whether additional steps need to be
           taken.
			  
			    Report Does Not Include the Status of All Legislative
			    Recommendations

           The annual report does not provide a way to track the status of
           TAS's legislative recommendations. A table is included in the
           annual report but it provides only limited information (see table
           7 for a copy of the 2005 table). We found that the table does not
           provide potentially useful information, making it difficult to
           determine what has happened as a result of a specific legislative
           recommendation. For example, the table

           o does not list all past recommendations, listing only
           recommendations for which the current Congress took some action,
           o omits information about actions taken by prior Congresses either
           on the listed recommendations or on previous recommendations,
           o does not include summaries of the recommendations or how the
           recommendations are addressed by proposed legislation, and
           o does not show the date of the recommendations it includes.

^24TAS issued OARs on about 46 percent of cases in fiscal year 2006. Some
cases involved more than one OAR, for a total of about 169,000 OARs.

^25TAS data do not indicate the reason for incorrectly routed OARs. An OAR
could be misrouted because of a TAS mistake, or because a procedural or
organizational change at IRS was not adequately communicated to TAS.

^26Treasury Inspector General for Tax Administration, Taxpayer Advocate
Service Employees Made Adjustments to Taxpayer Accounts Without Proper
Authorization, Reference No. 2002-10-079 (Washington, D.C.: Mar. 28,
2002).

^27IRS Oversight Board, Oversight of the Office of Taxpayer Advocate:
Principal Findings and Actions, (September 2002); Treasury Inspector
General for Tax Administration, Opportunities to Improve the Effectiveness
of Internal Revenue Service Advocacy Efforts, Reference No. 199910061
(Washington, D.C.: Sept. 27, 1999)--this report addressed the PRP, which
was the predecessor to TAS; GAO, IRS Management: IRS Faces Challenges as
it Restructures the Office of the Taxpayer Advocate, [35]GAO/GGD-99-124
(Washington, D.C.: July 15, 1999).

Table 7: TAS 2005 Annual Report to Congress Table Summarizing Status of
the Advocate's Legislative Recommendations; Actions Taken by the 109th
Congress

                               Bill                                           
Recommendation              number  Sponsor        Date Current status     
Alternative minimum tax     
(AMT)                       
Repeal the individual AMT   HR 1186 English    3/9/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
                               S 1103  Baucus    5/23/2005 Referred to the    
                                                           Senate Finance     
                                                           Committee          
                               HR 2950 Neal      6/16/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
                               HR 3841 Manzullo   9/2/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
Index AMT exemption         HR 703  Garrett    2/9/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
                               HR 4096 Reynolds 10/20/2005 Passed House       
                                                           12/7/2005; placed  
                                                           on Senate          
                                                           legislative        
                                                           calendar           
                                                           12/13/2005         
Tax preparation and         
low-income taxpayer clinics 
(LITC)                      
Matching grants for LITC    HR 894  Becerra   2/17/2005 Referred to the    
for return preparation                                  House Financial    
                                                           Institutions and   
                                                           Consumer Credit    
                                                           Subcommittee       
                               S 832   Bingaman  4/18/2005 Referred to the    
                                                           Senate Finance     
                                                           Committee          
Regulation of income tax    HR 894  Becerra   2/17/2005 Referred to the    
preparers                                               House Financial    
                                                           Institutions and   
                                                           Consumer Credit    
                                                           Subcommittee       
                               S 832   Bingaman  4/18/2005 Referred to the    
                                                           Senate Finance     
                                                           Committee          
Small-business issues       
Health insurance            S 663   Bingaman  3/17/2005 Referred to the    
deduction/self-employed                                 Senate Finance     
individuals                                             Committee          
Married couples as business HR 3629 Doggett   7/29/2005 Referred to the    
co-owners                                               House Ways and     
                                                           Means Committee    
                               HR 3841 Manzullo   9/2/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
Federal tax deposit         HR 3629 Doggett   7/29/2005 Referred to the    
avoidance penalty                                       House Ways and     
                                                           Means Committee    
                               HR 3841 Manzullo   9/2/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    
Election to be treated as   HR 3629 Doggett   7/29/2005 Referred to the    
an S corporation                                        House Ways and     
                                                           Means Committee    
                               HR 3841 Manzullo   9/2/2005 Referred to the    
                                                           House Ways and     
                                                           Means Committee    

Source: TAS.

  IRS Actions in Response to TAS Recommendations Are Unclear

Each annual report includes information on actions IRS has taken or
intends to take related to the most serious systemic problems covered in
that report. The annual reports do not include such information related to
the problems included in previous annual reports. By not including this
information, it is difficult to determine which problems have been
addressed and are no longer serious problems, and what actions, if any,
have been taken or remain to be taken to address a particular problem.

TAS sent the recommendations included in the 2004 and 2005 annual reports
to IRS. IRS provided information about the actions it had taken for the
2004 recommendations and, as of November 2006, was in the process of
providing TAS with similar information for the 2005 recommendations. TAS
officials said they plan to include an update of IRS actions in response
to recommendations made in the annual reports and that this update may be
included in the annual report or posted on the TAS Web site.

  TAS Does Not Explain Why Most Serious Problems Are Different Each Year

By law, the annual report must include a summary of at least 20 of the
most serious problems encountered by taxpayers. These do not have to be
the 20 worst problems, however, and the Advocate is free to list different
problems from year to year. The annual report does not explain this,
however, and it does not explain what happened to the problems in the
earlier reports. As a result, readers may have the impression that the
problems described in an annual report are the top problems facing the
taxpayers that year. Also, when a problem is included in one year's annual
report and not in the next, readers may mistakenly think that the problem
has been resolved.

A discussion of prior serious taxpayer problems may be helpful to IRS
stakeholders, including Congress, because the problems cited by TAS vary
from year to year. For example, of the 21 most serious problems included
in the 2005 annual report, only 4 were included in any of the prior three
reports, as shown in table 8.

Table 8: Comparison of the Most Serious Problems Included in 2005 Annual
Report to Those in Previous Reports

                                   Most serious taxpayer problems included in
                                    the 2004, 2003, and 2002 annual reports
                                   that are similar to the problems included
                                           in the 2005 annual report
Most serious taxpayer problems  2004 annual    2003 annual   2002 annual   
included in 2005 annual report  report         report        report        
Trends in taxpayer service                                                 
Criminal Investigation refund                  X                           
freezes                                                                    
The cash economy                                                           
Training of private debt                                                   
collection employees                                                       
Earned Income Tax Credit (EITC)                X             X             
exam issues                                                                
Levies on Social Security                                                  
payments                                                                   
Appeals campus centralization                                              
Refund application loans:                                                  
Oversight of the industry,                                                 
cross-collection techniques,                                               
and payment alternatives                                                   
Identity theft                                                             
Complexity of the Employment                                               
Tax Deposit system                                                         
Automated Collection System                                  X             
(ACS) levy releases                                                        
Regulation of Electronic Return                                            
Originators                                                                
Limited scope of backup                                                    
withholding program                                                        
Accessibility of E-Services for                                            
tax practitioners                                                          
Mandatory briefings for IRS                                                
employees about the Taxpayer                                               
Advocate Service                                                           
Allowable expense standards for                                            
collection decisions                                                       
Inadequate taxpayer service to                                             
exempt organizations resulting                                             
in unnecessary penalties                                                   
Direct deposit of income tax                                               
refunds                                                                    
Innocent spouse claims                         X             X             
Limitations of collection                                                  
account databases                                                          
Reasonable cause assistant                                                 

Source: GAO analysis of TAS reports.

Note: The issues may not be exactly the same, but the titles of the issues
were either the same, similar, or included the same words or phrases in
each. For example, the 2005 annual report included ACS levy releases and
the 2002 report included access to ACS.

In addition, TAS's analysis of the most serious problems included in the
2005 annual report showed that nine problems had not been specifically
addressed in previous reports while the remaining problems were related to
serious problems included in previous annual reports. For example, a
serious problem included in the 2005 annual report was entitled "trends in
taxpayer service" while a problem in the 2003 report was entitled
"taxpayer assistance centers" and a problem in the 2004 report was
entitled "taxpayer access: face-to-face interaction."

The Advocate said that it is a balancing act each year to decide which
taxpayer problems to include. She said that TAS should not issue an annual
report that repeats many taxpayer problems from year to year because the
annual report is the primary way that TAS informs Congress and the public
about systemic problems. As there are more than just 20 problems facing
taxpayers, reporting on new problems every year is the best approach.
Other TAS management officials expressed similar viewpoints.

In addition, as previously described, the Advocate must also prepare
another report that identifies TAS's objectives for that year. According
to the Advocate, she uses the objectives report as TAS's strategic plan
and the report gives her a midyear chance to discuss the effect of IRS
initiatives on taxpayers. The Advocate believes both reports are important
and if they were combined, she would lose a communication tool that allows
her to keep Congress informed about problems taxpayers are encountering
and TAS's plans to mitigate those problems.

Conclusions

Congress established TAS to help taxpayers with problems that were not
resolved through normal IRS channels as well as to reduce the number of
such problems through systemic advocacy. The recent increase in TAS
caseload may raise questions about the effectiveness of TAS systemic
advocacy at preventing new taxpayer problems from arising. However, the
available data--particularly the varied makeup of TAS's taxpayer cases
from year to year--suggest that the increase in caseload may not be an
indicator of TAS and IRS performance at preventing taxpayer problems but
be due to other factors such as increases in IRS enforcement activities or
changes in the economy. As IRS's enforcement actions have changed over
time, so has the nature of the problems taxpayers bring to TAS. As certain
problems have been reduced in number, other problems have taken their
place.

On the other hand, conclusions about the effectiveness of both case and
systemic advocacy are necessarily limited by a lack of some performance
information. Without measures of case advocacy efficiency and cost, TAS
management lacks information potentially useful for managing its case
advocacy staff and prioritizing its systemic advocacy efforts.
Understanding efficiency is especially important in light of the challenge
posed by a growing caseload. Without a broad-based measure of the
effectiveness of systemic advocacy, TAS, IRS, and Congress lack
information about whether efforts to prevent taxpayer problems, rather
than resolve them after they arise, are achieving any success. Similarly,
TAS's current reporting leaves key information about the status of the
issues it raises and IRS and congressional responses to past
recommendations unmentioned. TAS may have options about the best way to
provide more complete information to Congress and the public and to do so
does not necessarily mean adding to the length of the annual report. For
example, it might be preferable for TAS to use the Internet to make
available tables listing both current and past recommendations and
summarizing IRS and legislative actions to date. We note that TAS is
already considering posting to its Web site the actions IRS has taken to
address the recommendations related to the most serious problems in the
2004 annual report.

Recommendations for Executive Action

We recommend that the National Taxpayer Advocate

           o improve TAS case advocacy performance measures with the addition
           of a true measure of efficiency that incorporates case complexity
           and quality and a cost measure;
           o supplement the detailed information on specific systemic
           advocacy issues currently being developed with a broad measure of
           the effectiveness of systemic advocacy; and
           o improve TAS reporting by (1) describing actions taken in
           response to TAS legislative recommendations, (2) describing
           actions taken by IRS to address the most serious problems
           encountered by taxpayers, and (3) making it clear that the most
           serious problems included in the annual report to Congress are at
           least 20 of the most serious problems but not necessarily all of
           the top problems faced by taxpayers.
			  
			  Agency Comments and Our Evaluation

           The National Taxpayer Advocate provided written comments on a
           draft of this report in a February 12, 2007, letter which is
           reprinted in appendix IX. The Advocate agreed with our
           recommendations. Her letter notes that TAS already collects
           quality data which will be needed to develop an efficiency
           measure, has taken the first steps to collect case complexity and
           time spent on cases to be used to develop cost data, and has
           submitted work requests to collect additional case complexity and
           time spent on case data. Her letter says that TAS will then use
           this data to develop a method for measuring case advocacy
           efficiency. She also noted that TAS recognizes the value of a
           broad measure of the effectiveness of systemic advocacy and said
           that TAS will develop one. TAS is implementing an enhanced process
           to monitor actions taken in response to TAS legislative
           recommendations and the outcomes will be included in the annual
           report to Congress and be posted on the TAS web site. TAS will
           monitor the status of recommendations included in the annual
           report that address serious problems and post the results
           semiannually on the TAS web site. TAS included language in the
           2006 annual report to Congress to clarify that the most serious
           problems included in the report are at least 20 of the most
           serious problems but not necessarily all of the top problems faced
           by taxpayers.

           We also provided a draft of this report to the Commissioner of
           Internal Revenue for his review and comment. The draft report did
           not include any recommendations addressed to the Commissioner. The
           IRS Office of Legislative Affairs provided informal technical
           comments, and we incorporated them as appropriate.

           As agreed with your offices, unless you publicly announce its
           contents earlier, we plan no further distribution of this report
           until 30 days after its date. At that time, we will send copies of
           this report to the National Taxpayer Advocate, the Secretary of
           the Treasury, the Commissioner of Internal Revenue, and other
           interested parties. This report is available at no charge on GAO's
           web site at http://www.gao.gov.

           If you or your staffs have any questions, please contact me at
           (202) 512-9110 or [email protected]. Key contributors to this report
           were David Lewis, Assistant Director; Shellee Soliday; Lindsey
           Houston; John Mingus; Shirley Jones; and Jennifer Gravelle.

           James R. White
			  Director, Tax Issues Strategic Issues Team
			  
			  Appendix I: Objectives, Scope, and Methodology

           Our first objective was to determine why the Taxpayer Advocate
           Service's (TAS) caseload increased since 2004. To address this
           objective, we reviewed the case advocacy process; TAS's case
           acceptance criteria, changes made to the criteria by TAS, and TAS
           guidance for applying the criteria; the legal requirements for
           TAS's case acceptance criteria; TAS documents that included
           discussions of why their caseload was increasing, and the fiscal
           years 2002-5 National Taxpayer Advocate's annual reports to
           Congress, hereafter referred to as the annual report. We analyzed
           TAS caseload data from the Taxpayer Advocate Management
           Information System (TAMIS) for fiscal years 2002-6. To conduct our
           analyses, we associated cases with the fiscal year in which they
           were opened. Also, for cases that TAS closed and subsequently
           reopened, all of our analyses relate to the original case. To
           assess the reliability of the TAMIS data, we reviewed TAS
           documentation, conducted interviews with key officials, and
           conducted electronic testing of key variables. Based on this work,
           we determined that the TAMIS data were sufficiently reliable for
           our purposes. We also analyzed data related to Internal Revenue
           Service (IRS) enforcement activities for fiscal years 2002-5 that
           were included in the IRS Data Books or obtained from IRS
           officials. We interviewed several TAS officials including the
           National Taxpayer Advocate, hereafter referred to as the Advocate,
           the Executive Director of Case Advocacy, the Acting Director of
           Management Accountability, Policy and Strategy, and Local Taxpayer
           Advocates in three state offices and one campus office. We also
           interviewed Wage and Investment (W&I), Small Business/Self
           Employed (SB/SE), and Criminal Investigation (CI) officials to
           obtain their views about why IRS referrals to TAS were increasing.

           Our second objective was to determine how well TAS conducted its
           case advocacy activities in terms of measures such as customer
           satisfaction and quality. To address this objective, we reviewed
           TAS's performance measures for case advocacy; TAS's performance
           results and targets for fiscal years 2002-6; TAS's fiscal year
           2002-5 annual reports; previous GAO reports on performance
           measures and other performance measure literature; and the Office
           of Management and Budget's (OMB) 2004 Program Assessment Rating
           Tool (PART) report that discussed TAS's measures. We assessed
           TAS's performance measures using criteria previously established
           by GAO.^1 We interviewed TAS officials, including the Advocate and
           the Executive Director of Case Advocacy. We also interviewed W&I,
           SB/SE, and CI officials to obtain their views about coordinating
           with TAS to resolve taxpayer cases. In addition, we reviewed the
           Treasury Inspector General for Tax Administration's (TIGTA) report
           on the timeliness of TAS's case advocacy process^2 and GAO's
           report on restructuring the Office of the Taxpayer Advocate, which
           included an evaluation of the adequacy of the Advocate's
           measures.^3

           Our third objective was to determine how well TAS measures and
           reports its systemic advocacy efforts. To address this objective,
           we reviewed TAS's performance measures for systemic advocacy to
           determine if they addressed the effectiveness of systemic
           advocacy. We interviewed TAS systemic advocacy officials including
           the Executive Director for Systemic Advocacy, Acting Director of
           Systemic Advocacy Projects, Director of Immediate Interventions,
           the Project Manager for the Annual Report to Congress, and the
           Senior Advisor to the National Taxpayer Advocate and the Annual
           Report to Congress. In addition, we reviewed OMB's report that
           summarized the results of its use of PART to assess TAS for the
           year 2004, TIGTA's report on the effectiveness of systemic
           advocacy efforts,^4 and GAO's report on restructuring the Office
           of the Taxpayer Advocate to identify any issues raised related to
           measuring systemic advocacy activities.^5 We reviewed the 2002-5
           annual reports to determine what information they included about
           actions taken to address systemic issues identified in them. We
           focused on the annual reports to Congress since they are the
           primary method used by TAS to report on systemic advocacy efforts.
           In addition, we reviewed the legal requirements for the annual
           report and the Department of the Treasury report that summarized
           the actions TAS took to address the recommendations included in a
           2003 Treasury Inspector General for Tax Administration report
           related to the management of systemic advocacy.^6

           We performed our work from September 2005 through December 2006 in
           accordance with generally accepted government auditing standards.
			  
^1GAO, Tax Administration: IRS Needs to Further Refine Its Tax Filing
Season Performance Measures, [43]GAO-03-143 (Washington, D.C.: Nov. 22,
2002).

^2Treasury Inspector General for Tax Administration, The Taxpayer Advocate
Service Needs to Improve Case Management to Ensure Taxpayer Problems Are
Resolved Timely, Reference Number 2004-10-166 (Washington, D.C.: Sept. 29,
2004).

^3GAO, IRS Management: IRS Faces Challenges as it Restructures the Office
of the Taxpayer Advocate, [44]GAO/GGD-99-124 (Washington, D.C.: July 15,
1999).

^4Treasury Inspector General for Tax Administration, Opportunities to
Improve the Effectiveness of Internal Revenue Service Advocacy Efforts,
Reference Number 1999-10-061 (Washington, D.C.: Sept. 27, 1999).

^5 [45]GAO/GGD-99-124 .

^6Treasury Inspector General for Tax Administration, The National Taxpayer
Advocate Could Enhance the Management of Systemic Advocacy Resources,
Reference Number 2003-10-187 (Washington D.C.: Sept. 30, 2003).
			  
			  Appendix II: Process for Creating Immediate Interventions and
			  Systemic Advocacy Projects
			  
			  Immediate Interventions

           Taxpayer Advocate Service (TAS) systemic advocacy staff analyze
           systemic issues to determine if they meet the definition of an
           immediate intervention. Immediate interventions are administrative
           issues which cause immediate, significant harm to multiple
           taxpayers and demand an urgent response. Also, the issues have
           clear sources; are highly visible and sensitive locally, areawide,
           or nationally; and require that a resolution be identified within
           3-5 calendar days. The staff does not have written guidance for
           determining if an issue meets the definition and instead use
           factors such as their knowledge of Internal Revenue Service (IRS)
           operations and problems taxpayers are having with IRS to assess
           whether the issues meet the definition.

           If the systemic advocacy staff determines an issue meets the
           definition of an immediate intervention, they elevate the issue to
           the Director of Immediate Interventions who decides on whether to
           create an immediate intervention. If an intervention is not
           created, then the staff applies the TAS criteria used to determine
           if an issue should become a systemic advocacy project. These
           criteria are described in the following section.

           An example of TAS's use of the immediate intervention process was
           when a taxpayer submitted an issue to TAS's Systemic Advocacy
           Management System (SAMS) describing an experience while using a
           publicly shared computer at a library to access www.irs.gov .
           The taxpayer used the computer to complete and download IRS forms.
           After signing off and exiting the Web site, the taxpayer's
           personal information remained on the computer. TAS immediately
           raised the issue to the level of an immediate intervention due to
           the sensitive nature of the issue and the potential disclosure of
           taxpayer information via the external IRS Web site. TAS worked
           with other offices within IRS and the software vendor to correct
           this problem.
			  
			  Systemic Advocacy Projects

           TAS systemic advocacy staff use written criteria to score each
           systemic issue that does not become an immediate intervention. The
           scores are used to determine which issues will become systemic
           advocacy projects. Such issues are systemic and affect a segment
           of taxpayers; require study, analysis, recommendations, and action
           to effect positive results; involve systems, processes,
           procedures, or legislation; and involve more than one taxpayer.

           TAS systemic advocacy staff use the following 14 criteria, which
           are divided into five categories, to score the issues.

           o Extent of the problem: The following three factors help
           determine how widespread a problem may be. The greater the number
           of taxpayers potentially affected, the more widespread the
           problem, and the greater the frequency of occurrence, the more
           criteria points awarded.

                        o Potential volume of taxpayers affected within the
                        identified segment (i.e., individuals, small
                        businesses): Of the taxpaying population within the
                        identified segment, how many could be affected by
                        this issue? Designate as high, medium, or low the
                        number of affected taxpayers relative to the overall
                        segment of taxpayers.
                        o Geographic scope: Does the issue affect taxpayers
                        across the nation (national), in clustered areas
                        (area, region), or only in certain places (local)?
                        o Issue frequency: Does the issue happen on a
                        recurring or cyclical basis, on a limited or sporadic
                        basis, or only one time?

           o Interest/visibility/sensitivity: The following three factors
           help determine the amount of interest, visibility, or sensitivity
           associated with the problem. The higher the level of
           congressional, community, and media interest or support, the more
           criteria points awarded.

                        o Congressional interest/support: How much support or
                        interest has Congress expressed about this issue? Did
                        the support or interest come from one member's office
                        or is it widespread in the House or Senate or both
                        (high, moderate, or low)?
                        o Community/external stakeholder interest/support:
                        How much support or interest have external
                        stakeholders expressed about this issue? Was the
                        support from one specific group (i.e., AARP) or
                        spread across various sectors such as accountants,
                        lawyers, and other special interest groups (high,
                        moderate, or low)?
                        o Media interest/publicity: How much interest have
                        the media shown in this issue? What level of coverage
                        does this issue rate (high, moderate, or low)?

           o Taxpayer burden: The following four factors help determine the
           level of burden placed on the taxpayer trying to resolve the issue
           from the taxpayer's point of view. The more effort, time, and
           money required to straighten out the problem, the more criteria
           points awarded. If taxpayers are treated disparately, the issue is
           awarded criteria points.

                        o How long to resolve: How long does it take, from
                        the taxpayer's perspective, to resolve this issue?
                        The choices range from "less than 3 months" to
                        "greater than 1 year." The longer it takes, the more
                        points are awarded.
                        o Effort: How much effort is required, from the
                        taxpayer's or other stakeholder's perspective, to
                        resolve this issue (minimal, moderate, or
                        significant? The more effort it takes to resolve the
                        issue, the more points are awarded.
                        o Financial: What is the financial effect on the
                        taxpayer excluding tax, penalties, and interest
                        (minimal, moderate, or significant)? Factors include
                        issues such as the cost of representation, whether
                        the taxpayer has money available for this expense,
                        the cost of repeated photocopies or express mail for
                        documentation, and so on.
                        o Fairness: Is this taxpayer treated disparately
                        compared to other taxpayers? If the taxpayer is
                        treated fairly, the issue is not awarded criteria
                        points. If the taxpayer is not treated fairly, the
                        issue is awarded criteria points.

           o Taxpayer rights: The following two factors help determine how
           the problem affects taxpayers' rights. If rights are negatively
           affected, or if rights are enhanced, the issue is awarded criteria
           points.

                        o Denial of taxpayer rights: Did the taxpayer have
                        the opportunity to exercise a right or was he or she
                        denied something that the taxpayer had the right to
                        (i.e., privacy, collection, appeal)? If taxpayers'
                        rights are violated, the issue is awarded criteria
                        points; otherwise no points are awarded.
                        o Enhancement of taxpayer rights: Does this issue
                        enhance taxpayers' rights? If taxpayers' rights are
                        enhanced, the issue is awarded criteria points;
                        otherwise no points are awarded.

           o Ability to effect change: The following two factors help
           identify issues that may not be resolved without TAS intervention.
           If the operating division is likely to implement a change without
           TAS influence, minimal criteria points are awarded. If TAS is
           likely to influence operating division actions or influence
           change, more points are awarded.

                        o Likelihood of independent operating division
                        action: How likely is it that the operating division
                        will fix the problem without TAS intervention? The
                        higher the likelihood of independent action, the
                        fewer criteria points awarded.
                        o TAS ability to influence change: How likely is it
                        that TAS will be able to influence the operating
                        division to address the issue? The higher the
                        likelihood of TAS influencing change, the more
                        criteria points awarded.

           When applying criteria, staff use their knowledge of IRS
           operations; information contained in IRS systems, obtained from
           IRS officials, or developed by IRS Research offices; and current
           events.

           After the staff enter information into SAMS for each criterion,
           SAMS assigns a score. Each week, the staff then sends a list of
           scored issues to the Director of Immediate Interventions
           indicating which issues met or exceeded the current threshold for
           converting an issue into a systemic advocacy project. This
           threshold can change depending on available resources to work on
           systemic advocacy projects. The Director of Immediate
           Interventions, Director of Advocacy Projects, and the systemic
           advocacy portfolio managers review the issues and decide which
           will become systemic advocacy projects.

           An example of a systemic advocacy project was the tip compliance
           project. The project stemmed from complaints from taxpayers and
           practitioners about the manner in which IRS was conducting tip
           compliance examinations. Problems included, among others,
           inconsistent requirements for substantiating income, insistence
           that original tip diaries be sent to IRS, and refusal to provide
           detail supporting any IRS adjustments. The issue potentially
           affected a high number of taxpayers; was geographically national
           in scope; had high congressional, external stakeholder, and media
           interest; involved significant efforts by taxpayers to resolve the
           issue; and affected the equitable treatment of taxpayers, among
           other things, according to the scoring sheet used to rank the
           issue. TAS worked with Wage and Investment (W&I) and Small
           Business/Self Employed (SB/SE) staff involved in the examinations.
           TAS was able to resolve some of the issues at lower levels of W&I
           and SB/SE. For other issues, TAS submitted an Advocacy Proposal to
           the management of the Employment Tax Group within SB/SE. These
           SB/SE officials agreed to correct the issues TAS raised. TAS is
           monitoring these cases to make sure the problems are not
           experienced by other taxpayers.
			  
			  Appendix III: Information to Be Included in the National Taxpayer
			  Advocateï¿½s Annual Report to Congress

           The National Taxpayer Advocate is required^1 to prepare an annual
           report that describes the Taxpayer Advocate Service's activities
           for the previous year that shall contain full and substantive
           analysis, in addition to statistical information, and shall
			  
			                          1. Identify the initiatives the Office of the
                        Taxpayer Advocate has taken on improving taxpayer
                        services and Internal Revenue Service responsiveness.
                        2. Contain recommendations received from individuals
                        with the authority to issue Taxpayer Assistance
                        Orders under section 7811.
                        3. Contain a summary of at least 20 of the most
                        serious problems encountered by taxpayers, including
                        a description of the nature of such problems.
                        4. Contain an inventory of the items described in 1,
                        2, and 3 for which action has been taken and the
                        result of such action.
                        5. Contain an inventory of the items described in 1,
                        2, and 3 for which action remains to be completed and
                        the period during which each item has remained on
                        such inventory.
                        6. Contain an inventory of the items described in 1,
                        2, and 3 for which no action has been taken, the
                        period during which each item has remained on such
                        inventory, the reasons for the inaction, and identify
                        any Internal Revenue Service official who is
                        responsible for such inaction.
                        7. Identify any Taxpayer Assistance Order which was
                        not honored by the Internal Revenue Service in a
                        timely manner, as specified under section 7811 (b).
                        8. Contain recommendations for such administrative
                        and legislative action as may be appropriate to
                        resolve problems encountered by taxpayers.
                        9. Identify areas of the tax law that impose
                        significant compliance burdens on taxpayers or the
                        Internal Revenue Service, including specific
                        recommendations for remedying these problems.
                        10. Identify the 10 most litigated issues for each
                        category of taxpayers, including recommendations for
                        mitigating such disputes.
                        11. Include such other information as the National
                        Taxpayer Advocate may deem advisable.
								
^126 U.S.C. 7803(c)(2)(B).								
								
			  Appendix IV: Taxpayer Advocate Service Process for Selecting
			  Problems to Include in the Annual Report to Congress

           Prior to 2006, Taxpayer Advocate Service (TAS) systemic advocacy
           officials who prepared the annual report to Congress used input
           from the National Taxpayer Advocate, the Advocate's advisors,
           local taxpayer advocates, and Taxpayer Advocate Management
           Information System (TAMIS) and Systemic Advocacy Management System
           (SAMS) data to identify serious problems that taxpayers were
           encountering.^1 TAS officials considered several factors when
           developing the list including effect on taxpayer rights, the
           number or percentage of taxpayers affected, congressional
           interest, effect of noncompliance on tax administration or tax
           revenue, and barriers to taxpayer compliance. The Advocate and the
           systemic advocacy officials then met and developed a list of
           serious problems which was sent to the Internal Revenue Service
           (IRS) for comment. If IRS officials provided information that
           illustrated one of the proposed problems was not a serious issue,
           TAS dropped the issue. Systemic advocacy officials then prepared
           the final list of serious problems and the Advocate made the final
           decision on which problems were included in the annual report.

           When preparing the 2006 annual report, TAS officials used
           essentially the same process, plus additional sources of
           information to identify the serious problems. First, TAS officials
           summarized an environmental scan of documents that described
           issues that taxpayers have with IRS. Examples of documents
           included newspaper articles, letters to the Commissioner of
           Internal Revenue, and a Department of the Treasury news release.
           Examples of issues included the alternative minimum tax and offers
           in compromise. Second, TAS officials analyzed the "most serious
           problems" included in the 2001-5 annual reports. This process
           involved ranking the problems as critical, high, medium, low, or
           resolved based on the steps IRS had taken to address them. Third,
           they reviewed information related to immediate interventions, task
           forces, operations assistance requests, and low-income taxpayer
           clinics. They combined these three sources of data with input from
           the Advocate, the Advocate's advisors, and the local taxpayer
           advocates along with TAMIS and SAMS data in order to develop the
           proposed list of serious problems for the 2006 annual report. The
           Advocate made the final decision on which problems to include in
           the report.
			  
^1TAMIS and SAMS are the information systems TAS uses to track case and
systemic advocacy activities, respectively.
			  
			  Appendix V: Low-Income Taxpayer Clinic (LITC) Grant Program

           Responsibility for the LITC Grant Program was transferred from the
           Wage and Investment division (W&I) to the Taxpayer Advocate
           Service (TAS) in May 2003. The LITC Grant Program helps accredited
           academic institutions and nonprofit organizations represent
           low-income taxpayers in controversies with IRS and operate
           programs to inform individuals for whom English is a second
           language about their rights and responsibilities. TAS has
           responsibility for selecting LITC grant recipients and conducting
           site visits to ensure that LITCs are fulfilling their obligations.

           LITC grant applications go through a three-step selection process
           involving an eligibility screening, a technical evaluation, and a
           program office evaluation. To be eligible, grantees must offer
           services for free or for no more than a nominal fee and either
           represent low-income taxpayers in controversies with IRS or
           provide information to English as a second language (ESL)
           taxpayers about their rights and responsibilities as U.S.
           taxpayers. Next, a panel of TAS staff knowledgeable about the
           purpose and mission of LITCs conducts a technical evaluation of
           the eligible applicants. Panel members rank each LITC applicant
           based on four weighted criteria: the quality of their programs,
           their experience in sponsoring a clinic, the quality of their
           grant administration and accounting procedures, and the number of
           low-income or ESL taxpayers in the geographic area. Finally, LITC
           program staff conduct the program office evaluation during which
           they evaluate the rankings for inconsistencies or discrepancies.
           The LITC Program Office Director makes recommendations to the
           National Taxpayer Advocate who makes the final decision on who
           will receive the grants.

           TAS conducts several types of site visits to LITC grantees.
           Someone from the LITC Program Office visits each new clinic during
           the first 6 months to educate them on program requirements and to
           verify operational requirements listed in the grant guidelines
           such as keeping taxpayer information in a secure location and
           developing and maintaining relationships with other
           community-based organizations in order to reach targeted
           audiences. There are three tiers of additional site visits. The
           first tier visit is conducted by the local taxpayer advocate and
           includes checking items such as are the clinic's hours posted and
           easily visible, are brochures and posters visible, and does file
           security appear adequate. The second tier site visit is usually
           done by someone from the LITC Program Office and is more in-depth
           than the first tier visit. He or she reviews 30 items such as
           determining if the goals stated in the program plan are reflected
           in the program's actual activities, client records are maintained
           in a confidential manner, and the clinic has a written process to
           control and monitor costs and expenditures. If as a result of the
           second tier visit, the staff member identifies issues that need
           further review, then the LITC Program Office Director conducts a
           third tier visit. During this visit, the Director reviews
           requirements including financial/Office of Management and Budget,
           personnel, and program requirements in addition to other items
           including standards of operation and ethical considerations. Third
           tier visits can result in freezing funds for a grantee.

           For the 2006 grant cycle, TAS awarded $8 million in matching
           grants, ranging from $5,000 to $97,250, to 150 nonprofit
           organizations and accredited academic institutions.^1 According to
           the National Taxpayer Advocate's 2007 Objectives Report to
           Congress, during 2006, TAS expanded the coverage of clinics into
           rural and other areas where disadvantaged taxpayers had very
           limited access to assistance, funding 11 new clinics in areas that
           were underrepresented.
			  
^1Under section 7526 of the Internal Revenue Code, no more than $6 million
per year can be allocated for grants unless otherwise provided for by a
specific appropriation. The Department of the Treasury's 2006
Appropriations Act, Pub. L. No. 109-115, specifically provided $8 million
for LITC grants.			  
			  
			  Appendix VI: Number of Taxpayer Advocate Service Cases by Primary
			  Issue Code, Fiscal Years 2002ï¿½6

                                                    Fiscal year
Primary issue code                    2002    2003    2004    2005    2006 
Criminal Investigation (CI)          5,600  15,304  16,554  28,228  20,490 
Processing Amended Return           32,254  18,282  11,211  12,214  17,195 
Levy                                 8,413   9,104   8,208   9,279  14,651 
Injured Spouse Claim                    18   4,350   6,166   6,389  11,610 
Processing Original Return          19,396  10,730   8,485   8,966  10,417 
Reconsideration/Substitute for       7,395   7,224   7,388   8,028  10,075 
Return (SFR)/6020B/Audit                                                   
Expedite Refund Request                 34   4,742   7,002   6,743  10,045 
Closed Under Reporter Program        7,311   6,542   4,624   6,196   7,741 
(URP)                                                                      
Open Audit (Non Remittance           6,104   5,780   4,660   5,343   6,969 
Processing System (RPS), Earned                                            
Income Tax Credit (EITC))                                                  
Copies of Returns / Transcripts /    3,481   2,878   4,058   5,696   5,761 
Reports / Freedom of Information                                           
Act (FOIA)                                                                 
RPS (EITC Claim)                    27,184  23,358  10,307   6,945   5,729 
Other Document Processing Issues       878   1,316   2,149   3,050   5,631 
Taxpayer Delinquent Return           4,017   2,172   1,585   2,184   5,102 
(TDI)-SFR / 6020B                                                          
Open URP                                13   1,115   2,475   2,887   4,750 
Other Refund Inquiries / Issues     20,119   8,493   3,578   3,397   4,510 
Missing/Incorrect Payments           8,674   4,854   3,578   3,926   4,337 
Combined Annual Wage reporting       3,337   3,665   2,697   2,684   4,244 
(CAWR)/Federal Unemployment Taxes                                          
(FUTA)                                                                     
Failure to File Penalty (FTF) /         39   1,817   3,162   3,832   4,232 
Failure to Pay (FTP)                                                       
EITC Reconsideration                    16      43     867   3,628   3,915 
Federal Payment Levy Program             2       5     470   1,632   3,809 
(FPLP) Levy-Social Security                                                
Administration (SSA) Benefits                                              
Internal Revenue Service (IRS)       2,687   2,228   2,084   2,741   3,783 
Offset                                                                     
Lost / Stolen Refund                 7,770   3,939   2,953   2,634   3,627 
Installment Agreement (IA) - Other   2,235   1,740   1,659   2,331   3,365 
Lien Release                            17   1,229   2,486   3,063   3,316 
Account / Notice Inquiry             2,991   2,303   2,051   2,493   3,139 
Other Collection Issues              2,261   1,745   1,732   2,310   3,104 
Math Error                           2,554   1,908   1,616   1,919   2,914 
Returned/Stopped Refunds                13   1,666   1,900   2,262   2,852 
Civil Penalties other than Trust        18     788   1,718   1,926   2,754 
Fund Recovery Penalty (TFRP)                                               
EITC Recertification                    51   2,515   2,739   2,333   2,676 
Stolen Identity                          4      67     460   1,185   2,514 
Unpostable / Reject                            535     935   1,772   2,478 
Unable to Pay-(Currently Not         2,695   2,050   1,625   1,766   2,339 
Collectible (CNC))                                                         
Multiple/Mixed Taxpayer              1,598   1,665   1,705   1,632   2,066 
Identification Number (TIN)                                                
Offer in Compromise (OIC)-Doubt as   4,487   3,383   2,500   2,047   2,042 
to Collectibility                                                          
Form W-7/Individual Taxpayer         2,319   2,429   2,626   2,592   1,990 
Identification Number                                                      
(ITIN)/Adoption Taxpayer                                                   
Identification Number (ATIN)                                               
Other Penalty Issues                11,283   4,670   1,337   1,332   1,929 
Other Payment Issues                    14     507   1,084   1,182   1,735 
Bankruptcy                           1,439   1,005   1,009   1,185   1,721 
Failure to Deposit Penalty (FTD)     2,529   1,825   1,593   1,147   1,288 
Lien-Other                           3,124   1,757     786   1,048   1,249 
Innocent Spouse Claim                1,791   1,230     960   1,040   1,208 
Tax Questions                        2,034   1,068     860   1,115   1,175 
Other Entity Issues                    515     514     794     992   1,126 
Scrambled Social Security Numbers       98     562     841   1,128   1,112 
(SSN)                                                                      
Refund Statute (Refund Statute           5     398     821     940   1,089 
Expiration Date (RSED))                                                    
Other Exam                             895     717     783     864   1,070 
Treasury Offset Program (TOP)            3     549     750     835   1,062 
Offset                                                                     
Other Technical, Procedural, or         13     363     734     908   1,002 
Statute Issues                                                             
Undelivered Refunds                    902     675     570     757     987 
Application for Exempt Status          680     387     479     620     977 
(F1023/1024)                                                               
CI (Return Preparation Program)                  5      20     449     904 
TFRP                                   828     784     774     793     894 
Individual Retirement Account                    3     262     737     846 
(IRA) Penalty                                                              
Carryback / Carryforward Claims         17     591     733     747     717 
(Net Operating Losses (NOL), F                                             
1045/1139)                                                                 
Subchapter S Corporation               949     785     698     675     711 
Examination Appeals                     22     254     516     557     694 
FTD/Estimated Tax (ES)               3,386   1,635     807     631     675 
Appeals-Other                           15     221     452     524     668 
Name/Address Changes                     4     176     372     613     663 
Back-up Withholding (BWH)              664     332     759     783     660 
Direct Deposit                           3     169     223     433     577 
Streamlined IA (Unpaid Balance of        6     244     368     452     549 
Assessment under $25k and able to                                          
full pay in 60 months)                                                     
EITC Certification (Qualifying                   8     466     724     484 
Child)                                                                     
Other                                5,704   3,110     846     588     460 
ES Penalty                               3     268     287     265     454 
Penalty Appeals                          5     262     516     488     454 
Lien Withdrawal                          7     138     242     338     438 
Informal Interest Abatement              9     285     390     390     431 
Request                                                                    
Lien Subordination                       1     128     224     288     396 
Original Lien Filing                     3     151     256     327     370 
Collection Due Process (CDP)             6     131     179     239     352 
Appeals                                                                    
Taxpayer Rights                        365     235     198     155     330 
Lien Discharge                           1      78     202     282     306 
Excess Collection                        5     145     242     290     304 
Collection Statute Expiration Date      28     172     320     259     290 
(CSED)                                                                     
Form 843 (other than interest           15     162     215     317     285 
abatement)                                                                 
OIC Appeals                             15     137     303     319     274 
ITIN Merge                                              13     175     266 
Electronic Federal Tax Payment           2     102     206     138     241 
System (EFTPS)                                                             
OIC-Effective Tax Administration        10     189     277     215     231 
Unpostable Payment                       1      66     114     131     213 
Tax Exempt/Government Entity             2     147     215     195     211 
(TE/GE) (Employment Plans/Exempt                                           
Organizations (EP/EO)) Technical                                           
Formal Interest Abatement Request       18     209     275     235     209 
(F 843)                                                                    
Seizure and Sale                       115     128     127     163     197 
SS-4, Application for Employer       3,170     685     188     148     192 
Identification Number (EIN)                                                
Forms / Publication Request             22      93     198     231     191 
Interest Calculation                     8      86     177     203     185 
Invalid Social Security Number         321     241     173     159     177 
(SSN) (Primary / Secondary)                                                
OIC - Doubt as to Liability             14     248     295     246     175 
Math Error ITIN                                         18     184     163 
FPLP Levy-Fed. Empl. Salaries                           38      85     158 
Invalid Dependent SSN/Name             220     179     140     123     149 
Innocent Spouse Appeals                 20      82     143     120     137 
FPLP Levy-Office of Personnel                           41     101     129 
Management (OPM) Retirement Income                                         
Alien Taxation Problems/inquiries               38     125     176     128 
regarding determinations of alien                                          
status for income tax purposes.                                            
Other Interest                       1,603     522      89      84     106 
Guaranteed IA                                   28      40      75     100 
ITIN Refund Inquiry                                     14      87      90 
Tax Treaties                             1      30      79      76      85 
Non-Master File                          8     103     185     136      78 
Exclusion of Foreign Earned Income       2      27      37      77      78 
Problems/inquiries regarding the                                           
exclusion of income.                                                       
SS-8 Determinations                    132     118      86      88      77 
Restricted Interest                             48      82      90      66 
Assessment Statute (Assessment           1      26      41      40      63 
Statute Expiration Date (ASED))                                            
Invalid Spouse/Dependent ITIN                           13      79      55 
Refunds                                 17   1,194     372      97      53 
Collection Appeals Program (CAP)                17      27      35      53 
Appeals                                                                    
FPLP Levy-Federal                                       11      38      51 
Contractor/Vendor Payments                                                 
Foreign Tax Credit                       1      25      31      30      51 
Examination                             21     672     296      84      47 
Collection                              11     344     200      72      43 
EITC Certification (Filing Status)               2     660     244      40 
Credit Interest                                 29      39      40      36 
Technical/Procedural/Statute             2     179      89      58      33 
Document Processing                     10     433     153      50      33 
Payments/Credits                        12     423     217      53      30 
Penalty                                  5     355     138      39      29 
Disaster Relief Claim                            6       5      15      28 
Appeals/Other                           10     120      88      24      15 
Lockbox                                         25      14       8      10 
Entity                                   3      94      52      24       9 
EITC Certification (Automated                            4       3       6 
Underreporter)                                                             
Interest                                 2      56      19       5       3 
FPLP Levy-Federal Employment                             1       1       2 
Travel and Reimbursement Payments                                          
Total                              229,135 196,169 170,129 198,789 243,810 

           Source: GAO analysis of TAS data.
			  
			  Appendix VII: Types of Taxpayer Advocate Service (TAS) Cases That
			  Increased by More than 1,000 in Fiscal Years 2005 and 2006

           Table 9: Types of TAS Cases That Increased by More than 1,000
           Cases in Fiscal Year 2005
			  
                                                           Fiscal year        
                                          Fiscal year 2004        2005 Change 
Criminal Investigation                           16,554      28,228 11,674 
Processing Amended Return                        11,211      12,214  1,003 
Closed Under Reporter Program (URP)               4,624       6,196  1,572 
Lien                                              4,196       5,346  1,150 
Earned Income Tax Credit (EITC)                     867       3,628  2,761 
Reconsideration                                                            
Levy                                              8,769      11,136  2,367 
Copies of Returns / Transcripts /                 4,058       5,696  1,638 
Reports / Freedom of Information Act                                       
All Other^a                                     119,850     126,345  6,495 

           Source: GAO analysis of TAS data.

           a"Other" consists of the remaining 114 issue codes that TAS
           tracks. The number of cases in each of these codes either
           increased by fewer than 1,000 cases or decreased.

           Table 10: Types of TAS Cases That Increased by More than 1,000
           Cases in Fiscal Year 2006

                                               Fiscal year Fiscal year        
                                                      2005        2006 Change 
Levy                                             11,136      18,800  7,664 
Processing Original Return                        8,966      10,417  1,451 
Open Audit (Non Remittance Processing             5,343       6,969  1,626 
System, EITC)                                                              
Processing Amended Return                        12,214      17,195  4,981 
Closed URP                                        6,196       7,741  1,545 
Reconsideration/Substitute for                    8,028      10,075  2,047 
Return/6020B/Audit                                                         
Other Refund Inquiries / Issues                   3,397       4,510  1,113 
Taxpayer Delinquent Return (TDI) -                2,184       5,102  2,918 
Substitute for Return (SFR) / 6020B                                        
Installment Agreement - Other                     2,331       3,365  1,034 
Stolen Identity                                   1,185       2,514  1,329 
Combined Annual Wage Reporting/Federal            2,684       4,244  1,560 
Unemployment Taxes                                                         
Open URP                                          2,887       4,750  1,863 
IRS Offset                                        2,741       3,783  1,042 
Other Document Processing Issues                  3,050       5,631  2,581 
Injured Spouse Claim                              6,389      11,610  5,221 
Expedite Refund Request                           6,743      10,045  3,302 
All Other                                       113,315     117,059  3,744 

           Source: GAO analysis of TAS data.

           a"Other" consists of the remaining 114 issue codes that TAS
           tracks. These codes either increased by fewer than 1,000 cases or
           decreased.
			  
			  Appendix VIII: Taxpayer Advocate Service Customer Satisfaction
			  Survey Results

           Table 11: Summary of Taxpayer Advocate Service (TAS) Customer
           Satisfaction Scores: Fiscal Year 2005

Survey question                                           Fiscal year 2005 
The TAS employee...                                                        
gave you a way to directly contact them                         95 percent 
informed you of actions they were planning to take              91 percent 
offered you an apology                                          70 percent 
listened to your concerns                                             4.47 
gave you an adequate opportunity to explain your problem              4.47 
gave you a chance to present additional documents or                  4.35 
information                                                                
treated you with courtesy                                             4.58 
did their best to solve your problem                                  4.33 
was knowledgeable about your problem                                  4.27 
kept you informed about progress in resolving your                    4.29 
problem                                                                    
had a positive attitude                                               4.48 
understood all the issues and requests that you presented             4.30 
The TAS process...                                                         
it was easy to reach the person helping you                           4.25 
written correspondence was easy to understand                         4.33 
you feel your problem was handled in a reasonable                     4.11 
timeframe                                                                  
you were treated fairly by TAS                                        4.38 
overall satisfaction (unweighted)                                     4.39 
as a result of your TAS experience, your opinion of the               3.63 
Internal Revenue Service                                                   

           Source: TAS.

           Note: The responses to the first three TAS employee questions
           represented the percentage of respondents who answered "yes." The
           responses to the remaining TAS employee questions and the first
           four TAS process questions were based on a rating of 1-5, with 5
           representing "strongly agree." The response to the fifth TAS
           process question was based on a rating of 1-5, with 5 representing
           "very satisfied." The response to the last TAS process question
           was based on a scale of 1-5, with 5 representing "much more
           positive," 4 representing "a little more positive," and 3
           representing "about the same."
			  
			  Appendix IX: Comments from the National Taxpayer Advocate
			  
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Highlights of [47]GAO-07-156 , a report to the Committee on Finance, U.S.
Senate

February 2007

TAXPAYER ADVOCATE SERVICE

Caseload Has Grown and Taxpayers Report Being Satisfied, but Additional
Measures of Efficiency and Effectiveness Are Needed

Congress created the Taxpayer Advocate Service (TAS) to assist taxpayers
in resolving problems with the Internal Revenue Service (IRS) and to
propose changes to IRS's practices to mitigate problems affecting
taxpayers in general. TAS uses case advocacy and systemic advocacy,
respectively, to address these two goals. GAO was asked to address (1) why
TAS's caseload has increased since 2004, (2) how well TAS conducted its
case advocacy activities in terms of measures such as customer
satisfaction and quality, and (3) how well TAS measures and reports its
systemic advocacy efforts. GAO interviewed TAS and IRS managers and other
staff, reviewed TAS and IRS documents, and analyzed TAS and IRS data.

[48]What GAO Recommends

GAO recommends that TAS add performance measures to assess the efficiency
and cost of case advocacy and the effectiveness of systemic advocacy. TAS
should also improve what it reports about systemic advocacy such as
describing actions taken to address taxpayers' serious problems. The
National Taxpayer Advocate agreed with our recommendations, noting that
TAS has begun reporting about systemic advocacy and is acting to implement
the other recommendations. TAS and IRS provided technical comments, and we
incorporated them as appropriate.

The number of individual taxpayer cases opened by TAS increased
substantially in fiscal years 2005 and 2006 and our analysis of TAS and
IRS data shows that these increases correlated with increases in IRS
enforcement activities both overall and in some specific IRS enforcement
programs. For example, changes in the number of tax refunds frozen by IRS
coincided with changes in the number of frozen refund cases at TAS. While
TAS made changes after fiscal year 2004 to its guidance for accepting new
taxpayer cases, this did not notably influence TAS's caseload increase in
fiscal years 2005 and 2006. For example, TAS created two additional case
acceptance criteria in fiscal year 2006 that resulted in a little more
than 500 of the approximately 244,000 cases received that year.

TAS measures customer satisfaction and found that the taxpayers TAS serves
remained satisfied from fiscal years 2002 to 2006. TAS also measures the
quality of its case advocacy and found that this improved from 2002 to
2004 and stayed about the same in 2005 and 2006. While these case advocacy
measures are sound, there is important missing information in that TAS
does not have meaningful measures of case advocacy efficiency or cost. A
meaningful measure of efficiency would consider the ratio of cases closed
to the time spent on them and take into account case complexity and the
quality of the work, and unit cost information is needed to fully
understand this information. TAS is developing the means to capture time
per case, the key component of unit cost, and case complexity.

TAS currently does not measure the effectiveness of its systemic advocacy
efforts. TAS is piloting a program to study systemic advocacy
effectiveness in a few areas, but not broadly. Also, it is difficult to
determine what actions were taken to address systemic issues raised in the
annual report to Congress, TAS's primary method for providing information
to Congress and the public about its systemic advocacy efforts. For
example, the report describes serious problems faced by the taxpayers but
does not include the status of addressing those issues.

Overview of TAS Functions

References

Visible links
  32. http://www.gao.gov/cgi-bin/getrpt?GAO-03-143
  33. http://www.gao.gov/cgi-bin/getrpt?GAO-03-143
  34. http://www.gao.gov/cgi-bin/getrpt?GAO-04-287
  35. http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-124
  43. http://www.gao.gov/cgi-bin/getrpt?GAO-03-143
  44. http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-124
  45. http://www.gao.gov/cgi-bin/getrpt?GAO/GGD-99-124
  47. http://www.gao.gov/cgi-bin/getrpt?GAO-07-156
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