During our review, an allegation of potential taxpayer abuse received considerable media attention because it involved reports of possible improper contacts with IRS by staff of the White House and the Federal Bureau of Investigation (FBI). Those comments are presented and evaluated on pages 21 to 26 and are reprinted in appendix V.

	IRS’ Controls and Initiatives to Protect Against Taxpayer Abuse

IRS has a wide range of controls, processes, and oversight offices designed to govern how its employees interact with taxpayers. IRS Can Strengthen Its Efforts to Prevent Taxpayer Abuse

Despite IRS’ efforts to prevent violations of taxpayers’ rights, we found various instances of what we consider to be taxpayer abuse by IRS. Relatively large trust fund recovery penalties have caused financial hardships for the individuals involved. IRS has recognized weaknesses in its controls and procedures for identifying the responsible person for this type of penalty. IRS does not, however, have specific procedures to deal with a White House contact offering information about possible tax violations. Therefore, we believe IRS should define taxpayer abuse and develop the management information needed to identify its nature and extent. Specifically, we believe IRS can (1) ensure that the information systems now being developed under its TSM initiative include the capability to minimize unauthorized access to taxpayer information, (2) clarify its guidelines for selecting tax returns during IGPs, (3) reconcile its cash receipts more often and encourage taxpayers to avoid using cash whenever possible in making payments to IRS, (4) provide individuals who may be subject to trust fund recovery penalties with more information about their responsibilities, (5) attempt to identify short-term remedies to minimize the problems caused taxpayers by IRS’ information handling weaknesses and ensure that the TSM program includes requirements designed to solve those problems as the new information systems are implemented over the next several years, and (6) develop specific guidance for IRS employees on how they are to handle White House contacts. We do not believe that Congress needs to provide additional appropriations to enable IRS to implement these recommendations, with one possible exception. Recommendations to the Commissioner of Internal Revenue

To improve IRS’ ability to manage its interactions with taxpayers, we recommend that the Commissioner of Internal Revenue establish a service-wide definition of taxpayer abuse or mistreatment and identify and gather the management information needed to systematically track its nature and extent.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed whether the Internal Revenue Service (IRS) has adequate controls to prevent taxpayer abuse and whether additional appropriations are needed to strengthen IRS ability to prevent taxpayer mistreatment.

What GAO Found

GAO found that: (1) although IRS has undertaken several initiatives to prevent taxpayer abuse, evidence of abuse remains; (2) IRS has implemented a wide range of controls, processes, and oversight offices to govern staff behavior in their contacts with taxpayers; (3) IRS needs to better define taxpayer abuse and develop management information about its frequency and nature so that it can strengthen abuse prevention procedures, and identify and minimize the frequency of future abuses, and Congress can better evaluate IRS performance in protecting taxpayers' rights; (4) IRS needs to strengthen its controls and procedures to reduce unauthorized access to computerized tax information by IRS employees, inappropriate selection of tax returns during information gathering projects, embezzlement of taxpayers' cash payments, questionable trust fund recovery penalties, and information-handling problems that contribute to taxpayer frustration; (5) proposed taxpayer protection legislation would aid IRS in providing taxpayers with information needed to better deal with trust fund recovery penalties; (6) the allegation of potential abuse involving possible improper contacts with IRS by White House staff was unfounded; (7) the White House has provided explicit guidance for its staff regarding IRS contacts and IRS should improve its procedures for handling White House contacts; and (8) although Congress may not need to provide additional appropriations to IRS to prevent taxpayer abuse, additional appropriations may be needed to resolve IRS information-handling problems as part of its Tax Systems Modernization (TSM) program.