Tax Administration: IRS' Implementation of the Restructuring Act's
Taxpayer Protection and Rights Provisions (Letter Report, 04/21/2000,
GAO/GGD-00-85).

Pursuant to a congressional request, GAO: (1) reviewed the status of the
Internal Revenue Service's (IRS) implementation of the taxpayer
protection and rights provisions in title III of its Restructuring and
Reform Act of 1998; and (2) determined what, if any, tax administration
or other concerns IRS has identified in implementing these provisions.

GAO noted that: (1) IRS reported that, as of January 31, 2000, it had
met the legal requirements to implement the taxpayer protection and
rights provisions that had reached their effective dates, and was
integrating these requirements into its daily work processes,
procedures, and interactions with taxpayers; (2) as part of its overall
strategy to implement the Restructuring Act, IRS had developed action
plans for each of the 72 taxpayer protection and rights provisions
showing the steps IRS officials considered necessary to implement the
provisions; (3) IRS reported that it had completed these action plans
for more than half the provisions and was continuing work to complete
the others; (4) in implementing the taxpayer protection and rights
provisions, IRS has identified several tax administration concerns; (5)
two provisions--one to grant tax relief to innocent spouses and another
to increase taxpayers' rights during collection actions--increased IRS'
workload far more than anticipated; and (6) two other provisions--one
requiring IRS to notify taxpayers before contacting third parties about
their tax situation and one which eliminates the difference in interest
rates on overpayments and underpayments for any period of mutual
indebtedness--proved difficult to put into practice.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-85
     TITLE:  Tax Administration: IRS' Implementation of the
	     Restructuring Act's Taxpayer Protection and Rights
	     Provisions
      DATE:  04/21/2000
   SUBJECT:  Tax administration
	     Taxpayers
	     Tax law
	     Customer service
	     Administrative law
	     Internal controls
	     Legal rights
	     Reporting requirements

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United States General Accounting Office
GAO

Report to Congressional Requesters

April 2000

GAO/GGD-00-85

TAX ADMINISTRATION
IRS' Implementation of the Restructuring Act's

Taxpayer Protection and Rights Provisions

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Contents
Page 121GAO/GGD-00-85 Taxpayer Protection and Rights Provisions
Letter                                                                      1
                                                                             
Appendix I                                                                 14
Status of IRS' Actions
to Implement Title III
of the Internal Revenue
Service Reform and
Restructuring Act of
1998
                                                                             
Appendix II                                                                21
Comments From the
Internal Revenue Service
                                                                             
Appendix III                                                               23
GAO Contacts and Staff
Acknowledgments
                                                                             

Abbreviations

IRS       Internal Revenue Service
NRC       National Resource Center
TIGTA     Treasury Inspector General for Tax
Administration
TSI       Taxpayer Treatment and Service
Improvement

B-283953

Page 2GAO/GGD-00-85 Taxpayer Protection and Rights
Provisions
B-283953

April 21, 2000

The Honorable Bill Archer
Chairman, Committee on Ways and Means
House of Representatives

The Honorable Amo Houghton
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

When Congress passed the Internal Revenue Service
(IRS) Restructuring and Reform Act of 1998
(Restructuring Act),1 it signaled its strong
concern that IRS was not affording taxpayers the
protection and rights they deserved. As you
requested, we are studying IRS' implementation of
the Restructuring Act. We will issue separate
reports covering various aspects of the
implementation. This report describes the status
of IRS' implementation of the taxpayer protection
and rights provisions in title III of the act,
which require IRS to treat taxpayers fairly. Also,
this month, we are issuing a report on IRS'
implementation of the personnel flexibility
provisions in title I of the Restructuring Act,
which are, in part, also intended to help IRS
ensure that taxpayers are treated fairly.2

As agreed with your office, the objectives of this
report are to (1) describe the status of IRS'
implementation of the Restructuring Act's title
III provisions and (2) determine what, if any, tax
administration or other concerns IRS has
identified in implementing these provisions. To
fulfill these objectives, we interviewed IRS
officials at the national, regional, and local
levels with responsibility for implementing the
provisions. We supplemented the information they
provided with information from relevant documents,
IRS' database on taxpayer service initiatives, and
related studies by IRS and the Treasury Inspector
General for Tax Administration (TIGTA). As agreed
with your staff, we relied on information provided
by IRS and did not assess the effectiveness of the
taxpayer protection and rights provisions of the
act. We did, however, check information from
different sources for consistency. This report
shows the status of IRS' implementation through
January 31, 2000.

Results in Brief
IRS reported that, as of January 31, 2000, it had
met the legal requirements to implement the
taxpayer protection and rights provisions that had
reached their effective dates, and was integrating
these requirements into its daily work processes,
procedures, and interactions with taxpayers. As
part of its overall strategy to implement the
Restructuring Act, IRS had developed action plans
for each of the 72 taxpayer protection and rights
provisions showing the steps IRS officials
considered necessary to implement the provisions.
IRS reported that it had completed these action
plans for more than half the provisions and was
continuing work to complete the others. Appendix I
describes the status of IRS' implementation of
each of the 72 taxpayer protection and rights
provisions.3

In implementing the taxpayer protection and rights
provisions, IRS has identified several tax
administration concerns. Two provisions-one to
grant tax relief to innocent spouses and another
to increase taxpayers' rights during collection
actions-increased IRS' workload far more than
anticipated.  Two other provisions-one requiring
IRS to notify taxpayers before contacting third
parties about their tax situation and one which
eliminates the difference in interest rates on
overpayments and underpayments for any period of
mutual indebtedness-proved difficult to put into
practice.

Background
Following a series of hearings on IRS' treatment
of taxpayers, Congress concluded that IRS needed
comprehensive reform. On July 22, 1998, Congress
enacted the IRS Restructuring and Reform Act to
better balance IRS' responsibility to collect
taxes with its responsibility to protect the
rights of taxpayers and serve the public. Among
other things, the reforms included a change in the
agency's mission statement and organizational
structure aimed at providing top-quality service
to taxpayers.

Under title III of the act, Congress expanded
taxpayer protection and rights when dealing with
IRS. Title III contains 72 provisions that are
designed to help ensure that taxpayers are treated
fairly by limiting certain IRS practices and
specifying various steps IRS must take to help
taxpayers meet their tax obligations without undue
hardship. For example, the provisions allowed
taxpayers, under certain circumstances, the right
to collect civil damages from IRS up to $1
million, the guaranteed availability of
installment agreements, and notification in
advance of IRS' contacting others regarding their
tax situation. Most provisions were effective on
or the day following enactment. (App. I provides a
listing of the taxpayer protection and rights
provisions in title III of the Restructuring Act.)

Scope and Methodology
To meet our objectives, we interviewed IRS
officials with responsibility for implementing the
provisions. This included senior executives at
IRS' National Office in Washington, D.C., with
responsibility for collection, examination,
appeals, operations, training, and forms and
publications. We also contacted IRS' National
Taxpayer Advocate's Office, which helps taxpayers
resolve problems with IRS, and the Chief Counsel's
Office, which helps IRS staff correctly interpret
laws. To obtain field perspectives, we interviewed
IRS staff at the Southeast Regional Office,
Georgia District Office, Atlanta Submission
Processing Center, and Atlanta Customer Service
Center who coordinated the Restructuring Act
implementation efforts at those locations. As
agreed with your staff, we relied on information
provided by IRS and did not assess the
effectiveness of the taxpayer protection and
rights provisions of the act. We did, however,
check information from different sources for
consistency.

In addition, to determine the status of IRS'
implementation of the provisions, we reviewed
relevant documents, such as Restructuring Act
executive steering committee minutes, staff
training plans, and internal guidelines and
memorandums. We reviewed the role that the
National Resource Center (NRC), an IRS Intranet
Web site, played in disseminating policy and
guidance to staff. We used information from a
database maintained by the office of IRS' Taxpayer
Treatment and Service Improvement Program (TSI) to
determine the status of the provisions' action
plans. We did not independently verify the TSI
database nor assess the adequacy or completeness
of the various action plans; however, we reviewed
related documents and discussed some of the
provisions in detail with responsible IRS
officials.

To determine what tax administration concerns IRS
identified in implementing the provisions, we
interviewed IRS officials and reviewed selected
documentation, such as "provision folders" that
contained policies, procedures, and other
documentation related to the provisions. In
addition, we reviewed available evaluations and
studies conducted by IRS or TIGTA.

We conducted our work between October 1999 and
February 2000 in accordance with generally
accepted government auditing standards. On March
17, 2000, we provided a draft of this report to
the IRS Commissioner for comment. We received
written comments on April 7, 2000, which are
discussed at the end of this letter and reprinted
in appendix II.

Status of IRS' Implementation of the Taxpayer
Protection and Rights Provisions of the
Restructuring Act
IRS reported that steps had been taken to
implement the taxpayer protection and rights
provisions that were in effect. As of January 31,
2000, IRS had completed actions to implement more
than half of the provisions, and actions were
continuing for the remaining provisions.

IRS Reports That Implementation Action Plans Have
Been Completed for More Than Half the Provisions
For the provisions in effect, IRS said that it had
completed the legal requirements to implement the
law. According to IRS, action plans had been
developed for all 72 of the provisions, and, as of
January 31, 2000, IRS had completed the
requirements for implementing 43 provisions and
was continuing work to implement the remaining
provisions. IRS' records showed that 25 of the 68
provisions then in effect had uncompleted actions.

The action plans showed the status of actions that
IRS officials agreed were needed to implement the
provisions. For example, in some instances, IRS
had issued interim procedures so it could begin to
address the needs of taxpayers who were affected
by, or who were seeking assistance under, the law.
The actions included updating taxpayer forms and
publications; revising procedures, manuals, and
regulations; conducting training; and making
information systems changes.

Although IRS' records showed that all planned
implementation steps had been completed for more
than half the provisions, officials stated that
continued oversight would be needed to ensure that
staff were appropriately applying the procedures
and that the procedures were producing appropriate
outcomes for taxpayers. Consequently, according to
these IRS officials, actions placed into effect to
implement a provision may be subjected to review
at any time, and they may be changed to address
concerns or issues that may arise.

Appendix I summarizes the status of IRS' efforts
to complete items in the provisions' action plans
as of January 31, 2000, when all but 4 of the 72
title III provisions were at least partially in
effect. It is important to recognize that some
provisions have more than one part, and in some
instances, the law specified different effective
dates for each part.

Overall Restructuring Act Implementation Strategy
Used to Integrate Provisions Into Daily Operations
IRS developed a detailed implementation strategy
to manage the overall execution of the
Restructuring Act, including the taxpayer
protection and rights provisions. According to
IRS, because of the high-profile nature of the act
and the unusual number of provisions that were
effective upon enactment, a substantial effort was
required to implement the law. IRS' strategy for
integrating the taxpayer protection and rights
provisions into daily work processes, procedures,
and interactions with taxpayers consisted of (1)
assigning accountability, (2) designing a
communications strategy, (3) developing a training
plan, and (4) conducting reviews of new policies
and procedures.

Assigning Accountability
In June 1998, the IRS Commissioner assigned
accountability for the overall implementation of
the Restructuring Act to the Chief Operations
Officer, who in turn set up a cross-functional
approach to manage the implementation process,
which included the establishment of an executive
steering committee and assignment of individual
provisions to IRS executives who had lead
responsibility for their implementation. The
executive steering committee was initially chaired
by the Deputy Chief Operations Officer and was
comprised of senior IRS officials representing
major functions, such as Collection and
Examination, and offices such as Chief Counsel,
National Taxpayer Advocate, and Corporate
Education. The executive steering committee was
established to provide continuous review of the
act's implementation status and to resolve
implementation issues as they arose. In addition
to providing a forum for IRS officials to discuss
implementation issues from an agencywide or
functional perspective, the steering committee
focused on individual provisions to ensure that
issues and concerns about them were being properly
managed.

The executives with lead responsibility for
implementing specific provisions were to finalize
the action plans for each provision assigned to
them. Although each provision has only one owner
who has overall responsibility for the provision,
the actions pertaining to that provision may
belong to many different IRS functions.

Staff from TSI worked with the executive steering
committee and IRS executives who were the owners
of specific provisions. Among other things, TSI's
role was to help

ï¿½    ensure that the set of actions for each
provision would accomplish the implementation of
the provision;
ï¿½    identify critical interdependencies to ensure
the proper sequencing of actions and provide an
early indication of implementation problems;
ï¿½    provide support to functional areas in
resolving problems;
ï¿½    prepare a biweekly status report for use by
the executive steering committee; and
ï¿½    ensure that requests for information services
were included in appropriate plans and that the
requests were designated as Restructuring Act
requirements to ensure higher priority.

IRS field staff were also assigned as
Restructuring Act coordinators to provide
implementation assistance for staff in each
district, region, and service center. The
coordinators' primary responsibilities were to
help ensure that field staff were aware of IRS'
ongoing efforts to implement the Restructuring
Act, assist in coordinating training and
distributing policy and procedural guidance, and
assist in obtaining answers to questions and
concerns raised by staff.

Designing a Communications Strategy
Informing the staff about the tax law, policy, and
procedural changes was an important part of IRS'
Restructuring Act implementation according to IRS.
To facilitate agencywide communication, IRS said
it relied on interactive video training
broadcasts, labor management relations
professionals, and its NRC Intranet Web site as
the primary means to disseminate information. In
August 1998, the NRC Web site became operational
to support the Restructuring Act's implementation
by

ï¿½    serving as a central repository of relevant
policy and procedural guidance;
ï¿½    providing a means for posting questions and
answers on implementation concerns so that all
staff would receive consistent information;
ï¿½    showing the important memorandums, training,
and questions about each provision; and
ï¿½    providing a link to the TSI Web site that had
up-to-date information on the provision action
plans.

IRS did not have the technical infrastructure it
needed to make the NRC Web site an effective
communications medium. To do so would require that
the field users have access to computers with IRS'
Intranet capabilities, and many did not. In some
locations that had computers, staff did not have
access to IRS' Intranet or were unaware of the NRC
Web site. The lack of access placed a substantial
burden on local coordinators to use alternate
means to provide information to the frontline
staff who had to apply the procedures. According
to IRS officials, this was not conducive to
consistency in interpreting the policies and
procedures. IRS learned of this problem and later
used other means to supplement the NRC Intranet
Web site to provide information to staff.

Developing a Training Plan
IRS officials told us that another key to the
implementation of the Restructuring Act was
training employees about how the new law would
affect the agency in terms of impact on policies,
procedures, and taxpayer interactions. Preliminary
planning for training took place before the
passage of the law to ensure that the training
could be provided to employees in a timely manner
following enactment. The IRS provision owners were
responsible for ensuring that training classes
were developed and courses delivered to all staff
affected by the provisions.

Staff training was to be conducted in three
phases. The initial phase was referred to as
awareness training and consisted primarily of
instructional television programs, group
discussions, and memorandums to staff. The goal of
this training was to help ensure that staff were
aware of the changes in the law and IRS' policies
and procedures. According to IRS, about 51,000
employees received phase-one training.

The second phase of training, which was conducted
between May and September 1999, included
traditional classroom training. An example of
phase-two training was Customer Service's training
on the provisions relating to due process, offers-
in-compromise, third-party contact, liens and
seizures, and innocent spouse provisions, for
which 18,000 employees received 72,000 hours of
training.

Phase-three training, which is to reinforce the
earlier training, is to take place in fiscal year
2000. This training is expected to use traditional
classroom methods.

Conducting Reviews of the Implementation of New
Policies and Procedures
In fall 1999, IRS began conducting reviews of the
staff's implementation of its new policies and
procedures. This was to provide the executive
steering committee and IRS managers with
information on how field staff in IRS functions
were actually applying selected provisions.

The results of the reviews were mixed. In some
instances, staff found no implementation issues,
while in other instances, staff did find issues
that required corrective actions. The issues
requiring corrective actions varied from statutory
violations to a lack of adherence to internal
procedures. According to IRS, corrective actions,
which sometimes included additional guidance and
training, were taken when warranted.

Tax Administration Concerns IRS Has Identified in
Implementing the Taxpayer Protection and Rights
Provisions
IRS identified several tax administration concerns
in implementing the taxpayer protection and rights
provisions. The most significant concerns involved
two provisions that resulted in significant
workload increases and two other provisions that
were difficult to put into practice.

Some Tax Administration Concerns Resulted From
Workload Increases
According to IRS officials, substantial increases
in workload were attributable to taxpayers' claims
under the provision relating to innocent spouse
cases and the provision relating to due process
through requests for administrative hearings
before IRS takes enforcement actions, such as
imposing a lien or levy.

Innocent Spouses' Relief From Joint and Several
Liability
Under joint and several liability, spouses who
file a joint tax return are each fully responsible
for the accuracy of the return and for the full
tax liability. This is true even though only one
spouse may have earned the wages or income shown
on the return. Section 3201 of Restructuring Act
made it easier for innocent spouses to seek relief
under certain circumstances. To illustrate, under
certain circumstances, the provision allows a
spouse to have a previously filed joint tax return
recalculated to include only items allocable to
that taxpayer. In general, the tax would be
assessed as if the taxpayer had filed a separate
tax return.

The IRS Commissioner has acknowledged that IRS was
administratively unprepared to deal with the
separation of single tax liability for spouses
into multiple liabilities as mandated in the act.
Thus, IRS had to establish manual processes and
controls to deal with the requests, a measure
requiring about 720 additional full-time-
equivalent staff. As of December 31, 1999, IRS had
received almost 57,000 relief requests from about
30,000 taxpayers, and in about 15 percent of them,
IRS had reached a preliminary determination. IRS
considered the remaining relief requests to be a
significant backlog that would require, on
average, between 4 staff hours and 22 staff hours
per case to resolve, depending on complexity. IRS
officials were concerned about the agency's
ability to process all the cases in a timely
manner.

Due Process in IRS Collections
Section 3401 of the Restructuring Act, effective
on January 19, 1999, establishes procedures
designed to ensure that taxpayers receive due
process when IRS seeks to collect taxes by such
means as levies. This section of the Restructuring
Act required IRS to notify taxpayers in writing
when a notice of federal tax lien has been filed
or notice of intent to levy has been given,
informing them, among other things, of their right
to an administrative hearing with an IRS Appeals
officer. Additionally, if taxpayers exercised
their appeal rights, IRS was required by law to
suspend all collection activity until the claim
was adjudicated.

In calendar year 1999, IRS' Appeals Division
received approximately 7,000 appeal cases under
this provision. According to Appeals Division
officials, these cases represented a significant
amount of additional work. IRS Appeals officials
believed that many of the cases should have been
completed by Collection staff. In this regard,
Collection officials told us that when taxpayers
wanted to appeal their cases, their frontline
staff were sometimes reluctant to suggest
alternatives, such as installment agreements, for
paying the tax liabilities. The employee
termination provisions of section 1203 of the
Restructuring Act were viewed by some Collection
staff as an opportunity for taxpayers and
practitioners to make unwarranted allegations
against employees who had exercised their
enforcement authority appropriately.4 As a result,
some Collection staff forwarded cases to Appeals
upon the taxpayers' request rather than suggesting
alternatives to avoid the perception that they
were denying taxpayers their right to an appeal.
To deal with any backlog of appeals, Collection
officials have agreed to detail Collection staff
to the Appeals Division to help process the cases.

Some Tax Administration Concerns Resulted From
Provisions That Were Difficult to Put Into
Practice
According to discussions with IRS officials,
certain provisions of the Restructuring Act were
difficult to put into practice. Among them were
provisions relating to IRS contacts with third
parties and the elimination of interest rate
differences in overpayments and underpayments.

Third-Party Contact
Under prior law, IRS could contact persons other
than the taxpayer to obtain information relating
to either the determination or collection of a tax
liability. The taxpayer was not necessarily
informed about whom IRS had contacted. The
Restructuring Act changed this by requiring IRS to
give taxpayers reasonable notice that it might
contact third parties for information to help
determine the amount of tax owed or collect the
tax liabilities.5 In addition, the provision
requires IRS to maintain a list of the third
parties contacted and provide that information
periodically to the taxpayer.

The implementation of this provision has been
difficult for IRS because of the need to make
basic policy determinations, such as defining what
is a "third-party contact," what does
"periodically" imply regarding providing taxpayers
with a list of contacts, and how specific should
the notice of contacts be. In addition, according
to IRS officials, it took IRS a considerable
amount of time and effort to transform its policy
decisions into appropriate and practical guidance
for its staff to use.

IRS issued interim guidance and conducted training
to help the staff interpret the intent of the
provision. However, IRS officials remain concerned
that its field employees were still having
difficulty in identifying third parties in some
situations, such as when the taxpayer is a
business organization. Unless these determinations
are made correctly, a taxpayer's rights can be
violated.

Elimination of Interest Rate Differential
The Restructuring Act established a net interest
rate of zero when interest is payable and
allowable on equivalent amounts of overpayment and
underpayment of any taxes that exist for any
period of mutual indebtedness. According to IRS
officials, administering this provision is an
administrative challenge because it involves
complex calculations that cannot currently be
automated and therefore must be performed
manually. Because the provision also applies to
prior tax periods for which interest has already
been computed under prior law, it is possible that
large numbers of new refunds could be generated
for previously settled tax accounts.

To help comply with the requirements, IRS has
provided staff with a significant amount of
training. For example, 15,000 hours of training
were provided to 383 IRS employees-approximately
an average of 40 hours per employee. Also,
according to IRS Examination officials, from
September 1999 through March 22, 2000,
approximately 1,154 hours were used to process 37
net rate interest cases-about 31 hours per case.

In addition to providing additional training, IRS
plans to perform quality checks of completed
claims and, in the future, make system
improvements and develop its own software to
automate the processing of taxpayers' claims.

Agency Comments
In written comments on a draft of this report, the
Commissioner of Internal Revenue stated that the
report provided a fair and balanced assessment of
IRS' strategy to implement the taxpayer protection
and rights provisions and recognized the many
steps IRS had taken to manage the implementation
process (see app. II for the letter). IRS also
made a specific comment about the discussion in
our draft on due process in collections  Our
report indicated that Collection staff may have
forwarded cases to Appeals for a due process
review, when other collection alternatives
existed, to prevent allegations of misconduct
under section 1203 of the Restructuring Act. IRS
noted that it believes that the connection is not
quite so simple. Rather, the Commissioner said
that before IRS' publication of additional
guidance on January 11, 2000, many Collection
staff did not believe they had an alternative to
forwarding taxpayers' request for a due process
hearing to Appeals. IRS also said that it had
taken a number of additional steps to clarify
which actions are considered to be violations
under section 1203 and to emphasize that the
appropriate exercise of enforcement authority is
not prohibited.

     As agreed with your office, unless you
announce its contents earlier, we plan no further
distribution of this report until 30 days from its
date of issue. At that time, we will be sending
copies to Senators William V. Roth, Jr., Chairman,
and Daniel P. Moynihan, Ranking Minority Member,
Senate Committee on Finance; Representatives
Charles B. Rangel, Ranking Minority Member, House
Committee on Ways and Means; William J. Coyne,
Ranking Minority Member, Subcommittee on
Oversight, House Committee on Ways and Means; the
Honorable Lawrence H. Summers, Secretary of the
Treasury; and the Honorable Charles O. Rossotti,
Commissioner of Internal Revenue. We will also
make copies available to others upon request.

     If you have any questions, please call me or
Charlie Daniel at (202) 512-9110. Key contributors
to this report are acknowledged in appendix III.

Cornelia M. Ashby
Associate Director, Tax Policy
 and Administration Issues
_______________________________
1P.L.105-206 was enacted on July 22, 1998, and
calls for broad reforms in such areas as the
structure and management of IRS, electronic
filing, and taxpayer protection and rights.
2Tax Administration: IRS' Implementation of the
Restructuring Act's Personnel Flexibility
Provisions (GAO/GGD-00-81, Apr. 2000).
3Four of the 72 provisions have effective dates
between July 1, 2000, and January 1, 2001.
4Section 1203 of the Restructuring Act mandates
that IRS terminate the employment of an IRS
employee if there is a final administrative or
judicial determination that the employee committed
certain acts or omissions in the performance of
official duties. There are 10 acts or omissions
listed in this provision that require termination,
including willful failure to obtain the required
approval signature on documents authorizing the
seizure of a taxpayer's home, personal belongings,
or business assets.
5The provision does not apply (1) if IRS
determines that collection of tax would be in
jeopardy or if such notice may involve reprisals
against any person; (2) if there is any pending
criminal investigation; or (3) if the taxpayer has
authorized the contact.

Appendix I
Status of IRS' Actions to Implement Title III of
the Internal Revenue Service Reform and
Restructuring Act of 1998
Page 15GAO/GGD-00-85 Taxpayer Protection and Right
s Provisions

Section                 Effective date   Status  General description
                                       a
300 Burden of Proof      7/23/98          Action  Shifts general burden of
1                                       s       proof to IRS when taxpayer
                                       comple  meets procedural and
                                       ted     recordkeeping requirements
310 Expansion of         1/19/99b         Action  Moves the point in time after
1   Authority to Award                   s       which reasonable
   Costs and Certain                    ongoin  administrative costs may be
   Fees                                 g       recovered; raises hourly cap
                                              rate and expands reasons for
                                              exceeding it; considers
                                              losses on similar issues in
                                              other circuits to be relevant
                                              to the issue of substantial
                                              justification; allows for
                                              recovery of reasonable fees
                                              for pro bono services; awards
                                              administrative and litigation
                                              costs when IRS rejects
                                              "qualified offer" during
                                              "qualified period" and later
                                              recovers equal to or less
                                              than amount offered
310 Civil Damages for    7/23/98          Action  Expands circumstances where
2   Collection Actions                   s       damages could be obtained
                                       comple  from IRS
                                       ted
310 Increase in Size of  7/23/98          Action  Increases the jurisdictional
3   Cases Permitted on                   s       limit for small tax cases to
   Small Case Calendar                  comple  $50,000; simplified
                                       ted     procedures more readily
                                              available to taxpayers
310 Actions for Refund   7/23/98          Action  Permits estates electing to
4   With Respect to                      s       defer certain payments to
   Certain Estates                      comple  file a refund suit if no
   Which Have Elected                   ted     portion of certain payments
   the Installment                             have been accelerated; all
   Method of Payment                           installments due on or before
                                              the suit is filed have been
                                              paid; no Tax Court case is
                                              pending; and no proceeding
                                              for declaratory judgment is
                                              pending
310 Administrative       7/22/98          Action  Allows bond issuers to
5   Appeal of Adverse                    s       protest IRS' proposed
   Internal Revenue                     ongoin  revocation of the tax-exempt
   Service                              g       status of bonds as a matter
   Determination of Tax-                       of right before interest is
   Exempt Status of                            declared taxable
   Bond Issue
310 Civil Action for     7/22/98          Action  Provides administrative
6   Release of Erroneous                 s       relief to third parties
   Lien                                 comple  subject to wrongful liens on
                                       ted     property
320 Relief From Joint    7/23/98, with    Action  Increases ways to obtain
1   and Several          some exceptions  s       relief; expands and
   Liability on Joint                   ongoin  simplifies innocent spouse
   Return                               g       relief; allows separate
                                              liability election and
                                              equitable relief where
                                              appropriate
320 Suspension of        Periods of       Action  Suspends the statute of
2   Statute of           disability       s       limitations during periods of
   Limitations on       before, on, or   comple  physical or mental disability
   Filing Refund Claims after 7/22/98,   ted     when certain conditions are
   During Periods of    unless barred           met
   Disability           by operation or
                       rule
                       of law
330 Elimination of       7/23/98, with    Action  Eliminates the interest rate
1   Interest Rate        some exceptions  s       differential for periods of
   Differential on                      ongoin  mutual indebtedness
   Overlapping Periods                  g
   of Interest on Tax
   Overpayments and
   Underpayments
330 Increase in          1/1/99           Action  Increases the interest rate
2   Overpayment Rate                     s       on overpayments for all
   Payable to Taxpayers                 comple  taxpayers, except
   Other Than                           ted     corporations, to the federal
   Corporations                                short-term rate plus 3
                                              percentage points
330 Mitigation of        1/1/00           Action  Reduces failure-to-pay
3   Penalty on                           s       penalty to half the usual
   Individual's Failure                 ongoin  rate for any month when an
   to Pay for Months                    g       installment agreement is in
   During Period of                            effect, if return is filed in
   Installment                                 a timely manner
   Agreement
330 Mitigation of        1/19/99,b with   Action  Allows taxpayers to
4   Failure to Deposit   some exceptions  s       redesignate the application
   Penalty                              ongoin  of its deposits; eliminates
                                       g       some penalties when deposit
                                              status has changed; as of
                                              1/1/02 applies deposits to
                                              current liabilities first,
                                              unless the taxpayer
                                              designates a different period
330 Suspension of        Tax years        Action  Stops imposition of any
5   Interest and Certain ending after     s       interest, penalties, and
   Penalties Where      7/22/98          ongoin  additions to tax when
   Secretary Fails to                   g       taxpayer is not sent a notice
   Contact Individual                          of deficiency within 18
   Taxpayer                                    monthsc
330 Procedural           1/1/01           Not     Requires IRS to show how
6   Requirements for                     yet     penalties are computed and
   Imposition of                        effect  include a citation of the
   Penalties and                        ive     code provision under which
   Additions to Tax                            the penalty is imposed;
                                              requires management approval
                                              to assess penalties, except
                                              in certain situations
330 Personal Delivery of 7/22/98          Action  Permits personal delivery of
7   Notice of Penalty                    s       preliminary notice of trust
   Under Section 6672                   comple  fund recovery penalty;
                                       ted     alternative to mail
330 Notice of Interest   1/1/01           Not     Requires that notices show
8   Charges                              yet     detailed computation of
                                       effect  interest charged and citation
                                       ive     of Code section under which
                                              interest is imposed
330 Abatement of         1/1/98           Action  Abates the payment of
9   Interest on                          s       interest where time for
   Underpayments by                     comple  filing a return and paying
   Taxpayers in                         ted     income tax has been extended
   Presidentially                              for presidentially declared
   Declared Disaster                           disaster areas
   Areas
340 Due Process in       1/19/99b         Action  Requires written notification
1   Internal Revenue                     s       to taxpayer when lien has
   Service Collection                   ongoin  been filed, including
   Actions                              g       taxpayer's right to a
                                              hearing; requires
                                              notification when a levy is
                                              about to be made of a
                                              taxpayer's right to a
                                              hearing; entitles one hearing
                                              per tax period before appeals
                                              officer
341 Confidentiality      7/22/98          Action  Creates confidentiality
1   Privileges Relating                  s       privilege for tax advice
   to Taxpayer                          comple  between a taxpayer and any
   Communications                       ted     federally authorized tax
                                              practitioner
341 Limitation on        7/22/98          Action  Limits use of financial
2   Financial Status                     s       status audit techniques to
   Audit Techniques                     comple  situations where reasonable
                                       ted     likelihood of unreported
                                              income exists
341 Software Trade       7/23/98, unless  Action  Prohibits issuance of a
3   Secret Protections   software was     s       summons for tax-related
                       acquired on or   comple  computer software source
                       before           ted     code, in general
                       enactment, then
                       effective the
                       90th day after
                       such date
341 Threat of Audit      7/22/98          Action  Instructs employees not to
4   Prohibited to Coerce                 s       threaten taxpayers with an
   Tip Reporting                        comple  audit to coerce them into a
   Alternative                          ted     Tip Reporting Alternative
   Commitment                                  Commitment agreement
   Agreements
341 Taxpayers Allowed    7/23/98          Action  Requires taxpayer whose tax
5   Motion to Quash All                  s       liability is being
   3rd Party Summonses                  ongoin  investigated to receive
                                       g       notice of any summons issued
                                              to persons other than the
                                              taxpayer, with some
                                              exceptions; this provision
                                              does not limit IRS' ability
                                              to obtain information other
                                              than by summons, through
                                              other formal or informal
                                              procedures authorized by the
                                              Code
341 Service of Summonses 7/23/98          Action  Allows summonses to third-
6   to Third-Party                       s       party recordkeepers to be
   Recordkeepers                        comple  delivered by certified or
   Permitted by Mail                    ted     registered mail
341 Notice of Internal   1/19/99b         Action  Requires notification to the
7   Revenue Service                      s       taxpayer before a third-party
   Contact of Third                     ongoin  is contacted with respect to
   Parties                              g       the taxpayer; IRS must keep
                                              track of the third parties
                                              contacted; IRS must provide
                                              that information to taxpayers
                                              on a periodic basis or
                                              whenever asked; does not
                                              apply to criminal tax
                                              matters, when collection is
                                              in jeopardy, if IRS
                                              determines that disclosure
                                              may involve reprisals, or if
                                              the taxpayer authorized the
                                              contact
342 Approval Process for 7/22/98, except  Action  Expands circumstances where
1   Liens, Levies, and   in Automated     s       supervisors must approve
   Seizures             Collection       ongoin  liens, levies, and seizures
                       System Actions,  g
                       1/1/01
343 Modifications to     7/23/98          Action  Raises the levy exemption
1   Certain Levy                         s       amount of books, tools of
   Exemption Amounts                    comple  trade, fuel, provisions,
                                       ted     furniture, personal effects,
                                              arms for personal use,
                                              livestock and poultry;
                                              indexes amounts for inflation
343 Release of Levy Upon 1/1/00           Action  Calls for release of wage
2   Agreement That                       s       levies once IRS determines
   Amount Is                            ongoin  that the amount is
   Uncollectible                        g       uncollectible
343 Levy Prohibited      1/1/99           Action  Disallows levies on assets
3   During Pendency of                   s       for any unpaid "divisible
   Refund Proceedings                   comple  tax" during pendency of a
                                       ted     refund action over such
                                              taxes, in general
343 Approval Required    7/23/99          Action  Requires Chief Counsel to
4   for Jeopardy and                     s       approve all jeopardy and
   Termination                          comple  termination assessments and
   Assessments and                      ted     jeopardy levies
   Jeopardy Levies
343 Increase in Amount   7/22/98          Action  Increases the dollar limit
5   of Certain Property                  s       for purchasers at a casual
   on Which Lien Not                    comple  sale; indexes amounts for
   Valid                                ted     inflation
343 Waiver of Early      1/1/00           Action  Provides new exception to 10-
6   Withdrawal Tax for                   s       percent additional tax on the
   Internal Revenue                     ongoin  early distributions from
   Service Levies on                    g       qualified retirement plans or
   Employer-Sponsored                          Individual Retirement
   Retirement Plans or                         Accounts
   IRAs
344 Prohibition of Sales 7/23/98          Action  Requires a set minimum bid
1   of Seized Property                   s       price below which seized
   at Less Than Minimum                 comple  property cannot be sold
   Bid                                  ted
344 Accounting of Sales  7/23/98          Action  Requires IRS to keep a record
2   of Seized Property                   s       of all sales of property
                                       comple  seized and give the taxpayer
                                       ted     whose property has been sold
                                              or redeemed a copy of the
                                              record and amount from each
                                              sale applied to taxpayer's
                                              account and the remaining
                                              balance
344 Uniform Asset        7/23/00d         Not     Requires a uniform asset
3   Disposal Mechanism                   yet     disposal mechanism for sales
                                       effect  of seized property conducted
                                       ive     pursuant to certain
                                              regulations; removes revenue
                                              officers from sales and
                                              authorizes consideration of
                                              outsourcing
344 Codification of      7/22/98          Action  Codifies administrative
4   Internal Revenue                     s       provisions requiring the
   Service                              comple  revenue officer to determine
   Administrative                       ted     if there are sufficient net
   Procedures for                              proceeds from sales to apply
   Seizure of                                  to unpaid taxpayer
   Taxpayer's Property                         liabilities; requires
                                              verification of the
                                              taxpayer's liability and
                                              determination of any
                                              alternate means of collection
344 Procedures for       7/22/98          Action  Exempts principal residences
5   Seizure of                           s       from levy if levy amount does
   Residences and                       comple  not exceed $5,000; exempts
   Businesses                           ted     taxpayer's principal
                                              residence and tangible
                                              personal or real property
                                              used in trade or business
                                              from levy, except in certain
                                              circumstances
346 Procedures Relating  1/1/00, with     Action  Authorizes an extension of
1   to Extensions of     some             s       the collection statute of
   Statute of           exceptions       ongoin  limitations by agreement only
   Limitations by                       g       if in connection with an
   Agreement                                   installment agreement or the
                                              release of levy; IRS must
                                              notify the taxpayer of the
                                              right to refuse to extend the
                                              statute of limitations
346 Offers-in-Compromise 7/23/98          Action  IRS guidelines must provide
2                                       s       that basic living expenses
                                       ongoin  will be determined on the
                                       g       facts and circumstances of
                                              each taxpayer's case; offers
                                              from low-income taxpayers
                                              will not be rejected solely
                                              on the basis of the amount of
                                              the offer; taxpayers will no
                                              longer be required to waive
                                              the statute of limitations on
                                              collection; regulations will
                                              be expanded to provide
                                              additional bases for
                                              compromise; if one joint
                                              spouse defaults on
                                              compromise, nondefaulting
                                              spouse can reinstate;
                                              additional notices required
                                              to explain taxpayer rights;
                                              levy prohibited where offer
                                              pending or installment
                                              agreement pending or in
                                              effect
346 Notice of Deficiency 1/1/99           Action  Requires IRS to include in
3   to Specify Deadlines                 s       the notice of deficiency the
   for Filing Tax Court                 comple  deadline for filing a Tax
   Petition                             ted     Court petition
346 Refund or Credit of  7/22/98          Action  Allows any federal court with
4   Overpayments Before                  s       jurisdiction to order refund
   Final Determination                  comple  of any amount collected
                                       ted     during a period when IRS was
                                              barred from doing so; allows
                                              an action for recovery of an
                                              overpayment in certain
                                              situations
346 Internal Revenue     7/22/98          Action  Requires the establishment of
5   Service Procedures                   s       procedures for early referral
   Relating to Appeals                  ongoin  of disputes to Appeals,
   of Examinations and                  g       nonbinding mediation of
   Collections                                 unresolved issues or
                                              unsuccessful attempt to enter
                                              into closing agreements or
                                              offers-in-compromise;
                                              requires the establishment of
                                              a pilot program for binding
                                              arbitration, that IRS assign
                                              an appeals officer to each
                                              state, and to consider
                                              videoconferencing in rural or
                                              remote areas
346 Application of       7/22/98          Action  Incorporates certain
6   Certain Fair Debt                    s       restrictions of the Fair Debt
   Collection                           comple  Collection Practice Act
   Procedures                           ted     relating to communications
                                              with the taxpayer and to any
                                              actions the consequence of
                                              which would harass or abuse
                                              the taxpayer
346 Guaranteed           7/22/98          Action  Codifies existing
7   Availability of                      s       administrative procedure and
   Installment                          comple  requires IRS to enter into
   Agreements                           ted     installment agreements at the
                                              taxpayer's request if the
                                              liability does not exceed
                                              $10,000 and certain other
                                              conditions met
346 Prohibition on       7/22/98          Action  Prohibits any officer or
8   Requests to                          s       employee of the United States
   Taxpayers to Give Up                 comple  from requesting a taxpayer to
   Rights to Bring                      ted     waive the right to bring a
   Actions                                     civil action against the
                                              United States or any United
                                              States employee for any
                                              action taken in connection
                                              with the internal revenue
                                              laws, with some exceptions
350 Explanation of Joint 1/19/99b         Action  Requires revision to certain
1   and Several                          s       forms, publications, and
   Liability                            comple  notices to alert joint filers
                                       ted     of their joint and several
                                              liability for tax and the
                                              availability of relief under
                                              the new innocent spouse
                                              provision
350 Explanation of       1/19/99b         Action  Requires taxpayers to be more
2   Taxpayers' Rights in                 s       clearly informed of their
   Interviews with the                  comple  rights to be represented at
   Internal Revenue                     ted     interviews and to suspend an
   Service                                     interview if they want to
                                              consult with an authorized
                                              representative
350 Disclosure of        1/19/99b         Action  Requires IRS to incorporate a
3   Criteria for                         s       statement describing the
   Examination                          comple  criteria and general
   Selection                            ted     procedures for selecting
                                              taxpayers for examination
                                              into Publication 1, "Your
                                              Rights as a Taxpayer"
350 Explanations of      1/19/99b         Action  Requires IRS to include with
4   Appeals and                          s       any first letter of proposed
   Collection Process                   comple  deficiency, an explanation of
                                       ted     the entire process from
                                              examination through
                                              collection, including the
                                              assistance available from the
                                              Taxpayer Advocate at various
                                              points in the process
350 Explanation of       1/19/99b         Action  Provides taxpayers with
5   Reason for Refund                    s       reasons for the full or
   Disallowance                         comple  partial disallowance of a
                                       ted     refund claim
350 Statements Regarding 7/1/00           Not     Provides an annual statement
6   Installment                          yet     to every taxpayer with an
   Agreements                           effect  installment agreement setting
                                       ive     forth the initial balance at
                                              the beginning of the year,
                                              payments made during the
                                              year, and the remaining
                                              balance at the end of the
                                              year
350 Notification in      7/23/98          Action  Requires IRS to notify each
7   Change in Tax                        s       partner whenever it
   Matters Partner                      comple  designates a tax matters
                                       ted     partner of the name and
                                              address of the person
                                              selected
350 Disclosure to        7/22/98          Action  Requires general tax forms
8   Taxpayers                            s       instruction booklets to
                                       comple  include a description of
                                       ted     conditions under which tax
                                              return information may be
                                              disclosed outside IRS
350 Disclosure of Chief  10/20/98,e with  Action  Establishes a structured
9   Counsel Advice       some exceptions  s       process by which the IRS will
                                       comple  make "Chief Counsel Advice"
                                       ted     open to public inspection on
                                              an ongoing basis
360 Low-Income Taxpayer  7/22/98          Action  Authorizes IRS to make
1   Clinics                              s       matching grants up to
                                       ongoin  $100,000 per year to develop,
                                       g       expand, or continue
                                              qualifying low-income
                                              taxpayer clinics; the
                                              aggregate amount of grants
                                              that may be awarded each year
                                              is $6 million
370 Cataloging           1/1/00           Action  Requires a system to maintain
1   Complaints                           s       records of taxpayer
                                       comple  complaints regarding
                                       ted     misconduct on an individual
                                              employee basis
370 Archive of Records   7/23/98          Action  Requires IRS to disclose
2   of Internal Revenue                  s       certain records to officers
   Service                              comple  and employees of the National
                                       ted     Archives and Records
                                              Administration for purposes
                                              of the appraisal of such
                                              records for destruction or
                                              retention
370 Payment of Taxes     7/22/98          Action  Taxes paid by check or money
3                                       s       order may now be made payable
                                       ongoin  to the United States Treasury
                                       g
370 Clarification of     7/22/98          Action  Allows the Treasury Secretary
4   Authority of                         s       to prescribe the manner of
   Secretary Relating                   comple  making any election under the
   to the Making of                     ted     Code by any reasonable means,
   Elections                                   except as otherwise provided
370 Internal Revenue     9/20/98,f with   Action  Requires that any manually
5   Service Employee     some exceptions  s       generated correspondence will
   Contacts                             comple  include the name, telephone
                                       ted     number, and identifying
                                              number of the IRS employee
                                              that may be contacted; other
                                              correspondence will include a
                                              telephone number; taxpayer
                                              will be given IRS employee
                                              name and identifying number
                                              during telephone or personal
                                              contact; when possible, one
                                              IRS employee will be assigned
                                              to handle a taxpayer's matter
                                              until it is resolved; when
                                              appropriate, taxpayer
                                              questions on telephone help
                                              lines will be answered in
                                              Spanish; telephone help lines
                                              will provide an option for
                                              taxpayers to talk to IRS
                                              employees during normal
                                              business hours
370 Use of Pseudonyms by 7/23/98          Action  Limits use of an employee
6   Internal Revenue                     s       pseudonym only with adequate
   Service Employees                    ongoin  justification and management
                                       g       approval before its use
370 Illegal Tax          No longer use    Action  Prohibits use of "illegal tax
7   Protestor            designation as   s       protester" designation and
   Designation          of 7/22/98;      ongoin  calls for removal of any such
                       begin removing   g       designation in a taxpayer's
                       prior                   file
                       designations by
                       1/1/99
370 Provision of         7/22/98          Action  Allows any person who is or
8   Confidential                         s       was authorized to receive
   Information to                       comple  confidential tax information
   Congress by                          ted     to disclose information
   Whistleblowers                              related to possible
                                              misconduct,
                                              maladministration, or abuse
                                              directly to the Senate
                                              Committee on Finance, House
                                              Committee on Ways and Means,
                                              Joint Committee on Taxation,
                                              or any individual authorized
                                              by one of these committees
370 Listing of Local     As soon as       Action  Requires IRS to publish
9   Internal Revenue     practicable      s       addresses and telephone
   Service Telephone                    ongoin  numbers of local IRS offices
   Numbers and                          g       in appropriate telephone
   Addresses                                   directories
371 Identification of    7/22/98          Action  Authorizes IRS to approve
0   Return Preparers                     s       alternatives to Social
                                       ongoin  Security numbers to identify
                                       g       income tax return preparers
371 Offset of Past-Due,  1/1/00           Action  Permits states to participate
1   Legally Enforceable                  s       in the Tax Refund Offset
   State Income Tax                     comple  Program for specified past-
   Obligations Against                  ted     due, legally enforceable
   Overpayments                                state income tax debts
371 Reporting            1/1/99           Action  Requires institutions to
2   Requirements in                      s       report any grant amount
   Connection With                      ongoin  received by a student for
   Education Tax Credit                 g       payment of costs of
                                              attendance and processed
                                              through the institution
380 Administration of    7/23/99g         Action  Requires the Joint Committee
1   Penalties and                        s       on Taxation and the Treasury
   Interest                             comple  to separately study the
                                       ted     administration and
                                              implementation of the
                                              interest and penalty
                                              provisions of the Code and
                                              make any recommendations
                                              deemed appropriate to
                                              simplify penalty
                                              administration and reduce
                                              taxpayer burden
380 Confidentiality of   1/23/00h         Action  Requires the Joint Committee
2   Tax Return                           s       on Taxation and the Treasury
   Information                          ongoin  to separately study
                                       g       provisions on taxpayer
                                              privacy and make any
                                              recommendations
380 Study of             7/23/99g         Action  Requires the Treasury
3   Noncompliance With                   s       Secretary and IRS
   Internal Revenue                     ongoin  Commissioner, in consultation
   Laws by Taxpayers                    g       with the Joint Committee on
                                              Taxation, to conduct a study
                                              of noncompliance with the tax
                                              law, including tax law
                                              complexity and willful
                                              noncompliance or other
                                              factors
380 Study of Payments    7/23/99g         Action  Requires the Treasury
4   Made for Detection                   s       Secretary to study the use of
   of Underpayments and                 comple  section 7623 for detecting
   Fraud                                ted     the underpayment of tax and
                                              report any legislative or
                                              administrative
                                              recommendations
Note: Status of actions as reported by IRS as of
Jan. 31, 2000.
aA provision's status is either (1) completed, (2)
ongoing, or (3) not yet effective. According to an
IRS official, "completed" means that all legal
requirements of the IRS Restructuring and Reform
Act of 1998 have been met and that all steps in a
provision's action plan, such as updating forms,
publications, and manuals, have been completed.
"Ongoing" means that all legal requirements have
been met and that some, but not all, action items
have been completed. "Not yet effective" means
that the provision's effective date has not been
reached.
bThe amendments made by this section shall apply
after the 180th day after the date of enactment,
which is January 19, 1999.
cFor taxable years beginning January 1, 2004, the
taxpayer must be sent the notice within 1 year.
dThe amendments made by this section shall apply
not later than 2 years after the date of
enactment, which is July 23, 2000.
eIn general, the amendments made by this section
shall apply to advise issued more than 90 days
after the date of enactment, which is October 20,
1998.
fIn general, the amendments made by this section
shall take effect 60 days after the date of
enactment, which is September 20, 1998.
gThe findings of this study shall be given to
Congress not later than 1 year after the date of
enactment, which is July 23, 1999.
hThe findings of this study shall be given to
Congress not later than 18 months after the date
of enactment, which is January 23, 2000.
Source: P.L. 105-206 and IRS Taxpayer Treatment
and Service Improvement Program Office.

Appendix II
Comments From the Internal Revenue Service
Page 22GAO/GGD-00-85 Taxpayer Protection and Right
s Provisions

Appendix III
GAO Contacts and Staff Acknowledgments
Page 23GAO/GGD-00-85 Taxpayer Protection and Right
s Provisions
GAO Contacts
Cornelia M. Ashby (202) 512-9110
Charlie W. Daniel (202) 512-9110

Acknowledgments
     In addition to those named above, Elizabeth
M. Mixon, Catherine H. Myrick, Michael Tropauer,
and Clarence Tull made key contributions to this
report.

*** End of Document ***