The employee  has a right to respond to the letter. To identify what problems, if any, IRS and TIGTA have encountered in  processing section 1203 cases and the extent to which they have  addressed them, we reviewed IRS’s and TIGTA’s policies and procedures  for receiving, investigating, and adjudicating section 1203 allegations. Few Section 1203 Allegations Were Substantiated and Resulted in an Employee’s Firing, Except for Those Involving Compliance with Federal Tax Laws

IRS data show that, with the exception of employees’ tax compliance  provisions, few of the 3,970 section 1203 allegations received between July  1998 and September 2002 were substantiated as violations of section 1203  and resulted in an employee’s firing. Table 1 shows that IRS or TIGTA had finished investigating 3,512  allegations and substantiated 419 as violations, for which IRS fired 71  employees. Most Employees Believed That They Understood but Feared Section 1203, and That It Was One of Several Factors Affecting Their Work

Our survey indicated that most frontline enforcement employees  understood but feared section 1203, and that, because of section 1203,  their work takes longer and the likelihood of their recommending a seizure  decreased. Many Employees Said That IRS’s Reorganization and Tax Law Changes Have Had a Greater Impact on Their Ability to do Their Jobs Than Section 1203

Many IRS frontline enforcement employees also reported that IRS’s  reorganization and tax law changes have had a greater impact on their  ability to do their jobs than section 1203. . . efforts to  ensure those rights are honored.”

	IRS and TIGTA Have Taken Steps Intended to Improve the Section 1203 Process, but Extent of Progress is Unknown

IRS and TIGTA have taken steps intended to correct known problems,  such as lengthy investigations and conflicts of interest during  investigations, that may have reduced the effectiveness of the section 1203  process as well as the morale and productivity of enforcement employees. However, the extent to which these steps have succeeded is unknown  because IRS and TIGTA have not coordinated on an approach for  evaluating the section 1203 process on the basis of consistent types of  results-oriented goals, measures, and performance data. Recommendations

We recommend that the Acting Commissioner of Internal Revenue and the  Acting Treasury Inspector General for Tax Administration coordinate on  an approach for evaluating the section 1203 process.
Why GAO Did This Study

Section 1203 of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 outlines conditions for firing IRS employees for any of 10 acts of misconduct covering taxpayer and employee rights and tax return filing requirements. Both IRS and the Treasury Inspector General for Tax Administration (TIGTA) have responsibilities related to section 1203. Because of concerns that section 1203 may have a chilling effect on IRS enforcement staff's productivity, GAO (1) determined the number of section 1203 allegations, (2) surveyed IRS employee perceptions about section 1203, and (3) identified problems IRS and TIGTA face in processing section 1203 cases and the extent to which they have addressed them.

What GAO Found

IRS data show that of the 3,970 section 1203 allegations IRS received from July 1998 through September 2002, IRS or TIGTA completed investigations on 3,512 allegations and substantiated 419 as violations, resulting in 71 employees being fired for section 1203 misconduct. Employee misconduct related to the two section 1203 provisions on whether employees filed their tax returns on time and accurately stated their tax liability (as opposed to the eight taxpayer and employee rights provisions) accounted for almost all of the violations and firings. Most of the IRS frontline enforcement employees who responded to GAO's survey said that they understood, but feared, section 1203. They also reported that, because of section 1203, their work takes longer and the likelihood of their taking an enforcement action, such as recommending a seizure, has decreased. However, employees also were more likely to say that other factors, such as IRS's reorganization, have had a greater impact on their ability to do their job than to say that section 1203 had a greater impact. IRS and TIGTA have taken steps intended to correct known problems in their processing of section 1203 employee misconduct cases--such as lengthy investigations and conflicts of interest during investigations--that may have negatively affected frontline employees' morale and productivity. However, the extent to which these steps have succeeded is unknown because IRS and TIGTA do not have a coordinated approach for evaluating how effectively they process section 1203 cases. Such an approach would include results-oriented goals, balanced performance measures to mark progress towards these goals, and means to collect performance data.