type: other

jurisdiction: US

text: b'TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION\n\n\n\n\n Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n September 12, 2014\n\n Reference Number: 2014-30-068\n\n\n\n\n This report has cleared the Treasury Inspector General for Tax Administration disclosure review process\n and information determined to be restricted from public release has been redacted from this document.\n\n\n\n Phone Number | 202-622-6500\n E-mail Address | TIGTACommunications@tigta.treas.gov\n Website | http://www.treasury.gov/tigta\n\x0c HIGHLIGHTS\n\n\nFIELD COLLECTION COULD WORK \xef\x82\xb7 Information systems do not track case\nCASES WITH BETTER COLLECTION source data, so management cannot fully\nPOTENTIAL assess the effectiveness of field case\n selection criteria.\n \xef\x82\xb7\nHighlights Case selection criteria do not consider the\n age of associated delinquencies, so many\n assigned cases include older delinquencies\nFinal Report issued on that will not likely be collected.\nSeptember 12, 2014\n \xef\x82\xb7 Case selection criteria do not consider the\nHighlights of Reference Number: 2014-30-068 financial condition (such as income) of the\nto the Internal Revenue Service Commissioner delinquent taxpayers, so many of the\nfor the Small Business/Self-Employed Division. assigned cases involve taxpayers with no\n ability to make payments.\nIMPACT ON TAXPAYERS\n \xef\x82\xb7 Case selection criteria do not consider\nThe IRS has a large inventory of taxpayer unsuccessful prior attempts to contact or\ndelinquent accounts but limited resources to locate the taxpayers.\ncollect the unpaid taxes. If sufficient steps are\nnot taken to make the most effective use of Furthermore, many of the cases are older with\ncollection resources, it can have a substantial less collection potential because they were first\nimpact on the amount of Federal taxes that routed to the Automated Collection System but\nremain uncollected. were not resolved before assignment to the field.\n\nWHY TIGTA DID THE AUDIT Management has begun some initiatives\n intended to improve the workload selection\nWhile the Collection Field function (field) collects process. While these initiatives could provide\nbillions of dollars from delinquent taxpayers, benefits, TIGTA believes that further action is\nresources have declined and many balance due warranted.\nmodules have been closed as currently not\ncollectible. TIGTA performed this audit to WHAT TIGTA RECOMMENDED\ndetermine whether the IRS\xe2\x80\x99s workload TIGTA recommended that the IRS:\nidentification, selection, and assignment 1) reexamine the field case selection criteria and\npractices ensure that the cases with the greatest strategy, 2) ensure that field personnel are\ncollection potential are worked in the field. aware of the new strategy, 3) establish a method\nWHAT TIGTA FOUND to measure the effectiveness of the field case\n selection criteria, and 4) conduct a study of the\nThe field workload selection process is not cases routed to the Automated Collection\ndesigned to ensure that cases with the highest System to determine whether there are certain\ncollection potential are identified, selected, and types of cases that should instead be routed\nassigned to be worked. In Fiscal Year 2013, directly to the queue or the field.\n40 percent of the taxpayer delinquent accounts\nclosed by the field were written off as currently In their response to the report, IRS officials\nnot collectible. The amount of delinquencies generally agreed with our recommendations.\nwritten off that year totaled $16.1 billion, which The IRS plans to incorporate their corrective\nwas over five times as much as the amount actions as part of a new concept of operations in\ncollected by the field ($3.1 billion). There are the creation of a single Collection organization\nseveral contributing factors limiting the as part of a realignment of IRS compliance\neffectiveness of the IRS\xe2\x80\x99s collection efforts: programs. Improving case selection criteria will\n need to be a key component of its new concept\n\xef\x82\xb7 The IRS does not measure productivity or of operations to address the intent of TIGTA\xe2\x80\x99s\n establish specific goals to evaluate case recommendation.\n selection criteria.\n\x0c DEPARTMENT OF THE TREASURY\n WASHINGTON, D.C. 20220\n\n\n\n\nTREASURY INSPECTOR GENERAL\n FOR TAX ADMINISTRATION\n\n\n\n\n September 12, 2014\n\n\n MEMORANDUM FOR COMMISSIONER, SMALL BUSINESS/SELF-EMPLOYED\n DIVISION\n\n\n FROM: Michael E. McKenney\n Deputy Inspector General for Audit\n\n SUBJECT: Final Audit Report \xe2\x80\x93 Field Collection Could Work Cases With Better\n Collection Potential (Audit # 201230019)\n\n This report presents the results of our review to determine whether the Internal Revenue\n Service\xe2\x80\x99s (IRS) workload identification, selection, and assignment practices are ensuring that the\n cases with the greatest collection potential are worked in the Collection Field function. The audit\n is included in our Fiscal Year 2014 Annual Audit Plan and addresses the major management\n challenge of Tax Compliance Initiatives.\n IRS management expressed concerns regarding our sample methodology because the sample did\n not include cases resolved in the Automated Collection System (ACS). However, the scope of\n this audit focused on cases assigned and closed by Field Collection, not the ACS. ACS\n inventory management is the focus of a separate audit. Management\xe2\x80\x99s complete response to the\n draft report is included as Appendix VI.\n Copies of this report are also being sent to the IRS managers affected by the report\n recommendations.\n If you have any questions, please contact me or Bryce Kisler, Acting Assistant Inspector General\n for Audit (Compliance and Enforcement Operations).\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Table of Contents\n\nBackground .......................................................................................................... Page 1\n\nResults of Review ............................................................................................... Page 4\n The Workload Selection Process for Field Collection\n Cases Needs to Be Improved ........................................................................ Page 5\n More Consideration of Collection Potential Should Be\n Given When Identifying and Selecting Field Collection\n Case Inventory .............................................................................................. Page 7\n Recommendations 1 through 3:......................................... Page 14\n\n Many Cases Closed by Field Collection Were First\n Routed and Aged in the Automated Collection System\n or the Queue .................................................................................................. Page 15\n Recommendation 4:........................................................ Page 18\n\n\nAppendices\n Appendix I \xe2\x80\x93 Detailed Objective, Scope, and Methodology ........................ Page 19\n Appendix II \xe2\x80\x93 Major Contributors to This Report ........................................ Page 23\n Appendix III \xe2\x80\x93 Report Distribution List ....................................................... Page 24\n Appendix IV \xe2\x80\x93 Analysis of the Collection Queue Inventory ........................ Page 25\n Appendix V \xe2\x80\x93 Glossary of Terms ................................................................. Page 32\n Appendix VI \xe2\x80\x93 Management\xe2\x80\x99s Response to the Draft Report ...................... Page 35\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Abbreviations\n\nACS Automated Collection System\nCNC Currently Not Collectible\nFY Fiscal Year\nICS Integrated Collection System\nIDS Inventory Delivery System\nIRS Internal Revenue Service\nRO Revenue Officer\nROTER Record of Tax Enforcement Results\nTDA Taxpayer Delinquent Account\nTDI Taxpayer Delinquency Investigation\nTIGTA Treasury Inspector General for Tax Administration\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Background\n\nThe Internal Revenue Service\xe2\x80\x99s (IRS) Collection function has the primary responsibility for\ncollecting delinquent taxes and tax returns while ensuring that taxpayer rights are protected.\nSpecifically, the mission1 of the IRS Collection function is:\n To collect delinquent taxes and secure delinquent tax returns through the fair and\n equitable application of the tax laws, including the use of enforcement tools when\n appropriate, provide education to customers to enable future compliance, and\n thereby protect and promote public confidence in the American tax system.\nThis is a significant operation within the IRS because of the extent of noncompliance in both\ndelinquent tax liabilities and delinquent tax returns. The IRS estimates that the annual Tax Gap2\n($450 billion) includes $46 billion in delinquent tax liabilities and $28 billion in unfiled tax\nreturns.3\nThe IRS uses a three-phased approach for collecting unpaid tax liabilities until they are either\nfully paid, determined to be uncollectible, or otherwise resolved:\n \xef\x82\xb7 Notice Stream: The IRS sends a series of balance due notices to the taxpayer to prompt\n a payment by the taxpayer or a reply if the taxpayer disagrees with the balance due or is\n not able to pay the delinquency.\n \xef\x82\xb7 Telephone Contact (Automated Collection System (ACS)): IRS employees attempt to\n make telephone contact with the taxpayer to prompt a payment or take enforcement\n action that may include levying financial assets or filing a lien against the taxpayer\xe2\x80\x99s\n property.\n \xef\x82\xb7 In-Person Contact (Collection Field function (hereafter referred to as the field)):\n Revenue officers (RO) contact the taxpayer to prompt a payment or take enforcement\n action, including levies, liens, and seizures of taxpayer property.\n\n\n\n\n1\n As of November 2013.\n2\n See Appendix V for a glossary of terms.\n3\n The Tax Gap is the difference between what taxpayers should have paid and what they timely paid. The largest\nportion ($376 billion) of the Tax Gap is based on taxpayers underreporting taxes. A smaller portion ($46 billion) is\nbased on taxpayers not fully paying their tax liabilities. The final portion ($28 billion) is based on those taxpayers\nnot filing tax returns. These updated Tax Gap figures were reported by the IRS in January 2012 and represent Tax\nYear 2006 tax return data.\n\n Page 1\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nThe three-phased approach starts with a number of automatically generated balance due notices\n(notice stream). If the taxpayer is not able to pay the delinquency or does not respond to the\nnotices, the IRS issues a Taxpayer Delinquent Account (TDA) to the Collection Queue (hereafter\nreferred to as the queue), the ACS, or directly to the field to collect the balances due. If there are\ninsufficient resources to work the TDAs, the cases are either shelved4 or transferred to the queue5\nand not worked.\nThe IRS uses the Inventory Delivery System (IDS) to systemically evaluate a collection case and\ndetermine where it should be worked. The IDS uses consolidated decision analytics,\nrisked-based collection criteria, and established business rules to route cases to the ACS, the\nqueue, or directly to the field. Because the IDS operates systemically, it saves resources by\nconducting the following actions:\n \xef\x82\xb7 Perfects casework by using research services to obtain missing taxpayer information\n needed for case resolution.\n \xef\x82\xb7 Analyzes, classifies, and directs perfected cases to the collection operation that is best\n suited to work that particular type of inventory.\n \xef\x82\xb7 Closes cases and removes them from the active inventory if the cases do not meet the\n criteria to be assigned to a collection operation.\nIn addition to these actions, the IDS computes a predictive score for each case. The predictive\nscores are then used to assign a predictive code to the case. Currently, data associated with the\npredictive score are generally used only in prioritizing ACS cases.6 The IDS also identifies\naccelerated high-risk cases for direct assignment to the field (thereby bypassing both the ACS\nand the queue). Most cases that are assigned to the field\ninitially go to the queue (to await assignment to the field). IRS guidelines and a\nFor those cases routed to the queue and the field, IRS rules-based systemic process\n are used to determine the best\nmanagement uses the ENTITY Case Management place to send TDAs for\nSystem (hereafter referred to as the ENTITY system) to collection.\ncontrol the cases. The ENTITY system receives data\nfrom the:\n \xef\x82\xb7 Integrated Collection System (ICS) for open, closed, and \xe2\x80\x9creturn to queue\xe2\x80\x9d cases.\n \xef\x82\xb7 Delinquent Inventory Account List for queue cases.\n \xef\x82\xb7 Automated Lien System for lien information.\n\n\n4\n Cases that have been taken out of the collection inventory because they are of lower priority than other available\ninventory.\n5\n Appendix IV provides more details related to the Collection Queue inventory.\n6\n The IDS predictive score for cases with delinquent liabilities of $1 million or more is used to prioritize field cases.\n\n Page 2\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nWhile cases are in the queue, the ENTITY system applies risk rules to each case (on a weekly\nbasis) to determine its risk level. The system prioritizes the cases assigned to the queue and the\nfield based on the risk level established by the ENTITY risk rules.\nIn addition, the ENTITY system displays data from the ICS and the queue for case management,\nreports compilation, and management information. The ENTITY system has the capability to\nallow area and territory managers to monitor key business indicators for collection cases and\ngenerate reports at the individual, group, territory, area, and headquarters levels.\nThis review was performed at the IRS National Headquarters in Washington, D.C., in the\nSmall Business/Self-Employed Division\xe2\x80\x99s Enterprise Collection Strategy office during the period\nAugust 2012 through March 2014. We conducted this performance audit in accordance with\ngenerally accepted government auditing standards. Those standards require that we plan and\nperform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our\nfindings and conclusions based on our audit objective. We believe that the evidence obtained\nprovides a reasonable basis for our findings and conclusions based on our audit objective.\nDetailed information on our audit objective, scope, and methodology is presented in Appendix I.\nMajor contributors to the report are listed in Appendix II.\n\n\n\n\n Page 3\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Results of Review\n\nWith a significant growth in delinquent accounts and a reduction in the number of employees, it\nis essential that the field inventory selection process identifies the cases that have the highest risk\nand potential for collection. This requires IRS officials to make decisions about how to ensure\nthat the cases in the queue with the best collection potential are identified, selected, and assigned\nto be worked. However, the field inventory processes are not designed to do this.\nIn addition, management information systems do not provide complete information that would\nallow Collection function management to adequately assess the effectiveness of field case\nselection criteria. For example, although the ENTITY system allows group managers some\nflexibility when selecting and assigning cases to ROs, it does not track a source code that could\nbe used to identify when this flexibility is used. Similarly, the system does not identify cases\nthat managers assigned based on the ENTITY risk level. Such information would be helpful in\ndetermining correlations between risk levels and revenue and could be used to help improve\nselection criteria.\nCompounding these challenges, the field selection criteria do not consider some key information\nthat could be used to improve the probability that assigned cases will result in revenue.\nAlthough the dollar value and age of the current liability are considered, the ENTITY risk rules\ndo not consider the age or status of older liabilities for that taxpayer. Such delinquencies could\nbe an indication that the taxpayer does not have the ability to pay. In addition, the field selection\ncriteria do not consider the financial condition of the taxpayer, such as whether or not the\ntaxpayer has an income source or assets. Furthermore, the ENTITY risk rules do not consider\nany unsuccessful prior attempts to contact or locate the taxpayer. As a result, assigned cases\noften involve taxpayers who do not have the ability to make payments or taxpayers who cannot\nbe contacted or located.\nIn addition, many cases that are initially assigned to the ACS are not resolved and are ultimately\nassigned to the field after they have aged in the ACS. This practice potentially reduces the\nlikelihood that revenue will be collected.\nThe combination of these factors has a direct impact on the IRS\xe2\x80\x99s ability to reduce the Tax Gap\nand emphasizes the need for proper inventory management and the importance of identifying\nproductive cases to work. IRS officials need to ensure that the delinquent accounts in the queue\nwith the most collection potential are identified, selected, and assigned to the field while\nbalancing the need to protect taxpayers\xe2\x80\x99 rights and minimize taxpayer burden.\n\n\n\n\n Page 4\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nThe Workload Selection Process for Field Collection Cases Needs to\nBe Improved\nThe IRS faces difficult challenges when collecting the billions of dollars in unpaid taxes owed by\ndelinquent taxpayers. Between Fiscal Years (FY) 2010 and 2013, the IRS\xe2\x80\x99s budget was reduced\nby approximately 8 percent, to $11.2 billion (after sequestration). This correlated to a 17 percent\nreduction in the number of ROs working inventory (671 fewer ROs). There has been a\n13 percent reduction in overall enforcement revenue collected ($7.4 billion less). At the same\ntime, delinquent liabilities have grown considerably. With declining resources, many of the\ncases are unlikely to be worked by IRS employees. Specifically, since the end of FY 2010:\n \xef\x82\xb7 The number of TDAs in the queue has decreased by 10 percent, from 3.3 million to\n 3.0 million, although the dollar value has increased by 8 percent, from $46.2 billion in\n delinquencies to $49.9 billion in delinquencies. In addition, 4.1 million TDAs, involving\n $33.7 billion, were removed from inventory (shelved).\n \xef\x82\xb7 Over 80 percent of the modules in the queue have aged four years or longer. Collection\n potential drops as the cases become older, especially if taxpayers incur additional\n delinquencies from different tax periods.\n \xef\x82\xb7 The average number of cases assigned to each RO has been reduced to 85 percent of\n former levels, and the time permitted to take certain actions was extended from 30 days\n to 45 days, which potentially slows inventory turnover.7\nThe IRS assigns its highest-risk and most complex collection cases to the field. Field personnel\nhave unique skills that enable them to work such cases; however, because they are\nlabor-intensive, the cost associated with working these cases is higher than in other collection\noperations. To achieve the best use of its resources, the IRS needs to ensure that field personnel\nare assigned the most productive queue cases from which to collect delinquent taxes.\nDuring FY 2013, 610,151 (40 percent) of the 1,507,700 TDAs closed by the field were written\noff as currently not collectible (CNC) and were no longer being actively worked. More\nspecifically, 435,790 (71 percent) of the 610,151 TDA modules were closed as CNC because the\ntaxpayer did not have the ability to pay, while 116,198 (19 percent) were closed as CNC because\nthe RO could not contact or locate the taxpayer.8 Since FY 2008, the percentage of TDAs closed\nas CNC by the field has remained at 38 percent or higher. Figure 1 shows the gap between field\nCNC closures and dollars collected between FYs 2008 and 2013.\n\n\n\n7\n Treasury Inspector General for Tax Administration (TIGTA), Ref. No. 2013-30-043, Oversight of Revenue Officer\nCase Actions Can Be Improved (May 2013).\n8\n The remaining 10 percent were closed as CNC for various other reasons, such as the death of an individual with no\ncollection potential from the decedent/decedent estate.\n\n Page 5\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 1: Field Collections and CNC Closures for FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\nDuring FY 2013, the dollar value of the tax liabilities closed by the field as CNC ($16.1 billion)\nwas over five times as much as what was collected ($3.1 billion). Over 60 percent of the\n$16.1 billion were closed as CNC because the IRS determined that the taxpayers did not have the\nability to pay.\nA recent IRS study9 concluded that there could be some benefits from working cases that are\nclosed as CNC. Specifically, the study found that cases worked by ROs and closed as CNC\noften resulted in more revenue and better taxpayer compliance than cases that were not worked\nat all. However, the study only compared working cases with not working cases. It did not\ncompare the benefits of working different types of cases. Specifically, it did not compare\nrevenue or future compliance of working CNC cases with other cases that were also actually\nworked but were closed as fully paid or with an installment agreement. Furthermore,\napproximately 32 percent of the CNC dollars were closed because the RO could not contact or\nlocate the taxpayers. Overall, field personnel could be spending more time on queue cases that\nresult in collecting revenue if the workload selection process was improved.\n\n\n\n\n9\n Internal Revenue Service Study, Uncollectible vs. Unproductive, Compliance Impact of Working Collection Cases\nThat Are Ultimately Not Fully Collectible, June 19, 2014, IRS Research Conference.\n\n Page 6\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nMore Consideration of Collection Potential Should Be Given When\nIdentifying and Selecting Field Collection Case Inventory\nIRS collection program procedures require that collection inventory selection systems deliver\ncurrent and potentially collectible inventory to the field. However, there is no feedback system\nalerting management on whether this occurs since the probability that revenue will be collected\nis not fully considered when selecting inventory. Without this consideration, a large percentage\nof cases that were assigned to the field involved taxpayers who did not have the ability to pay or\ncould not be contacted or located.\n\nThe IRS has not established quantifiable goals for its case selection criteria\nThe enactment of the IRS Restructuring and Reform Act of 199810 ushered in dramatic changes\nin tax law as well as in the structure and functioning of the IRS. The changes affecting the IRS\nfocused mainly on improving customer service and expanding taxpayer rights, and they required\nthe IRS to incorporate many new or modified taxpayer rights provisions into its collection work\nprocesses. However, the law also required the IRS to establish new administrative review and\napproval requirements.\nSpecifically, the law codified several taxpayer rights that the IRS needed to protect while\ncarrying out its enforcement activities. The law also provided that employees could be removed\nif they willfully disregarded a taxpayer\xe2\x80\x99s rights. These provisions resulted in a significant\nreduction in the Collection function\xe2\x80\x99s use of enforcement actions (liens, levies, and seizures) for\na number of years. While a balanced focus on customer service and taxpayer rights is\nappropriate, it is also important for the Collection function to remain focused on its mission of\ncollecting revenue. ROs should focus on the goal of bringing taxpayers into compliance, which\nincludes collecting revenue, provided that they also comply with IRS policies and procedures\nthat protect taxpayer rights. Assigning queue cases with collection potential helps ROs achieve\nthis goal.\nCollection function management advised us that they have not established criteria that use\nrevenue due to concerns about the prohibition on the use of records of tax enforcement results\n(ROTER) to evaluate employee performance. According to the IRS\xe2\x80\x99s Internal Revenue\nManual,11 ROTERs are data, statistics, and compilations of information or other numerical or\nquantitative records of the tax enforcement results reached in one or more cases. Using dollars\ncollected on closed cases to evaluate ROs is considered the use of ROTERs.\nNotwithstanding the prohibition on the use of ROTERs to assess the performance of individual\nROs or group managers, there are specific areas in which revenue and collection statistics may\n\n10\n Pub. L. No. 105-206, 112 Stat. 685 (codified as amended in scattered sections of 2 U.S.C., 5 U.S.C. app.,\n16 U.S.C., 19 U.S.C., 22 U.S.C., 23 U.S.C., 26 U.S.C., 31 U.S.C., 38 U.S.C., and 49 U.S.C.).\n11\n Internal Revenue Manual 1.5.2.2(7) (May 8, 2012).\n\n Page 7\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nbe considered in managing the program. IRS procedures do allow the use of collection statistics\nto measure the performance of its workload selection criteria. Specifically, the Internal Revenue\nManual12 and Treasury Regulations13 allow that ROTERs may be used for purposes such as\nforecasting, financial planning, resource management, and the formulation of case selection\ncriteria. These important records may be incorporated in the field workload selection system.\nThis type of tracking would help the Collection function make the best use of its limited\nresources and ensure that queue cases with collection potential are assigned to the field.\nCollection function management has established several performance measures associated with\nfield casework. However, the Collection function had not established goals for all of the\nmeasures. TIGTA previously reported14 that not all collection performance measures were tied\nto the IRS\xe2\x80\x99s strategic goals, and few included quantifiable targets. Specifically, just nine of\n68 collection performance measures have targets, and none of them relate to revenue collected.\nGoals were established for measures related to closing cases, such as the number of taxpayer\nclosures and the number of offers in compromise closures as well as the cycle time for closing\noffers in compromise cases. While these measures provide some useful information, none\nmeasure efficiency or productivity associated with case selection criteria. Instead, the\nquantitative measures focus primarily on procedural compliance and closing cases out of active\ninventory.\nBecause the performance measures and goals do not specifically define productivity or expected\noutcomes for case selection criteria, employees may not have clear direction about expectations.\nWe interviewed a judgmental sample15 of eight group managers and eight ROs from\ntwo territories. While we did not interview a representative sample of ROs and group managers,\nwe obtained some personal perspective on the case assignment process from those responsible\nfor assigning and working cases in those territories. The ROs and group managers we\ninterviewed had an inconsistent understanding of collection goals for case resolution and had\ndifferent interpretations about what was considered a successful (productive) case closure.\n \xef\x82\xb7 Seven of the 16 respondents indicated that the productivity of a case is measured by the\n ability to take appropriate actions for case resolution in a timely manner.\n \xef\x82\xb7 Five of the 16 respondents indicated that the productivity of a case is measured by the\n amount of dollars collected.\n\n\n\n\n12\n Internal Revenue Manual 1.5.2.3.2 (May 8, 2012).\n13\n 26 C.F.R. \xc2\xa7 801.6, Balanced System for Measuring Organizational and Employee Performance Within the IRS,\nBusiness Results Measures (2012).\n14\n TIGTA, Ref. No. 2013-30-028, Improvements Are Needed to Ensure That Performance Measures Are Balanced\nand Adequately Assess the Effectiveness of the Collection Program (Mar. 2013).\n15\n A judgmental sample is a nonstatistical sample, the results of which cannot be projected to the population.\n\n Page 8\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n \xef\x82\xb7 Four of the 16 respondents included both timely actions and dollars collected as\n productivity indicators.\nSeveral ROs interviewed advised us that closing a case for which all case actions complied with\nprocedures was considered a productive case, regardless of the outcome (full paid, abatement of\nthe balance due, CNC, installment agreement, or offer in compromise). A few of the ROs\nadvised us that transferring a case from their inventory to the queue or to another RO was\nconsidered a successful case resolution even though taxpayers may not have made any payments\ntowards their delinquent liabilities.\nAlthough managers interviewed were inconsistent about how they interpreted desired outcomes\nin working cases, six of them believed a productive case is a case for which proper steps were\ntaken to appropriately close the case, without consideration to revenue collected. This view is\nimportant in evaluating casework; however, in selecting cases, other factors should be considered\nbecause measuring compliance with case closure procedures does not provide feedback on the\ncase selection criteria.\nThe collection program can operate more effectively when management sets clear objectives and\nmethods for improving its case selection criteria to achieve improved outcomes, such as\nimproving taxpayer compliance and collecting delinquent taxes.\n\nThe ENTITY system does not provide management with feedback on workload\nselection criteria\nAlthough workload selection procedures instruct field group managers to assign cases from the\npool of available cases within the ENTITY system, group managers maintain flexibility to assign\nfrom any available case within the system. For example, a high-risk complex case would not\nlikely be assigned to an inexperienced RO because it may be scored as a higher-graded case.\nThrough our interviews with the eight group managers, we learned that some managers were\nsupplementing the workload selection system with their experience by identifying cases for\nwhich the taxpayer has the ability to pay. For example, some group managers sometimes\nskipped the ENTITY system\xe2\x80\x99s range of high-risk cases because they were often older cases with\nvery low collection potential. Four of the eight interviewees indicated that cases with more\nrecent tax liabilities were more productive cases. However, they advised us that a significant\npercentage of the cases assigned to the field were not new, at times indicating this was because\nthe cases were first assigned to the ACS. In addition, managers avoided assigning cases with\nimpending Collection Statute Expiration Dates because if they expire when assigned to an RO, it\ncreates an administrative burden for both the group manager and the RO.\nAlthough the ENTITY system determines the risk level for cases and prioritizes cases for\ninventory assignment, it does not allow management to determine whether the high-priority\ncases were ever assigned to be worked or the results of the case closures. Collection function\nmanagement told us that the ENTITY system is not a historical database, so any historical record\n\n Page 9\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nof cases, closures, and time charges would not be a complete and accurate record. Neither the\nICS nor the ENTITY system is able to determine or accurately recreate inventory for a point in\nthe past because each record is a snapshot of that case in real time. While the ENTITY system\naccurately captures time charges and other current information in the End of Month Reports for\nField Collection, it does not maintain any historical records. Also, the dollars collected amounts\nonly account for dollars collected by the ROs and processed through the ICS and does not\ninclude payments sent directly to an IRS campus.\nAlthough the ENTITY system has the capability to provide information on case closures, such as\ndollars collected at the group levels, management does not use it to evaluate the case selection\ncriteria. Such information could be beneficial when determining the types of cases that result in\nthe most effective use of resources. For example, group managers who routinely skip cases\nidentified in the range of next-best cases in the ENTITY system may be identifying and\nassigning more productive cases, and these factors, if identified, could be built into the system.\nWe obtained an extract of closed case data16 from the ENTITY system for the Dallas and\nManhattan Territories. Our analysis showed that field revenue collected was attributed to a small\npercentage of cases. Of the 3,596 cases in these two territories, just 858 (24 percent) involved\ncollecting revenue. More specifically, 57 percent of the dollars collected were attributable to\nonly 1 percent of the total cases. For this 1 percent of cases, ROs spent approximately\n1,000 hours in total and collected over $15,000 per hour. In contrast, for the remaining\n99 percent of the cases, ROs spent over 33,000 hours in total and collected $349 per hour.\nFurther analysis showed that cases that took more time to close did not necessarily result in more\nrevenue collected. In contrast, the cases that took less time to close resulted in significantly more\nrevenue.17 Specifically, ROs spent on average 12.6 hours working a CNC case, compared with\n8.8 hours for all other closures. These results are consistent with group managers\xe2\x80\x99 perception\nthat high-risk cases identified by the ENTITY system do not always account for collection\npotential. By using the ENTITY system to perform these types of analyses, the Collection\nPolicy function could identify characteristics of productive cases that could be included in case\nselection criteria to improve the overall productivity and revenue collection across all of the\nCollection Field function groups.\n\nThe ENTITY system does not consider all indicators of a taxpayer\xe2\x80\x99s ability to pay\nThe Collection Policy function establishes the criteria for the ENTITY risk rules that assign risk\nlevels to unassigned inventory in the queue. Based on the risk levels, Collection function\nmanagement uses the ENTITY system to assign the inventory to the field. Because the field is\n\n\n16\n For the period September 1 to November 23, 2012. Subject to the ENTITY system data limitations described in\nthis report. Dollars collected data were taken from the ENTITY field \xe2\x80\x9cDollars Collected and Processed via ICS by\nRO assigned case.\xe2\x80\x9d\n17\n Refers to revenue based on dollars collected divided by hours expended.\n\n Page 10\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nthe most expensive collection operation, it is important that queue cases assigned to the field are\nproductive. Cases that involve taxpayers who do not have an ability to make payments are\nunlikely to result in collecting any revenue and have a greater chance of being closed as CNC.\nDuring FY 2013, 71 percent of the TDA modules closed as CNC (involving over 60 percent of\nthe $16.1 billion closed as CNC) were closed because the taxpayer did not have the ability to\npay. Even though there may be a future benefit for working such cases, any benefit may not be\nquantifiable. Alternatively, ROs who work cases that involve taxpayers with an ability to pay\nhave a greater chance of collecting revenue. Collecting revenue is a quantifiable benefit and is\nconsistent with the Collection function\xe2\x80\x99s responsibility to collect taxes and delinquent returns.\nGroup managers interviewed indicated that the Master File provides valuable information about\na taxpayer\xe2\x80\x99s ability to pay. One indication that a taxpayer may not have the ability to make\npayments is the existence of older tax modules on the Master File that have been closed as CNC.\nCollection cases are not module-based but instead include all unpaid modules associated with the\ntaxpayer. For example, a collection case may include a current module (under two years old) for\na taxpayer but also two or three more modules for older periods. These older modules may have\nbeen worked previously and closed as CNC.\nCollection function management advised us that the ENTITY risk rules consider multiple\nmodules as a factor when assigning risk to the cases. Although the risk criteria include the age\nof the most current delinquent tax module, risk criteria do not consider the age or status of prior\nperiod delinquencies that may exist for the taxpayer. Modules closed as CNC are automatically\nreactivated if the taxpayer\xe2\x80\x99s income exceeds a certain level on a subsequently filed return. This\npractice ensures that the IRS reassesses the taxpayer\xe2\x80\x99s ability to pay if the taxpayer\xe2\x80\x99s financial\ncondition changes. Therefore, if the prior period modules are still CNC, it is likely the financial\ncondition has not changed and the taxpayer still lacks the ability to pay. However, inventory\nassignment criteria do not consider this probability.\nFigure 2 shows that 72 percent of taxpayers in the queue at the end of FY 2013 had multiple\ndelinquencies.\n\n\n\n\n Page 11\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 2: Taxpayers With One or More Modules\n in the Queue as of the End of FY 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Report for\n FY 2013.\n\nMany of the assigned cases that include older delinquencies may not be collected. If these types\nof cases represent a historically low probability of collection, there could be an opportunity to\nadjust the field workload selection criteria. Although multiple older tax modules can be an\nimportant factor, we believe it should be considered together with the taxpayer\xe2\x80\x99s ability to pay\nwhen determining which cases to assign to ROs, especially given the limited resources within the\nfield and the growing inventory of delinquent accounts.\nIn addition, risk criteria includes the dollar value of all the taxpayer\xe2\x80\x99s delinquent modules, the\ntype of tax, special project or selection codes, and the taxpayer\xe2\x80\x99s last return amount.18 However,\nunlike CNC reactivation criteria, the ENTITY risk rules do not consider taxpayer income. Such\ninformation could be useful in determining a taxpayer\xe2\x80\x99s ability to pay, especially when there are\nprior period liabilities that have been closed as CNC. When cases are assessed for risk without\nconsideration of a taxpayer\xe2\x80\x99s financial condition, many cases involving taxpayers with little or\nno ability to pay could ultimately be assigned and worked by field personnel.\n\nThe ENTITY system does not consider unsuccessful prior attempts to contact or\nlocate taxpayers\nROs may also close cases as CNC if they are unable to contact or unable to locate the taxpayer.\nGroup managers interviewed indicated that they sometimes do not assign ENTITY cases with\nhigh risk levels if the case histories show prior unsuccessful attempts by either the ACS or ROs\nto collect revenue. However, the ENTITY risk rules do not consider unsuccessful attempts at\n\n18\n The taxpayer\xe2\x80\x99s last return amount reflects the total tax liability amount reflected on the taxpayer\xe2\x80\x99s last tax return,\nnot the taxpayer\xe2\x80\x99s income.\n\n Page 12\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\ncontacting or locating the taxpayer when assigning a risk level. Instead, group managers must\nreview the taxpayer\xe2\x80\x99s Master File data, which is sometimes voluminous, to decide whether or not\nto assign the case. Because this can be a time-consuming process, many cases involving\ntaxpayers who cannot be contacted or located may be assigned and worked by ROs. During\nFY 2013, 19 percent of the TDA modules closed as CNC (involving approximately 32 percent of\nthe $16.1 billion closed as CNC) were closed because the RO could not contact or locate the\ntaxpayer. A systemic identification and consideration by the ENTITY risk rules of prior\nunsuccessful RO contact attempts could help improve the selection criteria for queue cases.\nPreviously unsuccessful contact attempts could be weighted with other risk rules, and\nconsideration should also be given to RO skill level and additional tools that could result in\ncontacting or locating taxpayers even when prior attempts have been unsuccessful.\n\nManagement is studying and revising some of its inventory practices\nThe Director, Enterprise Collection Strategy, advised us that some efforts are underway to help\nimprove the Collection function\xe2\x80\x99s workload selection process. For example, Collection function\nmanagement is currently reviewing IDS modeling and risk assessments to identify areas of\nimprovement. Management cautioned that their ability to implement improvements is limited by\nthe lack of availability of IRS Information Technology organization resources. However,\nCollection function management was able to use existing program resources to adjust the full\npaid and CNC models in IDS and planned to implement the changes in July 2014. Management\nanticipates that the changes to these models will accelerate more high-risk cases with collection\npotential to the field.\nIn addition, a separate effort is under way that focuses on the Collection function\xe2\x80\x99s CNC models.\nThis effort is intended to determine the benefit of working certain CNC cases. Preliminary\nresults indicate that cases closed as CNC by either the ACS and/or the field resulted in increased\nrevenue collected and improved future compliance compared with cases not worked. The study\nidentified characteristics of CNC cases that may be incorporated into the CNC models to better\npredict which cases will become CNC cases and which of those should be worked or shelved.\nCollection function management also plans a new initiative, referred to as the Collection\nPath 2015 project, for which they are requesting funding. The project\xe2\x80\x99s objective is to increase\nthe effectiveness and efficiency of Collection function employees by enabling them to better\ndefine, measure, and work the most productive cases. The Collection Path 2015 project intends\nto include revenue collected as one of the factors in identifying the most productive cases.\nWhile these initiatives could provide benefits, we believe further action is warranted. Case\nselection practices need to be reevaluated and adjustments made to identify more productive\ncases, including better identification of taxpayers with the ability to pay and taxpayers who can\nbe contacted and located. Field personnel time could be better spent on productive cases that\nresult in collecting revenue, which would help to reduce the Tax Gap and ensure a better use of\ncollection resources.\n\n Page 13\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nRecommendations\nThe Director, Enterprise Collection Strategy, SB/SE Division, should:\nRecommendation 1: Reexamine the field workload selection criteria and strategy to\ndetermine whether it ensures that the field prioritizes collecting revenue as well as makes the\nbest use of its limited resources. The strategy should include:\n \xef\x82\xb7 A broader definition of the attributes of productive collection cases, beyond high-risk\n attributes, such as the taxpayer\xe2\x80\x99s ability to pay, the age of the case, and the likelihood of\n locating and contacting the taxpayer.\n \xef\x82\xb7 Tracking, monitoring, and measuring the productivity of the cases selected for\n assignment.\n Management\xe2\x80\x99s Response: IRS management agreed with this recommendation.\n Specifically, management will review their strategy for employing Collection field\n resources as part of the work on a new concept of operations for the IRS Collection\n program and the implementation of the key operational theories and techniques\n supporting their Collection vision.\n Office of Audit Comment: The IRS\xe2\x80\x99s corrective action is not specific on the point of\n improving its case selection criteria. This will need to be a key component of its new\n concept of operations to address the intent of our recommendation.\nRecommendation 2: Coordinate with the Director, Field Collection, SB/SE Division, to\nprovide training to ensure that all field personnel are fully aware of this strategy.\n Management\xe2\x80\x99s Response: IRS management agreed with this recommendation.\n Specifically, management will provide training on their new concept of operations,\n including a discussion of the strategy for employing field resources, in future continuing\n professional education for all Collection employees.\nRecommendation 3: Establish a method to measure the effectiveness of the field case\nselection criteria.\n Management\xe2\x80\x99s Response: IRS management agreed with this recommendation.\n Specifically, management will review the methods for measuring the effectiveness of the\n manner in which Collection resources are utilized as part of the work on a new concept of\n operations for the IRS Collection program.\n\n\n\n\n Page 14\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nMany Cases Closed by Field Collection Were First Routed and Aged\nin the Automated Collection System or the Queue\nThe IDS is designed to direct delinquent cases to the point in the collection process from which\nthey can be processed optimally by routing cases to the ACS, the queue, or directly to the field.\nMany cases that are closed without being resolved by the ACS are then routed to the queue or the\nfield. Even though the IDS routed some cases from the notice stream directly to the field, the\nmajority of the cases were first issued to the ACS. From FYs 2008 through 2013, IRS collection\nreports show that 66 to 75 percent of all TDAs were initially issued to the ACS.\nWe selected a random statistical sample of 73 field cases closed as CNC and a random statistical\nsample19 of 73 field cases closed as full paid or with an installment agreement.20 Each sample\nwas selected from the population of field cases ranked as high-risk by the queue prioritization\ncriteria and closed during the 12-month period ending June 18, 2011.\nAlthough all 146 cases were eventually closed by the field, the IDS determined that nearly half\n(70) of them could be processed optimally in the ACS. However, the taxpayer was not brought\ninto full compliance within the ACS, and the cases either entered the queue prior to assignment\nin the field or were transferred directly to the field.\nSpecifically, the IDS initially routed 34 (47 percent) of the 73 CNC cases and 36 (49 percent) of\nthe 73 revenue generating cases to the ACS. Eventually, 97 percent (68 of 70 originally assigned\nto ACS) of these cases were either routed from the ACS to the field or from the ACS to the\nqueue and then to the field. Figures 3 and 4 show the average amount of time the sampled cases\nspent in each inventory before they were eventually closed by the field.\n\n\n\n\n19\n Both samples used a confidence level of 95 percent with an expected error rate of 5 percent and a precision of\n\xc2\xb1 5 percent.\n20\n The sample of cases closed as CNC was taken from a population of 55,450 cases. The sample of full paid or\ninstallment agreement cases was taken from a population of 37,281 cases.\n\n Page 15\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 3: Analysis of Cases Assigned to the ACS\n and Then to the Queue Prior to the Field\n\n\n\n\n Source: TIGTA analysis of sampled cases closed by the field.\n\n\n\n Figure 4: Analysis of Cases Assigned to the Queue\n and Then to the ACS Prior to the Field\n\n\n\n\n Source: TIGTA analysis of sampled cases closed by the field.\n\nCNC cases closed by the field spent more time within the ACS and the queue prior to assignment\nin the field compared to the cases closed as full paid or with an installment agreement. Overall,\ncases routed to the field from the ACS are older cases based on the average time cases remain in\nthe ACS. Figure 5 shows that, on average, cases spend more time in the ACS than in the field.\n\n\n\n\n Page 16\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 5: Comparison of the Time\n TDAs Spent in the Field and the ACS\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports.\n\nAs of the end of FY 2013, 2.6 million (33 percent) of the TDA modules in the ACS inventory\nhad been there more than 16 months.21 An additional 1.2 million TDA modules (15 percent) had\nbeen in the ACS inventory between 10 and 15 months. Based on our case reviews, many of\nthese cases will eventually be worked by the field regardless of the amount of time spent in the\nACS. The longer a case remains in the ACS, the more a taxpayer\xe2\x80\x99s financial situation could\nchange and collectability could decrease. This figure does not account for the age of the cases\nprior to being routed to the ACS.\nIn addition, cases routed to the queue before or after the ACS increase the age of the cases. Over\nhalf of the cases in the queue waiting to be assigned to the field have been idle in the queue for\nover 10 consecutive months, not including the time spent prior to being routed to the queue.\nThe length of time that modules are in the ACS and the queue contrasts with the time that they\nspent in the field. Of the 886,000 TDA modules in the field at the end of FY 2013, only 219,000\n(25 percent) had been there for 10 months or more. Sixty-two percent have been in the field for\nless than six months. This figure does not account for the age of the cases prior to being routed\nto the field.\nIRS data and case review results indicate that many TDA cases are assigned to the ACS initially,\nbut ACS employees are not resolving the cases. Per ACS business rules, cases can remain\ninactive in the ACS for up to two years and 90 days before being routed to the queue. These\nunresolved cases may then be in the queue for a significant period of time prior to assignment to\nthe field. For example, cases closed as CNC may have spent more than a year in the ACS and/or\nthe queue prior to field assignment; this is in addition to the time spent in the notice stream prior\n\n\n21\n Sixteen months is the criterion the IRS uses to track the age of cases in the ACS inventory.\n\n Page 17\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nto ACS assignment. IRS studies have shown that the likelihood of collection diminishes\nconsiderably as cases become older. For example, the IRS Office of Research conducted a\nstudy22 and concluded that as more time elapses before a taxpayer makes at least one payment, it\nbecomes less likely that the taxpayer will do so at any subsequent time. Thus, the collection\npotential for these cases diminishes as they age in the ACS and the queue.\nManagement Action: Collection function management advised us that they have a Unified Work\nRequest pending that may allow them to identify potentially unproductive field cases that are\ncurrently in the queue and were first routed through the ACS. Once identified, management will\nwork to limit the assignment of such cases to the field in the future.\n\nRecommendation\nRecommendation 4: The Director, Enterprise Collection Strategy, SB/SE Division, should\nconduct a study of the cases routed to the ACS to determine whether there are certain types of\ncases that the IRS should discontinue routing to the ACS and instead route directly to the queue\nor the field.\n Management\xe2\x80\x99s Response: IRS management agreed with this recommendation.\n Specifically, in connection with the work on a concept of operations for the new\n Collection organization, management will review the ACS processes to determine if\n expanding the authority of ACS employees will yield better results and optimize the use\n of these resources.\n\n\n\n\n22\n U.S. Department of the Treasury, IRS \xe2\x80\x93 The IRS Research Bulletin, Publication 1500 (Rev. 11-99).\n\n Page 18\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix I\n\n Detailed Objective, Scope, and Methodology\n\nOur overall objective was to determine whether the IRS\xe2\x80\x99s workload identification, selection, and\nassignment practices are ensuring that the cases with the greatest collection potential are worked\nin the Collection Field function.1\nI. Evaluated IRS policies, procedures, and goals pertaining to IRS collection case\n assignment criteria.\n A. Reviewed relevant policies, procedures, and criteria related to the movement of\n collection inventory through IRS collection systems and in assignment to collection\n operations employees.\n 1. Through the IDS.\n 2. From IDS to collection operations.\n 3. Within the queue.\n 4. During assignment by group managers to ROs.\n 5. In the course of shelving low-priority cases from the queue.\n B. Reviewed methods, criteria, and goals used to monitor and evaluate collection case\n selection and inventory delivery processes, including the queue and the process of\n shelving low-priority cases. We also identified and reviewed any internal or external\n reviews performed on collection case selection and inventory delivery processes,\n including the queue and the process of shelving low-priority cases.\n C. We interviewed a judgmental sample2 of eight group managers and eight ROs from\n two Collection territories (Dallas and Manhattan Territories) with regards to\n inventory workflow policies, procedures, and initial case impressions upon\n assignment. A judgmental sample was used due to time and travel cost\n considerations.\n 1. Interviewed group managers and identified any assignment prioritization (such as\n focusing on industries specific to their area), views on case prioritization policies\n and procedures, and trends or high-risk areas noted with regards to inventory\n workflow.\n\n\n1\n See Appendix V for a glossary of terms.\n2\n A judgmental sample is a nonstatistical sample, the results of which cannot be projected to the population.\n\n Page 19\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n 2. Interviewed ROs for views on case prioritization, impressions of cases upon\n assignment, and any trends or high-risk areas noted with regards to inventory\n workflow.\nII. Evaluated field inventory in conjunction with collection inventory workflow criteria and\n determined whether field resources are being utilized in the most efficient and effective\n manner possible.\n A. Identified a population of field cases closed between June 2010 and June 2011,\n profiling case characteristics for items such as predicted case dispositions, actual\n dispositions, risk-level prioritization, area assignment, or case grade. We also\n stratified the population of closed cases based upon distinguishing characteristics\n such as whether or not they produced revenue.\n B. Selected a statistically valid random sample of 73 taxpayers from a universe of\n 55,450 taxpayers who had a module closed as CNC between June 26, 2010 (cycle\n 201025), and June 18, 2011 (cycle 201124).3 We took a second statistically valid\n random sample of 73 taxpayers from a universe4 of 37,281 taxpayers who had a\n module closed as full paid or an installment agreement between June 26, 2010 (cycle\n 201025), and June 18, 2011 (cycle 201124). We analyzed the following\n characteristics: predictive codes, grade levels (of cases), disposition, collection status\n codes (full paid, installment agreement, etc.), and risk levels.\n C. Analyzed differences in collection rates between the field and the ACS.\nIII. Profiled the current collection cases in the queue.\n A. Used IRS Collection Activity Reports and IRS analysts with access to the ENTITY\n system to identify the population of cases in the queue.\n B. Used IRS Collection Activity Reports to identify details of and performed profiling of\n the queue. Profiling included analysis of issuances, dispositions, and transfers in and\n out as well as dollar value. We received queue and field ENTITY information, for\n cases in inventory between October 2010 and December 2012, with which to analyze\n case risk. Monthly text files were provided and had to be entered and analyzed to\n assess the number of cases by risk level in the queue and any related trends.\n C. Used IRS Collection Activity Reports and ENTITY reports to profile the queue. We\n profiled the cases in the queue by type of taxpayer, dollars per module, dollars per\n\n\n\n3\n Both samples used a confidence level of 95 percent with an expected error rate of 5 percent and a precision of\n\xc2\xb1 5 percent.\n4\n These two universes of taxpayers are not necessarily mutually exclusive as a taxpayer could fully pay one module,\nbut not have sufficient resources to fully pay a subsequent debt.\n\n Page 20\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n taxpayer, modules per taxpayer, age of delinquency, and risk and prioritization of\n queue cases.\nIV. Profiled low-priority cases that have been shelved and are not actively being worked.\n A. Used IRS Collection Activity Reports to profile the shelved cases by type of taxpayer,\n dollars per module, dollars per taxpayer, modules per taxpayer, age of\n noncompliance, and length of time being shelved.\n B. Used the IRS Collection Activity Reports to analyze the current trends in shelved\n cases. We reviewed by type of taxpayer and dollar value of shelved modules,\n summarized to relate increasing number of modules in this status, and compared to\n data identified in our queue analysis.\nV. Established the validity of the electronic data obtained to accomplish the previous\n subobjectives. We reconciled specific case information from our sample of closed cases\n with Master File data via the Integrated Data Retrieval System. We determined that the\n data used in our review was sufficiently reliable to perform our audit analyses.\nVI. Obtained and analyzed ENTITY data of cases closed between September 1 and\n November 23, 2012, for the Dallas and Manhattan Territories.\n A. Requested from Collection Analytics, Automation, Inventory Selection, and Delivery\n personnel, an extract from the ENTITY system. We received an ENTITY system\n extract involving closed cases for the period September 1, 2012, to November 23,\n 2012. The extract included a total of 3,596 closed cases from two territories. The\n extract included 2,260 cases from Territory 2501 and 1,336 cases from Territory\n 2103. The closed cases from Territory 2501 included those cases selected and\n worked by group managers and ROs from the Dallas, Texas, area, whom we\n interviewed as part of our audit. The closed cases from Territory 2103 included\n those cases selected and worked by group managers and ROs from the New York,\n New York, area, whom we interviewed as part of our audit.\n B. Analyzed the closed cases by focusing on risk levels, dispositions, hours worked, and\n dollars collected.5\nInternal controls methodology\nInternal controls relate to management\xe2\x80\x99s plans, methods, and procedures used to meet their\nmission, goals, and objectives. Internal controls include the processes and procedures for\nplanning, organizing, directing, and controlling program operations. They include the systems\nfor measuring, reporting, and monitoring program performance. We determined the following\n\n\n5\n Dollars collected data taken from the ENTITY field \xe2\x80\x9cDollars Collected and Processed via ICS by RO assigned\ncase.\xe2\x80\x9d\n\n Page 21\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\ninternal controls were relevant to our audit objective: the SB/SE Division policies, procedures,\nand practices for identifying, selecting, assigning, monitoring, and measuring the productivity of\ncollection cases to be worked by group managers and ROs in the field. We evaluated these\ncontrols by interviewing IRS management and field employees as well as evaluating closed case\ndatabases for actions and results to determine the productivity of the Collection Field function\xe2\x80\x99s\nworkload selection criteria.\n\n\n\n\n Page 22\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix II\n\n Major Contributors to This Report\n\nNancy Nakamura, Assistant Inspector General for Audit (Compliance and Enforcement\nOperations)\nAugusta R. Cook, Acting Assistant Inspector General for Audit (Compliance and Enforcement\nOperations)\nBryce Kisler, Acting Assistant Inspector General for Audit (Compliance and Enforcement\nOperations)\nCarl L. Aley, Director\nTimothy F. Greiner, Audit Manager\nRichard Viscusi, Lead Auditor\nCurtis J. Kirschner, Senior Auditor\nDoris Cervantes, Senior Auditor\n\n\n\n\n Page 23\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix III\n\n Report Distribution List\n\nCommissioner C\nOffice of the Commissioner \xe2\x80\x93 Attn: Chief of Staff C\nDeputy Commissioner for Services and Enforcement SE\nDirector, Office of Research, Analysis, and Statistics RAS\nCommissioner, Wage and Investment Division SE:W\nDeputy Commissioner, Small Business/Self-Employed Division SE:S\nDeputy Commissioner, Wage and Investment Division SE:W\nChief Counsel CC\nNational Taxpayer Advocate TA\nDirector, Office of Legislative Affairs CL:LA\nDirector, Office of Program Evaluation and Risk Analysis RAS:O\nOffice of Internal Control OS:CFO:CPIC:IC\nAudit Liaisons:\n Commissioner, Small Business/Self-Employed Division SE:S\n Commissioner, Wage and Investment Division SE:W\n\n\n\n\n Page 24\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix IV\n\n Analysis of the Collection Queue Inventory\n\nThe Collection function maintains an inventory of unassigned Taxpayer Delinquency\nInvestigations (TDI)1 and TDAs in the queue. The queue inventory comes from several sources.\nMost of the queue inventory is comprised of cases that had been assigned to ACS personnel and\nwere not fully resolved or cases that bypass the ACS and go directly to the queue when the\ndelinquency was not resolved by the routine set of notices mailed to the taxpayer. As of the end\nof FY 2013, the queue inventory included:\n \xef\x82\xb7 2.6 million TDI tax modules (tax periods) involving 837,207 entities2 (taxpayers).\n \xef\x82\xb7 3.0 million TDA tax modules involving 848,241 entities with balance due amounts\n totaling $49.9 billion.\nDelinquent tax returns\nThe number of queue TDIs (both modules and entities) at the end of FY 2013 decreased\ncompared to the end of FY 2012. Figure 1 shows the trend of this data over the past six years.\n Figure 1: TDIs in the Queue at\n the End of FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\n1\n See Appendix V for a glossary of terms.\n2\n Because the returns were not filed, there are no dollar values associated with TDIs.\n\n Page 25\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nDelinquent accounts\nThe number of TDA modules, entities, and dollars also decreased during the same time period.\nFigure 2 shows the trend of this data over the past six years.\n Figure 2: TDA Entities, Modules (in millions), and Dollars (in billions)\n in the Queue at the End of FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\nSince FY 2008, the dollar value of the TDA modules in the queue increased by 13 percent, to\n$49.9 billion. During the same period, the number of TDA modules in the queue decreased by\n9 percent due to a decrease of 22 percent from FY 2012 to FY 2013. The decrease from\nFY 2012 to FY 2013 coincides with an increase of TDA modules in the ACS of 19 percent\nduring the same period and the shelving of nearly 1.2 million TDA modules (with a dollar value\nof $10.8 billion) from the queue in FY 2013. The number of TDA modules and associated\ndollar value shelved from the queue during FY 2013 are increases of 78 percent and 82 percent,\nrespectively, from the 667,000 modules worth more than $5.9 billion shelved in FY 2012.\nFigure 3 shows the number of modules with balances of $100,000 or more increased by\n55 percent during this period. Modules with delinquent balances of $100,000 or more are\nconsidered high risk.\n\n\n\n\n Page 26\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 3: Queue Inventory TDA Dollar Amounts\n Greater Than $100,000 at the End of FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\nMillions of queue cases are shelved\nAlthough the queue inventory includes a substantial number of TDA modules, its inventory at\nthe end of each fiscal year does not include millions of TDA modules shelved (removed from\ninventory and placed in uncollectible status) during the last five years. Queue cases are\nreassessed for risk and priority on a weekly basis. TDIs and TDAs that are not likely to be\nassigned because of low risk levels and resource constraints are shelved. Specifically, after\n52 consecutive weeks in the queue without assignment, a case is shelved. Once a case is\nshelved, it is no longer reassessed for risk or priority.3 Figures 4 and 5 show the number and\ndollar value, respectively, of TDAs and TDIs shelved from the Collection function\xe2\x80\x99s inventory4\nover the past six years.\n\n\n\n\n3\n Shelved cases may be reactivated in certain circumstances, such as when additional liabilities are incurred by the\ntaxpayer that increase the risk level.\n4\n TDAs and TDIs in the Compliance Services Campus Operations, the ACS, the field, and the queue inventories.\n\n Page 27\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 4: Number of TDAs and TDIs Shelved\n During FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\n\n\n Figure 5: Dollar Value of Shelved TDAs\n During FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports for FYs 2008 through 2013.\n\nFrom FYs 2008 through 2013, the IRS shelved 5.7 million TDA tax modules with balance due\namounts totaling $36.8 billion. Analysis of TDA modules in the collection inventory showed\nthat the number of modules in delinquent status increased from 9.2 million modules in FY 2008\n\n Page 28\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\nto 11.7 million modules in FY 2013, an increase of 27 percent. In addition, the IRS shelved\n12.0 million TDI modules during the same time. Most of the delinquent liabilities shelved will\nnever be collected.\n\nThe queue inventory is getting older\nAs the number of TDA modules has increased, so has their age.5 This is important because as\ninventory ages, the likelihood of collection decreases.6\n \xef\x82\xb7 TDA modules for tax periods four years old and older increased from 68 percent of the\n queue inventory in FY 2003 to more than 80 percent in FY 2013.\n \xef\x82\xb7 TDA modules for tax periods two years old or less decreased from 21 percent of\n inventory in FY 2003 to only 10 percent in FY 2013.\nTDA modules in the queue for 10 consecutive months or more increased from 47 percent of\nTDA queue inventory in FY 2003 (926,000 modules) to nearly 66 percent of inventory in\nFY 2009 (2.4 million modules). Due to the large number of shelved modules, the percentage\ndecreased to 49 percent (1.6 million modules) in FY 2010. However, it has since increased to\n59 percent of inventory (1.8 million modules) in FY 2013. Given these trends, more of the\nqueue inventory will increasingly be at risk of becoming uncollectible.\nTime spent in the queue does not include the time modules may have spent in the ACS or in the\nnotice stream. Specifically, the aging begins over at zero each time a TDA moves between the\nACS, the field, and the queue. As a result, the IRS management information reports used to\nidentify this data do not track the total length of time a taxpayer has an outstanding delinquency.\nROs that we interviewed indicated that the advanced age of modules coming from the queue had\na direct effect on whether a case would lead to the successful collection of balance due amounts.\nFigure 6 shows the inverse relationship between the trend in enforcement revenue7 and the\nnumber of TDA modules in the queue for 10 consecutive months or longer.\n\n\n\n\n5\n Refers to the tax period of the module, not how long it has been in the queue.\n6\n TIGTA, Ref. No. 2011-30-112, Reducing the Processing Time Between Balance Due Notices Could Increase\nCollections (Sept. 2011).\n7\n Enforcement revenue includes any tax, penalty, or interest received from a taxpayer as a result of an IRS\nenforcement action (usually an examination or a collection action).\n\n Page 29\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 6: Age of Modules in the Queue Compared With\n Enforcement Revenue for FYs 2008 Through 2013\n\n\n\n\n Source: TIGTA analysis of IRS Collection Activity Reports and IRS Compliance Data Warehouse\n information for FYs 2008 through 2013.\n\nUnassigned cases in the queue continue to increase, while assigned cases in the\nfield continue to decrease\nThe field does not have the resources to stop the increase of unassigned cases in the queue.\nFigure 7 shows that from the beginning of FY 2011 to the end of FY 2012, the number of cases\nin the queue rose by over 30 percent, while the number of cases assigned to the field decreased\nby 17 percent.\n\n\n\n\n Page 30\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Figure 7: Number of Cases in the Queue and Field and\n Their Percentage Change for FYs 2011 and 2012\n\n\n\n\n Source: TIGTA analysis of IRS ENTITY data for FYs 2011 and 2012.\n\nThe increase in unassigned queue cases is due to the combination of increasing new inventory\nand decreasing resources. These factors have a direct impact on the IRS\xe2\x80\x99s ability to reduce the\nTax Gap and emphasize the need for proper inventory management and the importance of\nidentifying productive cases to work.\n\n\n\n\n Page 31\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix V\n\n Glossary of Terms\n\n Term Definition\n\nAutomated Collection A telephone contact system through which telephone assistors\nSystem collect unpaid taxes and secure tax returns from delinquent\n taxpayers who have not complied with previous notices.\nAutomated Lien System A comprehensive database that prints lien notices, stores\n taxpayer information, and documents all lien activity.\nCampus The data processing arm of the IRS. The campuses process\n paper and electronic submissions, correct errors, and forward\n data to the Computing Centers for analysis and posting to\n taxpayer accounts.\nCollection Activity Reports A group of reports providing management information to field\n and National Office Collection officials. The reports reflect\n activity associated with TDA and TDI issuances and installment\n agreements including issuances, dispositions, and inventories as\n well as collection-related payments.\nCollection Area Office A geographic organizational level used by IRS business units\n and offices to help their specific types of taxpayers understand\n and comply with tax laws and issues.\nCollection Field function The unit in the Area Offices consisting of ROs who handle\n face-to-face contacts with taxpayers to collect delinquent\n accounts or secure unfiled returns.\nCollection Statute The date, established by statute, when the Government\xe2\x80\x99s right to\nExpiration Date pursue collection of a liability expires.\nCurrently Not Collectible One reason for removing accounts from active inventory after\n taking the necessary steps in the collection process. Accounts\n may be reported currently not collectible for a variety of reasons\n using the appropriate closing code.\nDelinquent Inventory An Integrated Data Retrieval System extract of all account\nAccount List information for collection inventory.\n\n Page 32\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Term Definition\n\nENTITY Case A current database displaying field and advisory inventory. The\nManagement System ENTITY system receives data from the ICS, the Delinquent\n Inventory Account List, and the Automated Lien System.\nFiscal Year Any yearly accounting period, regardless of its relationship to a\n calendar year. The Federal Government\xe2\x80\x99s fiscal year begins on\n October 1 and ends on September 30.\nInstallment Agreement Arrangement in which a taxpayer agrees to pay his/her tax\n liability over time.\nIntegrated Collection An information management system designed to improve\nSystem revenue collections by providing ROs access to the most current\n taxpayer information, while in the field, using laptop computers\n for quicker case resolution and improved customer service.\nIntegrated Data Retrieval The IRS computer system capable of retrieving or updating\nSystem stored information. It works in conjunction with a taxpayer\xe2\x80\x99s\n account records.\nInternal Revenue Manual The operations manual for employees of the IRS.\nInventory Delivery System The delivery system for collection case inventory. The IDS uses\n analytical scoring models and a business rules engine to route\n cases to the ACS, the queue, or direct field assignment.\nMaster File The IRS database that stores various types of taxpayer account\n information. This database includes individual, business, and\n employee plans and exempt organizations data.\nModule Refers to one specific tax return filed by the taxpayer for one\n specific tax period (year or quarter) and type of tax.\nOffer in Compromise An agreement between a taxpayer and the Government that\n settles a tax liability for payment of less than the full amount\n owed.\nQueue An automated holding file for unassigned inventory of\n delinquent cases for which ROs in the field are unable to be\n immediately assigned for contact due to limited resources.\n\n\n\n\n Page 33\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Term Definition\n\nRevenue Officer Employees in the field who attempt to contact taxpayers and\n resolve collection matters that have not been resolved through\n notices sent by the IRS campuses or the ACS.\nSequestration Fiscal policy procedure encompassing an automatic form of\n spending cut equal to the difference between the cap set in the\n budget resolution and the amount actually appropriated.\nTax Gap The estimated difference between the amount of tax that\n taxpayers should pay and the amount that is paid voluntarily and\n on time.\nTax Period Refers to each tax return filed by the taxpayer for a specific\n period (year or quarter) during a calendar year for each type of\n tax.\nTax Year A 12-month accounting period for keeping records on income\n and expenses used as the basis for calculating the annual taxes\n due. For most individual taxpayers, the tax year is synonymous\n with the calendar year.\nTaxpayer Delinquency An unfiled tax return(s) for a taxpayer. Only one TDI is issued\nInvestigation for each delinquent tax period for a taxpayer.\nTaxpayer Delinquent A balance due account of a taxpayer. One TDA exists for all\nAccount delinquent tax periods for a taxpayer.\nTerritory Collection function geographic locations across the country,\n with direct supervision by one of seven Area Office directors. A\n territory is headed by a second-level manager in the Collection\n function (territory manager) responsible for supervision of all\n group managers within the territory.\n\n\n\n\n Page 34\n\x0c Field Collection Could Work Cases\n With Better Collection Potential\n\n\n\n Appendix VI\n\nManagement\xe2\x80\x99s Response to the Draft Report\n\n\n\n\n Page 35\n\x0cField Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Page 36\n\x0cField Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Page 37\n\x0cField Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Page 38\n\x0cField Collection Could Work Cases\n With Better Collection Potential\n\n\n\n\n Page 39\n\x0c'


type: caselaw

jurisdiction: EU

text:
 20.4.2015
 FR
 Journal officiel de l'Union européenne
 C 127/17
 Arrêt du Tribunal du 3 mars 2015 — Bial-Portela/OHMI — Isdin (ZEBEXIR)
 (Affaire T-366/11 RENV) (1)
 ([«Marque communautaire - Procédure d’opposition - Demande de marque communautaire verbale ZEBEXIR - Marque communautaire verbale antérieure ZEBINIX - Motifs relatifs de refus - Article 8, paragraphe 1, sous b), du règlement (CE) no 207/2009»])
 (2015/C 127/23)
 Langue de procédure: l’anglais
 Parties
 Partie requérante: Bial-Portela & Ca, SA (São Mamede do Coronado, Portugal) (représentants: B. Braga da Cruz et J. Pimenta, avocats)
 Partie défenderesse: Office de l’harmonisation dans le marché intérieur (marques, dessins et modèles) (représentant: P. Geroulakos, agent)
 Autre partie à la procédure devant la chambre de recours de l’OHMI, intervenant devant le Tribunal: Isdin, SA (Barcelone, Espagne) (représentants: P. López Ronda, G. Macias Bonilla et G. Marín Raigal, avocats)
 Objet
 Recours formé contre la décision de la première chambre de recours de l’OHMI du 6 avril 2011 (affaire R 1212/2009-1), relative à une procédure d’opposition entre Bial-Portela & Ca, SA et Isdin, SA.
 Dispositif
 1)
 La décision de la première chambre de recours de l’Office de l’harmonisation dans le marché intérieur (marques, dessins et modèles) (OHMI) du 6 avril 2011 (affaire R 1212/2009-1) est annulée.
 2)
 L’OHMI supportera ses propres dépens ainsi que ceux exposés par Bial-Portela & Ca, SA.
 3)
 Isdin, SA supportera ses propres dépens.
 (1) JO C 269 du 10.9.2011.