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IRS OPERATIONS AND TAXPAYER ASSISTANCE
`~ ~
HEARINGS
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
NINETY-FOURTH CONGRESS
FIRST SESSION
FEBRUARY 27 AND APRIL 14, 1975
Printed for the use of the Committee on Ways and Means
~GERS U\V'J SCHOOL UBRi'~
CAMDEN, N. ~L 08102
GOVERNMENT n0cUMENT
0
:
~? ~I&~) J~4~1
U.S. GOVERNMENT PRINTING OFFICE
23 WASHINGTON: 1975
ILk
"~r~
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WILBUR D. MILLS, Arkansas
JAMES A. BURKE, Massachusetts
DAN ROSTENKOWSKI, Illinois
PHIL M. LANDRUM, Georgia
CHARLES A. VANIK, Ohio
RICHARD H. FULTON, Tennessee
OMAR BURLESON, Texas
JAMES C. CORMAN, California
WILLIAM J. GREEN, Pennsylvania
SAM M. GIBBONS, Florida
JOE D. WAGGONNER, JR., Louisiana
JOSEPH E.. KARTH, Minnesota
OTIS G. PIKE, New York
RICHARD F. VANDER VEEN, Michigan
J. J. PICKLE., Texas
HENRY HELSTOSKI, New Jersey
CHARLES B. RANGEL, New York
WILLIAM R. COTTER, Connecticut
FORTNEY H. (PETE) STARK, California
JAMES H. JONES, Oklahoma
ANDY JACOBS, JR., Indiana
ABNER J. MIKVA, Illinois
MARTHA KEYS, Kansas
JOSEPH L. FISHER, Virginia
SAM M. GIBBONS, Florida
OTIS G. PIKE, New York
RICHARD F. VANDER VEEN, Michigan
J. J. PICKLE, Texas
HENRY HELSTOSKI. New Jersey
CHARLES B. RANGEL, New York
FORTNEY H. (PETE) STARK, California
JAMES R. JONES, Oklahoma
HERMAN P. SCHNEEBELI, Pennsylvania
BARBER B. CONABLE, JR., New York
JOHN J. DUNCAN, Tennessee
DONALD D. CLANCY, Ohio
BILL ARCHER, Texas
GUY VANDER JAGT, Michigan
WILLIAM A. STEIGER, Wiscon~jn
PHILIP M. CRANE, Illinois
BILL FRENZEL, Minnesota
JAMES G. MARTIN, North Carolina
L. A. (SKIP) BAFALIS. Florida
WILLIAM M. KETCHUM, California
COMMITTEE ON WAYS AND MEANS
AL ULLMAN, Oregon, Chairman
JOHN M. MARTIN, Jr., Chief Counsel
J. P. BAKER, Assistant Chief Counsel
JOHN K. MEAGHER, Minority Counsel
SUBcOMMITTEE ON OVERSIGHT
CHARLES A. VANIK, Ohio, Chairman
DONALD D. CLANCY, Ohio
L. A. (SKIP) BAFALIS, Florida
JAMES G. MARTIN, North Carolina
JOHN J. DUNCAN, Tennessee
(II)
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CONTENTS
INTERNAL REVENUE SERVICE WITNESSES
Page
Hon. Donald C. Alexander, Commissioner, accompanied by William E.
Williams, Deputy Commissioner; Meade Whitaker, Chief Counsel;
Burke W. Willsey, Assistant to the Commissioner; Robert H. Terry,
Assistant Commissioner (Accounts, Collection, and Taxpayer Service);
Anita F. Alpern, Acting Assistant Commissioner (Planning and
Research); Joseph T. Davis, Assistant Commissioner (Administration);
and Singleton B. Wolfe, Assistant Commissioner (Compliance) - 2, 127
MATERIAL SUBMITTED FOR THE RECORD
Information on delinquent taxpayers 9
Rules governing disclosure of tax returns and tax information to members
of the White House staff 11
IGRU/IGRS 15
Corporate taxpayer versus individual taxpayer 49
Congressional inquiries on behalf of constituents 65
Use of temporary taxpayer service representatives 68
Organization of regional office, district office, and service center 68
Inspection of returns by Federal agencies 72
Procedure and administration: Disclosure under § 301.6103(b) 81
Levy and seizure statistics 83
EPEO budget 85
Response to questions by the subcommittee 87
Taxpayer assistance plans 133
Workflo~v of IRS in the courts 203
Costs of processing returns 207
(III)
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IRS OPERATIONS AND TAXPAYER ASSISTANCE
THURSDAY, FEBRUARY 27, 1975
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT,
COMMITTEE ON WAYS AND MEANS,
Wa~hington~ D.C.
The subcommittee met at 9:10 a.m., pursuant to notice, in room H-
208, the Capitol, Hon. Charles A. Vanik (chairman of the subcom-
mittee) presiding.
Mr. VANIK. The subcommittee will come to order.
As our members get in, we can move on to get preliminary business
over with.
I want to say first of all that our committee is saddened by the tragic
death of our colleague, Mr. Pettis, of California, due to tragic circum-
stances. It has been very difficult, and he has be.en a very hard and
conscientious worker, and we are going to deeply miss him.
I also want to point out to the committee that Mr. Duncan has been
selected to serve and is willing to serve as a member of this subcom-
mittee, and we will welcome Mr. Duncan later today.
I want to say at the outset that our meeting today will last 1 hour,
since we must adjourn by 10 o'clock in order to meet with the caucus of
Democratic Members, and I will endeavor to provide that we move
expeditiously with our business so we can get as much done within this
time frame as possible.
We are pleased to have with us today the Commissioner of Internal
Revenue, Mr. Donald Alexander, one of my dear friends and col-
leagues. There are a number of issues we would like to discuss today,
and I regret that we are faced with time limitations. I hope we can
concentrate on things that are timely, particularly in the light of our
current business, the collection of revenue for the year 1975, based on
1974 income, and 1 hope we can concentrate on the progress of the
taxpayers' assistance program, the possible problems in the area of tax
return preparers, and I hope we can hear from the Commissioner on
how we can proceed in the Ways and Means Committee to make his
task easier and the work of his Service more efficient.
We are here to do a constructive job, as a unit of Congress acting on
behalf `of our colleagues, to provide for an oversight and review of the
ongoing programs of the administration in carrying out legislative
mandates.
I will yield at this point to my colleague from Ohio, Don Clancy. I
know he wants to say some special things about the Commissioner.
There are two kinds of Buckeyes in Ohio, Cleveland Buckeyes, and
then there are Cincinnati Buckeyes. I am going to let Don tell you
about the difference.
(1)
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2
Mr. CLANCY. First, we share your sentiments with respect to the
untimely passing `of Mr. Pettis. He was a very valued member of this
subcommittee and the committee as a whole, and we regret very much
that he. would have this tragic ending.
We are, however, very grateful for the fact that Mr. Duncan will
join us. He is a very able member of the committee and one who has a
great deal of dedication and will be a valued member.
With that, Mr. Chairman, I would also like to say that we are
pleased to have with us my friend and a person who is a fellow Cm-
cinnatian, one whom we have had a great deal of respect for both in
private and public life. He is a person who has an enviable reputation
in his profession, the legal profession, and I think that the country as
a whole is much better off with a person of this caliber serving in this
position. So we will welcome him this morning, and we want to com-
pliment him and his staff on the great job that he has done while he
has served in this capacity.
Mr. VANIK. The committee will be very happy to hear from you
before we proceed.
STATEMENT OF HON. DONALD C. ALEXANDER, COMMISSIONER OF
INTERNAL REVENUE SERVICE, ACCOMPANIED BY WILLIAM E.
WILLIAMS, DEPUTY COMMISSIONER; MEADE WHITAKER, CHIEF
COUNSEL; BURKE W. WILLSEY, ASSISTANT TO THE COMMISSION-
ER; ROBERT H. TERRY, ASSISTANT COMMISSIONER (ACCOUNTS,
COLLECTION, AND TAXPAYER SERVICE); ANITA F. ALPERN, ACT-
ING ASSISTANT COMMISSIONER (PLANNING AND RESEARCH);
J~OSEPH T. DAVIS, ASSISTANT COMMISSIONER (ADMINISTRA-
TION); AND SINGLETON B. WOLFE, ASSISTANT COMMISSIONER
(COMPLIANCE)
Mr. ALEXANDER. Congressman Vanik and Congressman Clancy,
thank you for those kind words. I am a. fellow Buckeye who is now
trying to .help some very fine people. in a very difficult job.
I want to tell you how delighted the Internal Revenue Service is
about your interest in the Service and the way we try to administer
the laws for which you gentlemen `are responsible.
We have the job of putting into effect and carrying out the laws that
you pass to govern our tax system; who pays what, when, and under
what circumstances, what people are entitled to what deductions, and
what administrative procedures and judicial rights of appeal are
written into title 26 of the United States Code.
Tax administration is too important to be left to the administrators
alone. I am delighted with the creation of this Subcommittee on Over-
sight and its companion in the Senate. I hope that you will have
periodic meetings. Call us down to explain to you what we are doing
and why we are doing it and what we aren't doing and why we aren't
doing it.
In this way we will be benefited, and I think the cause of a sound
tax system, both in the legislation that is written here and in the ad-
ministration of that legslation, will be benefited. I am grateful to you
for this oversight hearing. I hope there will be many more.
I have just two points that I would like to touch on, at this time..
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For almost 2 years we have been engaged in an effort to help people
understand their rights as well as their responsibilities under this very
complex Internal Revenue Code. We have done our best to produce
some simplified tax return packages, some simplified instructions, some
simplified documents telling people what `their rights are, `and the
rights `of appeal and the rights of persons in the. collection area.
We need to do more than that, but we need help from you. We need
help from you in simplifying the law, itself. The law in certain re-
spects, `as outlined in former Secretary Schultz's testimony before the
Ways and Means Committee on April 30, 1973, is so complex that the
people that should be entitled to particular benefits, the retirement
income credit being an outstanding example, can't find their way
through the maze that Congress intended for them.
We hope there will be basic simplification of the law on this issue.
Now, the economic downturn has created some special problems `and
some special responsibilities for the Internal Revenue Service. We are
the largest collection agency, we think, in the world, and I am sure
that all members of this committee are aware of the economic and
financial problems facing many of their constituents. All taxpayers
are, of course, our constituency.
We have a special responsibility to try to understand the nature
of our constituency. We need to understand th'at the person who is
delinquent with respect to his or her taxes for the first time, because
of unanticipated problems, layoffs and dismissals, and problems facing
small business these days in keeping open, is different from the person
who plays games with the tax system and who engages in violation of
that person's legal duties with respect to taxes withheld on the wages
of employees, and not paid over to the Federal Government. Also, we
need to recognize the repeater, the person who is not delinquent for
the first time, but who engages in continued delinquencies because we,
unlike other creditors, have charged a bargain interest rate of 6
percent.
We are grateful to this committee for meeting the problem of this
bargain rate of interest and for changing the rate effective July 1.
We have some other suggestions we would like to bring to the corn-
inittee in this respect.
So I look forward to the questions of this subcommittee about what
we are doing and why we are doing it, and what we are not doing in
tax administration.
I would like to introduce Meade Whitaker, the Chief Counsel of the
Internal Revenue Service, on my immediate right; and just beyond
Mr. Whitaker is Mr. William Williams, Deputy Commissioner of the
Internal Revenue Service; and there are `a number `of other Internal
Revenue officials, largely assistant commissioners, in the room.
There are two purposes, not only the purpose of responding spe-
cifically to your questions, but for the purpose of hearing your con-
cerns directly rather than through hearsay reported by me.
REFUNDS
Mr. VANIK. Thank you, Mr. Commissioner.
There is one question that I would like to propound, and I know it
is in the minds of all of us dealing with the current legislation before
us, `and that is: How long w~ill it take your Office to engineer out what-
ever refund plan is devised by the Congress?
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4
We are just talking about days and time to machine out to the
mandate we are under.
Mr. ALEXANDER. Members of my staff `are working with the Joint
Committee staff and Ways and Means Committee staff in assisting in
the drafting of a bill that will provide a rebate in the amounts that
C'ongress decides upon for the people., but in a way that we can ad-
minister, in `a way that permits us to decide the amount of the rebate
which each taxpayer will receive and get that information to the
Treasury Disbursing Office for issuance of the checks.
We think that, if the legisl'ati6n is, as we understand it to be, tailored
to what we input and maintain on our computers we can, in an addi-
tional computer cycle, an additional week after the determination of
the refunds to which the particular taxpayers on the cycle would be
otherwise entitled, do our job and get the information over to the
Treasury Disbursing Office.
Now, the Treasury Disbursing Office can issue about 12 million
checks a week, as I understand it.
I would like to call on Mr. iRobert Terry, our Assistant Commis-
sioner, Taxpayer Service, who is right back behind Mr. Williams, to
supplement this answer.
Mr. TERRY. That is correct.
Mr. VANIK. The total time within `approximately what period, what
is that?
Mr. ALEXANDER. We are talking about beginning the processing in
May, depending on when the legislation is passed.
Mr. VANIK. How many days and weeks does it take?
Mr. ALEXANDER. Assuming the legislation is finalized before April
15, we believe, depending on the Disbursing Office workload, `the first
checks can be in the mails or to the recipients before the end of May.
Now, those will be the first checks and not all of the checks by any
means. We will have checks continuing in June. We also have some
late filings, and those people who file after the April 15 date, won't get
their rebates in June.
Mr. TERRY. We can begin moving the refund tapes to regional dis-
bursing centers, within about 45 days after the effective date of the
legislation. Assuming that it is April 1, we could begin moving those
refund tapes within about 45 days.
The reason for that period, of course, is, when we can complete our
programing and do our testing. We anticipate d'oing the rebate job
as part of the routines on the programs already existing, so if we can
tailor the legislation to match our present system we can move quite
expeditiously.
It is possible we can improve on that 45 days, and we are presently
doing some work in the programs in anticipation of the provisions as
they are now suggested.
Mr. VANIK. What you are saying, it will take about 45 days and 1
week for every 12 million returns.
Mr. ALEXANDER. It takes 45 days, although we are trying to reduce
that period. That is for us to develop a test and distribute our com-
puter programs.
We have a 1-week cycle built into the program that we have ten-
tatively developed based upon the recommendations of the adminis-
tration with respect to the rebate and also the determinations made in
H.R. 2116.
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5
We will get this information to the Disbursing Office of the Treas-
ury that actually issues the checks, and we understand that they can
issue checks at the rate of about 12 million a week, running full time,
24 hours a day, with maximum staff.
The delays, as we see it, in the rebate checks being in the hands of
the individual taxpayers entitled to them may be as a result of this
limitation on how many checks can be issued and how soon.
INCRF~ASING STANDARD DED1JCTIONS
Mr. CLANCY. May I ask at that point what do you contemplate in
the way of adjustments in regard to title 2, if that were to be adopted
by Congress and signed by the President? What would it require on
the part of the Internal Revenue Service to comply with those
provisions?
Mr. ALEXANDER. Congressman Clancy, I am not sure I understand
totally what title 2 means.
Mr. CLANCY. That has to do with the increase in the standard deduc-
tions which would result in tax decreases for the calendar year 1975.
Mr. ALEXANDER. For the calendar year 1975, between the increase in
the standard deduction and the changes in the withholding tables,
which are also in title 2, the changes in the withholding tables would
take effect first.
I would like to ask Mr. Terry or Miss Alpern, who is Acting Assist-
ant Commissioner of Planning and Research, to tell this committee
how long it might take to have these changes in the withholding tables
reflected not only in the distributions that we would make of instruc-
tions to taxpayers, but also in our computer program.
Miss ALPERN. We are working on the withholding tables now. I
know the time frame will not impact adversely on rebates. it will have
no impact on that program whatsoever.
We `are working on withholding instructions, and we are also work-
ing with the printers in terms of constructing withholding tables, so
that hopefully almost within the same 45-day time frame new with-
holding tables and instructions will be ready for promulgation. Em-
ployers could then begin to withhold based upon the new withholding
tables. It is the same time frame as rebates, about the end of June,
assuming that the legislation goes as it is now being formulated.
Mr. CLANCY. You wouldn't contemplate `any difficulty in having
these provisions complied with, say by the second half of calendar
year 1975?
Miss ALPERN. No.
Mr. ALEXANDER. The final impact will be in next year's filing period.
On the next year's filing period, we would anticipate that some people
would go off the tax rolls, not many, because people would still need to
file returns to get the refunds that they would be entitled to.
Mr. `\TANIK. Just to wrap this up, the staff has a question here that
I would like to offer.
If the Senate does not make major changes in the 1974 refund pro-
vision, could that 45-day period start before Congress finishes its work
on the bill?
Mr. ALEXANDER. We are developing a program now assuming that
the Senate stays with the exact same wording as that in the House bill.
We might suggest some modifications in the House bill with respect to
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6
interest on delayed refunds. We would do our best to shorten this 45-
day period because the 45-day period is one of developing and testing
as well as of implementation. So we would hope that we could shorten
it.
We recognize that congressional action may not be completed by
April 1. April 1 is not very far away. We will try to shorten it on
our end.
I would like to make one further point. I mentioned that some people
would be going off the tax rolls. Some people will be coining on. Some
people will be coming on if we give refunds to those who have not
paid income tax, refunds in excess of the income tax that they had
paid. I did not want to leave the impression that the enactment of
title 2 would have a necessary effect of decreasing the Internal Reve-
nue Service workload. Instead, it is the opposite I think will be true,
but whatever you enact you can be sure that we will do our best to
administer.
TAX FORM SIMPLIFICATION
Mr. VANDER VEEN. I would like to ask whether or not the Service
has a combination of recommendations with reference to one of our
goals, to simplify the returns, and the other aspects of complying with
the rules and regulations?
Mr. ALEXANDER. Mr. Vander Veen, the Treasury made a number of
recommendations on April 30, 1973, with respect to simplification of
some of the items in present law that cause the most administrative
difficulty.
I think the Joint Committee staff is fully aware of these items, re-
tirement income credit, miscellaneous deductions, the child care de-
duction to name three examples, and we will be glad to present our
views which are presented through the Assistant Secretary for Tax
Policy.
We can do that immediately to the staffs down here at the Hill.
They can be aware of the problem areas, that are causing people not
to understand what they need to do to reduce their taxes, and nobody
need pay more than the amount they are legally required to pay.
Everybody is entitled to understand what their responsibilities are.
Mr. VANDER VEEN. In addition to that, Mr. Commissioner, if we
could aim toward a goal such that the average wage earner did not
need to employ the services of somebody to prepare a tax return for
him or her.
Has consideration been given to that also?
Mr. ALEXANDER. Yes, it has. This is the effect of simplification,
Mr. Vander Veen, rather than a goal of simplification, as Internal
Revenue sees it. We are not attempting to put tax return preparers
out of business, but we do believe that there is a vital public need in
having a tax law that the public cannot only respect, but can under-
stand.
We think that those two issues, respect and understanding, go hand
in hand. The effect of simplifying the law will be to make it possible
for more people to comply with their reponsibilities and exercise their
rights without having to hire someone to do it. We think that is in
the public interest.
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Mr. VANDER VEEN. I would like to say that I thoroughly agree with
that, and I would like to ask one more question. That is whether or
not any consideration has been given or any study given to computer-
ized methods of making it possible such that many wage earner tax-
payers would not have to file a return at all, that is, by linking with-
holding on the part of large employers with a computerized system
at the IRS, whether or not it wouldn't be possible to eliminate al-
together the filing of returns.
Mr. ALEXANDER. It may be possible to eliminate the filing of returns
by many people. This is the case in Great Britain and Japan now.
I think that in Japan returns are actually filed by only 3 million of
the 30 million people on the tax rolls. The employers in Japan take
care of this particular responsibility, with respect to their employees.
In the United States, where we do have a more mobile employment
force and we have people that are tied less to their employers than they
are in other countries, we go only halfway. We go to withholding, an
obligation imposed on the employer with respect to not only the em-
ployer's share of employment taxes but the employee's income taxes
and employment taxes.
It may well be possible in the future to go further, and we are study-
ing this as well as the concept of annual filing, and a number of other
innovations to try to make the tax system better and easier to comply
with, and fairer.
At the moment we have no recommendations to present to the Treas-
ury and to Congress with respect to the employer undertaking a duty
to file, through a hookup with the employers and the computer, the
income tax returns of the employees.
We are constantly encouraging the use of magnetic tape in reporting
to us instead of the use of paper documents. But we will study this
matter further to find out whether a concept like that employed in
other highly industrialized countries might make sense, too.
Mr. VANIK. We will have to move on. We are going to try to limit
our individual questions to 4 minutes so we can get around the table.
Mr. BAFALIS. Thank you, Mr. Chairman.
INCREASE IN INTEREST ON DELINQUENT TAXES
Mr. Commissioner, in your opening remarks you spoke of the pos-
sibility of a raise in the interest penalty from 6 percent, to somewhere
around 9. I have had concern with the economic downtrend in the
last several months, the number of business failures that we have had,
and we are going to have a great number of delinquencies.
Do you think that increasing the interest rate is going to help solve
that problem? And, secondly, how are we going to collect what I
believe will probably be one of the largest sums of money due us in
many years?
Mr. ALEXANDER. Increasing the interest rate will solve the imbalance
that we now have with the 6-percent rate that has been in effect for
many years, and the fact that rates charged by lending agencies gen-
erally are far in excess of 6 percent.
When one adds the penalty of a half of 1 percent a month, which is
the standard late payment penalty, to the 6-percent interest, we still
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8
have, we think, an inadequate tool to make it economic for someone
to play games with the system, someone who deliberately avoids re-
sponsibilities like that of paying withheld taxes.
Of course, this penalty is not applied where there is a reasonable
cause for late payment.
We hope that the committee will consider an acceleration of the pen-
alty from one-half of 1 percent a month to 2 percent a month, or 1
percent `a month, to give us the right, in situations where there is no
reasonable cause for late payment, `to make it unprofitable as well as
unsound for people to play games with the system. Some people. have
in the past played games with the system. More people may today be
playing games with the system. We have `a difficult task in our collec-
tion effort not only by reason of the problems that creditors face gen-
erally, the economic downturn creating hardships and making it im-
possible for people to pay previously incurred liabilities.
*But also we have a problem of the taxpayer's need to produce more
slices of cake than there are funds available to pay. Frequently the tax-
payer puts Uncle Sam at the end of the line of creditors rather than
at the. beginning.
We have facing us an increase in the number of delinquent tax-.
payers, an increase in the amount of delinquent taxes. We have a
special responsibility here to collect those taxes, but collect them using
the least possible force.
We have some strong medicine in the Internal Revenue Code, the
right to seize the taxpayer's property, the right to levy, the right to
make a jeopardy assessment, and we need to use that strong medicine
only where it is clearly required.
Mr. BAFALI5. I think you are in a unique situation that you haven't
been in for a long time, and I am just concerned whether the increased
penalties are going to compound the problem.
I realize some people have tried to use the 6-percent base to save
some money, but with many people this year that just isn't a matter
of playing games. They don't have the dollars available to them to ifie,
on the trust fund moneys, particularly.
Do you have any estimates as to how many in numbers, the approxi-
mate numbers, will increase in fiscal 1975 over fiscal 1974 ~
Mr. ALEXANDER. We can supply for the record both the numbers of
taxpayers that are delinquent and have, been delinquent in fiscal 1973
and fiscal ~1974, and our projection for 1975, and the aggregate
amounts. The total amount that is just not collected is a bad debt, to
use the business term.
Out of t.he aggregate that we must collect it is very small. As I
understand it, Mr. Terry, it is less than $1 billion out of the $169 bil-
lion that we collected last year.
Now, we have an inventory of more than $2 billion in taxes that are
overdue, but t.hat doesn't mean that the taxes are uncollectible.
Individual taxpayers present a different situation from business
taxpayers. As to individual taxpayers, many `of them would be entitled
to a refund at the end of the year but for the fact that they owe us
taxes. And, of course, we will offset that against the rebate that would
otherwise be paid to them.
[The following was offered for the record by Mr. Alexander:]
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9
DELINQUENT TAXPAYERS INFORMATION
The following figures represent the total number of first notices issued and
their aggregate amount for delinquent taxes during calendar years 1972, 1973
*and 1974. The number of taxpayers included in these delinquencies is not
available.
*
First notices
issued for
Calendar year'
delinquent
taxes 3
Aggregate amount
of first notices3
1972
1973
1974
1975 (projected)
7,200, 000
7,380,000
8,088,000
8, 193, 000
$4, 148,000, 000
4,403,000,000
4,957,000,000
5,022,000,000
Fiscal year data cannot be given because a processing problem caused a significant number of notices that would have
been issued in May or June of fiscal year 1973 to be issued in July of fiscal year 1974. The calendar year statistics were not
distorted by this occurrence and therefore provide a more accurate picture of delinquency growth.
2 Rounded to thousands.
3 Rounded to millions.
Mr. BAFALIS. I would like to explore this further, but we have some
other members.
Mr. VANIIc. I was going to point out, Mr. Commissioner, we are also
concerned with the interest that we have to pay out on delinquent pay-
outs. I noticed that in 1974 it was $220 million, and in 1975 it was $239
million, and the estimate for 1976 is $390 million.
I don't want to take time now to have you analyze that, but I hope
you might be `able to supplement something in the record to point out
the problem that arises, that causes that increase in interest paid out
on delinquent refunds.
Mr. ALEXANDER. Part of it is due to increased volume, and part of it
is taking into account the increase of 50 percent in the rate. When you
look at that figure, and you consider the interest rate on deficiencies, it
is double that particular figure, so there is a profit to the Government
in interest.
Mr. RANGEL. What answer is given to the taxpayer as to why the
Government and/or the employer should not pay interest on the money
withheld from his salary?
Mr. ALEXANDER. Mr. Rangel, this problem of overwithholding-
Mr. RANGEL. No, sir. I am talking about the withholding.
Mr. ALEXANDER. I think that aspect of it, the aspect that concerns
us-
Mr. RANGEL. I am not talking about overwithholding. When you
dea.l with overwithholding, you `are really aggravating the situation.
But in New York State there is a tendency for landlords, and certainly
telephone companies, to hold moneys for services not rendered. The
taxpayer is entitled to the going interest rate or at least a fair return
for that money which is actually being used.
Mr. ALEXANDER. Well, our system of pay-as-you-go taxation as in-
stalled and developed back in 1943 calls for the taxpayers, through
withholding and through estimated `taxes, to pay to the Government
taxes due on their earnings to the particular time of payments.
Thus, taxes are paid on wages as they are earned, rather than later,
at `the end of the year, as has been the situation before that. It is rather
hard for this `agency to envision how it could operate successfully if
we did not have this system.
PAGENO="0014"
10
Mr. RANGEL. It may be hard for me, but I didn't think anything
would be too difficult for the computer. It seems as though during that
year the computer could be programed to figure out the interest
which should be returned to the taxpayer for the use of his money.
Mr. ALEXANDER. They have been using your money, Mr. Rangel; if
the taxpayer had a right to delay until after the end of the year the
meeting of his or her tax obligations. So we could, if Congress chose
to enact `a~ law calling for the payment of interest on withheld taxes
or taxes paid on estimated returns. We could make that interest pay-
ment or make it an offset to the tax obligation of a particular taxpayer.
Congress has not called for this.
Mr. IRANGEL. But it can be done, though?
Mr. ALEXANDER. It could be done, yes, but we have a special problem
in o'verwithholding. There is a great degree, as Chairman Vanik men-
tioned at `a previous hearing, of `overwithholding in the United States
at this time. We will pay out, we anticipate, about $26 billion in refunds
to `more than 65 million individual taxpayers. If we make those re-
funds within 45 days of the April' 15 deadline for filing individual tax
returns, no interest is paid with respect to them.
Chairman Vanik brought up the issue of the large amount of interest
that we anticipate paying in any event, almost $400 million antici-
pated in the next fiscal year. Any requirement shortening the 45-day
period or calling for the payment of interest on withheld taxes or esti-
mated taxes would, of course, add to that cost.
INVASION OF PRIVACY
Mr. RANGEL. May I ask just one more question. This is a sensitive
one, but it is seeking information.
Has there been any change in Internal Revenue regulations or Execu-
tive orders that would prevent the political intrusion into the privacy
of income taxpayers?
Mr. ALEXANDER. Yes, there have been some changes, the Executive
order issued by President Ford, and there have been changes in the In-
ternal Revenue's procedures.
Mr. RANGEL. How would IRS handle a request that came from the
White House for someone's income tax returns?
Mr. ALEXANDER. President Ford issued an Executive order last Sep-
tember which very narrowly restricts the right of the White House or
anyone in it to request or examine income tax returns.
Since I have been Commissioner of Internal Revenue, no such re-
quests have been made by the White House.
Mr. RANGEL. And the FBI?
Mr. ALEXANDER. The FBI does get tax information at a rate of about
1,000 a year on prospective appointees, on prospective employees of the
`White House, or employees of the `White House or employees of the
executive branch.
Mr. RANGEL. Must they give information to `indicate who has re-
quested from the White House?
Mr. ALEXANDER. Not as to the tax checks, but tax checks are very
narrowly limited. We simply say to the FBI, who are in charge of
course of checking out the prospective appointees' qualifications,
whether the particular person has filed a tax return for the last 3 years,
PAGENO="0015"
11
whether there has been a criminal investigation of that particular per-
son, whether that person has an unpaid liability.
Mr. RANGEL. You mean it is impossible for them to look at the raw
information?
Mr. ALEXANDER. They do not look at the raw returns, and I would
like to suppiy for the record, if I may, Congressman Rangel, and
Mr. Chairman, the Executive order issued by the President, the in-
structions which I issued which centralized all of this through my office,
and only the Deputy Commissioner and I can act in this particular
respect, and other materials which I think will give a complete and
comprehensive answer to this very good question.
Mr. RANGEL. You will put that in the record?
Mr. ALEXANDER. Yes.
[The material follows:]
THE PRESIDENT
EXECUTIVE ORDER 11805
Inspection by President and Certain Designated Employees of the White House
Office of Taa~ Returns Made Under the Internal Revenue Code of 1954
By virtue of the authority vested in me as President of the United States, and
in the interest of protecting the right of taxpayers to privacy and confidentiality
regarding their tax affairs consistent with proper internal management of the Gov-
eminent, and in the further interest of maintaining the integrity of the self-assess-
ment system of Federal taxation, it is hereby ordered that any return, as defined
in Section 301.6103(a)-i of the Treasury Regulations on Procedure and Adminis-
tration (26 CFR Part 301) as amended from time to time, made by a taxpayer in
respect of any tax described in Section 301.6103(a)-i (a) (2) of such regulations
shall be delivered to or open to inspection by the President only upon written re-
quest signed by the President personally.
Any such request for delivery or inspection shall be addressed to the Secretary
of the Treasury or his delegate mid shall state: (i) the name and address of the
taxpayer whose return is to be inspected, (ii) the kind of return or returas which
are to be inspected, and (iii) the taxable period or periods covered by such return
or returns.
In any such request for delivery or inspection, the President may designate by
name an employee or employees of the White House Office who are authorized
on behalf of the President to receive any such return or make such inspection,
provided that the President will not so designate an employee unless such em-
ployee is the holder of a Presidential commission whose annual rate of basic pay
equals or exceeds the annual rate of basic pay prescribed by 5 U.S.C. 5316. No
disclosure of such return, or any data contained therein or derived therefrom
shall be made by such employee except to the President, without the written
direction of the President.
All persons obtaining access to such return, or any data contained therein or
derived therefrom shall in all respects be subject to the provisions of 26 U.S.C.
6103, as amended.
GERALD R. FORD.
THE WHITE HOUSE,
September 20, 1974.
~FR Doe. 74-22293 Filed 9-20-74; 4 :42 pmj
NEwS RELEAsE-DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE, WASHINGTON, D.C., AUGUST 22, 1974
The Internal Revenue Service has issued formal instructions to all of its
employees that place strict limitations on the furnishing of tax returns and tax
information to the White House.
PAGENO="0016"
12
The instructions, which had been previously conveyed orally to key IRS
officials, provide that requests from the White House must be in writing and
may be responded to only by the Commissioner of Internal Revenue. In the
Commissioner's absence, only the Deputy Commissioner may act for him in this
regard. No other IRS officials will be empowered to act in their absence.
The IRS action is in accordance with testimony given by Commissioner Donald
C. Alexander on July 31, 1974 before the Subcommittee on Administrative Prac-
tice and Procedure of the Senate Judiciary Committee.
Copies of IRS Information Notice 74-23 containing the formal instructions
and a revised portion of the Internal Revenue Manual dealing with Special Tax
Check Reports are attached.
U.S. TREASURY DEPARTMENT-IRS
INFORMATION NOTICE NO. 74-23, AUGUST 9, 1974
Disclosure of Tace Returns and Ta~r Inf ormat kin to Members of the White House
$taff
This is to inform Service employees of the procedures which should be followed
with respect to requests for tax returns and tax information from members of
the White House Office. The White House Office comprises the officers and
employees of the staff of the President required in the performance of the
detailed activities incident to his immediate office. Any officer or employee of
the Internal Revenue Service who receives a request for tax returns or tax
information from a member of the White House Office shall promptly communi-
cate the contents of the request to the Commissioner through the head of the
office in which he serves. The Commissioner will evaluate the request and will
ask the Assistant Commissioner (Compliance) to prepare whatever reports may
be necessary in the same manner as provided by sections (18)30(1) (b) and (3)
of IRM 1272, Disclosure of Official Information Handbook. Only the Commis-
sioner, or, in the absence of the Commissioner, the Deputy Commissioner, will
make the report, the tax returns, or tax information available to the members
of the White House Office. These procedures will be made a part of the Dis-
closure of Official Information Handbook, IRM 1272. The institution of these
procedures is intended to include the Special Tax Check Report Program estab-
lished by Chapter (19)00 of IRM 1272, Disclosure of Official Information Hand-
book. Pending revision and republication of Chapter (19)00 of IRM 1272, the
information submitted pursuant to a report under this Program should be limited
to whether an individual has filed income tax returns with respect to the im-
mediately preceding three years, has failed to pay any tax within 10 days after
notice and demand, has been under any criminal tax investigation and the
result of such investigation, or has been assessed a civil penalty for fraud or
negligence.
DONALD C. ALEXANDER,
Commissioner.
MANUAL TRANSMITTAL 1272-6
INTERNAL REVENUE SERVICE, AUGUST 22, 1974
Purpose
This transmits revised material for IRM 1272, Disclosure of Official Informa-
tion Handbook.
Remeeal and Insertion of Pages
Remove: Text (19)00-(19)70 : (3) (f)
Insert: Text (19)00-(19)70:(3) (f)
Nature of Changes
Chapter (19)00 has been revised to require a written request by a designated
official, who is charged by the head of the requesting agency with the responsi-
bility for such requests, before the National Office ~vill request a special tax
check report, and to have the special tax check report contain only specified
tax information concerning Chapter 1 of the IRC of 1954.
DONALD C. ALEXANDER,
Commissioner.
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13
(19)00 SPECIAL TAX CHECK REPORT
(19)10-General
(1) The National Office will request tax check reports on prospective Presi-
dential appointees, on nominees for Presidential "E" Awards established by
Executive Order 10978, and on certain other persons. Generally, these tax records
checks are made to supplement investigations concerning the character, loyalty,
or suitably of such prospective appointees or nominees. We cannot emphasize
too strongly the need for prompt, completed, and discreet processing of these
requests.
(2) Requests for tax check reports will be made by the National Office only
pursuant to a written request signed by a designated individual who is charged
by the head of the requesting agency with the responsibility for such requests.
(3) Tax record checks should be confined to taxes imposed by Chapter 1 of
the Internal Revenue Code of 1954.
(4) When field contact with the taxpayer is required, the Director may assign
any officer he deems appropriate to perform this task. In this respect, any
attempt to substantiate the filing of a return by telephone is not desirable and
should be discouraged.
(5) If in the judgment of the Director certain information is of such a nature
that it should not be transmitted by teletype, the report should state that addi-
tional information is being forwarded by memorandum.
(19)20-Type "X" Reports
(1) Communications from the National Office for reports on prospective ap-
pointees will ask for a Type "X" Report.
(2) District offices should submit a teletype report to the National Office,
Attention: CP :D, within three workdays after receipt of the request. The report
should be in the format described in (19)50. If complete data is not assembled
within the time limit, a report should be sent containing any partial information
available, and should indicate the approximate period of time needed to complete
the report.
(3) In "no record" cases a field contact in accordance with established pro-
cedure should be made with the taxpayer to substantiate whether returns were
filed and to determine the place of filing.
(a) These inquiries should be conducted as discreetly as possible, giving no
indication to the taxpayer that anything other than a routine check is being
made.
(b) Upon field contact, if the taxpayer indicates he has filed his returns in
another district, immediately teletype identifying information to the District
Director and request that a collateral Type "X" Report be submitted directly
to the National Office, Attention: CP :D. Also advise the National Office of such
action.
(c) If a field contact is not desirable, the National Office teletype or other
communication will contain specific instructions that the taxpayer will not be
contacted under any circumstances for information because of the request.
(4) In failure to file cases, returns should not be solicited without first con-
sulting the Intelligence Division.
(19)30-"R" Award Reports
(1) Communications from the National Office for reports on nominees for "E"
Awards will ask for an "E" Award report.
(2) District offices should submit a report to the National Office within five
workdays after receipt of the request. The report should be in the format
described in (19)50.
(a) If complete data is not assembled within the time limit, a report should
be sent containing any partial information available, and should indicate the
approximate period of time needed to complete the report.
(b) Reports should be made by memorandum using the fastest available mail
service.
(3) In "no record" cases, the same procedures as prescribed for Type "X"
Reports in (19)20: (3) should be followed.
(19)40-$ervice Center Participation
(1) Because of the transfer to service centers of information on outstanding
balances, and because of the increasing importance of service centers in our over-
57-236 0 - 75 - 2
PAGENO="0018"
14
all operations, district offices in preparing tax check reports should make such
arrangements as may be necessary with service centers to obtain the required
data so that complete and accurate reports will be furnished to the National
Office. This may impose additional work on district offices, but with our decen-
tralized operations, the National Office is unable to assume the responsibility
for coordinating all details on individual cases of this nature.
(2) The responsibility for submitting tax check reports to the National Office
will, therefore, still lie with the District Director concerned.
(19)50-General Format of Reports
(1) The general format for making Type "X" Reports, "E" Award Reports,
or other similar reports follows:
(a) Name or title of report (Type "X" Report) or ("E" Award Report).
(b) Name and address of person, firm, or organization.
(c) Furnish statements indicating:
1. Whether such party has filed returns with respect to taxes imposed under
Chapter 1 of the Internal Revenue Code for not more than the immediately
preceding 3 years.
2. Whether such party owes any unpaid taxes and, if so, for what years.
3. Whether such party has been or is under investigation of possible criminal
offenses under the internal revenue laws and the result of such investigation.
4. Whether such party has been assessed any penalty for fraud or negligence.
(19) 60-Tace Checks on Treasury Employees
(1) Requests for tax checks on Treasury employees (other than Internal
Revenue Service employees) will be initiated by bureaus or offices of the Treas-
ury by use of Treasury Department Form TD 4002.
(2) District offices should complete items 10 through 15 of Form TD 4002
no later than 10 workdays after receipt of the request.
(3) If a lien was filed (item 11(b)), furnish the name, address, amount, date
and place of filing, and date of release in item 15.
(4) The completed form should be returned to the originating office by use of
double-sealed mailing, the inner envelope to be marked, "To Be Opened By
Addressee Only."
(5) In "no record" cases it will not be necessary to contact the taxpayer
unless a specific request is received from the Treasury office concerned. In
failure-to-file cases, returns should not be solicited without first consulting the
Intelligence Division.
(6) If district offices receive requests for additional information regarding
items 10 through 15, the request, together with the proposed reply to the re-
questing Treasury office, should be transmitted to the National Office, Attention:
OP :D.
(19) 70-Tace Audits in Connection with Type "X" Reports
(1) Treasury Administrative Circular 189, dated May 12, 1969, (since revised)
established requirements for preappointment tax audits on persons not already
on Treasury rolls selected for high-level positions, such as Heads of Treasury
Bureaus, Assistant Commissioners of Internal Revenue, and Presidential ap-
pointments, including persons serving on Presidential Committees.
(2) The responsibility for initiating and coordinating the audits is assigned to
the Disclosure Staff, Office of the Assistaiit Commissioner (Compliance), OP :D.
(3) When the Director, Office of Personnel, Treasury Department, determines
that a tax audit on a prospective Treasury appointee is needed, he will ask the
Disclosure Staff to initiate the audit.
(a) The Disclosure Staff will telephone the District Director in whose district
the taxpayer resides to obtain the returns from the service center or Federal Rec-
ords Center and to assign an Internal Revenue Agent to make the audit.
(b) If the prospective appointee has already moved from lii's permanent resi-
dence to the Washington, D.C., area, it may be advisable to ask the District Direc-
tor, Baltimore District, or the District Director, Richmond District, to conduct
the audit.
(c) If a return for one of the open years has been examined under established
procedures, it will not be necessary to re-examine the return. However, a report
of the previous audit should be furnished to the Disclosure Staff.
(d) A regular `Type "X" Report should be furnished as soon as possible in ac-
cordance with established procedures without waiting for the completion of the
audit.
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15
(e) A supplemental report of the audit should be furnished by telephone to
the Disclosure Staff as soon as the results are known. It should be confirmed by
memorandum to which is attached a copy of the audit report.
(f) Because of the extremely tight deadline in these cases, district offices are
requested to make every effort to complete the audit within five workdays after
receipt of the request. If this is not possible, a telephone or teletype report should
I)e furnished to the Disclosure Staff indicating the approximate time when the
audit will be completed.
TAX CHECKS REQUESTED BY FEDERAL AGENCIES
Agency: CF 1971!
White House 1, 045
Department of Justice 835
Department of Treasury 775
Department of Commerce 106
Department of State 148
Export-Import Bank 15
U.S. Information Agency 9
Total 2, 933
IGRU
Mr. VANuC I want to state: What is the status of your research unit
and information-gathering unit known as IGRTJ? There was a great
deal of interest about what this unit was doing.
Mr. ALEXANDER. Mr. Chairman, this unit and its work is under exam-
ination now in our office. We understand that the Joint Committee staff
will be looking into this unit, its past activities and its present activities
and prospective future, and we welcome that investigation.
We have suspended intelligence-gathering activities. We have sus-
pended anything other than the normal disposition of files such as an-
cient forms 1040 w-hich we must dispose of in order to accommodate the
new 1040's which we are now receiving. We are designing new and
restrictive directives to our field people to assure that only such infor-
mation as is directly related to tax administration and enforcement
will be compiled and to assure proper controls over the compilation,
the retention and disposition of this material.
We will be glad to supply further information for the record with
respect to this, Mr. Chairman.
We have issued a public statement in detail as to our information
gathering.
[The information follows:]
NEWS RELEASE-INTERNAL REVENUE SERVICE, FEBRUARY 7, 1975
The Internal Revenue Service today released the following documents in con-
nection with its information gathering systems:
1. Telegram providing Interim Guidelines for Information Gathering Activities
for Audit, Intelligence and Collection Activities.
2. Exchange of Correspondence w-ith Senator Joseph M. Montoya.
3. Exchange of Correspondence with Senators Mike Mansfield and Hugh Scott.
4. Exchange of Correspondence with Senator Vance Hartke.
5. Letter to Senator Frank Church.
6. Exchange of Correspondence with Congressman Charles A. Vanik.
7. IRS Fact Sheet on IRS Information Gathering and Retrieval System.
8. Telegram suspending information gatherIng activities.
9. Internal Revenue Manual text on Intelligence Gathering and Retrieval
System.
Copies of these released documents are attached.
PAGENO="0020"
16
FEBRUARY 7, 1975.
To: All Regional Commissioners, IRS; All District Directors, IRS; All Service
Center Directors, IRS; Director, Office of International Operations, IRS.
(Via Mail)
From: W. B. Williams, Deputy Commissioner, IRS.
(MSARD) (MSASC)
Subject: Interim guidelines for information gathering activities for audit, Intel-
ligence and collection activities.
(1) This is in further reference to our January 22, 1975 telegram suspending
IGRU, JCP and other similar information gathering activities pending clarifica-
tion of the definition of directly tax-related information.
(2) Until such time as legal questions are resolved concerning application of
the Freedom of Information Act amendments and the Privacy Act of 1974, all
information gathering activities will remain suspended except to the extent
provided in this telegram. No new information gathering projects will be
initiated.
(3) With reference to IG&R, returns compliance programs, joint compliance
coordinated compliance and intelligence projects:
(A) Previously collected information or information received without solici-
tation which involves transactions with potential tax consequences may be
processed and associated with case files for use in development of the case.
(B) No additional information (except information relating to an open as-
signed case on a specific taxpayer) will be solicited.
(C) No new projects will be initiated.
(4) The returns preparers program, including shopping activities, may be
continued.
(5) Financial information and other data directly related to notices, TDA's
and TDI's may be obtained and will continue to be associated with the case files
as provided in existing instructions.
(6) Any files or information, gathered or assembled, pertaining to any taxpayer
or group of taxpayers and in the possession of an individual employee, which
do not relate to a current assignment, will be immediately forwarded to the
employee's division chief. Such information which the chief determines does
not require immediate action wifl be placed in suspense pending further
instructions.
(7) All employees should continue to submit information reports and informa-
tions items with potential tax consequences uncovered while working assigned
cases. Such information reports and information items will be processed in
accordance with existing instructions. Any other information will be forwarded
to the employee's division chief to be suspended pending further instructions.
(8) No records concerning intelligence information gathering activities, joint
compliance program activities, coordinated compliance projects and returns
compliance program activities shall be destroyed, disposed of, or transferred to
Federal records centers.
(9) Questions regarding these guidelines that cannot be resolved by assistant
regional commissioners should be referred through channels to the appropriate
assistant commissioner.
(10) This message will be reissued in the JR Manual in accordance with
IRM 1254.
WILLIAM B. WILriAM5,
Depaty Comm4ssioner.
FEBRUARY 6, 1975.
Hon. JOSEPH M. MONTOYA,
U.S. Senate,
Washingto~a, D.C.
DEAR SENATOR MONTOYA: This is in response to your inquiry concerning the
information gathering unit of the Internal Revenue Service's Intelligence Divi-
sion. We welcome the opportunity to respond to your concerns and to clarify
the misleading and inaccurate impressions that may have been created by recent
press accounts concerning this unit. For example, some press accounts charac-
terized this activity as a "secret" unit. This is completely inaccurate. The Intelli-
gence Division's Intelligence Gathering and Retrieval System (IGRS) was im-
plemented on May 4, 1973, by the issuance of guidelines in Part IX of the Internal
Revenue Manual (IRM 9390). This document, as well as a subsequent revision,
PAGENO="0021"
17
dated March 4, 1974, was released to the IRS Public Reading Rooms soon after
it was issued. In addition, these instructions have been published by Commerce
Clearing House, Inc., in their publication, Internal Revenue Manual, which is
available for purchase by the general public. The system was also included in a
report from the Treasury Department to Senator Ervin, dated May 8, 1973, con-
cerning his inquiries about computerized files.
Although the Intelligence Gathering and Retrieval System, as such, is fairly
recent, the practice of gathering and storing information is not new. In fact, the
Intelligence Division, as any other law enforcement agency, has always main-
tained background files, information files, leads, etc., as part of its overall
responsibilities for keeping informed about the nature and extent of noncom-
pliance with the tax laws under its jurisdiction. Prior to IGRS, such files were
kept as background or as sources for case development. These files were main-
tained manually, with little or no uniformity. The implementation of IGRS was
an attempt to attain greater uniformity in the gathering of tax-related informa-
tion and to utilize the most effective means available for the storage and retrieval
of this information Under IGRS, each district still maintains its own filing
system and the judgment of local officials still determines what goes into the
system. However, they now have guidelines to aid them in making these judg-
ments as well as access to data processing capabilities to help reduce the costs
of processing and storage.
The IGR system was established based upon the results of a study which
was made in 1969. The purpose of the system was to facilitate the ongoing
responsibilities of the Intelligence Division-especially in the identification of
areas of noncompliance with the tax laws and in uncovering tax evasion schemes.
It was designed as an adjunct to our tax administration system and without
regard to political affiliation.
With that brief background summary of IGRS, the responses to your specific
questions are enclosed. For your information, we have also enclosed copies of
recent letters to Senators Mansfield and Scott, Senator Church and Congressman
Vanik, in response to their inquiries regarding intelligence gathering by the
Internal Revenue Service.
With kind regards,
Sincerely,
(5) DONALD C. ALEXANDER,
Commissioner.
Enclosures.
IRS RESPONSES To QUESTIONS FROM SENATOR MONTOYA
1. At whose request was the so-called IRf~ Intelligence Gathering and Re-
search Unit established, and under whose direction did it operate?
In May, 1969, the then Director, Intelligence Division, William A. Kolar,
convened a study group to determine the feasibility of a formal, uniform Intelli-
gence Gathering and Retrieval System (IGRS). The group designed a system
and recommended its implementation. A number of alternative systems were
tested in various districts. The systems were monitored and evaluated by Intelli-
gence managers at all levels and in cooperation with the IRS Planning and
Research organization at the National Office. Finally, a uniform system was
outlined in formal guidelines which were issued on May 4, 1973, by Manual
Transmittal9300-40 (Attachment 1). These guidelines were modified on March 4,
1974, by Manual Transmittal 9300-47 (Attachment 2).
Subsequent to the issuance of the foregoing guidelines the individual field
offices implemented IGRS as each District Director saw the need for such a
system in his district and as his available resources permitted. Once IGRS was
implemented in a district office, it operated under the direction of the Chief,
Intelligence Division.
2. What was its intended purpose?
IGRS was implemented to provide an effective, uniform means of gathering,
evaluating, cross-indexing, retrieving, and coordinating data relating to mdi-
viduals or entities involved in illegal activities and having potential as tax
violations on a district and national basis. In March, 1974 the reference to
"illegal activities" was clarified to focus on "potential tax law violations."
3. What were the inclusive dates of its ccvistence and operation, and in pre-
cisely what way did it function?
PAGENO="0022"
18
TGRS was implemented May 4, 1973 and continued in operation until Jan-
uary 22, 1975 at which time its activities were suspended by order (Attachment
3) of Deputy Commissioner William E. Williams pending clarification of "tax
related information".
IGRS consists of a District Background Files Index and a National Register~
A Summary of Guidelines for these two segments of IGRS is provided as Attach-
ment 4. Attachments 5 and 6 provide a resume of the procedures for the operation
of the District Background Files Index and the National Register respectively.
Detailed procedures are set out in Section 9390 of the Internal Revenue Manual
(Attachment 2).
4. If the IGR has been dismantled, have any of its functions been assigned to
any other part of the IRS?
IGRS has not been dismantled. With the suspension of its activities on Jan-
uary 22, 1975 (Attachment 3) the personnel assigned to those activities were
reassigned to their regular examination or investigative duties. The functions of
IGRS have not been assigned to any other part of IRS.
5. Upon how many individuals and groups did the IGR maintain information?
Please supply the Subcommittee with a complete list of those upon whom files
were kept.
In connection with our review of IGR activities, we recently secured a name
count to determine the number of taxpayers included in the computerized Dis-
trict Background Piles Indexes maintained by the 45 districts that are using
this facility. At January 15, 1975, these indexes included 465,442 individuals,
corporations, or other entities. Most of these were entered from each district's
existing files of background information and leads relative to potential tax
violations. However, this figure is not all inclusive since some district offices
do not use the index and other district offices have not completed the process
of entering data into the index.
This is an index of names, not files. Although files are maintained on many
of the individuals appearing on the index, a separate file is not maintained for
each name reflected in the index. Many of the names were entered for cross-
reference purposes as a result of their appearance on documents in the system.
Because of the disclosure statute that applies to Internal Revenue Service
information, Section 6103 of the Internal Revenue Code, we are not permitted
to furnish the names of those upon whom files were kept.
6. With regard to the data accumulated by the Unit, was information pro-
vided to any other agency, department of government, group or individual?
Yes. Under section 6103 of the Internal Revenue Code, information contained
in the IGRS system can be made available upon receipt of written requests from
other Federal agencies. Also, under certain circumstances, information can be
furnished to states only for tax administration purposes. The information would
not, however, be available to any other groups or individuals.
Unsolicited allegations of offenses not related to tax violations may be trans-
mitted to the agency involved.
7. Specifically, what was the nature of the data gathered?
The nature of the data gathered is best explained by reference to the criteria
for inclusion as shown in Section 9393.1 of the Internal Revenue Manual (At-
tachment 2). Documents to be entered must relate to specific individuals or
entities. Of primary importance was the consideration that any documents in-
cluded be tax-related. Implementing instructions provide that "they must involve
financial transactions with potential tax consequences; illegal activities with
tax potential; or other illegal activities which fall within our investigative
jurisdiction."
The last clause covers items that may not have direct tax potential but would
have a significant tax relationship such as submission of false statements or
affidavits of third parties, concealment of property in connection with offers in
compromise, or tax related conspiratorial situations.
8. Was all information in the files of the IGR ta~v-reiated?
The intent of the IGR system, insofar as the type of information to be in-
cluded, is spelled out in section 9393.1 of the Internal Revenue Manual (Attach-
ment 2). This states that to be included, documents ". . . must involve financial
transactions with potential tax consequences; illegal activities with tax poten-
tial; or other illegal activities which fall within our investigative jurisdic-
tion
PAGENO="0023"
19
All determinations and judgments for entry in the system are made at the
district level. To approve an entry, the person making the decision must believe
that the entry has a direct or indirect relationship to tax matters, as set out in
the implementing instructions.
9. Did the Unit collect information at any time which was not taa-related?
As reflected in the January 22 telegram to our field personnel (Attachment 3),
the IRS is attempting to develop a precise definition of the term "tax-related."
Prior to the issuance of the telegram, the IGR guidelines in Section 9393.1 of
the Internal Revenue Manual (Attachment 2) were intended to define the
scope of the material to be included. Since these guidelines were subject to inter-
pretation and exercise of judgment by local Intelligence managers, some of the
information placed in the system may not be clearly tax-related. Certain items
may contain both tax-related and non-tax-related information. There has been
no requirement that the material be edited to delete non-tax-related information.
10. What was the role of the IGR vis-a-vis the Intelligence Division of the In-
ternal Revenue Sci-vice?
The IGR system has always been an integral part of the ongoing process of the
Internal Revenue Service Intelligence Division. The need for this activity is re-
flected in the statement of the mission of the Intelligence Division which states,
in part:
"The Intelligence mission is to further the total Service objective of encouraging
and achieving the highest degree of voluntary compliance with the internal reve-
nue laws by: identifying the existence of areas of willful noncompliance by tax-
payers and the devious and complex methods employed by them to evade the
tax laws
The IGR system generates leads and identifies noncompliance situations which
require investigative activity by the Intelligence Division or action by other
functions of the Internal Revenue Service.
11. In what way was the IGR related to the law-enforcing Strike Forces sit-
uated around the country?
There was, and is, no unique relationship between IGR and Strike Forces. As
you are aware, the IRS is a participant in the Strike Forces through its Audit
and Intelligence Divisions. In this regard, as indicated in our response to Ques-
tion 6, information from the IGR system can be made available, under the provi-
sions of section 6103 of the Internal Revenue Code, to other law enforcement
agencies who were, and are, participants in Strike Forces.
U.S. SENATE,
COMMITTEE ON APPROPRIATIONS,
Washington, D.C., January 29. 1975.
Hon. DONALD C. ALEXANDER,
Commissioner, Internal Revenue Service, Department of the Treasury,
Washington, D.C.
DEAR COMMISSIONER ALEXANDER: My concern about privacy of taxpayer infor-
mation is well known to you. I was therefore greatly disturbed by recent press
accounts disclosing that a secret, information gathering unit has been operating
inside the Intelligence Division of the Internal Revenue Service.
To dispel some of my concerns, I sincerely hope you will, at your earliest con-
venience, respond to the questions which I herein submit to you.
1. At whose request was the so-called IRS Intelligence Gathering and Research
Unit established, and under whose direction did it operate?
2. What was its intended purpose?
3. What were the inclusive dates of its existence and operation, and in precisely
what way did it function?
4. If the IGR has been dismantled, have any of its functions been assigned to
any other part of the IRS?
5. Upon how many individuals and groups did the IGR maintain information?
Please supply the Subcommittee with a complete list of those upon whom files
were kept.
6. With regard to the data accumulated by the Unit, was information provided
to any other agency, department of government, group or individual?
7. Specifically, what was the nature of the data gathered?
8. Was all information in the files of the IGR tax-related?
9. Did the Unit collect information at any time which was not tax-related?
PAGENO="0024"
20
10. What was the role of the IGR vis-a-vis the Intelligence Division of the In-
ternal Revenue Service?
11. In what way was the IGR related to the law-enforcing Strike Forces situ-
ated around the country?
If .a group such as the Intelligence Gathering and Research Unit did function
as a political body within the Intelligence framework of the IRS, it rekindles the
worst fears created by abuse of other federal agencies during the Nixon years.
Taxpayers will certainly lose essential confidence in our tax system if they feel
the IRS has used its tax gathering power to cover an illegal and unethical intelli-
gence gathering operation.
I look forward to hearing from you on this matter.
With best wishes.
Sincerely,
JOSEPH M. MONTOYA,
Chairman, Subcommittee on Treasury,
Postal Service and General Government.
JANUARY 31, 1975.
Hon. MIKE 1\IANSFLELD,
Hon. HUGH SCOTT,
U.S. Senate, Washington, DXI.
DEAR SENATORS MANSFIELD AND SCOTT: In response to your letter of January 27
enclosing a copy of S. Res. 21 and requesting that the Internal Revenue Service
should not destroy, remove from possession or otherwise dispose of or permit the
disposal of records or documents which might have a bearing upon the subjects
under investigation, let me assure you that press reports that we have ordered
destruction of Intelligence Gathering and Retrieval System files are completely
false. We issued instructions yesterday to each of our operational offices that our
intelligence files should be maintained and not destroyed or otherwise disposed
of pending the investigation and study described in S. Res. 21. Enclosed is a copy
of a telegram implementing these instructions.
We are concerned, however, because the Resolution and your request are
worded so broadly that there could be an unintended impact on our normal opera-
tions of the Internal Revenue Service, we collect various items of information
concerning the financial affairs of individuals and organizations. This informa-
tion can generate internal documents resulting from our efforts to correlate the
information with an individual's or organization's tax liabilities. Although this
activity could be regarded as "intelligence gathering" in the broadest sense of
that term, the information is intended for use only in the direct administration
and enforcement of the civil and criminal provisions of the Internal Revenue laws.
Pursuant to our established records disposition procedures, certain of these items
which are no longer essential to tax administration are ordinarily disposed of by
IRS employees or sent to the Federal Records Center. Also, the Federal Records
Centers have normal disposition practices for files which have reached the end
of the retention periods specified by the IRS.
To cause as little disruption as possible, clarification of the extent to which
your request applies to our routine operations would be helpful. We would ap-
preciate your permission to continue our previously-established records disposi-
tion practices.
To limit duplication of effort as much as possible, we are sending a copy of this
letter to Chairman Church for the Committee's consideration.
With kind regards,
Sincerely yours,
DONALD C. ALEXANDER.
Enclosure.
To: RUGSGDF/all Regional Commissioners, IRS; RUGSGGN/all Service Center
Directors, IRS; RUGSGCF/all District Directors, IRS; RUWLSBT/district
director, IRS, Honolulu, Hawaii; RUCHLYU/director, IRS Data Center,
Detroit, Mich.; and RUEVEAK/Director, IRS, NCC, Martinsburg, W. Va.
From: JOHN WEDICK, Jr., for W. E. WILLIAMS, Deputy Commissioner, IRS,
Washington, D.C.
PAGENO="0025"
21
Subject: Retention of service records.
In connection with the establishment of the Sel~ct Committee of the Senate
to conduct an investigation and study with respect to intelligence activities
carried out by or on behalf of the Federal Government, the Senate has requested
the following: That the Service not destroy, remove from its possession or con-
trol, or otherwise dispose or permit the disposal of any records or documents
which might a bearing on any matters under investigation by the Senate Select
Committee.
These records include any and all data and information gathered or assembled
pertaining to any taxpayer or group of taxpayers at any level of the Service
and in the possession or under the control of the Service of January 27, 1975,
including files maintained by individual employees.
Effective upon receipt of this telegram, no such records will be destroyed,
disposed of or transmitted to Federal record centers. However, the intention of
this telegram is not to suspend any operations involving the use of such records.
Additionally, no agreements concerning the coordination of service intelligence
activities with other Federal law enforcement or intelligence agencies or pertain-
ing thereto shall be destroyed or disposed of.
The national office has arranged with GSA to suspend records destruction at
Federal records centers.
This message should receive the broadest possible distribution to all em-
ployees and will be reissued in the JR Manual in accordance with IRM 1254.
U.S. SENATE,
Orvicu OF THE MAJORITY LEADER,
Washington, D.C., January 27, 1975.
Mr. DONALD ALEXANDER,
Commissioner, Internal Revenue Service,
Washington, D.C.
DEAR COMMISSIONER ALEXANDER: As you may `be aware, the Senate is to con-
duct an investigation and study of government operations with respect to intelli-
gence activities. The scope of the investigation is set out in S. Res. 21, a copy
of which has been enclosed for your information.
We are writing to request that you not destroy, remove from your possession
or control, or otherwise dispose or permit the disposal of any records or docu-
ments which might have a bearing on the subjects under investigation, includ-
ing but not limited to all records or documents pertaining in any way to the
matters set out in section 2 of S. Res. 21.
Sincerely yours,
MIKE MANSFIELD,
Majority Leader.
HUGH SCOTT,
Republican Leader.
Hon. VANCE HARTKE,
Chairman, Subcommittee on Foundations, Committee on Finance,
U.S. Senate, Washington, D.C.
DEAR Ma. CHAIRMAN: This is in response to your letter of January 29, 1975,
concerning the recent newspaper articles which purport to describe the Internal
Revenue Service's intelligence activities. To the extent that these reports state
or imply either that the Service is engaged in arbitrary or selective enforcement
of the tax laws, or intentionally accumulating non-tax-related information about
the private lives of citizens, or destroying or otherwise disposing of such in-
formation, those reports are completely false.
I agree with you that public confidence is essential to the effective function-
ing of the Internal Revenue Service. I believe that your immediate concern
should be satisfied by the enclosed copies of a fact sheet describing the intelli-
gence gathering system and of the manual provisions dealing with the subject.
Also enclosed is a copy of a letter which I have sent to Senators Mansfield,
Scott and Church on this general subject. In view of this correspondence, I
think that it is reasonable to expect the Select Committee to look into this
subject in some detail. It is also possible, of course, that if that inquiry does
PAGENO="0026"
22
not develop the complete factual circumstances concerning the Service's intelli-
gence activities, the Joint Committee on Internal Revenue Taxation may also
wish to look into the matter.
If there is any further information you would like on this subject, please let
me know.
With kind regards,
Sincerely,
DONALD C. ALEXANDER.
U.S. SENATE,
COMMITTEE ON FINANCE,
Tvashington, D.C., January 29, 1975.
Hon. DONALD C. ALEXANDER,
Commissioner, Internal Revenue Service,
Washington, D.C.
DEan CoMMIssIoNER ALEXANDER: I have been deeply concerned about a recent
report that the Internal Revenue Service has been conducting intelligence activi-
ties which accumulated non-tax-related information about the private lives of
citizens.
As you know, the Senate Subcommittee on Foundations has investigated the
Special Service Staff within I.R.S. because it appeared that the Service was in-
volved in the arbitrary, selective enforcement of the tax laws. The charge related
to this new unit within I.R.S-the Information Gathering and Retrieval System-
is a similar one.
If it is true that the I.G.R.S. was involved in the collection of information
which is not directly tax-related, then the Service will have suffered another blow
to its credibility. I am sure that you share my belief that the Internal Revenue
Service cannot function effectively without public confidence.
I trust that it will not take an investigation by Congress for the full facts about
I.G.R.S. to be revealed to the public. Beyond this important step, it is essential
that the Congress and the public have unequivocal assurances that the Internal
Revenue Service will no longer engage in the arbitrary, selective enforcement of
the tax laws, nor will it collect information which bears no reasonable connection
with its statutory responsibilities.
With my best wishes, I am
Sincerely,
VANCE HARTKE,
Chairman, Subcommittee on Foundations.
JANUARY 31, 1975.
Hon. FRANK CHURCH,
Select Committee to Study Governmental Operations with Respect to intelligence
Activities, U.S. Senate, Washington, D.C.
DEAR MR. CHAIRMAN: Enclosed is a copy of correspondence which I have had
with Senators Mansfield and Scott. In view of the correspondence and the broad
charter of the Select Committee, I anticipate that your Committee will be look-
ing into the operations of the Internal Revenue Service in the general area of
information gathering.
I want to assure you of the full cooperation and assistance of the Internal
Revenue Service in the work of the Committee. I w-ould like to point out, how-
ever, certain limitations on our ability to furnish the Committee w-ith informa-
tion. Section 6103 of the Internal Revenue Code, and Section 1905 of Title 18 of
the United States Code contain specific limitations upon our authority to provide
information. Section 6103(d), however, provides that a select committee such as
yours may be authorized to receive such information by a special resolution of
the Senate.
Accordingly, in order to facilitate the complete and timely furnishing of such
information as the Committee and its staff may find necessary or useful, may I
suggest that you give consideration to asking the Senate to adopt the appropriate
resolution. We are enclosing for your convenience a draft of a resolution which
would satisfy the requirements of the disclosure provisions of the Code.
With kind regards,
Sincerely,
DONALD C. ALEXANDER.
Enclosures.
PAGENO="0027"
23
RESOLUTION
To authorize the Senate Select Committee to Study Governmental Operations
With Respect to Intelligence Activities to inspect tax returns, applications for
tax exemption, and related documents held by the Internal Revenue Service.
Whereas it may be necessary for the Senate Select Committee to Study Govern-
mental Operations With Respect to Intelligence Activities to inspect tax returns,
or applications for tax exemption, as well as, related documents and information
in connection with the investigation and study authorized by Senate Resolution
21 (94th Congress, 1st Session).
Resolved, That in accordance with the provisions of sections 6103(d) and
6104(a) (2) of the Internal Revenue Code of 1954, the Senate authorizes the
Select Committee to Study Governmental Operations With Respect to Intelli-
gence Activities to investigate, receive and inspect any data, documents or other
information held by the Internal Revenue Service which relates directly to the
investigation being conducted by the Senate Select Committee to Study Govern-
mental Operations With Respect to Intelligence Activities as authorized by Sen-
ate Resolution 21 (94th Congress, 1st Session).
COMMISSIONER, IRS,
TVashington, D.C., January 31, 1975.
Hon. CHARLES A. VANIK,
House of Representatives,
Washington, D.C.
DEAR Mn. VANIK: In response to your letter of January 28, 1975, concerning
possible destruction of Internal Revenue Service records, enclosed is a copy of
correspondence which I have had with Senators Mansfield, Scott and Church, and
the attachmnent to my letter. I believe that the procedures outlined in that corre-
spondence satisfy your concern, but if I am mistaken, please let me know.
Furthermore, I would like to point out that the Internal Revenue Service has
not established or maintained any of its files for the use of time Central Intelli-
gence Agency.
With kind regards,
Sincerely,
DONALD C. ALEXANDER.
Enclosure.
HOUSE OF REPRESENTATIVES,
Washington, D.C., January 28, 1975.
Hon. DONALD C. ALEXANDER,
Commissioner, Internal Revenue Service,
TVashington, D.C.
DEAR Mn. COMMISSIONER: In accordance with your conversation today with
Dr. Lawrence Woodworth and myself, it is my understanding that the Internal
Revenue Service will not permit the destructiomi of any files or records established
or maintained or used in the past by the Central Intelligence Agency.
Sincerely yours,
CHARLES A. ~TANIK,
Member of Congress.
IRS PUBLIC AFFAIRS DIvIsIoN FACT SHEET-JANUARY 27, 1975
IRS INFORMATION GATHERING AND RETRIEVAL SYSTEM
In response to inquiries about a news story in the Philadelphia Bulletin of
January 27, 1975, headlined, "Secret Unit of IRS Disbanded-", the IRS today
said the so-called secret unit is neither secret, nor has it been disbanded, nor
has any order been issued for destruction of its files.
Over the years, individual IRS offices have gathered information which ap-
peared useful as leads in detecting instances of non-compliance w-ith the tax
laws. It became apparent that there was a need to standardize both the type of
material gathered and the organization of information-gathering efforts.
Instructions were developed and issued to establish a standardized system for
use by all IRS offices. This system was called the Information Gathering and
Retrieval System (IGRS) and, in larger IRS district offices where the workload
justified it, the District Director was authorized to establish an identifiable unit
within the Intelligence Division to handle the workload.
PAGENO="0028"
24
The IGR work was not sheltered from the rest of the Intelligence Division. In
fact, its purpose was to serve the IRS Intelligence tax fraud detection responsi-
bilities. The IGRS was formally established by the issuance of IRS Manual Trans-
mittal 9300-40 dated May 4, 1973. It was revised by Manual Transmittal 9300-47,
dated March 4, 1974. Neither of these documents were secret. They were released
to IRS Public Reading Rooms soon after they were issued, and are currently
available.
The IGRS instructions have also been published by a commercial service which
reprints and sells public portions of the IRS Manual.
Criteria for inclusion of information in the IGRS is that the material must in-
volve financial transactions with potential tax consequences; illegal activities
with tax potential; or other illegal activities which fall within the investigative
jurisdiction of the IRS.
In December 1974 the IRS undertook a study to insure that its information
systems and programs contained only directly tax-related information. As the
study plan developed it was decided that information-gathering activities should
be suspended pending completion of the study. The suspense order was issued on
January 22, 1975.
The suspension will remain in effect until procedures are developed to insure
that investigative files contain only materials which meet a generally accepted
definition of "directly tax-related." These procedures will be directed toward
giving maximum privacy to taxpayers with regard to their own tax affairs while,
at the same time, protecting the general public's right-to-know under the Free-
dom of Information Act.
Notwithstanding the implications in the Bulletin story, Tom Lopez of IRS has
assured his supervisors that he never discussed the IGRS system with, and never
furnished information from that system to, John W. Dean, III.
JANUARY 22, 1975.
ALL REGIONAL Co~fMIssIoNERs,
CC: ALL ASSISTANT CoMluIssIoxEns,
Internal Revenue Eervice.
Pending clarification of the definition of "tax-related information," as it relates
to IGRTJ, JCP and other similar information gathering activities conducted by
any function of the Service, all such activities shall be suspended immediately.
Personnel currently assigned to these activities shall be reassigned to the regular
examination and investigative duties for which the respective functions are
responsible.
WILLIAM E. WILLIAMS,
Deputy Commissioner.
PAGENO="0029"
25
Ir~(zll
Purpose
This transmits revised text and Exhibits, in part. for
1kM 9390. Intelligence Gathering and Retrieval Sys-
tem.
Removal and Insertion of Pages
Remove:
Text 9390 - 9394.5:(2)
Exhibit 9390-l-Cont.(4)
Exhibit 9390-5 - 9350-S-Cent. (3)
Exhibit 9390-7-Cont.
Innert:
Text 9390 - 9394.5:(2)
Exhibit 939(1- 1-Cont. (`I)
Exhibit 939(1-5 - 9350-5--Cost. (2)
Exhibit 9390-7-Cont.
Nature of Changes
IRM 9391 has been revised to change the reference
of ``illegal activities' to ``potential ax lass' violations''
and to define the distinction betsseen the District
Background Files Index and the National Register.
1kM 9393.4:(2) changes the reference of the
"Chief, Intelligence Division." to "Chief."
1kM 9394.l:(l)(b) has been deleted to discontinue
use of Form 1351, Special Enforcement Control
Record, as an inpitt form for the National Register.
1kM 9394.1 :(l)(c) has been renumbered 9394.1 :( l)(b).
* New 1kM 9394.l:(l)(c) has been added to rellect
the itse of Form 4860, National Register Input Form,
to inpttt ``SEP-I" subjects into ttte National Register.
JRM 9394.2 has been revised to include the input of
"SEP-I" subjects on Form 4860.
IRM 9394.3 has been revised to include the quart-
erly sttbmission of "SEP-I" subjects on Form 486(1.
IRM 9394.3:(2) has been added to reflect the
reporting periods for sending the input documents to
the National Office.
IRM 9394.4:12) has been revised to reflect th~use
of Forms 505$, National Register Correction/Deletion
Form, for reporting the closing of Forms 1351.
IRM 9394.4:(3) has been revised to reflect the
reviesv of background files for "SEP-F-' subjects in
addition to "potential SEI" subjects and to provide
purge procedures for all SEP subjects via use of Form
5058.
IRM 939t.4:(4) has beets revised to reflect correc-
tion procedures for additiouts as well as inaccuracies,
Internal *` 9300-47
Revenue ` Oate at tssuo:
Service , March 4, 1974-
1 kM 9394.4:(5) has been added to reflect the use ol
transactiott code 10 for deletions tad the ssvutching of
status hetsveen potential S El5 and SE P-I subiects.
IRM 9394.4:(6) Itas been added to reference kM
9394,3 rcgardiitg tttc reporting frequency for correc-
tions and dek'ttotis.
1kM 939t.5:(l)(c) has been added to reflect sshen
National Register district listitigs ss'ill be received by
the field.
1kM 9394.5:(2) has beets revised to reflect the
addition of a nttnserical listing by TI N of stibjm'cts
within Ilte Natiotsal Register and provides that tcle~
photie or letter iitquir'y may be communicated to Ctht:l'.
Exhibit 9390-l-Cont.(4), cotitinuatioti of illirgid
aclivily codes, has been revtscd to retlect ncsv codes
161 atid 345, and changes to lie termino!ogy of codes
152 aitcl 506.
Exhibit 9390-5-Cont, (I). National Register Input
Fortit. Itistructions for Coitiplu iou. has been renrm~
bercd ittto two paragraphs. 1) md 12). Paragraph 21
has been added to provide or a handsurimuen dc~igna-
lion at lie top of Form 4860 for the category 01 SEP
sstbjects and requtres hat separate Forms 4)60 he
used for each category.
Exhibit 9390-5-Cont. (I). Colttmn Instructions
tent I. ltas been revtsed 10 reference 1k hI 957mt, Case
Management mind Time Reporting System H~i~uJ(io~k.
Section 230, for District 0113cc codes.
Exhibit 9390-5-Coat. (2). Item ~5), has been
res'iscd to clarify the MM Dl)'u'Y (month nuonth daa
day 1-ear year) forntat ott the date of birth.
Exitibit 9390-5-Cottt. (2). Item (6), h:ts he~is
revised to delete the illegal activity code list and make
referetice to the list mind instructions under Es,htibit
9390-I, Iletu 14.
Exhibit 9390-7-Cont. has been chatiged to reflect
revised instructions its the use of Form 51)58. Transac-
lion Code 09 is res'iscd to provide chmatuges to a TIN
and TRN 10 is added to mullosv the delelion of an
entire record.
~ ~
Joust J, Ot.szr.wset
Director, Intell)genee Division
MT.9300-47 (3-4-74) 1R Manual
Ofliclal Use Only
PAGENO="0030"
0390
Intelligence Gathering and Retrieval System
9391
General Description of System
(I) The Intelligence Gathering and Rctrieval Sys-
* 1cm will provide an effective. uniform means for
gathering. cvaluating. cross-indexing and retrieving,
on a district and national basis, intelligence data
* relating to individuals or entities involved in potential
tax law violations.
(2) The system consists of two separate and distinct
parts, the t)istrict Background Files Index and the
Nationat Register. The District Background Files
Indexes will be maintained on a district he district
basis, and no national index will he compiled. The
National Register wilt be a compilation of suhiccts in
three categories: alt open investigations: all SEP-I
subjects, and potential SEP subjects. The National
Register will be maintained in tlte Natiotial Office.
26 -
(c) Periodic reviews of inforniation in lie hack.
ground files to determine if any invest ig;itive action
should be taken, and to ensure that subjects and
documents no longer of interest to the Intelligence
Division are purged from the files.
(dl Estabtishintent. developmeiut and coordination
of liaison coiitacts sviihi other lass enforcement :ucen-
cics and other orgauiizations and information sources
as directed by lie Chief, Intelligence Division.
9393
District Background Files Index
9393.1
Criteria for Inclusion in District Background Files
(I) Documents entering the district background `des
must relate to specific subjects or entities. They must
involve financial traiisactuons svdhu potential tax coese-
queuices: illegal activities svithu tax potential: or other
illegal activities' which fill srithin our inrestiea:is
jurisdiction. These documents may include, hut are
not limited to. the folloss iug: -
(a) copies of income t:is returns.
(h) special agents reports.
(c) revenue :lgent's rcrorts.
El) reports from police and other investig~::'.
agencies.
(e) nuemoranda of interviesv. question-and.anss. cc
statements, and affidavits.
(f) collateral requests and replies.
ig) information items.
(Ii) nesvspaper aiid magazine articles and other
published data.
(i) fin:incial information from public records, sad.
(j) ease initiating documents.
9393.2
Preparation of District Input
A Form 4860-A, District Input. svhich transaJts
detailed information concerning each document. sad
significant subjects thereiit. must fe prepared for each
document entering the files. I)etailed instructions ~cir
the preparation of Form 4S60-A are set forth in
Exhibit 9390-I.
9393.3
Transmittal Procedures
(I) The conupleled Forms 4860-A ss-iIl he shipped
by certified air mail to arrive at the 1 RS Data Center
on or hefiri' tiC 12th working day of each month.
(21 Two copies of Form $055, District Backgrcuad
File Transntittal, svill he enclosed uvith each sluipmerut
of input forms to hue Data Center for processing. The
Dai;.i Center will return one copy of Form 505$ to the
district to acknowledge receipt of the shipment.
Inslruchions for prep:iration of Foriti 5055 arc set
forth in Exhibit 9390-2. A negative report, using
Form 5055, niust be submitted for those ntonths in
9392
Organization and Slatting
(I) In larger districts. ss'here lie svorklcuad justifies
it, Ilie District Director nuav elect to establish a
separate orgaiuizationat unit designated as the Intelli-
gence Gathering and Retrieval Unit. The personnel
requirements in each district for intelligence gathering
and retries-al activities urill ears according to the size
of the district and the extent of intelligence gathering
aclivilies within the district. Sufficient nlanposs'er
should be allocated to permit this activity to operate
effectively and ef6cientlv.
(2) Regarulless of the organizational structure of this
segment of Ihe Intelligence activity, the records of
thin unit must hecoiue a part of the division's general
rccords system, available to and fed by all special
agents.
(3) In districtn ss'luere major segments of the divi-
sion's operations are located apart front the headquar-
ters office, tite intelligence gathering and retries-al
activities may be coutducted and tlue background files
maintained at branch oh'lice locations. `the indexes to
the district background files will include all back-
ground files and will specify their locations. Each
branch office will receive a copy of the district's
indexes,
(4) Special agents assigned to the intelligence gath.
ering and retries-al actis'ity. whether on a full-time
basis for specific periods in a larger district, or on a
part-time basis in a smaller district, should be selected
because of their ability to recognize and develop
significant intelligence data: their capability to develop
good working relatioutshmips with others: and their
enthusiasm for intelligence gathering aitd inforntanl
contract work.
(5) Tlte specihml agent assigned to Itme district's
Intelligence Gathering and Retrieval Unit will be
responsible fur hue following day-to-day operations:
(a) Evaluation of nesvhy received iiufornuation.
(b) Prepmrmtion and suihuiutission of input docu- - MT 9300-47 (3-4-74) IR Manual
tennIs for information entering the background files. Official Use Only
9393.3
PAGENO="0031"
27
Intelligence Gathering and Retrieval System
9393-3
Transmittat Procedures-Cont.
which no Forms 4860-A are stripped to tttc Datti
Center.
(3) The Data Center will process no District
Dackgrosrnd File Indexes until input sheets or nega-
tive reports arc reccivmt from cr11 districts. Therefore,
it is imperative that alt stsipnscnts he received timely
at the Data Center.
9393.4
Correction and Detetion Procedures
(I) Form 5056, District I npiit- CorrectionlDclction
Ferns, svilt be used to make corrections to, or
deletiorts from. the District Backgtound File Indexes.
Instructions for preparation of the correction,deletton
forms are set forth iii Exhibit 9390-3. These forms
wilt be prepared and transmitted monthly to the Data
Center witlt Forms 4680-A.
(2) Anttually. rIte Chief, or his delegate. trill revress'
all subjects and documents in the background Des.
Forms 5056 trill he used in deleting front the index ill
subjects and documents no longer of interest to the
district tutelligence Division.
(3) Subjects svihl be automatically purged from the
files if to document relating to tire ssibject has entered
the files during tire past seven ye:rrs. The district will
be ptovided sritii a list of all names so purged. If the
district wishes a purged sante to remain Ott the iitdex
a Form 4680-A should be submitted to re-itrput the
name. --
9393.5
Output Formats
ci) The IRS Data Center ss'ill provide a master
alphabetical subject index for each district in January
and July of each year. A cumitlaiis'c supplemental
subject index trill be produced for tilt other months
and merged witti tie ntastcr iuutex semiannually. All
documents its the districts background files relating to
a specific subject trill be associated sritlt that subject.
indexes svitt be fitrnislred by lie I)ata Center to mite
districts within 10 working days after receipt of the
district inpttt forms. Exhibit 9390-4 contains an exam-
ple of the format of a typical District Backgroitnd File
"-Subject lirdex.
~: (2) l'lie Data Center svill nimnitttatieousty produce
and fuirtiish to the districts a Docttmeutt Index listing
the backgroutnd file docunients in numerical sequence.
The names of tilt significant subjects nsemtttoned in
these documntents trill be listed foliosring the utocu-
ments. Extiihit 9390-I conirtiuus tin exanipte of mite
format of a typical Distr4ct Backgroutid File Docu-
ment. Index.
(3) Special indexes setting forth information con-
tained iii tire I)ismrict Backgruiiiitd Files hiuutexes (for
example, a histitig of mite nanies of all suhjccts,with a
certauti illegal activity cone) tray he requested by ttte
Chief. Such ieqiiests should be sent directly to the
Data Center ss'itli copies of mIte request to regional
office.aitd Natiottal 0111cc.
9394
National Register
9394.1
Criteria for Inclusion on National Register
(I) Ttte National Register is a computer-generated
listing of persons and entities hr which tire tnt cli rgerrce
l)ivision may have an interest. Names included on
the Natiottal Register conic from three sources:
(a) Subjects of all I titetirgeirce Diviston open
investigations trill be placed on the National Register
auttontaticallv svhieti case control records are sulinnit-
ted. They st-ill remain on lie Natiottal Regrster irntrl
till crinsinal featuires of the crises have been corn-
pie tent
(h) Poteittial SEP stibjects may be placed on the
National Register by tIre district's sirbmission of
Form 4860. National Register I npuit Form. Entities
defined as potential SEP stibiects are those srhro ha. e
nu)t been placed on t lie National Register aurtomatr-
ealty, butt wlto meet cite or both of tire foiloss rug
criteria:
I The suh.ject is engageut in illegal activities
invotviirg potential uinreported or urnderstated income.
or other oficrrses svithin tire j urisulictiors of tire triteili-
gence Division.
2 There are indications tlrat the subject is
engaged its inter-district activities or tirere are files in
niece hiatt omre district on tire same entity.
(c) All SEP-I subjects svtuo svere previously!
reported ott Forms 1351. Special Enforcenrent Corsnrolj
Record, atsd st-ho has-c not vet been closed, trill he
inchiuded lit tire initial printing of the Natronal Regis-
ter. Alt ness' SEP-I subjects svilt be suihtrittted on
Form 4860. Ntitionat Register Input Form.
9394.2 -
Prepnration of National Register Input Form -
Each calendar qitarter. tire Chief, or his delegate.
svill rcviess' all available data regarding special en-
forcensent subjects sviitsin his district. Time nannes of
newly idettuifiect entities ss'lro erect hue crtmeria for
inclusiout on tire Nationntt Register as either SEP~l or
potetitial SEP subjects will be subnuitued on Form
4860, National Register Input Form. Insurucumomus for
preparation of Forms 4860 are set foruh in Exhibit
9390-5. -
9394.3
Transmittal Procedures
(I) The completed Forest 4860 listing the names of
nesv SEP-I or potential SEP subjects will be submit-
MT 9300-47 (3-4-74) IR Manual
Olficlal Use Only - -
9394.3
PAGENO="0032"
28
9394.3
Transmittal Procedures-Cont.
ted quarterly to the National Office. Form 5057.
National Register transmittal, and Form 5058. Na-
tional Register Correction/Deletion Form, wilt he
prepared to accompany each shipment. Instructions
for the preparation of Forms 5057 and 5058 are set
forth in Exhibits 9390-6 and 9390-7, respectively.
Negative reports, using Form 5057. are to be made
for any quarter in which there are no additions of
either SEP-I or potential SEP subjects to the Na-
tional Register.
(2) Shipments should arrive at the Nationol Office
not later than the 20th day of November, February,
May and August of eaclt year. They should be
marked for the attention of CP:l:P.
93944
Correction and Deletion Procedures
(I) Subjects of current investigations, who are
automatically placed on the National Register by the
submission *of case control records. ssilt be automati-
catty purged front the National Register when case
control records shun' that the criminal features of the
case have beets completed.
(2) SEP-I subjects previously placed on the Na-
tional Register by submission of Form 1351 ss'ill not
aut~ntatically be purged svtsen Form 1351 is closed.
lttstead Form 5058, National Register Correction!
Deletion Form, ss'itt he used to submit reference to
the closing of Forms 1351. Instructions for prepara-
tion of Form 5058 are set forth its Exhibit 9390-7.
(3) Each calendar quarter, when the Chief, or his
delegate, reviews the background files to identify
additional SEP-I or potential SEP subjects, he svitl
also review the current National Register district
listing of SEP subjects to determine those who no
longer meet the criteria for inclusion.. These sulsjects
will then be purged from the National Register by.
tion/l).'letion tor,tt.
(4) lnaccuraciei, its or additions to the information in
tltc National Register stay be corrected by completing
Forms. 505$ its accordance with the instructions its
Exhibit 9390-7.
(5) To change from potential SEP to SEP-I or vice
versa, delete the entire initial entry h~ using transac-
tion code tO (see Exhibit 9390-7). Resubmit the
revised entry on Forts `1860.
(6) Alt forms are sent quarterly in accordance with
IRM 9394.3.
9394.5
Output Formats . .
(I) Each quarter, etich district will receive tlse
following front the National Register:
(a) A list of all National Register suhiects svhose
names were generated, or subntitted. Its' the district.
(b) A list of all its National Register subjects
whose names also appear on the list of one or note
other districts: This listitsg wilt shun' tie idesstitv of
the other district(s) as ss'ell as the categors of the
subject (active investigation. SEP-I, or potential
SEP). This, list merely alerts one district to the fact
that another district has some type of infurnsation
regarding S subject its ss'hich the tss'o districts save a
mutual itstcrest. tt is the responsibility of the districts
involved to comnsunicate with cacti other and ex-
change information.
(c) Natiotsal Register district listings svill be
prepared and seist to district offices to arrive no later
than the 10th day of September. Decensher. March
and June.
(2) Each quarter. the National Office ss'ill produce
one cotssposite. aiptialsetical and one numerical listing
of alt sulsjects in alt three consponents of the National
Register. This tistitsg svitl not be dissensinated to the
regions or districts. 1 toss'ever. if a district has a sante
or taxpayer identification nttnsher which it has not
entered on lie National Register. but svhich it wishes
to match against ttse National Register, it max' do so
by contacting the National Office (CP:t:P) by either
telephone or letter,
MT 9300-47 (3-4-74) lR Manual
plftetjal Use Only
9394.5
PAGENO="0033"
E
CI)
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t ~ iW `till HI~Wfl~
`!`F~"11 4_I: ~1T ~ EtH1I: ~i1 :~Ii.:.':::i}~:~T ~ ~
~)EI11~ H (CIT ~~~EtL
2L) LCG ()JJ~)O In
~ lA I I r~1 ii I 11111111 I 1111 ~
C C ~LI1~osiu :cxl
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0
PAGENO="0034"
30
Intellt~ence Gathering and Retrieval System
EXIIIIJIT 9390-1-Coist. (1)
DISTRICT INPUT
(Form 4860-A)
INSTRUCTIONS ro~ COMPLETION
Yost arc preparing a workshcet that will be used by
a kcypttnch operator. It is most inspottast that the work
be ciotse scatty and accuratels'. Neatness is important
because the permit reading thin sheet will not be able to
ask you if "I" means "one, `"i" or "U'. Form your
letters completely, all CAPS only.
GENERAL INSTRUCTIONS
I. Only one character (number or letter) will be
printed in each space.
2. Print all CAPITALS.
* 3. For items containing both alphabetical and nstnicri-
cal characters, print zeros as 0 and the letter Z as ~
in order to avoid confusion with the letter "o" and
rntitsbcr `2," respectively.
4. No punctuation ss'ill be used-omit comtnas, pc-
* nods, dashes, etc.
5. If you make an error, draw a line through the
entire entry and rewrite it on another line.
12 P.'arcottrs .
13 \Vagering
14 Newspaper or Magazine Article
- ` 15 Local, State, or Federal Law Ettforcement
Aj~cncy
16 Prclittsiitaiy Cotttrol Record
17 Subject Abstract Record
18 Cane l)evclopmeut
19 Conlidetttial Informant
20 l'rojects and Programs
21 Investigations Assigned
99 Other
5, ~ (2 spaces). Use the district codes con-
taitsed in IRM 9280. I'OI) (I spaee)-Post of Duty-
Each district is responsible for developing its osvn cod_-s
for the posts of duty itt that district. This in applicable
whctt records arc stored at more tItan one location.
6. `Date i'repared (6 spaces). Use tlte sante (lating
metltod an explained above.
7. `Nantes on this page (upper rigisl corner) Enter
total nussber of tames Ott the input form.
8. Docsinzeitt Description (40 spaces). Enter brief
description of document, its contents, or any o:her
infortttatiots of interest to tlsc district. Leave a blank
space hewccn "words. Generally knosvn abbreviations
and forns numbers stay he used.~
9. `Name (25 spaces allosved). Enter the name
exactly as it appears in tlse docstmens and fornsatteJ as
shown below.
TEM INSTRUCTIOPS A. Individuals-last, first, nsiddle names
(Remiss stacked below with an asterisk (`) nsust be 1. Apossroohes should not be used. For exam-
complclpd in order to process district input sheet.) pie: Ilse same O'Mallev should be wristets OMALLEY.
1. `L'age - of (upper left cortscr). Enter 2. Use closed spacine for last nassas. For exam-
page number of total input forms per document. Exam- pie: sIte name Dc Carlo should be svrittes DECAL LO.
pIe: The third focus of a document requiring 5 forum 3. Capitalize all letters Thus, the taste btc-
would be Page 3 of 5. Henry will be written bICHENRY.
2. `Register and Document Nusntber (6 spaces). 4. First tsamcs will he written in full, if avzi!able.
These codes will be determined by the district in accbrd- 5. Middle names will be written in full, uraizss
ance with their storage system. This nustbec must he there are insufficient Spaces. In this case, use an initial
unique. Only one number will be given to a document for the nsiddle name..
no matter how nsan~' pages are in lie docussent. 6. Nanses that have initials only will be written
3. `Date of Document (6 spaces). Month, day, and *ithout punctuation, for exanspic: Cox, `N. E. wilt be
year. Use two digits for cads segment. For example: COX \V E.
Deccnsbcr 1, 1972, will be entered as 120172. `7. Leave a single space between all names-
4. Source (2 spaces). Use tlsc follosving codes, if last, first, nsiddle.
appltcable N n' cod s stay be creat d if Is re ts a bc tI 8 If a n'snte contains a Jr or Sr 1 stuoald
need, . . * . . be written as follosvs: JONES \VILLJAM LEO JR.
Source Codes * * . . . . 9. Enter. only otse sante per. line. Do not irtctude
01 Service Center (lie wif s tu'utnc if t appear I or ccanspl ISa ho Jo! n
02 Special \gent I & Ruth Jr null be yr tten II \InI..O JOlIN I JR
03 Audit * : *. JO. The first letter of the last sante will bc
04 Collection .. - entered in tIme first oiscn space in the sante field.
05 Public ii. l3usitsc.ss Names
06 listelhigetsee .~athening * . I. Capitalize, single space, and use nix ptmndtua.
07 TCR * ~fl.
08 OIlier Governntest Agency . .
09 Joint Cotisphiasce Prograns
JO \VAII) MT 51300-40 (5-4-73) IR Manual
11 TCMP . Oflicial Use Only
PAGENO="0035"
Intelligence Gathering and Retrieval System
EXHIBIT 9390-1-Cent. (2)
2. The word and' will always be written as an
ampersattd. "A." For example: Jones and Sons svdl be
3ONES & SONS.
3. Do not use "The" when recording business
names. For cxample: The Big Company will be BIG CO.
4. The follosving will always be used to shorten
business castes:
Corporatiott = CORP
Incorporated INC
Cotttpany = CO
Limited = LTD
Associates = ASSOC
5, Whets business names have more letters than
spaces available, write as ttsuclt of the naitte as tltere are
available spaces.
10. 11 or I (one sitace). If tlte taxpayer idenlifleation
nunsber is, for a business, enter "B." if as indis'iduat,
enter "1." The "B" or "1" ntttst be entered if tltere is a
SSN or EIN.
11. Taxpayer Jdentification Number (SSN or EIN)
(9 positions). Ester if available.
12. l'rofrssioit or Occttpntioit (2 spaces). Use tltc
two-digit code provided for the profession or occupation
whiclt tttost ttearly describes the ssbiect. If tone is
applicable. yott may usc Code 99 or create ness' codes;
betss'eett `13-50 for a profession, or 95-93 for an occu-
patiott. If the docitnient does not describe the subject's
profession or oceupatioti, leave these space blattk.
PROFESSIONS
Medical
01 Pltysielass, Surgeons, and Specialists
02 Dentist, Deittal Surgeons and Specialists
03 Osteopathic Pttysieiatts
04 Chiropractors
05 Mental Ileal:tt Counseling
06 Medical or Dental Laboratories
07 Hospital Professiott
08 Nttrse Registered or Practical
09 Sanatoriunt, Cons'alescettt, attd Rest Homes
Miscellaneous
10 Attorney
11 Education, Teaelter, Tutor, etc.
12 Engineer
13 Architect
14 Certified Public Accountattt
15 Otttcr Accounting. Auditing, and Bookkeeping
16 Tax Preparer
20 Private lrtvestigator
21 Private Proteetiott Service
25 Entertainer
26 Musical
27 Professional Sports
28 Business Mattagers/Agents/Ilandlern
31
30 Atttotnotivc Raring
32 1 torse and Dog Ractttg
40 Others tot specified
T' 4 1 Acls'isor/Aitle/COttttselOr
42 l'ltartttacist
OCCUPATIONS
51 Skilled Laborer
52 Semi-skilled Laborer
53 Utsskilled Laborer
54 Owner
55 Manager
56 Officer or Director
57 Executive
58 t'ttreltasitsg Agetit
59 Public Official
60 Gos'eritittent Ettiplovee
61 Factor istoities or Cotttntodtties
62 Jobber
63 Manitfacturer Represetttatis'e
64 Repairtssan
65 Agetit
66 Clerk
67 Salesman
68 Promoter/Lobbyist
69 I_ass' Ettforcetiteitt
70 llottelsman
71 Uttioit Official
72 Cottsttltattt
73 Ststdcttt
74 ltstcrior Decorator
75 Pltotographer
76 Editor/Writer
77 Model Fasltion and Pltoto
7fl Attendattt
79 Artist/Mstsician
80 Contractor
81 Pil9t
82 Driver
83 Hauler
84 Gardener
85 Diver
86 \Vriter
87 Trttstee
88 Stockltcilder
89 Travel Agent
90 Developer-Land
91 Casino Excctttive or Employee
92 Land Spccttlator
93 News Reporter
94 Grocer
99 Other
13. Inthistry (2 spaces). Use the two-digit ci
shown belosv to ittdieatc the industry in sshieti the
ject is employed, lithe ittdustry is not mentioned in
docrttnettt. leave these spaccs blztnk.
MT 9300-40 (5-4-73) IR Manual
Official Lisa Only
PAGENO="0036"
Iritrdhgence Cathcrin~ and Retrieval System
EXUIDIT 9390-1---Corrt. (3)
IUDUSTRY CODES
01 Farming
02 AgrictIrrirat
03 Pctroletrm
04 Government
08 Forestry
09 Fisltcries
10 Minirtg
15 Contract Cotrslrtrction-Ilsildisg
16 General Cotrtractors-otltcr titan building
17 Classified Trades
18 Other Contractors
21 Food and Kindred Products
22 Textile Mill Products
23 Apparel and other textile products
24 Lunsber and wood predicts, except furniture
25 Furniture and Fixtures
27 Printing, publislina. and allied industries
31 Leather aisd leather predicts
32 Stone, clay, and glass proclrtcts
33 Metal Prodttcts
35 Machinery, except electric
36 Electrical machinery, eqitipittent, and supplies
37 Transportation equipnsest
41 Local tratssportatiois
42 Truckisg arid wareltoitsing
43 Rail traitsportatios
44 Water trattsportation
45 Air transportation
46 Pipelirse tratssportaton
47 `l'rarssportatiots Services/Travel Agencies
48 Communication
49 Utilities
52 `Building malerials, hardware, and farm
eqsripntcrtt
53 General nierchandise
54 Retail sales
55 Motor Vehicles and supplies
58 Restaurant and Bars
60 l3atrking
6! Credit or Loan Agencies ottter tItan banks
62 Security and Conttttoiiity brokers
64 insurance
65 Real Estate
66 investment
70 Lodging
72 Personal Services
73 Business Services
75 Automotive repair and services
76 Miscellaneous repair services
78 Motion pictures
79 Amusement and recreation services, except
motion pictures
80 Medical and Ilealtir Services
81 Legal Services
82 Educatiomsal Services
32
89 Emsgitteering, Accoustimtg, artd Arcliitccttirat
Services
90 Gatnil'ling Lcgaliaed
91 Climb, Fraternal Orgatsieatiors
99 Otlrcr
14. Alleged illegal act/thy or source of potential sit:-
reported iitcoinc. (6 spaces). Two alleged illegal activity
codes stray ite entered.
1. 11 you are uttahsle to delertttine an applicable coJe,
use general codes, mcli as 010, 050, etc.
2. 1f only otte code is used, enter it irs (a), leave (h)
Mantle.
ILLEGAL ACTIVITY CODES.
010 Racketeer
011 Major Racketeer
012 Minor Racketeer
050 Narcotics and Dangerous Drugs
051 Supplier
052 .Ptt~her
053 User
054 Financier
055 Transporter
056 Sntuegler
060 Pr~ostitutiont
061 ?sfadamc
062 Pittip/Paisderer
063 Prostitstte-Fettiale
064 Prostitttte-Male
065 Massage Parlor
070 Loan Shtarl:ing
071 Lender
072 Borrower
073 Collector
074 Fitsattcier
075 Loan Arranger
080 Corruption-Pstbhic Trstst
081 Corrttption-Fecieral
082 Corruption-State
* 083 Corrtrpniots-Local
100 Legal Business Fronts/Nominees
110 Labor Racketeering
111 Multi-Utsion Organizer
112 l'cmmsion Fstttds
113 Kickbacks
120 Coin-Operated Dcviees-Gaming
121 Mansnmfaemtmrers
122 Distributors
123 Conssignces
130 Coin-Operated Devices-Vending
131 Service Ecittipntent
132 Cigarettes
133 Entcrlainntent
134 Food & Beverage
MT 9300-40 (5-4-73) lB Manual
Official lists Only
PAGENO="0037"
Intelligence Gathering and Retrieval System
ExhIbIt 9390-1-Coot. (4)
140 Foreign Illegal Financial Transactions
141 Banking
142 Insurance
143 Securities
144 Corporations
145 Courier
150 Fraud
151 Mail
152 Skimming (General)
153 ConFidence Scheme
154 Securities
155 Credit Card
156 \Velfarc and Pension Funds
157 Insurance Carriers
158 Medical
159 Exempt Organizations
160 Land Sates
161 Payroll Padding
33
200 Tax Violation
201 Tax Evasion-72Ol
202 Failnre to Collect, Account for and
Pay-72O2
203 Failure to Filc-7203
204 False Statement (\V-1b7204
206 False Rctuin-Perjury-7061 I)
207 Aictiitg and Advising-7206(2)
320 Ganibting
321 Layoff Bookmaker'NatiOnat
322 Layoff I)ookmaker-Local
323 Booknnakcr-Horne
324 Bookmakcr'Sports
325 Hatndicappcr
326 \Vire Service
327 Big Bettors
328 Dice
329 Cards
330 Electronic Expert
331 Numbers Operator
332 Lottery Operator
* 333 Policy Operator
334 Rolita Operator
335 Writer
336 Rtintter -
* 337 Eniptoyce
338 Beards
339 Gambling Equipment Manufacturer
340 Gamhtiitg Equipttsent t)islributor
341 Courier
342 Oft' Track Betting
343 Casino-Operator or Employee
344 Bookntaking-General
345 Skimming
400 Theft, Burglary. Robbery atid Larceny,
Fencing and Smuggling
401 Autottsohiles
402 Jewelry
403 Fttrs
404 Liquor
405 Securities
406 Credit Cards
407 Money
408 Electronic Equipment --
409 Cigargttcs
410 Jesvels. \Vatctues, Coins, etc.
414 Gold/Silver
500 Miscellaneous -
501 Murder, Mayhem. Violence
502 I'ornograpluy
503 Counterfeiting
504 Forgery
505 1-tijackitig
506 Sabotage
507 Abortioti
508 Extortion
509 Bribery
510 Pcrjiiiy
511 Bootlegging
512 Arson
900 District Use
Districts may use 900 series codes for illegal
acth'ities unique to that district.
15. For Disirici Usc (8 spaces). These spaces may
be used by the district for whatever codutug it wishes.
MT93IQ-47 (3-4-74) lB Manual
Official Use Only
PAGENO="0038"
teiri~ero..e i.hr(55 c wi. i,.,...
Exhibit 9390-2
Form 5055, District Flackground FUe Transmittal
MT 9300-40 (5-4-73) IR Manual
Official Use Only
34
Instructions
District L~ackground File Tr~nsrnittaI -
* 1. Prepare in triplicate. Enclose two copies with each shipment and retain one copy rot district tiles.
*2. Attach ho adding machine tape used in totaling the lines ot data (names) being submitted.
3. Ship Forms 4860-A in sequential order by Flegisler-Docunrent Number.
4. Make shipments via Ccrtilied Air Mail in a secure package.
Fonns SOtA -
Lines ot Data (7eral (meum Nt-i-cs this
-pa~r. bun a5yQA
Register. Document
sumboms(,,,e5,n,ce)
Reversed by
Form 5055 tOns. 4.73)
PAGENO="0039"
35
Intelligence Gathering and Retrieval System
Exhibit 9390-3
Form 5056 District tnput Cerrection/Detetian Form
E -- ---- -
0
U.
- - - -
0
C
C)
13 ----
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0
a
0 -
8
a
11.
(0
ci
I
g : : :
I ~TO
I UI I I I 111111111 1 Ui
* MT 9300-40 (5-4-73) ID Manual -
* Official Use Only
PAGENO="0040"
Intelligence Gathering and Retrieval System
Exhibit 9390-3----Cont.
Form 5056, District Input-Correction/Deletion Form:
36
District Input - Correctionf Deletion Form
instructions
1, Use this Ions to make corrections!
deletions to the District Background File
indexes. There are two categories:
general rind specific.
a. General: These are items which re-
late to all the names one particutar input
document, i.e.. Date of Document. Source
Post of Duty, Date Prepared, and Docu-
* meet Description. To correct these items
* youmust enter the District Numher(DIST),
check Digit (CD). Register-Document
Number (REG)STER-DOCI. and the proper
transaction code (TRNI forthe item being
corrected/deleted. Then enter she cor-
rection in the Correction Data area start-:
ing in the first space following the trans-
action code.
b. Sgg'cific: These are items which per-
tain to only one entity on a particular
form i.e., Name, B/I: Taxpayer Identifi-
cation Number. Profession or Occupation.
Industry, Alleged Illegal Activity, and
For District Use. To correct any of these
items. you must enter the District Number
IDISTI. Check Digit ICDI. Register-'
Document Number IREGISTEFbDOCUMI,
Page, Litre Number, and the proper trans-
action code lTRNl for the data being cor-
rected/deleted. Thbn enter tire correction
in tire Correction Data, area starting in
the first space lot towing the transaction
code. To Correct the "District Use'
field, enter all ccdes in the correct se-
quence. This should be done even if only
one code is being corrected. I/hen cor-
recting the Taxpayer Identification Nur~r-
ber, tire correction must he precedad by a
"B" for an E)N. or an `1" for a SSN.
2. Only one correction may be made on a
line for each typo of correction/deletion,
3. If the Ilegister-Documons Page, cnd/
or line number are is error, then the en-
tire record must be deleted by entering
tire Identification Data Dist. CD. etc.l
and TIP'! Code 05. The correct data
should then be re.suhmitted on Form
4860-A, District Input Form.
Transaction Codes
00 Document Description Correction
01 Date of Document
02 Source
03 Post of Duty
04 Date Prepared
05 Delete Record
10 Name
`11 81
12 TIN
13 Profession/Occupation
14 Industry
15 lltggal Activity
16 District Use
17 Delete Line (Namel
MT 9300-40 (5-4-73) lB Manual
Official Use Only
PAGENO="0041"
60
1.4
-o
Co
00
1.4
23
40
01~-05-73 7:0 (863)
7 POLO COOS-SOC 005-010120 02A1~
1 0105 5381-000 06-30-70 ARXSTROOG 7Omt A
1 0211 1331-991 07-11-70
1 0227 L301-999 07-13-70
1 0002 4291-530 12-05-70
1 0103 14C.0-339 03-12-71
1 0101 0403-341 03-14-71
1 0118 0410-776 09-02-70
1 0205 84422-253 01-02-70
1 1036 0532-333 11-05-71
1 0101 1502-037 12-07-71
1 0100 V502-147 02-20-70
1 0101 0002-155 03-09-71
1 0101 1502-169 01-25-72
1 0001 0532-125 04-04-72
1 0101 2502-127 04-04-72
1 0101 0511-020 06-00-72
1 0102 0502-739 00-15-72
1 0209 8291-008 10-23-68 12380 T3AIL LOSS! EtC
1 03172181-796 07-05-71 A7.721TA L032930
1 0104 Q172-253 10-22-65 A03500 TOA'O'ZS.
1 0007 8252-000 11-13-67
1 0001 0011-431 06-13-65 A030LD 15403080 .7
1 0213 0212-021 10-04-65
1 0101 0022-043 03-15-66
1 0101 0322-001 04-15-66
1 0000 00:2-922 04-15-65
1 0319 3172-137 10-03-65
1 0004 8172-253 00-22-65
1 0215 1.131-959 12-27-66
1 0001 0211-525 04-25-67
1 0109 1232-329 04-03-67
1 0002 0221-100 07-03-67
¶ 0101 0231-776 04-05-67
1 0407 1230-992 12-05-67
1 0102 0252-031 01-13-67
DISTRICT 36 SS3JZCT 2200070
000I2SEO2OT 002C7.1P01C78
0230 00 3003040 02 C/03L133 302CR
07020 COO 0700 077020
SÃO 702000 CLT.D0O 300272144 11? 66-7
COT 010041770703 01 DOLL009 0A7)'L!S 51704252 14 0
CS? 20001 00177) 1.0011 001 4-7104 L2321 107.0
COT 7 7171 WAY 2077 1-033 071 4071.01
8-171.) 04 1.21'T01.017 7704 1030010 571.30 54 0
TELl TOLL CALLS 3 ELI1:0001. 1
COD ROOT 2140/ 00 S102LE 0 GUN CLIS DISOt 2 4
015 .3 1 1.01:5004-4 6212
1040 6912 3 A /.971134-13
1040 7012 3 1 10.1:733:10
1040 7012 3 is 4717170ooo
30.00 A .04-142344.2 0702(003
76010 3 6 /0011401:03 302447344 69-70
COIlS 31.10 4 20/3 ATr.00.D 41739507 1 6
301570 54 000:4441 Soor 8440010005 .7/31077078505 3
807540 SOS POOL 1)CLOCI700
CS? 32 AEREOTOD 09 144055 03 CICERO TAYER 6
Cr03 00007028-73 0200 TO/VOL AlTEC? -
1520 6009 /.7150700 444132 5110
0507) 54 0420/LEE 0.77 007002L5183 . 1
01.5 CEO 0 5,7171011 301109701 PROS 61-3
7100 A 3 & CLAO 4703009 0312 6412
1049 6312 A 3 0. CLP077 400.415
10.40 4052 A 3 4 22.0770 /035L9
TWA PASO LI 0.37 C2003 1./.5 44443 317150OT
CTRD 1,00525/2.3 03.27 TOOV2L /6:7:678
800.3 LEO /01:01004 sosr II 04(445510 CR5020
0:0 04 01111:31ST 7700 C03710010503
POD 2(39 22003:7 1.OCIOC.11
615 IOILTI4ILLIO) `/70301.ILISS STOlE 093.53 4
5010 6512 /. 0002 A 3 0 C /.RIOLD
0.7.7.) 0300 ?OILIP 61.1.06 91(0 503,0015.
112) 01(9 .447l1.LO) 41:300 531
10- 201
030
060 01
010
0)940
000
-4
300-ZOO
0
0
36-2701422 ë~
234-34-0006 ~
0.
001
001-326
47 001 33-34072572
320-326 01 346 34 2976
321
11. 335-03-3959
83-47
89-47
83-67
01
89-47 326-321
010
052
1)4
89-47
01
56-47
63
1.4
CO
01
C,
B
SlOT-CS! 770-03 22.6-05.0 SC
320-070 01
09
71 01.0 150
`156
110
920 07
27 010 100
10-65 - 14
10-81
10-15
10-52
722 15 7077
PAGENO="0042"
38
F322175
MT9300-40 (6-4-73) JR Manual
O(ficj;~l Use Only
Exhibit 9300-4-Cent.
Example of Format of Typical District Dacl;ground
Fife Document Index
01-05-73 CP:I (863) DISTRICT 36 DOC INDEX
* C011431 07-05 71 02 36 07-07-71 HEHO SA GONZALES RE GAHOLING
0101 ARNOLD ANTHONY J 346 34 2976 55 320 326 3102
0103 DIANCA CHARLES 320
0104 HIDE AHAY LOUNGE 36 1271001 58 320 2
0102 TAYLOR JOHN
0105 320
0106 326
0011436 07-05-71 11 36 07-07-71 RAR JOSEPH REYHARDT 6912 7017
0101 RETNARDT JOSEPH 724 25 7210 56 054
0102 REYNARDT SUPPLY CO 36 1476532 36 D54
0103 STEVENS JOHN Z 14 918
0104 054
0105 916
E011451 06-22-71 06 36 07 08 71 CTRB GARBLING RAIDS IN CHICAGO KEIGUTS -
0102 HEIGHTS TAVERN 58 333 1115
0101 JONES COIN SHOJ 53 333 1115
0103 LAULAS LOUNGE 58 333 1115
0105 P~LALDOS RESTJ.URA~ 58 333 1115
0104 ZANZIBAR LOUNGE 58 333 1115
0106 333
10 17 72 09 36 11 13 72 STRIKE FORCE REQ FOR BACKGROUND INFO
0101 BUCHORI FIORE 722 15 7077 010 070 1
0104 JOHNSON RICHARD 0
0102 LITTNANN BURL S 342 02 7169
0107 3~ORFNZO GEORGL~
0105 lIALHFIST BOBBY
0106 PHILLIPS FELIX NILIIAUKEE 070 1
0103 REALONDO JACQULINE *. 061
PAGENO="0043"
.4.
C
RATIONAL REGISTER INPUT FORM
2)
0
z
OR
RN
UN
CR
1/
~tt1W;~L N
~-1--
tt4Th~tL
-1:
~tH'1- +fJ:~~.:I~
J~b ffiT~
~1~*
c-c
±±fH+:~FF:HJHi±H±LHTh:t
J+ftfH-+L'- -IHJH H EH~-L+
-~+h~~+ tffl~J~+~
436O~..
+ HH-*t1~f d:
ii 1t1WL4~
L
-[4~'fl
rI:~It
,
~
~±- ~t
--
1 1
~~tib
I 2
PAGENO="0044"
40
Intelligence Gathering and Retrieval System * 4. First narnc2. shpuld be wriuen in full, if
avatlabte.
ExhibIt 9390-5'--Cont. (1) 5. Middle names will be written in full unless
______________________________________________________ there are-more letters than there are spaces.. In this
case use an initial for the middle name,
National Register Input Form 6. Names ihat have initials only will he written
(Form 4060) without punctuation. I-or example: Cox, W. E. will
be COX \V E. -
Instructions for Completion -- 7. Leave a single space between all names-
last, fiwl, middle.
(I) This form will be used by keypunch opcralors, 8. If a name contaitss a `Jr' or "Sr.," it
therefore it is most important that die svork he done should he written as follosvs: JONES \VILLIA M
neatly and accurately. Neatness is important because LFO JR
the person reading this sheet will not be able to ask 9. Enter only one name per line. Do not
you if .j ` meatts "one. "t, ` or "L.' Form your include the wife's name if it isppears. For examplç:
Ieltcrsxstrpletely and use all capitals. Banko, Johtt I. & Ruth, Jr. should he written
(2) Separate fornis ssill be used to reflect SEP-I or BANKO JOHN I JR.
potential SEP categories. Each form still be desig. tO. The first letter of the last name will be
naled by hand writtng at the lO~ oh the page above entered in he first space in the name field.
preparcd by hliL c-ltenorb ( ~ ~t srr or B I3tisitt s N tnt s
"SEP-I") of its contents. Eaclt page svill contain I. Use all capitals. Single space. Use ito
from one to tsventy.five entries within the same punctuation.
category. 2. TIse word `and" will always he svritters as
an ampersand. `&." For exaniple:. Jones and Sons
General Instructions will be JONES & SONS.
I. Only one character (number or letter) still he 3. Do itot Use `TI-I E' st-hen recording business
priisiect in each stsaec. names. For exatUple The Big Company trill he 131 G
2. Print in capital letters. CO.
3. For items containing both alphabetical and mm- 4. Use the following to shortest business
merical characters, print zeros as ~ and the letter nanses:
"Z" as ~ in order to avoid confusion with the letter - Corporation = CORP
"0" and nunsber 2, respectively. Incorporated INC
4, No punctuation still be used-omit commas, Company = CO
periods, dashes, etc. Linsited = LTD
5. If you make sit error, draw a line thtrottgh lhc Associates = ASSOC
entire cntiy and rest rite it on another line. 5. \Vlicn business n:snscs have more letters than
spaces available, write as nsuch of the name as there
Column Instructions are available spaces.
I, District codes are found in 230:(2) ~f IRM 9570, .(2) City (12 spaces possible).
Case Matsagement and Time Reporting System Hand. I. Use all capitals. Single space. Use no
book. . punctuation.
2. Region codes are nhown bclosv: 2. If a one-word city name has more letters
I Southeast than there are available spaces, write as niuch of the
3 Midwest name as possible.
4 Central 3, Ciiies with two-word names.
5 Southwest a. If the first word is North, South. East or
6 NorIhi.Atlautie West, use only the first letter N, 5, E, \V., and the
7 010 second svord. For example: East Detroit will be
.8 Mid-Atlanlic ` entered as E DETROIT.
9 Western b. For cities with other lss'o-word nanses,
3. Enter the calendar year in which the name is wrile lJte eistire first worst and shorten the second
~ubnmiiIed 10 he National Register. word b~'.leaving out the vowels 10 fit the 12 spaces
-. available.
Item InstructIons Highland Park = HIGI-ILAND PRK
(1) Nantes (25 spaces possible). Harper Woods = HARPER WDS -
A. Individuals-lust, first, nsiddle, c. For cities stills i~iree or more words in
I. 1)o not use apostrophes. For example: their nantes, svr.iie tIme entire firsi word and the
O'Maltey ss-ill be written OMALLEY. shortened form of the remaining names. It may be
2. Usc closed spacing for last nantes. For
example: Dc Carlo will be written I)ECARLO. ___________________________________________________
3. Use till capitals. For exaniphe: MeHenry will MT 9300-47 (3-4-74) hR Manual
be wrillen MCIIENRY. Official U'so Only
PAGENO="0045"
ntofligcnCo Gathering and Retrieval System
ExhIbIt 9390-5-Coat. (2)
Etem Instruclions-Cont.
necessary to write the entire name without vowels.
For exanipte:
Grosse Point Shore = GRSS PNT SIIR
North liar View Village N flY VW
VLLG
(3) State Codes (2 spaccs).
Use the two-letter special code shown below.
Alabama AL Maine ME
Alaska AK Maryland M I)
Arizona AZ Massachusetts MA
Arkansas AR Michigan MI
Minnesota ` MN
California CA Mississippi MS
Colorado CO Missouri MO
Connecticut CT Montana MT
Delaware BE
Nebraska NB
District of
Nevada NV
Columbia DC
N ess'
Florida FL Ilampshire NH
Foreign Ness' Jersey NJ
Country FC Ness' Mexico NM
New York NY
Georgia GA North
Carolina NC
Hawaii Hl North Dakota NI)
Idaho ID
Ohio OH
Illinois IL Oklahoma OK
Indiana IN
Oregon OR
Iosva IA
Kansas KS Pennsylvania PA
Kentucky KY Puerto Rico PR
Louisiana LA Rhode Island RI
Vermont \`T
Virginia VA
Virgin Islands VI
Washingtott \VA
\Vcst \`irgi.iiia \VV
\Visconsin \Vl
Wyoming WY
(4) Taxpayer ldctttification Number (SSN or EIN)
(9 spaces).
I. Every name must have a unique TIN,
2. In those instances where the El N or SSN is
not known. use a unique identification number as
described hctosv.
The first space receives an asterisk. The next
tsvo digits arc tlte district codes. The fourth digit ss itt
designate the year of input, 1971 will he ``1.'' 1972
`2,'' and so on. The last five digits will he a
sequentially assigned number starting walt 001)01 for
the first stibmission~ of die calendar sear and ascend-
iag to 99999. if necessary. `t'he sequential number si ill
begin ssitti 00001 cacti calendar year. For example.
the tiumber for the It 5th submission &om the Chicago
District (for svhich the SS N and Ii IN are uiikiiosvnl In
1971 ss'ould he: * 36 1(10115.
Each district svill need to keep a tog of the
numbers assigned in order to avoid duplication.
(5) Dati' of flirt/i (6 spaces).
I. Use six (61 numbers-ia MM I)DYY or:t
mat-example: Jan. 2. 1937 would he 010237.
2. if the date of birttu is not as'aiiahie. di ass
line through the spaces.
(6) .1 Ileged illegal act/rOy or source iif poteuiiual
uuuureportcd itcoiite (3 spaced.
See Exhibit 9390-I, Illegal Activity Codes and
instructions (!=t 4).
(7) 8 or / (1 space)
If taxpayer identification nuasber is for a busi-
ness enter "B", if for an individual enter "I."
41
Sotuth
Carolina , SC
Sottth I)akota SI)
Tennessee TN
Texas . TX
Utah UT
MT 9300-47 (3-4-74) JR Manual
OffIcial Use Only
PAGENO="0046"
42
Il,tcHi~6nco Gathering anU ldctrteval ~rystcrn'
Ev;Itibil 9390-6
Vorm 5057. Uationat Gcgistcr Transmittal
Pat~o~aI Rcc~ioter Tr~crnittcI
nstructions
1. Prepare in triplicate. Enclose tao ce;ties ruth each clnporynt and retain one copy for district files.
2. Ship Focus 4860 and Forms 5068 in order by page number (ace upper eiyhf hand corner).
3. Make shipment via Certified Air Mail in a secure package.
4. Enclose odding machine tape used in totalling number of names.
tfnturiu) slapped:
Forms 4660
Lines cml data (fatal eun,brr of onrmmeuJ
FormaSO5O
Shipped a:
.
~
0 (~ d 6)
Spocial Notes:
Form bO~37 One. 4-73)
Dt~muetrmmnmt of tlmu ttuimtcmty arsenal
MT9360-43 (5-4-73)
Oflicial Usc Only
PAGENO="0047"
43
litettigence Gathering end Retrieval System
Exhibit 9390-7
rin 5058, National Register Correction/
&Jeletion Form
- --I -
----t---.----------------~'----
----4--- -----±- - --` - - ---- -
I-
z
U
0
U
4- -- - -- -
~- -~-~- -4-----
-~--
0
0
Li.
0
Lii
-J
Lii
0
0
I-.
U
`ii
tic
0
U
-` I-- -
~iiijiiiiiJi~iiiiiiiiiJ-iiii
tic
ILL
I-
0
LU
tic
-I
-i
z
0
I-
-ic
:~
z
w*~rv
~
.
~_~_
WI 9300-4O (5-4-73) JR Manual
Official Use Only
PAGENO="0048"
Intelligence Gtrthenng and Retrieval System
~xhibit 9390-7--Cent.
National Register Correction/Deletion Form
Form 5050
44
(ns~tructions
Use (iris form to make corrections to. additions to.
or deletions from, the SEP-i or Potential SE P subject
categories of tire National Register.
To delete air entire record, enter taxpayer idenjiEr.
catior, number arid transaction code (TEN) 10. Make
no entry in eorrectiorr data spaces.
To correct art irrforrnatiorr field, enter taxpayer
ntenntifieattonn trtrrnrbet-, trans:rctiorr c~rt~ (TEN), arid
the correction data, starting itt itre Irrst spree foitoss-
ing (Ire transaciirrrr code. To ctrarrge trtorc than orrc
field irt a recorit, yonr nrrrst use 1 RN 10 and tire a
rcsuhnrnir tire record strewing all reqrnired irtlortntationr
on Form `I StiO.
Transaclioti Codes
01 Name
02 City
03 State Code
04 Date of Itirtlr
05 Altegect Illegal Activity
06 1)/I
07 \`ear
08 Rep
09 Update Taxpayer 1st. No.
10 1)eiete Record
MT 9300-47 (3-4-74) ff1 Manual
OfficIal Usa Only
PAGENO="0049"
45
NEWS RELEASE DEPARTMENT OF THE TREASURY
IRS, WASHINGTON, D.C., FEBRUARY 19, 1975
The Internal Revenue Service today released the following additional docu-
ments in connection with its information gathering systems:
Letter to Senator Frank Church, dated February 12, 1975;
The- four attachments to the letter.
Copies of the released documents are attached.
The Internal Revenue Service had previously released, on February 7, nine
items involving its information gathering systems, including a letter of Jan-
uary 31 to Senator Church.
FEBRUARY 12, 1975.
Hon. FRANK CHURCH,
select Committee Td -Study Governmental Operations With Respect to Intelli-
gence, Activities, U.S. Senate, Washington, D.C.
DEAR MR. CHAIRMAN: On January 31 I wrote you concerning the participation
of the Internal Revenue Service in the Select Committee's investigation and
study. I also included a copy of a letter that I sent to Senators Mansfield and
Scott in response to their request that we not destroy and records or documents
relevant to the Select Committee's activities. In that letter I expressed concern
about the breadth of the request and the possible unintended impact on the
Service's normal operations.
Subsequently, on February 5, Burke Wilisey, Assistant to the Commissioner,
telephoned Mr. William Miller of your staff and informed him that, `because of
the large volume of returns being received by the Internal Revenue Service, it
was necessary for us to resume shipping 1973 returns and related materials to
the Federal Records Center to make room, physically, for the storage and
processing of the returns currently being filed. ~\-Ir. Miller agreed that our resump-
tion of shipping was appropriate, and asked us to send you a copy of our in-
structions to our field offices on these documents. A copy of that telegram is
enclosed as Attachment No. 1. -
At the same time, we authorized the Federal Records Centers to resume
destruction of tax returns in order to permit them to make space available to
receive the records we resumed shipping. A copy of the letter authorizing that
resumption is enclosed as Attachment No-. 2.
Although these instructions have alleviated part of our problems in this re-
spect, we would appreciate receiving your permission to continue a broader
range of our previously-established records disposition practices. Mr. Willsey
assured Mr. Miller, and I repeat those assurances, that we are not asking for
permission to destroy any materials gathered pursuant to that part of our in-
formation-gathering activities coming within the Committee's area of interest.
For example, in paragraph (3) of the enclosed telegram dated February 7, 1975
(Attachment No. 3), which provides interim guidelines for information-gathering
activities, our personnel are specifically instructed not to destroy or dispose of
any records relating to any of our intelligence-gathering activities.
Another facet of this problem for Internal Revenue Service is illustrated by
the vast number of documents which we receive containing information about
amounts paid to different taxpayers as wages, dividends, interest, etc. In the
normal course of our operations, the relevant information from these documents is
transcribed into our data processing equipment for evaluation and use with
respect to the tax-payers who may be affected. After the information is tran-
scribed, many of the source documents themselves are disposed of. Others of the
documents are associated with the taxpayers' returns and are disposed of with
the returns themselves. Attachment No. 4 is a telegram to our data processing
personnel authorizing them to continue our normal practice of disposing of those
documents. -
As you can see from this relatively brief outline, the possible breadth of the
Select Committee's activities could have a severe, and, we believe, unintended
impact on our routine operations. - Consequently, I would like to repeat the re-
quest we made to Senators Mansfield and Scott for permission to continue our
previously-established records disposition practices. If it would be helpful, we
are prepared to meet with the Committee or its staff to supply any further in-
formation in this regard that you feel would be necessary or helpful.
With kind regards, -
Sincerely,
DONALD C. ALExANDER.
57-236 0 - 75 - 4
PAGENO="0050"
46
FEBRUARY 5, 1975.
To: Regional Commissioners, IRS; all Regional Counsels, IRS; all Regional In-
spectors, IRS; all District Directors, IRS; all Service Center Directors; IRS
Data Center, Detroit, Mich.; IRS NCC, Martinsburg, W. Va.
From: W. B. WILLIAMS, Deputy Commissioner, IRS.
Subject: Retention of service records.
This is in further reference to our telegram dated January 30, 1975. Transfer
of IRS records to Federal records centers can be resumed except for those records
concerning intelligence information gathering activities, joint compliance pro-
gram activities, coordinated compliance projects and returns compliance pro-
gram activities. A separate telegram will be issued concerning the above
exceptions. However, this instruction does not contemplate the screening of case
files before transfer to the Federal records center to remove individual exam-
ination reports, etc., that are the product of such information gathering
activities.
IRS waste material containing tax data accumulated in formal daily opera-
tions can be destroyed.
W. B. WILLIAMS,
Deputy Commissioner.
FEBRUARY 6, 1975.
Mr. WALTER W. STaNDER,
Assistant Archivist for Federal Records Centers,
National Archives and Records Service,
Washington, D.C.
DEAR MR. STENDER: The Commissioner, in a letter dated February 3, 1975, to
the Administrator, General Services Administration, requested suspension of the
destruction of IRS records in the Federal Records Centers until further notifica-
tion. `The letter further stated that we would notify you of records that could
be exempted from this freeze as soon as possible.
It has been determined that Forms 1040, U.S. Individual Income Tax Returns,
can be destroyed in accordance with disposal authorizations in Record Control
Schedule 206, Service Centers.
We appreciate your cooperation in this matter and hope to more narrowly
define IRS records subject to the freeze at an early date.
Sincerely,
(Signed) RICHARD B. SIMK0
(For Leo C. Inglesby, Director,
Facilities Management Division).
FEBRUARY 7', 1975.
To: All Regional Commissioners, IRS; All District Directors, IRS; All Service
Center Directors, IRS; Director, Office of International Operations, IRS.
(VIA MAIL)
From: W. B. WILLIAMS, Deputy Commissioner, IRS.
(MSA'RD) (MSASC)
Subject: Interim guidelines for information gathering activities for audit, intelli-
gence and collection activites.
(1) This is in further reference to our January 22, 1975, telegram suspending
IGRU, JCP and other similar information gathering activities pending clarifica-
tion of the definition of directly tax-related information.
(2) Until such time as legal qu~stions are resolved concerning application of
the Freedom of Information Act Amendments and the Privacy Act of 1974, all
information gathering activities will remain suspended except to the extent
provided in this telegram. No new information gathering projects will be initiated.
(3) With reference to IG&R, returns compliance programs, joint compliance,
coordinated compliance and intelligence projects:
(A) Previously collected information or information received without solici-
tation which involves transactions with potential tax consequences may be proc-
essed and associated with case files for use in development of the case.
(B) No additional information (except information relating to an open as-
signed case on a specific taxpayer) will he solicited.
(C) No new projects will he initiated.
(4) The returns preparers program, including shopping activities, may be
continued.
PAGENO="0051"
47
(5) Financial information and other data directly related to notices, TDA's
and TDI's may be obtained and will continue to be associated with the case files
as provided in existing instructions.
(6) Any files or information, gathered or assembled, pertaining to any tax-
payer or group or taxpayers and in the possession of an individual employee,
which do not relate to a current assignment, will be immediately forwarded to
the employee's division chief. Such information which the chief determines does
not require immediate action will be placed in suspense pending further
intructions.
(7) All employees should continue to submit information reports and informa-
tion items with potential tax consequences uncovered while working assigned
cases. Such information reports and information items will be processed in accord-
ance with existing instructions. Any other information will be forwarded to the
employee's division chief to be suspended pending further instructions.
(8) No records concerning intelligence information gathering activities, joint
compliance program activities, coordinated compliance projects and returns com-
pliance program activities shall be destroyed, disposed of, or transferred to
Federal records centers.
(9) Questions regarding these guidelines that cannot be resolved by assistant
regional comissioners should be referred through channels to the appropriate
Assistant Commissioner.
(10) This message will be reissued in the JR Manual in accordance with IRM
1254. _______
FEBRUARY 11, 1975.
To: All Regional Commissioners, IRS and all Service Center Directors, IRS.
From: RUssELL E. DYKE, Associate Director (Accounts and Services), Accounts
and Data Processing Division, IRS.
(Priority) (MSAR & MSASC)
Subject: Retention of service records.
This is in reference to the telegrams of January 30, 1975, and February 5, 1975,
from the deputy commissioner, internal revenue service. These telegrams do not
affect any instructions in ADP Handbook 334-405, SC mail and work control,
information document procesing. Continue to dispose of information documents
according to the manual reference cited in this handbook.
Mr. VANIK. I think we are going to want to go into that in detail,
and I know that other committees of the Congress are considering
major investigations of the issue. We know the quality of our work
with Dr. Woodworth, and we are going to await the results of your
joint efforts.
Now, I think Mr. Pickle is next.
PRIVACY OF TAX RETURNS
Mr. PIOKLE. Mr. Secretary, do you agree with the income tax re-
turns privacy bills that have been introduced? Congressman Litton
has introduced one, and I know Senator Bentsen on the other side is
going to introduce such a bill.
Without going into detail, can you support those bills?
Mr. ALEXANDER. I strongly favor the strengthening of the laws with
respect to the privacy of tax returns and tax return information. Con-
gressman Schne~beli last year introduced a bill which, I feel, carried
out not only the principle, but the mechanics of, the corrections of
existing law that we think are necessary.
So we do not differ as to the purpose with Congressman Litton,
Senator Bentsen, and others. We have some concerns. We have con-
cerns as to the particular aspects of the legislation.
Mr. PICKLE. You look more favorably to Mr. Schneebeli's approach
than either to Mr. Litton's approach or Senator Bentsen's approach?
Mr. ALEXANDER. That is correct.
PAGENO="0052"
48
TAXPAYER SERVICE
Mr. PICKLE. I have some questions to submit to you later, but I am
trying to get the general feel of those questions from your agency.
With respect to audits and tax returns of individuals, no one is
happy when he pays taxes, mighty few. I have an office in my district
where people have come in, looking for their income tax forms and
they have all a bad look on their face, and they are not happy. We
have to understand that.
Are you going to be able to add to your staff, and will you be able
to put more people on to meet the public to explain the tax laws and
talk to them? Is that in your planning?
Mr. ALEXANDER. Yes, since 1972 we have almost doubled the num-
bers of our taxpayer service representatives. We had about 1,200 then,
and we have over 2,300 today, and in our 1976 budget request we are
asking for an additional 145 man-years for this purpose. We recog-
nize the greater need to serve the public.
Mr. PICKLE. Do you have funds to conduct a public relations cam-
paign, assuming such a campaign would be a good thing? Can you
spend funds to advertise the fact that you have some people to help
taxpayers and that people can come in and get tax returns, and so
forth?
Mr. ALEXANDER. We obtain, we are happy to say, muc~h free assist-
`ance from the media. We do spend funds on putting television spots
together, and we have a 30-minute film on taxpayer audit and appeal
rights. We produce a large amount of material, particularly in the
filing season, which we ask the media to carry and which they do carry
pretty well for us without an additonal expenditure of Government
funds for that purpose.
Mr. PICKLE. I am sure that the media gives you cooperation. I think
probably we should be more positive in our approach so that people
know that they can come in and talk. Perhaps we could have an
analysis of your' procedures and forms `and discuss'ions in advance so
people could feel freer to come.
They are suspect when they come in that IRS office, and they take
out their frustrations on you. I think we can do more.
I was hoping in these times when we have so much unemployment.
and so many people that may be delinquent, that you don't plan to
realine and shi'ft these `district offices around `at this time. That is cer-
tainly not being contemplated, `is it?
Mr. ALEXANDER. Well, we have a responsibility to serve the public
in the most efficient and effective way. We also have a responsibility
not to make a move unless the~ move is clearly warranted. On the other
hand, we can't stay static and believe that in these days of shifting
populations and shifting needs that we should necessarily maintain the
same size office in each city in the country in which we now have one,
or fail to open new offices where they are needed.
We have a balancing of nee'ds and you can be sure that we do not
move people or curtail services unless and until we have considered
very carefully whether any benefit could be gained, whether it is worth
the clear cost of the move.
Mr. PICKLE. I can understand that, an'd I can understand why you
might want to enlarge another office, but at least half o'f the State
PAGENO="0053"
49
might be neglected if you made such a move, by removing ~one from
another city. I would think that that would be unbelie~vably improper
under the present economic conditions.
I would like to talk to you about that because obviously I have a
concern of my own State and my own district on that.
CORPORATE TAXPAYER VERSUS INDIVIDUAL TAXPAYER
Mr. JONES. Mr. Commissioner, I just have one question that is raised
more than once by constituents and that is the relationship of the IRS
to a corporate taxpayer versus an individual taxpayer.
The impression is that when the corporate taxpayer is delinquent or
has some problem on a tax return, you automatically .go into negotia-
tions and reach a negotiated settlement, and it is all done amicably.
The impression is that when an individual taxpayer has a problem,
there is movement against him.
That is the impression of a number of my constituents. What can
we do under the present regulations to help change that image-and
it is a problem-~and to change the practice?
Mr. ALEXANDER. That impression is false, and that situation does
not exist. We need to do certain things to make the image fit the
actuality.
We need to tell more individuals what their rights are so that they
will know what their rights are. And we need to make absolutely cer-
tain that our people in this Internal Revenue Service, almost 80,000
of us, feel a special responsibility toward the frightened taxpayers,
the hostile taxpayer, and the one who can't commun'iöate very well, if
at all, in the English language; and the taxpayer who is so overcome
by a letter from the Government that the letter is put in back of the
refrigerator and never read.
We need to understand that that taxpayer has special problems and
requires special guidance and requires a special attitude.
We are doing our best to do just that.
We have put together some material which I would like to supply
for the record, publication 566, which spells out in as simple English
as we bureaucrats can write, what people's rights are when they do
get one of these letters from us saying that they are under audit.
We need to make the image fit the actuality. We need somehow to
get `this message over to the public that, indeed, this is the case, and
to try to get this message over to the public we have taken actions like
that film that I mentioned.
[The publication referred to follows:]
PAGENO="0054"
c~l.Jp ~/
Audit of Returns,
Dfe~rtment
Appeal Rights,
7
and Claims for Refund
(~)
Publication 556
(Revised October 1974)
50
TABLE OF CONTENTS
Page
I. Audit of Returns 3
A. Why Returns Are Selected for Examination 3
B. Confidentiality of Tax Matters 3
C. If your Return is Examined 3
D. Transfers to Another District 3
E. The Examination: In General 3
F. If You Agree 3
II. Appeal Rights 4
A. If You Don't Agree 4
B. Appeal Within the Service 4
C. Written Protests 4
D. Representation 5
E. Appeals to the Courts: In General 5
F. Tax Court 5
G. District Court and Court of Claims 6
III. Claims for Refund 6
A. How to Claim a Refund 6
B. Time for Filing a Claim for
Refund: General Rule 6
C. Limit on Amount of Refund: General Rule 6
D. Exception: For Special Types of Refunds 6
E. Processing Claims for Refund 6
PAGENO="0055"
51
AUDIT OF RETURNS
WHY RETURNS ARE SELECTED FOR
EXAMINATION.
The usual reason for selecting a tax return for
examination is to verify the correctness of in-
come, exemptions, or deductions that have been
reported on the return. However, some returns
are selected as part of a random sample for re-
search studies.
The vast majority of taxpayers are honest and
have nothing to fear from an examination of their
tax returns. An examination of such a taxpayer's
return does not suggest a suspicion of dishon-
esty or criminal liability. It may not even result in
more tax. Many cases are closed without change
in reported tax liability and, in many others, the
taxpayer receives a refund.
CONFIDENTIALITY OF TAX MATTERS
You have the right to have your tax case kept
confidential. The IRS has a duty under the law to
protect the confidentiality of your tax information.
However, if a lien or a lawsuit is filed certain as-
pects of your tax case will become public knowl-
edge.
IF YOUR RETURN IS EXAMINED
The examination may be conducted by corre-
spondence, or it may take place in your home or
place of business, an Internal Revenue Service
office,,or the office of your attorney or account-
ant. We try to select the method of examination
which is most appropriate under the circum-
stances, taking into account the complexity of
your return. If the method selected is not conve-
nient for you, we will attempt to work out a more
suitable method.
If you operate a business and file a Schedule C
with your return, the examination normally will be
conducted at your place of business for quick
access to your books and records.
Whatever method of examination is used, you
may act on your own behalf or you may have
sOmeone represent you or accompany you. An
attorney, a certified public accountant, an indi-
vidual enrolled to practice before the Internal
Revenue Service, or the person who prepared
the return and signed it as the preparer, may rep-
resent or accompany you. If you prefer, you do
not have to be present at a routine examination, if
you have authorized one of these persons to rep-
resent you. Authorization may be made on Form
2848-D, Authorization and Declaration, which is
available at any Internal Revenue Service office,
or by means of any other properly written autho-
rization.
If you filed a joint return, either you or your
spouse (or both) may meet with us.
TRANSFERS TO ANOTHER DISTRICT
As a general rule, the examination of a tax re-
turn is made in the Internal Revenue Service Dis-
trict where the taxpayer files. However, in any
case where the examination of your return can
be completed more quickly and conveniently in
another district, you may request that the case be
transferred to that district. Transfers are usually
based on circumstances such as:
1. Your place of residence is changed before
or during the examination; or
2. Your books and records are kept in another
district.
THE EXAMINATION: IN GENERAL
The examination normally begins when we no-
tify you by mail that your return has been se-
lected for examination. You will also be notified
of the method of examination and the records
you will need to assemble in order to clarify or
prove items reported on your return. By assem-
bling your records beforehand, you may be able
to clear up questionable items or arrive at the
correct tax with the least trouble.
Upon completion of the examination, our ex-
amining officer will explain to you (or your autho-
rized representative) any change he may pro-
pose to adjust your tax liability. He will also
explain the reasons for the change. It is important
that you understand any proposed change, so
please don't hesitate to ask questions about any-
thing that is not clear to you. Most individual ex-
aminations are agreed to and closed at this level,
but you don't have to agree and you may appeal
any proposed change.
IF YOU AGREE.
If you agree with the findings of the examining
officer, you will be asked to sign an agreement
form. By signing you will indicate your agreement
to the amount shown on the form; and if you owe
additional tax, you will stop a six percent interest
charge 30 days after filing the form. No further
interest (or penalties) will be charged unless you
3
PAGENO="0056"
52
fail to pay the amount you owe within ten days
after you receive a notice of such amount. How-
ever, if you pay the tax when you sign the agree-
ment form, interest stops immediately.
If you wish to pay, make your check or money
order payable to the Internal Revenue Service.
Include interest on the additional tax (but not on
IF YOU DON'T AGREE.
If you don't agree with the proposed changes
of the examining officer and the examination was
made in an Internal Revenue Service office, you
may request an immediate meeting with a super-
visor to explain your position to him. If agreement
is reached, your case will be closed. If agreement
is not reached at this meeting, or if the unagreed
examination was made outside of an Internal
Revenue Service office, we will send you (1) a
copy of the examination report explaining the
proposed adjustments and (2) a transmittal letter
detailing the further appeals available to you and
giving you 30 days to respond.
If after receiving the examination report you
decide to agree With the examiner's findings, you
may pay any additional amount you owe without
waiting for a bill. Make your check or money or-
der payable to the Internal Revenue Service. In-
clude interest on the additional tax (but not on
penalties) at six percent from the due date of the
return to the date of payment. Please do not send
cash through the mail.
If after receiving the examination report you
decide not to agree with the examiner's findings,
we urge you to first appeal your case to higher
levels within the Service before you go to court.
Because people sometimes disagree on tax
matters, the Service maintains a system of ap-
peals, Most differences can be settled in these
appeals without court trials.
If you do not want to appeal your case in the
Service, however, you can take it directly to
court.
The following general rules tell you how to ap-
peal your case.
penalties) at six percent a year from the due date
of the return to the date of payment. If the exami-
nation results in a refund, the Internal Revenue
Service can refund your money more promptly if
you sign the agreement form. You will receive
interest at the rate of six percent per year on the
amount of the refund.
you want a District Conference, ask for it in ac-
cordance with our transmittal letter to you. We
will then arrange a meeting at a convenient time
and place and a conferee from the Staff will dis-
cuss the disputed issues fully with you or your
repre~entative. You or your representative
should be prepared to discuss all disputed issues
and present your views at this meeting, in order
to save the time and expense of additional con-
ferences. Most differences are resolved at this
level.
If you and the conferee don't reach agreement
at your District Conference, however, you may
appeal your case to the second level-the Appel-
late Division in the Regional Commissioner's of-
fice. Or, if you do not want a District Conference,
you may appeal directly to the Appellate Division.
If you want an Appellate Division hearing, ad-
dress your request to your District Director in ac-
cordance with our transmittal letter to you. Your
District Director will forward your request to the
Appellate Division, which will arrange for a hear-
ing at a convenient time and place.
If agreement is not reached at your District
Conference or your Appellate Division hearing,
you may, at any stage of these procedures, take
your case to court. See Appeals To The Courts,
below.
WRITTEN PROTESTS
So that your case may get prompt and full con-
sideration by the District or Appellate conferee,
you need to file a written protest with the District
Director. You don't have to file a written protest,
however, if you are appealing to the DistrictCon-
ference Staff, and
(1) the proposed increase or decrease
in tax, or claimed refund, does not exceed $2,500
for any of the tax periods involved; or
(2) your examination was conducted by
correspondence or by an interview at our office.
A written protest is required for an Appellate
APPEAL RIGHTS
APPEAL WITHIN THE SERVICE
We have two levels of appeal: The District Con-
ference Staff and the Appellate Division.
Your first level of appeal from the findings of
the examiner is the District Conference Staff. If
4
PAGENO="0057"
53
Division hearing in all cases except those (1)
where the amount involved does not exceed the
$2,500 limit described above and (2) you ap-
pealed to the District Conference Staff first. If you
filed a protest for your District Conference, you
don't have to file another for the Appellate Divi-
sion hearing.
If a written protest is required, it should be sub-
mitted in duplicate within the 30-day period
granted in the letter transmitting the report of ex-
amination and should contain:
1. A statement that you want to appeal
the findings of the examining officer to the Dis-
trict Conference Staff or to the Appellate Division,
as the case may be;
2. Your name and address;
3. The date and symbols from the letter
transmitting the proposed adjustments and find-
ings you are protesting;
4. The tax periods or years involved;
5. An itemized schedule of the adjust-
ments with which you do not agree;
6. A statement of facts supporting your
position in any contested factual issue; and
7. A statement outlining the law or other
authority upon which you rely.
A statement of facts, under 6 above, must be
declared true under penalties of perjury. This
may be done by adding to the protest the follow-
ing signed declaration:
"Under the penalties of perjury, I declare that I
have examined the statement of facts presented
in this protest and in any a~companying sched-
ules and statements and, to the best of my knowl-
edge and belief, they are true, correct, and
complete."
If yo~ir representative submits the protest for
you, he may substitute a declaration stating:
(1) That he prepared the protest and ac-
companying documents; and
(2) Whether he knows personally that
the statements of fact contained in the protest
and accompanying documents are true and cor-
rect.
REPRESENTATION
You may represent yourself at your District
Conference or Appellate Division hearing, or you
may be represented by an attorney, certified pub-
lic accountant, or an individual enrolled to prac-
tice before the Internal Revenue Service. If he
attends a.conference without you, he must file a
power of attorney or a tax information authoriza-
tion before he may receive or inspect confiden-
tial information. Form 2848, Power of Attorney, or
Form 2848-D, Authorization and Declaration (or
any other properly written power of attorney or
authorization) may be used for this purpose.
Copies of these forms may be obtained from any
Internal Revenue Service office.
You may also bring witnesses to support your
position.
APPEALS TO THE COURTS: IN
GENERAL
If you and the Service still disagree after your
conference or hearing, or if you skipped our ap-
peals system, you may take your case to the
United Slates Tax Court, the United Slates Court
of Claims, or your United Slates District Court.
These courts are independent judicial bodies
and have no connection with the Internal Rev-
enue Service.
TAX COURT
If your case involves a disagreement over
whether you owe additional income tax, or estate
or gift tax, you may go to the United Stales Tax
Court. To do this, ask the Service to issue a for-
mal letter, called a statutory notice of deficiency.
You have 90 days ftom the date this notice is
mailed to you to file a petition with the Tax Court
(150 days if addressed to you outside the United
States).
The Court will schedule your case for trial at a
location convenient to you. You may represent
yourself before the Tax Court, or you may be rep-
resented by anyone admitted to practice before
that Court.
If your case involves a dispute of $1,500 or less
for any one taxable year, a simplified alternative
procedure is provided by the Tax Court. Upon
your request and with the approval of the Tax
Court your case may be handled under the Small
Tax Case procedures. At little cost to you in time
or money, you can present your own case to the
Tax Court for a binding decision. If your case is
handled under this procedure, the decision of
the Tax Court is final and cannot be appealed.
You can obtain more information regarding the
Small Tax Case procedures and other Tax Court
matters from the United States Tax Court, 400
Second Street, NW., Washington, D.C. 20217.
PAGENO="0058"
DISTRICT COURT AND COURT OF
CLAIMS
As explained below, you may file a claim for
refund if, after having paid your tax you believe
the tax is erroneous or excessive. If your claim is
rejected, you will receive a statutory notice of
disallowance of your claim. If we haven't acted
on your claim within six months from the dateyou
filed it, you can then file suit for refund. A suit for
refund must be filed not later than two years after
54
we have disallowed your claim. You may file your
refund suit in your United States District Court or
in the United States Court of Claims. Generally,
your District Court and the Court of Claims hear
tax cases only after you have paid the tax and
have filed a claim for refund. You can obtain in-
formation about procedures for filing suit in ei-
ther court by contacting the clerk of your District
Court or the clerk of the Court of Claims, 717
Madison Place, NW., Washington, D.C. 20005.
CLAIMS FOR REFUND
HOW TO CLAIM A REFUND.
Once you have paid your tax you have the right
to file a claim for refund if you believe the tax is
erroneous or excessive. You may claim a refund
by filing Form 1 040X, Amended U.S. Individual
Income Tax Refurn. You can obtain this form and
information abopt filing it at any Internal Revenue
Service office. You should file your claim by mail-
ing it to the Internal Revenue Service Center
where the original return was filed. Corporations
should use Form 1120X or such other form as is
appropriate for the type of refund claimed.
A separate form must be filed for each tax year
involved. You should attach to such form a state-
ment supporting your claim, including an expla-
nation of each item of income, deduction, or
credit on which you are basing your claim.
TIME FOR FILING A CLAIM FOR
REFUND: GENERAL RULE
A claim for refund must be filed within three
years from the date the return was filed (returns
filed before the due date are considered to have
been filed on the due date) or within two years
from the date the tax was paid, whichever date is
later.
LIMIT ON AMOUNT OF REFUND:
GENERAL RULE
If you file your claim within three years of the
date your return was filed, the credit or refund
may not exceed the portion of the tax paid within
a period, immediately preceding the filing of your
claim, equal to three years plus any extension of
time for filing your return. If you do not file your
claim within such three-year period, the credit or
refund may not exceed the portion of the tax paid
during the two years immediately preceding the
filing of your claim. This general rule is subject to
the exception described below, however.
EXCEPTION: FOR SPECIAL TYPES OF
REFUNDS
If your claim for credit or refund is based on a
bad debt, worthless security, net operating loss
carryback, capital loss carryback, foreign tax
credit, or an investment credit carryback; or if
you have entered into an agreement with the In-
ternal Revenue Service extending the period for
assessment of tax, you may be entitled to file
your claim at a date later than stated above and
the above limit on amount may not apply. In such
cases, you should consult your Internal Revenue
Service office for further information.
PROCESSING CLAIMS FOR REFUND
Claims are usually processed shortly after they
are filed. Your claim may be accepted as filed or
may be subject to examination. If a claim is exam-
ined, the procedures are the same as in the audit
of a tax return.
PAGENO="0059"
CONFERENCE Office
APPELLATE DIVISION
CONFERENCE
Rngixcsl Office
STATUTORY No1iCEJ~>
J.
PETITION TO
TAX COURT
OPPORTUNmES
~ APPELLATE DIVISION
Rogiccal Off icu a
a
a
I STATUTORY NOTICE OF
CLAIM DISALLOWANCE
DISTRICT COURT
sTAN COURT
- COURT OF APPEALS
4
COURT OF CLAIMS
55
INCOME TAX APPEAL PROCEDURE
Internal Revenue Service
EXAMINATION OF
INCOME TAX RETURN
District Directxrs Office
CONSIDERATION OF
CLAIM FOR REFUND
District Dirnctxrs Offkn
PRELIMINARY NOTICE
30-Day Letter
At any stage of procedure:
Agreement and payment
may be arranged.
Requests for issuance of a
notice of deficIency to allow
petition to tha Tax Court
may be made.
The tax may be paid and
a refund clahn filed.
o Nc Appesl Ptttcitttd
It Cons Hctdlxd
Uttdxt SttsIl Tee
Cccx Prxcxdctx.
U.S. SUPREME COURT
7
PAGENO="0060"
The CoDe
ctlon
Department
Process
Revenue
(Income Tax
Accounts)
Service
Publication 586
(January 1974)
56
Table of Contents
Page
I. Introduction 3
It. Liability for Unpaid Taxes and Notice to Taxpayer 3
A. Notice and Demand 3
B. Accelerated Notice and Demand 3
lit. Payment Procedure 3
A. if You Believe Your Bill is Wrong 3
B. It You Believe You Can't Pay 4
1. Financial Statement 4
2. Payment Agreements 4
3. Undue Hardship Cases 4
C. Summary 4
IV, Enforced Collection Policy 4
A, Levy 4
1. Property Exempt from Levy 4
2. Property Generally Not Levied On, 5
B. Seizures and Sales 5
1. Seizures 5
2. Sales 5
3. Proceeds of Sale 5
4. Redemption of Property 6
C. Federal Tax Lien 6
V. Claim Procedure 6
A. How to Claim a Refund 6
B. Time for Filing a Claim for Refund 6
C. Processing Claims for Refund 6
D. Rejected Claims-Filing Suit in District Court and
Court of Claims 6
Vt. Rights 7
A. Representation 7
B. Transfer of Your Tax Case to Another
Geographical Area 7
C. Interest on Refunds 7
D. Receipts 7
E. Confidentiality of Tax Matters 7
F. Elimination of Penalty-Reasonable Cause 7
PAGENO="0061"
I. Introduction
This booklet is designed to explain your
rights and duties as a taxpayer owing a bill for
taxes. It also explains our obligation, by law,
to collect any tax due on your account, and how
57
we fulfill this obligation. It is not intended to be
a precise and technical analysis of the law in
this area.
II. Liability for Unpaid Taxes and Notice to Taxpayer
A. Notice and Demand
Each return filed with the Internal Revenue
Service is checked for mathematical accuracy
and to see whether appropriate payment has
been made. If tax is owing, a notice of tax due
(bill) will be sent to you.
We are required to issue you this bill which
is a demand for payment. You are then required
by law to make payment within 10 days. If the
tax remains unpaid after the 10 day period has
passed, a statutory lien attaches to your prop-
erty and rights to property.
The only notice which we are required to is-
sue for unpaid tax is this 10 day notice and de-
mand. However, in actual practice, we will send
Ill. Payment Procedure
By law you are required to pay a tax bill
within 10 days after receiving the notice and
demand. Most taxpayers respond to this first
notice and pay the full amount owed.
If your tax is not paid on time, the law pro-
vides for interest and penalty for late payment.
* Interest-is computed at the rate of 6
percent a year on the unpaid tax from
the due date of the return.
* Penalty for Late Payment-is ½ of 1
percent of the unpaid tax for each month
or part of a month the tax remains un-
paid. The penalty cannot exceed 25 per-
cent of the unpaid amount. However, if
you can show that your delay in payment
is due to reasonable cause this penalty
is eliminated
Therefore, accounts should be paid promptly
to keep interest and late payment penalty
charges to a minimum. If you believe you can't
pay or believe your bill is wrong, you should
additional notices, normally three, to give you
added opportunity to make payment before en-
forcement action is taken.
B. Accelerated Notice and Demand
While the routine billing procedure is fol-
lowed in the great majority of cases involving
unpaid taxes, situations arise where the normal
10 day notice and demand period must be
shortened. Accelerated billings are made if we
have reason to believe that the Government's
interest will be jeopardized by delay. These
bills become immediately due and payable after
delivery of the notice and demand to the tax-
payer, and collection action may begin if pay-
ment is not made at once.
immediately visit or contact your local Internal
Revenue Service office. This last sentence is
so important that we repeat it for emphasis. It
you believe you can't pay or believe your bill is
wrong, you should immediately visit or contact
your local Internal Revenue Service office.
Ordinarily, the local IRS office address and
telephone number are located under the
heading of "United StatesGovernment" in the
white pages of your local telephone directory.
A. If You Believe Your Bill is Wrong
If you believe that your bill contains an error,
bring to our office whatever records you believe
would help in correcting the mistake (such as
cancelled checks, tax returns, etc.). Explain
the problem to our representative, and if you
are correct the necessary adjustment will be
made to your account. You will be asked to pay
any tax, interest and penalty still due after the
correction is made.
3
PAGENO="0062"
58
IV. Enforced Collection Policy
If you do not follow the recommendations just
discussed, the law provides that we may take
enforced collection against you. The following is
an explanation of our enforcement activity and
your rights in relation to it.
A. Levy
A levy is a seizureof property to satisfy a tax
liability. The Internal Revenue Code provides
that if any person liable to pay neglects or re-
B. If You Believe You Can't Pay
If you believe that you cannot immediately
pay your bill in full, bring whatever records you
have which would be useful in supporting your
financial condition (such as mortgage or rent
books, unpaid bills, etc.). Explain the problem
to our representative at our office.
1. Financial Statement
We will ask you to complete a Statement of
Financial Condition. If you need help, one of
our employees will be available to aid you in
the preparation of this financial statement. Once
you have completed the statement, our em-
ployee will carefully review your financial condi-
tion to determine whether or not you are in a
position to pay the amount due. He or she will
check to see whether you might have assets
which could readily be sold, mortgaged, or used
to secure funds to pay the tax; or whether you
might be able to secure a commercial loan for
such purposes.
2. Payment Agreements
If the examination of your financial condition
shows that immediate payment of the tax in full
would cause undue hardship, our employee will
help you prepare a form itemizing your monthly
income and expenses. After studying this in-
formation, we may determine that a monthly
payment agreement is in order and, if so, it
will be based on your maximum ability to pay.
In certain cases we can arrange, through a pay-
roll agreement, for your employer to withhold
and regularly pay to us amounts deducted from
your wages. If you are given a part-payment
agreement, you must make each payment on
time. Collection action will be promptly taken
if you miss an installment without immediately
notifying us of the unusual circumstances caus-
ing the failure to pay. Also, during the time you
are making payments you are required to keep
the Service advised of improvements in your
financial condition which may enable you to
increase the amount or frequency of your pay-
ments.
3. Undue Hardship Cases
Our policy for collecting tax bills is based
upon your ability to pay. If in our judgment you
are unable to pay your account at this time be-
cause it would cause undue hardship to you
and your family, we may decide to delay collec-
tion action to a later date. Delaying collection
does not mean that your debt is forgiven; it is
merely held until your financial condition has
improved to the point where you can pay.
C. Summary
The most important step for you in the collec-
tion process is your contacting the Internal
Revenue Service, If you are unable to come
into our office, for example because of sickness
or physical handicap, contact us by mail or
phone.
When you come to our office, we will assist
you in determining the best way to pay your
tax. If you do not agree with the recommenda-
tions of our employee, you have the right to
appeal to his or her supervisor or to higher
management. Our employees will tell you the
name and location of their immediate super-
visor.
fuses to pay within 10 days after notice and
demand, the tax may be collected by levy on
any property or rights to property belonging to
a taxpayer. This includes, but is not limited to;
accounts receivable; bank accounts; evidences
of debt; securities; and any salaries, wages,
commissions and other compensation due.
We take levy action only after you have had
an opportunity to respond (and make satisfac-
tory disposition of the tax) and you have failed
to do so. This does not apply, however, in situa-
4
PAGENO="0063"
tions where the Government's interest will be
jeopardized by delay.
If more than one levy is necessary to fully
satisfy a tax liability, service of later levies is
timed to avoid undue hardship. As a general
rule, we do not serve consecutive levies on
wages.
A levy served to reach your wages attaches
your take-home pay. Any deductions which were
being made for such items as union dues, hos-
pitalization, court-ordered support payments,
etc., are not attached.
If at any point during the levy process you
establish reasonable doubt as to the correctness
of the tax bill, the levy may be released while
we consider your position. Moreover, the levy
may be released in full or in part if you pay
your tax bill or agree to a payment plan, accept-
able to us, to pay it off.
1. Property Exempt From Levy
The following types of property are exempt
from levy:
(a) Wearing apparel and school books-
However, expensive items of wearing ap-
parel, such as furs, are luxuries and are
not exempt from levy.
(b) Fuel, provisions and personal effects
not to exceed $500 in value.
(c) Books and tools used in your trade,
business or profession not to exceed $250
in value.
(d) Unemployment benefits.
(e) Undelivered mail.
(f) Certain annuity and pension pay-
ments.
(g) Workmen's Compensation.
(h) Salary, wages or other income subiect
to a prior judgment for court-ordered child
support payments.
(i) Deposits to the Special Treasury Fund
made by members of the armed forces and
Public Health Services Employees on per-
manent duty assigned outside the United
States or its possessions.
2. Property Generally Not Levied On
The following types of income, as a matter of
policy, are only levied on in flagrant and
aggravated cases of refusal to pay:
(a) Social Security Benefits.
(b) Medicare.
59
(c) Welfare.
(d) Payments under the Manpower Devel-
opment and Training Act of 1962 or the
Area Redevelopment Act.
(e) Cash loan value of insurance policies.
(f) Death benefits.
B. Seizures and Sales
1. Seizures
In taking levy action, we first consider levying
on such property as wages, salaries and bank
accounts, since the proceeds can be applied
directly to your tax account. However, where
this action does not fully satisfy the tax bill and
you still neglect or refuse to make payment or
an arrangement to pay, property not readily con-
vertible to cash will be considered for levy. Levy
on this type of property is referred to as a seiz-
ure.
Any type of property (including residential
property) may be seized and sold to satisfy your
tax bill. However, before seizing property, IRS
considers factors such as your equity in prop-
erty and the sale value of the property, and also
considers whether the seizure and sale of the
property would cause you or your family any
undue hardship. Serious consideration is given
to all other alternatives before determining to
seize a family home. You also have the right to
refuse access to your home to Collection per-
sonnel.
2. Sales
After property is seized for nonpayment of
taxes, we then take action to sell it. Except in
the case of perishable property which must be
sold immediately, sales are not made until at
least 10 days after notice to you and to the
public about the proposed sale.
3. Proceeds of Sale
Sale proceeds are applied first to the expen-
ses of the levy and sale; the remaining amount
is then applied against the tax bill. If the sale
proceeds are less than the tax bill, the unpaid
portion will, of course, be subject to further col-
lection action, If such proceeds are in excess of
the tax bill and seizure expenses, the balance
may be paid to your creditors if they have a
prior claim on the property that was seized and
sold, or, if not, to you.
5.
PAGENO="0064"
4. Redemption of Property
You have the right to redeem your property
prior to the sale. Redemption consists of paying
the tax due, together with the expenses of the
seizure. Also, real estate may be redeemed at
any time within 120 days after the sate by paying
the purchaser the amount he paid for the prop-
erty plus interest of 20 percent per annum.
C. Federal Tax Lien
As we mentioned previously, once notice and
demand for payment is made and you neglect or
refuse to pay the tax, a statutory lien attaches
to your property and rights to property. This lien
is not valid against certain of your creditors
until a Notice of Lien has been filed. The filing
of the Notice of Lien is notice to your creditors
that the lien exists against your property. This
also includes property acquired after the lien is
filed.
Under normal circumstances we don't need
to file a Notice of Lien, because the taxpayer
pays the tax bill after receiving our notice and
demand. But in cases where a taxpayer neglects
to pay the tax due, we must determine whether
filing the Notice of Lien is necessary in order to
V. Claim Procedure
60
A. How to Claim a Refund
Once you have paid your tax bill, you have
the right to file a claim for refund if you feel the
bill is erroneous or excessive. You may claim a
refund by preparing a Form 1040X, "Amended
U.S. Individual Income Tax Return"; Form 843,
"Claim," or such other form as is appropriate
for the type of refund claimed; You should file
your claim by mailing it to the Internal Revenue
Service Center where the original return was
filed. A separate form must be filed for each tax
year involved. You should attach to such form
a statement supporting your claim, including an
explanation of each item of income, deduction
or credit on which you are basing your claim.
B. Time for Filing a Claim for Refund
A claim for refund must be filed within 3 years
from the date the return was filed (returns filed
before the due date are considered to have
been filed on the due date) or within 2 years
protect the interest of the Government in the
taxpayer's property. Once a notice of lien is
filed, it becomes a matter of public record and
may adversely affect -a taxpayer's business
transactions or other financial interests. There-
fore, it is normally filed after we have tried to
contact the taxpayer personally and afford him
or her the opportunity to pay.
The Federal Tax Lien also may be filed when
an account is either under a payment agreement
(to protect the Government's interest until the
final payment is made) or where collection ac-
tion is suspended. -
The Notice of Lien is filed in one office, gen-
erally prescribed by the State where your prop-
erty is located. However, if the State prescribes
more than one place of filing or no place for
filing notices, the Notice of Lien is filed with the
Clerk of the U.S. District Court for the District
in which your property is located. Once the lien
is filed, it becomes effective against yourcred..
itors and puts them on notice that the tax is
due and owing.
A lien will be released when the tax due (in-
cluding interest and other additions to the tax)
has been satisfied by payment or adjustment.
from the date the tax was paid, whichever date
is later.
C. Processing Claims for Refund
Claims are usually processed shortly after
they are filed. Your claim may be accepted as
filed or may be subject to examination, If your
claim is examined, it may require an audit of
your tax return. (Publication 556, "Audit of Re-
turns, Appeal Rights and Claims for Refund" is
available at your local IRS office to explain our
procedures for auditing returns.)
D. Rejected Claims-Filing Suit in Dis-
trict Court and Court of Claims
If your claim is rejected, you will receive a
statutory notice of disallowance of your claim.
After receiving a notice of disallowance, you
may file a suit for refund in a U.S. District Court
or in the U.S. Court of Claims. You must file suit
within 2 years from the date the notice of dis-
PAGENO="0065"
allowance is mailed to you. Also, if we haven't
acted on your claim within six months from the
date you filed it, you can then file suit for
refund. You can obtain information about pro-
VI. Rights
The following section contains an explanation
of taxpayer rights. Read this section carefully to
be sure that you are aware of the rights which
may pertain to your tax account.
A. Representation
You may represent yourself or you may be
represented by an attorney, certified public
accountant, or an individual enrolled to practice
before the Internal Revenue Service. Your rep-
resentative must be qualified to practice before
the Internal Revenue Service. If he attends a
conference without you, he must file a power
of attorney, or a tax information authorization
before, he may receive or inspect confidential
information.
Form 2848, "Power of Attorney," or 2848D,
"Authorization and Declaration" (or any other
properly written power of attorney or authoriza-
tion) may be used for this purpose. Copies of
these forms may be obtained from any Internal
Revenue Service office.
You may also bring witnesses to support your
position.
In any case where your tax problem can be
handled more quickly and conveniently in
another district, you may request that the case
be transferred to that district. Transfers are us-
ually based on circumstances such as:
1. Your place of residence is changed before
or during the discussion of your tax case.
2. Your books and records are kept in another
district.
C. Interest on Refunds
You will receive interest at the rate of 6 per-
cedures for filing suit in either court by contact-
ing the Clerk of your District Court, or the Clerk
of the Court of Claims, 717 Madison Place, NW.,
Washington, D.C. 20005.
cent per annum on any refund delayed more
than 45 days after either the filing of your return
or the due date of the return, whichever is later.
D. Receipts
You have the right to receive a receipt for any
payment you make on your account. You will be
given a receipt for all cash payments, and we
will give you, on request, a receipt for any other
type of payment you make. You also have the
right to receive copies of all contractual
arrangements (such as a part-payment agree-
ment) which you make with us.
E. Confidentiality of Tax Matters
You have the right to have your tax case kept
confidential. The IRS has a duty under law to
protect the confidentiality of your tax return in-
formation. However, if a levy is served or if a
Notice of Lien or lawsuit is filed, certain as-
pects of your tax case will become a matter of
public record.
The Internal Revenue Code provides for elim-
ination of penalties when a taxpayer shows
reasonable cause for either late filing of a return
or late payment of a tax. Reasonable cause,
broadly defined, is a cause which arises despite
ordinary care and prudence exercised by a
taxpayer. If you believe you have reasonable
cause for elimination of a penally, discuss your
reason with our representative. If he or she
agrees, yoqr penalty will be eliminated upon
your supplying us a written statement setting
forth the facts establishing reasonable cause.
61
B. Transfer of Your Tax Case to Another F. Elimination of Penalty-Reasonable
Geographical Area Cause
7
57-236 0 - 75 - 5
PAGENO="0066"
62
COLLECTION PROCEDURE Internal
FOR COLLECTING
DELINQUENT TAXES -
FILING OF TAX
RETURN, WITH
TAX DUE
TAX RETU R~-j~c~
BY IRS FOR
MATHEMATICAL
ACCURACY
c
.\. r~
TAXPAYER'S
CHOICE OF ACTION
EXAMINATION OF TAXPAYER'S
~ FINANCIAL STATEMENT TO
~ DETERMINE ABILITY TO PAY TAX DUE
Revenue
Service
IGNORE
NOTICENO PAYMENT
MADE ON TAX BILL
WHICH LEADS TO
IRS TAKING ENFORCED
COLLECTION ACTION
TO COLLECT
THETAXDUE
\ ~SE-~1 \
FILING OF NOTICE OF
FEDERAL TAX LIEN
\~!=- AGAINST TAXPAYER'S
PROPERTY AND
RIGHTS TO PROPERTY r"'l
/ LEVY /
SERVING OF I
NOTICE NOTICE OF /
LEVY /
FILING OF
NOTICE OF SEIZURE
10-DAY NOTICE
AND DEMAND (BILL)
IS MAILED
-~
TAX DUE
TAXPAYER
CONTACTS
THEIRS
REQUEST FOR PAYMENT AGREEMENT
FULL PAYMENT BASED ON TAXPAYER'S
OF TAX ABILITY TO PAY
COLLECTION SUSPENDED
BECAUSE OF
SEVERE HARDSHIP
PAGENO="0067"
INDEX
A
63
Ability to pay -
Accelerated notice and demand 3
Accoants receivable-levy on 4
Adjustment of tax ~, 6
"Amended U.S. Individual Income Tax Return"
-Form 1040X 6
Annuity payments-levy on 5
Appeals to sspervisors 4
Area Redevelopment Act payments-levy on 5
"Audit of Returns, Appeal Rights and Claims for
Refund-Publication 556 6
"Authorization and Declaration" (Power of Attornoy)
-Form 2848
B
Bank accounts-levy on 4, 5
Books- levy on
C
Child support payments-levy On 5
Claim, Disallowance cf-Statutory Notice of 6, 7
Claim-Form 843 6
Claim, procedure 6, 7
Claim, rejected 6, 7
Claims for refund 6, 7
Claims for refund, processing 6
Claims for refund, time for Sting 6
Collection policy, enforced 4, 5, 6
Commissions-levy on 4
Confidentiality of tax matters 6, 7
Consecutive levies
D
Death benehts-levy on 5
Disallowance of Claim, Statutory Notice of 6, 7
E
Elimination of penalty 3. 7
Enforced collextion policy 4, 6
Enforcement activity 4. 6
Erroneous notice
Evidences of debt-levy on 4
Examination of hnancial condition 4
Excess proceeds of sale 5
Expenses of levy and sale 5
F
Federal Tax Lien 6
Financial condition, examination of 4
Financial condition, statement of 4
Financial Statement, preparation of 4
Form 843-Claim 6
Form 1040X-"Amended U.S. Individual Income
Tax Return" 6
Form 2848-Power of Attorney" 7
Form 2848D-"Authorization and Declaration"
(Power of Attorney)
Fuel-levy 00
H
Hardship, undue `~
Income subject to prior judgment-levy on 5
Insurance policies, cash loan value-levy on 5
Interest I-
Interest on refunds
J
Judgments, prior income subject to-levy on 5
L
Lute payment penalty
Levies, consecutive
Levy ~
Levy, exempt property
Levy and sale, expenses of 5
Levy, release of
Levyon accounts receivable 4
Levyort annuity payments 5
Levyort Area Redevelopment Act payments 5
Levy On bank accounts 4, 5
Levy onbooks
Levy on child sapport payments 5
Levy oncommiosi005 4
Levy on death benefits 5
Levy on evidences of debt 4
Levy On fuel
Levy on income subject to prior judgment 5
Levyon insurance policies-cash loan value 5
Levy on luxuries
Levy on Manpower Development and Training Act -. 5
Levy on Medicare
Levy on pension payments 5
Levy on personal effects
Levy on property
Levy on provisions
Levy on residential property 5
Levy on rights to property
Levy on salaries
Levy On school books 5
Levy on securities
Levy on Social Security payments 5
Levy on Special Treasury Fund~ 5
Levy on tools of a trade, business or profession. -- 5
Levy onundelivered mail 5
Levy on unemployment benefits 5
Levy on wages
Levy on wages subject to a prior judgment
Levy onweariog apparel
Levy on welfare 5
Levy on Workmen's Compensation 5
9
PAGENO="0068"
Lien, Federat Tax - 6
Lien, Notice of 6
Lien, Notice of, filing on payment agreement 6
Lien, Notice of, place of tiling 6
Lien,Notice of, release 6
Lien, Statutory 3, 6
Lien, validity of 6
Luxuries-levy on 5
M
Manpower Devetopment and Training Act
-~ 5
Medicare-levy on 5
N
Notice and Demand 3
Notice and Demand, accelerated 3
Notice, erroneous 3
Notice of Disallowance, claims 6, 7
Nolice of Lien 6
Notice of Lien, filing on payment agreement 6
Notice of Lien, place of filing 6
Notice of Lien, release 6
Notice of Tax Doe 3
p
Payment agreement 4
Payment agreement, Notice of Lien filing 6
Paymenl agreement, monthly 4
Payment procedures 3, 4
Payment, receipts for 7
Payroll agreements 4
Penally, elimination of 3, 7
Penally, late payment 3
Pension paymenls-levy on 5
Perishable properly, sale of 5
Personal ettects-levy on 5
"Power of Attorney-Form 2848 7
Preparation of Financial Statement 4
Proceeds of sole
Proceeds of sate, excess 5
Properly, exempt from levy 5
Property, generally not levied on 5
Property, redemption of 6
Properly-levy on 4, 5
Publicalion 556, "Audit of Returns, Appeal Rights
and Claims for Refund" 6
Refunds, claims for 6, 7
Refunds, interest on 7
Release of levy
Release of notice of lien 6
Representation 7
Residential property-levy on 5
Rights, taxpayer's 7
Rights to properly-levy on 4
S
Salaries-levy ~
Salary, subject 10 prior judgment-levy on 5
Sale and levy, expenses of 5
Sate of perishable property 5
Sale, proceeds
Sates
School books-levy on 5
Securities-levy on 4
Seizures 5
Seized properly, redemption of 6
Social Security payments-levy on 5
Special Treasury Fund-levy on 5
Statement of Financial Condilion 4
Statutory Lien 3, 6
Slululory Notice of Disallowance of Claim 6, 7
Sail for refund 6, 7
T
Taxpayer's rights 7
Toots of a trade, business or profession-
levy on
Transfer of tax cases to another geographic area - 7
U
Undelivered malt-levy on 5
Undue hardship 4, 5
Unemployment benefits-levy on 5
U.S. District Court 6, 7
U.S. Court of Claims 6, 7
V
Validity of lien 6
w
64
R Wages-levy on 4, 5
Wages subject to a prior judgmenl-levy on 5
Reasonable caase, elimination of penalty 3, 7 Wearing apparel-levy on 5
Receipts for payment 7 Welfare-levy on 5
Redemption of seized property 6 Workmen's Compensation-levy on 5
Refund, suit for 6, 7 Witnesses 7
10
PAGENO="0069"
65
CONGRESSIONAL INQUIRIES ON BEHALF OF CONSTITUENTS
Mr. RANGEL. Following that question, how far can public servants,
especially Members of Congress, go in making an inquiry to the IRS
on behalf of one of our constituents I am concerned with that line of
propriety as to whether or not it could be interpreted as political
influence.
When we come across that type of person that you describe, that
just panicked, and who we believe `acted without criminal intent, what
course of action is proper for us to take?
We have problems with the post office, and what is the procedure on
that?
Mr. ALEXANDER. I think you are perfectly entitled to inquire on
behalf of your constituents to see whether or not our procedures are
being properly followed, and whether the constituent is getting fair
treatment and whether the constituent's letter may have been lost `in
one of our refrigerators, for example, or why the constituent~s refund
for 1973 hasn't been paid yet.
Mr. RANGEL. It is such an important point.
Mr. ALEXANDER. I would like to also supply for the record a letter
that we sent to each Member of Congress with respect to congressional
inquiries, which I think might be helpful.
[The letter follows:]
LETTER SENT TO EVERY CONGRESSMAN IN THE 93D CONGRESS, SECOND SESSION ON
SEPTEMBER 30, 1974.
EVERY NEW MEMBER OF CONGRESS RECEIVED THE LETTER ON JANUARY 29, 1975.
As YOU know, the Internal Revenue Code contains strict provisions limiting
the disclosure of taxpayers' affairs except in certain specified situations. These
provisions require the Internal Revenue Service to take particular care that
inquiries about a taxpayer are either authorized by the taxpayer or come within
the statutory and regulatory exceptions to the disclosure prohibitions.
Frequently, a taxpayer who feels that the IRS has not treated him or her
properly will ask either his Congressman or Senator to look into the matter.
This IS a time-honored custom, and we believe that the elected officials in ques-
tion perform a valuable function, both to the constituent and to the IRS, in
ascertaining what the problem is and ensuring that the causes of the problem are
dealt with an appropriate.
This function of elected officials can, however, conflict with the IRS' obliga-
tion to maintain the confidentiality of taxpayers' affairs. Thus, it is essential
that IRS personnel be assured that a particular inquiry has been authorized by
the taxpayer, and that our response is limited to only that information which the
taxpayer consents to have disclosed.
In view of these competing considerations, the IRS earlier this year pre-
pared an instruction sheet to all employees involved in responding to Congres-
sional inquiries. A copy of these instructions is enclosed. As you can see from
these instructions, it has been necessary to adopt rather rigid requirements of
verification. We believe that the law and the taxpayers' basic right of privacy
demand that we do no less. You may wish to bring these instructions to the
attention of your staff personnel who are involved in this area.
I would, of course, certainly appreciate receiving any comments or suggestions
you may have on this problem.
Sincerely,
DONALD C. ALEXANDER,
ComnlissiOner.
PAGENO="0070"
66
(25)00 DiscLosuRE OF TAX INFORMATION IN ANSWERING CONGRESSIONAL INQUIRIES
(25)10 GENERAL
(1) A member of Congress, in his individual capacity, is entitled to only that
information which is available to any person inquiring about the tax matters of
a third party. The disclosure of tax information in most cases may be made only
in accordance with 26 U.S.C. 6103 and 7213, corresponding provisions of the regu-
lations in Part 301 on Procedure and Administration, 18 U.S.C. 1905, and 5 U.S.C.
552, and Manual instructions and Delegation Orders. The manner and extent to
which such information may be furnished is contained in IRM 1272, Disclosure
of Official Information Handbook; in Part 601, Statement of Procedural Rules;
regulations 26 CFR 301.9000-1; and Delegation Orders No. 83 and 86 (revised).
The requirements concerning tax information authorizations from taxpayers are
in 26 CFR 601.502 (c) (2), Conference and Practice Requirements. Generally, all
of the aforementioned provide that tax return information submitted by the
taxpayer and all information oral or written which the Service obtains in its
investigation or examination of such returns are protected from disclosure
except as provided by the law and regulations.
(2) These instructions are intended to maintain the highest possible degree
of privacy for taxpayers. They should not be construed in any way to inhibit a
taxpayers' right to correspond with his elected representatives.
(25)20 BACKGROUND
In some instances when a taxpayer communicates with a member of Congress
about some action the Service has taken or failed to take with respect to his tax
matters, he does not provide the member of Congress with a tax authorization
signed by the taxpayer nor does he execute a formal power of attorney authoriz-
ing the member of Congress to obtain information about his tax matters. In such
a situation, the Service takes the position that the taxpayer has made a limited
waiver of the privilege of confidentiality with respect to his tax affairs, and
there is no legal restriction preventing the Service from disclosing specific infor-
mation required to place in proper context the matter on which the privilege has
been waived. A taxpayer's waiver of privilege as to a portion of his tax affairs
does not legalize or justify disclosure of all of his tax affairs. Indeed, the Service
should limit its response to the factual situation presented by the taxpayer and
disclose only that information required to do so.
(25)30 TELEPHONE INQUIRIES
Sometimes a member of Congress, or a member of his staff, will make a tele-
phone inquiry on behalf of a taxpayer. In such a situation, the Service requires
the member to send the taxpayer's correspondence, which then furnishes us
with a clear understanding of the extent of the waiver of privilege. The Service
will not disclose information absent such correspondence or, as an alternative,
the Service will request permission of the member of Congress to deal directly
with the taxpayer and provide disciosable feedback if requested.
(25)40 CONGRESSIONAL INQUIRY ACCOMPANIED BY TAXPAYER'S CORRESPONDENCE
(1) If the member of Congress encloses with his letter an authorization or a
request from his constituent asking him to secure information concerning the
constituent's tax matters, it is permissible to furnish the member information
about the specific matter disclosed by the taxpayer.
(2) In each case, judgment must be used in deciding how much information
should be disclosed. For example:
(a) If a constituent writes to a member complaining about some collection
action taken by the Service, it is likely that the constituent does not intend for a
full disclosure to be made of all his financial affairs as shown on income tax
returns, or other records which he has furnished the Service. Our reply should
deal as specifically as possible with the issues raised by the taxpayer and avoid
information concerning the taxpayer's financial status or the amount of his
unpaid liabilities. For example, if it is the case, the member may be told that
there are unpaid taxes, that the taxpayer did not fulfill his agreement, and that
after full consideration of the taxpayer's rights, enforced collection action
PAGENO="0071"
67
became necessary. Information to counteract specific allegations about our
collection actions may also be disclosed, if required to correct the record.
(b) A similar type of response might be appropriate where the taxpayer com-
plains about certain audit activity or subsequent assessments. In a case of this
type, the member could be told, if it is the case:
1. how the taxpayer's legal rights had been observed;
2. of the required statutory notices sent to him;
3. that he either agreed to the assessment or did not avail himself of his
appeal rights; and
4. under which section of the law the additional assessment was made.
(25)50 CONGRESSIONAL INQUIRY UNACCOMPANIED BY TAXPAYER'S CORRESPONDENCE
(1) If a member of Congress does not enclose with his letter an authorization
or a request from his constituent asking him to secure information concerning
the constituent's tax matters, the disclosure restrictions shown in (25)10 gen-
erally prohibit our providing such information. In such situations, it will be
necessary to communicate with the member of Congress and ask that he provide
you with a copy of the taxpayer's request. The member of Congress should be
advised that it is necessary for the Service to have such information since the
precise circumstances and extent of the taxpayer's waiver determine whether
and to what extent the Service can or should disclose related information. An
alternative approach should be to request permission of the member of Congress
to deal directly with the taxpayer and provide disciosable feedback if requested.
(2) If the member of Congress does not provide a copy of the taxpayer's
request, our response must necessarily be limited to avoid an unauthorized dis-
closure of tax information. We should, at a minimum, advise the member of
Congress why a particular disclosure of tax information may not be made and
the procedures concerning how the information may be obtained.
(25)00 CONGRESSIONAL INQUIRY INVOLVING COURT CASES
(1) If a member of Congress inquires about a pending court action (other
than before the United States Tax Court) involving his constituent, such inquiry
should be referred to Chief Counsel for reply or for reference to the Department
of Justice for reply, or for coordination purposes.
(2) If a member of Congress inquires about a constituent's Tax Court case
jointly under Commissioner and Chief Counsel jurisdiction, information in the
"public record" (taxpayers' petition, statutory notice of deficiency, answer, reply,
etc.) may be used or enclosed in response to such inquiry after coordination with
Counsel.
(3) If a member of Congress inquires about a constituent's Tax Court case
under the sole jurisdiction of Chief Counsel, such inquiry should be referred to
Chief Counsel for reply.
(25) 70 SPECIAL INSTRUCTIONS
In all disclosure decisions involved in responding to members of Congress and
other similar requests, the particular fact situation must be carefully studied
and the appropriate legal and policy considerations applied to determine how
much information, if any, may be disclosed. While the Service desires to be
responsive to members of Congress when they are acting on behalf of their
constituents, the Service is governed by the law and regulations concerning the
disclosure of tax information.
Mr. ALEXANDER. We do have two issues here. One is the issue of tax-
payer privacy, and the other more important issue that you raise is the
issue of propriety.
Certainly you are entitled to ask us to review our procedures, to
remove those cases, but I am sure you don't want to ask us in a way
that influences our judgment as to the outcome, as to the. exercise of
our investigatory rights and the powers that we have, the limited
powers, to decide cases.
Mr. VANHc. We have just a few moments, and I wanted to divide it
between Mr. Duncan and Mr. Helstoski.
PAGENO="0072"
68
TAXPAYER ASSISTANCE
Mr. DUNCAN. I want to compliment you on your response to the
questions, Mr. Alexander, and I wish that you were sitting down in my
district talking to people who come. in and talk with us, because I
think that they would feel at ease with you.
Do you make an effort to get your employees in the local office to
treat people in a courteous manner? Most of them do, but occasionally,
my office at one time was on the same floor with the Internal Revenue
Office in Knoxville, and some people would come in crying about the
manner in which they had been treated. And also they are unable to
communicate with the person who is talking with them.
I was just wondering what you are doing in that respect?
Mr. ALEXANDER. We are working on this, Mr. Duncan. We deal, as
has been mentioned earlier, in an atmosphere where there is hostility,
and hostility can breed hostility.
We do our best, and we monitor this constantly, to call on our people
to be courteous, to be careful, to not let fright be something that is
taken advantage of in any way, and not let hostility on the part of the
taxpayer who may be hostile to engender hostility on our part.
People are human, and if each of our 80,000 people made only one
mistake a year, that would be 80,000 mistakes.
But we try to avoid them, to prevent them from happening, and we
will do our best to do a better job in the future.
Mr. JONES. Could you supply this for the record? A lot of these
problems that Mr. Duncan brought up seem to result from temporary
people who are not adequately informed. It is a bureaucratic mistake.
You should have a stable work force during the. year.
Mr. ALEXANDER. We are pinned to that now, and it would create
some problems. We are curtailing our hiring of temporaries because
we are aware of this problem, and we are hiring more permanent
assistants.
Mr. DUNCAN. How many one-man offices do you have?
Mr. ALEXANDER. We can supply that.
[The information follows:]
USE OF TEMPORARY TAXPAYER SERVICE REPRESENTATIVES
Fewer temporary Taxpayer Service Representatjve,s will `be used in Taxpayer
Service in FY 1975 than in FY 1974. This fiscal year, only 650 temporaries are
being used in our field offices, while we had over 1200 last year. On the other
hand, we have increased our permanent Taxpayer Service Representative work-
force from 1800 in FY 1974 to over 2300 today.
Generally, temporary TSR's are assigned receptionist and clerical duties such
as tax forms distribution. In instances where it is necessary to use temporary
TSR's in a tax assistance area, however, our field offices have been instructed
to assign temporary TSR's only if they have experience and training comparable
to a permanent TSR and have demonstrated the ability to perform at a level
equal to that of a permanent TSR. Some of our temporary TSR's have worked
for a number of previous filing seasons and have gained this experience and
training.
[The number of one-man posts of duty in the Internal Revenue Service is 52.
This does not include visitation offices which are open on less than a full-time
basis.]
ORGANIZATION AUTHORITY AND CONTROLS
1141.6 REGIONAL OFFICE, DISTRICT OFFICE, AND SERVICE CENTER ORGANIZATION
(1) The organization structure of the regional offices, district offices and
service centers will be prescribed by the Commissioner or the Deputy Commis-
PAGENO="0073"
69
sioner down to the point at which flexibility can be left to local officials without
the loss of essential uniformity. Generally, prescribed organization will go down
through the branch level and guidelines will be provided for organizing below
that level.
(2) Regional Commissioner's Responsibility and Authority-The Regional
Commissioner is responsible for and authorized to prescribe the organization
structure of the regional office, including Appellate branch offices, or suboffices,
below the level prescribed by the National Office within any guidelines which
may be provided. He is also responsible for establishing any regional guidelines
which may be considered necessary for the organization of district offices and
service centers below the level of National Office prescribed structure and for
acting on any changes in prescribed organization or guidelines proposed by
subordinates.
(3) District (and Service Center) Director's Authority-District Directors
and Service Center Directors are responsible for organizing their offices below the
level of National Office prescribed structure and within the guidelines provided
by the National Office and reg~onal office.
1141.7 ESTABLISHMENT AND DISCONTINUANCE OF BRANCH OFFICES AND OFFICES
BELOW THE DISTRICT HEADQUARTERS
(1) Regional Commissioners will develop and submit for review and approval
of the National Office proposals which deal with the establishment or discon-
tinuance of Appellate branch offices or suboffices.
(2) The Regional Commissioner is responsible for authorizing the establish-
ment or discontinuance of offices below the district headquarters, as defined in
IRM 1118.8, except that the closing of any such office in a redevelopment area
designated as such in accordance with Section 401 of the Public Works and
Economic Development Act of 1965, Public Law 89-136, shall be submitted to the
Deputy Commissioner for prior approval. If in doubt as to whether an office is
in a redevelopment area, information should be requested from the local field
office of the Commerce Department or, if information is not available there,
from the Director, Facilities Management Division.
(3) Decisions on establishing or discontinuing offices below the district head-
quarters shall be made in accordance with the following guidelines.
(a) From the standpoint of efficient assignment of personnel and rotation of
cases, offices below the district headquarters are usually justified in cities where
the Internal Revenue workload warrants the stationing of at least six employ-
ees (including both technical and clerical employees).
(b) Although workload is the primary criterion for establishing an office, con-
sideration must also be given to the distances that taxpayers must travel for
assistance and conferences, and to the cost of travel by Internal Revenue em-
ployees. If needed on account of these factors, offices may be established in:
1. each city of 25,000 and over population which is not included in the same
metropolitan area (as defined by Census) as a larger city in the same district;
2. the largest city of each county, provided the county has 50,000 or more pop-
ulation; and
3. the largest city in each county, provided the county has 5,000 or more popu-
lation, which city is located more than 60 miles by year-round surface travel
from the nearest office established under guides 1 and 2 above.
(c) Strict application of the guides above is not practicable, or desirable, in
all instances. For example, the availability of assistance and conference facilities
in a nearby city may make it unnecessary to have an office in a city meeting the
criteria in (b) above. Likewise, the Regional Commissioner is authorized to main-
tain an office in a city meeting neither the criteria in (a) or (b) above if he
finds exceptional circumstances which, in his opinion, require such an office in
the best interests of the Service. It is the responsibility of each District Director
to maintain a continuing watch on conditions in his district which would war-
rant establishment of new offices or discontinuance of old offices, and to make
appropriate recommendations to the Regional Commissioner. If discontinuance
of an office is indicated, it should be closed as soon as feasible, taking into
account personal hardship on the employees, impact on the community, and the
desirability of closing the post from the standpoint of efficient management and
effective supervision. This should be done by normal attrition and voluntary
transfer and reassignment as far as is reasonable, minimizing hardships on
employees resulting from involuntary transfers.
(d) It may be necessary to establish more than one office in a large metro-
politan area due to transportation facilities or other local factors. It might be
PAGENO="0074"
70
advisable to substitute another city for the largest city of a county where the
substitute city is about the same size as the largest city and is more centrally
located or has other advantages over the largest city.
(4) District Directors are the officials primarily responsible for determining
the need for offices below the district headquarters. In meeting this responsibil-
ity, they should be objectively responsive to public demand and keep current on
economic changes, shifts or trends in population and other factors which may
have a bearing upon the need for such offices, including the Service's responsi-
bility for providing essential service to taxpayers throughout the year. In con-
sidering the closing of an office in a redevelopment area, careful consideration
should also be given to the need to alleviate distress in such areas and to exercise
forbearance to avoid worsening existing conditions of unemployment or under-
employment. Upon determining that an office should be established or discon-
tinued, the District Director will make his recommendations to the Regional
Commissioner.
(5) Although closing an office below the district headquarters may lower
operating costs and increase efficiency without any undue effect on taxpayer
service, an uninformed public may look at it only as a withdrawal of service
which will seriously handicap their obtaining knowledge and help in fulfilling
tax obligations. Therefore, ea~cept when the discretion authorized in paragraph
(8) of this subsection is exercised in the closing of small posts of duty, public
relations action must be taken before such changes are made to inform the public
of what is to be done, why it is being done, and how the Service will continue to
provide essential taxpayer service, especially during the income tax filing period.
To the maximum extent possible, civic leaders and local officials should be
informed of proposed changes in person by District Directors or other top
officials.
(6) Written notice should be given in advance, ea~cept when the discretion
authorized in paragraph (8) of this subsection is exercised in the closing of
small posts of duty, to all members of Congress of action to open or close an
office in their constituencies. This should be done by the Regional Commissioner
or District Director, whichever in the judgment of the Regional Commissioner
is most appropriate, and should, whenever practicable, precede any other action
which would alert employees or other interested individuals who would be
affected by the proposed change. Letters of notification on proposed closings of
offices must reflect the specific considerations that went into the decision to close
and show specifically how taxpayers in the area will be serviced under the new
arrangements. Notifying the Congressmen in question is effective only when
the reasons are stated succinctly and properly. Closings apparently based only
on small economies such as rent and travel costs give the appearance of being
indefensible and provoke controversy. Exhibits 1140-i, 1140-2 and 1140-3 are
sample letters dealing with various situations involved with office closings. The
letters are not meant to be prototypes for all notifications. They should, however,
be used as guides in formulating congressional notifications. They emphasize tax-
payer assistance and employee relations. By stressing the qualitative advantages
rather than the quantitative the Service is in a stronger position to resist
challenges.
(7) Advance copies of the notification letters, which should contain substan-
tially the same information which will be furnished to local persons and groups,
will be sent by the Regional Commissioner to the Deputy Commissioner for his
information so as to reach him at least ten days before the date of mailing to
the members of Congress. These letters to the Senators and Representatives
should be mailed sufficiently in advance of the effective date of the office change
to permit receipt and consideration of any replies before action is taken. In the
normal course of events, it is anticipated that these matters can be so planned
as to permit giving 60 days notice except in extraordinary circumstances.
(8) At the discretion of the Regional Commissioner, the requirements in
paragraphs (5), (6) and (7) of this subsection need not apply to closing small
posts of duty which have outlived their usefulness because of changes in economic
conditions, reduction in population, etc., when the personnel at that office can be
relocated, without reduction in grade or salary, to another office where they will
be of greater service to Internal Revenue and the public. Generally, normal
attrition without the filling of vacancies will materially assist in these situa-
tions and result in less possibility of employee dissatisfaction. When the discre-
tion authorized by this paragraph is exercised, the Regional Commissioner will
notify the Commissioner and Deputy Commissioner as soon as the decision is
PAGENO="0075"
71
made. The notification should explain the specific considerations that went into
the decision to close and the actions to be taken concerning affected employees.
(9) Regional Commissioners will furnish to the National Office advice of offices
below the district headquarters established or discontinued under authority
granted in this subsection, in order that an up-to-date record as to the number
and location of such offices will be available centrally. This will be done under
procedures provided in IRM 1(14)50, Space Management Handbook.
CONFIDENTIALITY OF TAX RETURNS
Mr. HET~sTosII. This goes to the question of privacy.
Is the submission of IRS taxpayer information to Federal agencies
automatic on the request of that particular agency?
Mr. ALEXANDER. On the request of some agencies, yes. It is pretty
much automatic. We have an arrangement with all but two States, and
we submit information on their request. WTe have tightened up on it
somewhat, and we are doing our best to make certain that the people
to whom we supply information have the same regard for this vital
right of taxpayer privacy that we do.
Mr. HET~sTos1~I. You mentioned that the Executive has authority to
secure information which would go to the FBI or the U.S. Attorney's
Office, and you mentioned this casually, for criminal investigations.
What makes that determination of criminal investigaton-does the
IRS peruse the return prior to the submission of that return to one of
those offices?
Mr. ALEXANDER. If the U.S. Attorney makes a request for a tax
return, the particular person would have to justify that request and
explain that, and then explain why they need it.
There is a~ paragraph at the bottom of :the letter that contains their
undertaking to use this information only for the use required, and to
hold the information confidential.
Mr. HELSTOSKI. What does that mean?
Mr. ALEXANDER. Of course, in a court case, you have a problem.
Mr. HELSTOSKI. Is it that in supplying it for court purposes, the
confidentiality is violated, as far as the relation of IRS to the par-
ticular office in question?
Mr. ALEXANDER. As far as the relationship of the office in question
is concerned, to other offices and the public, if I understand correctly
the issue is what these offices, the TJ.S. Attorney and the Department
of Justice, do with the information that we give them or that we are
directed to give them by present law and present regulations. They
undertake to safeguard that information that we give them against
improper use and improper disclosure.
Would you care to add to that?
Mr. WHITAKER. Of course anytime the Department of justice has a
criminal matter under investigation and requests income tax informa-
tion, they must be free to use it in their prosecution. There are oc-
casions where, in the course of a. prosecution, the tax information must
be used in a court proceeding.
Mr. HELSTOSKI. I am not talking about submission of information
to the courts; I am talking about allegations, or if there is an investi-
gation of an individual, there may be some allegations, and the re-
quest for tax information, to IRS. Do you automatically submit it
because it has been requested? What is the basis or substantiation for
the request? That is what I am seeking.
Mr. ALEXANDER. We have regulations on that.
PAGENO="0076"
72
Mr. HELSTOSKI. If your determination is that there is no valid reason
why that request should be honored, then what is the basis for judg-
ment there?
Mr. ALEXANDER. We have questioned certain requests that have been
made to find out whether the request was, indeed, made for a purpose
contemplated by the statute and the regulations, and to find out
whether we should honor the particular request.
So, in answer to your initial question, this is not an automatic
matter.
I would like to supply the information for the record.
[The following was submitted:]
INSPECTION OF RETURNS BY FEDERAL AGENCIES
Section 6103(a) of the Internal Revenue Code provides that returns shall be
open to inspection upon order of the President. Treasury regulations approved
by the President, 26 CFR 301.6103(a)-i (e), (f), (g), and (h), provide that the
Secretary of the Treasury or the Commissioner of Internal Revenue may permit
the head of a Federal agency to designate an employee of his agency to inspect
tax returns where necessary in connection with some matter officially before the
agency. The request must be signed by the head of the agency (no lesser official
may make the request) and state the official purpose, the name and address of
the taxpayer whose returns are desired, the type of return and the taxable period,
and the name and title of the employees designated to inspect the returns or
receive the information. WThen requests meet all of these criteria, they are
honored. If any one requirement is not met, the request is denied. If IRS has
any reason to believe that the purpose stated is not a valid one, the requester is
contacted for further information before a decision to honor the request is made.
Requests from the Department of Justice may also be signed by the Assistant
Attorneys General of the various divisions and by United States Attorneys. We
will deny access to tax returns if the reason given is for an investigation of a
tax matter, other than a tax case referred by IRS to the Department of Justice,
as such investigations are under the jurisdiction of the Internal Revenue Service.
Following are copies of correspondence from two United States Attorneys and
our replies, with identifying information deleted, showing typical reasons and
the emphasis placed upon confidentiality by both Justice and the Service. In
addition, Notice 129 is affixed to each return furnished. Also provided in the
following charts are the number of requests for returns made by Federal agencies
for calendar year 1974 and the number of taxpayers (individuals and corpora-
tions) involved, as well as a summary of reasons for the request.
IRS does not peruse the return prior to submission to the agency for the pur-
pose of deciding whether it contains information pertinent to the reason for the
request. It is screened, however, to remove documents which, if disclosed, might
hinder a tax case and the administration of the tax law or might identify or
tend to identify informants. In requests involving a number of taxpayers, IRS
may deny the furnishing of copies of returns, but may extract and provide
selected information from the returns. Also, we encourage the inspection of
returns at an Internal Revenue Service office, when possible, rather than provid-
ing copies.
The Federal Bureau of Investigation is a part of the Department of Justice
and not an independent agency, and the Director of the FBI does not have
authority to make requests for tax returns or tax data, other than tax checks.
Therefore, any requests fof returns for use of the FBI must be made by the
Attorney General, the Deputy Attorney General, or an Assistant Attorney
General.
In addition to disclosure to Federal agencies, Section 6103(b) of the Internal
Revenue Code and the regulations issued thereunder provide for access to tax
return information by States. But only if the use is for State or local tax
administration purposes will it be made available and then only to State tax
officials who have been designated in writing by the Governor. At the present
time we have Federal-State tax agreements for the exchange of tax information
with all the States except Nevada and Texas, and with the District of Columbia,
American Samoa, Guam, and Puerto Rico. The same degree of safeguards are
instituted to prevent unauthorized or unwarranted disclosures of tax information
to States as to Federal Agencies.
PAGENO="0077"
December 6, l97L~
Commissioner of Internal Revenue
1111 ConstitUtiOn Avenue, h. ti. DEC9 ~
Waahir~~ton, D.C. 2O22~4
~ C~:J
Attentfor:OF:D 1ScF3Jp? 9~
Dear Sirs:
Pursuant to Title 26, Code of' Federal Reou.1.aticns,
`Sectfcn 301.6lC3(a)-l(g)(h), it is recuested that tnis
cfrice be furn!shec codes of the income ta~ returns for
the perIod 1971, 1q72 and 1973 torether With ~oy anu alL
ether information collected by your revunue intalllrence
agenos, of Social SecurIty .umcor
(Bus~uess oduress: date of bIrth:
We respectfully reauert tWa; this
matter receiva expedIted treatme~.t and that the income
tax returns be furnished to us as soon as possisle.
This office iS conductirF an offIcIal investiratluil
involvint cho violation of TItle 18, ~hii:ec States Code,
bectiors l7C9 ano ~3lP relatin; to theft or r'~ceipt of
~toieri n~il ana interstate transportation of rtoien secur-
~.t~es and these documents are needed in connectIon with
our investigatIon.
Documents furnished In response to this recoest wIll
b~ lImited in use to the purpose for whIch tney are re-
quested and will uncier no ciroumstsnces be made cuhl;c
e~-,; to tWa extent that publicity necessarily
if they are used in l~tIgaticn.
Access to these documents, on a ne~d-tu-knoW basin,
will he UnIted to those attorneys or employees o~'
office who are actively erpaced in be inwestlpatlon: or
subseausno liticatlon, or other Federal emplo:.355
ting me in tne investIgation. Persons havin; acceso 00
73
.4mitth ~t:tf~e ~LpsrhaEmt of ~uz'
UNITED STATES ATrORNEY
SorrUtRN DTSTflICT o~
VNIT?2' BTATE.3 COE0~TUOUSE
PAGENO="0078"
74
EJC:SA:slc )
-d-22~p
Commissioner of Internal Revenue -2-- Deceaber 6, l57~4
these documsnts will he cautioned as to the confidentiality
of the information contaIned the~-ein ant of the cenaity
provisions of Section 72L~ of Title 26 and SectIon l9O~
of Title l~, United States Coce, re~-ard~ng the unautho-
rized dIsclosure of such informatIon.
~erv truiv~ vou~s.
United States Attorney
cc: Service Center
PAGENO="0079"
75
DEC 24 1974
C? D
Unito~ Statc~ Attor~e~
* Southern Dirtrict o~
m~it~: ~t~tfZ~S coo-'
i)~r Mr,
to ret
in recporso to your l~tt~r o~ fler~-~or ~, lt~74,
`-~ov~ a -~z r~ic'~ `-it r
D~r'?:~cr to furnic~ you ~~i'~i o1 t~e rct~ docun~it~.
Co~i~ of roturr~ ~tr~ i or-'~it~on ~v~il~le ~`11~ bc
furi~i-~~-~ on'.y for th~ ~pr-~r~ ~cifi"~ ir ~cur 1ett~r,
~nfi ~`~th ~ ~ t~ot t~-~v will ~o u~c'~ strictly
in ~ wzh, ~rv~ ~ojort to th'~ 1.itOt~t~ of, t~o
fi~r1o~nire ~rovi ~ of tho ternol ~ovc~o~ Co:'c ~crta1n~-
ing to c fic~c'nci:iity &nc~ tax~~yor re~ht~ of ~
If ot~'~r i~~-~cr-,l l~e~ or~ a~i-oo~ to your cffice
jOY Ot~'DO `~ ~ !ru~Ot lit~~it1on,
pl'~~ c-'i:n t~o:~ that t'~ ti:: irfory~ition ~h~iicI nec be
~ise~' or ~ for ~n! ~ ~
I' wt~ c~n I~o of ~rthev t~nit~tance, lee~a l~t un
~inccre1y,
(Sgn~d) Charles A~ Cibb
Ch1~, ~ staff
cc: Service Center Off~co cf ~ni~tDnt CCY2iSS~Cfl~r
(Ccn?li.nc0)
PAGENO="0080"
76
th~~u~o STAns ArroL~E. ~Laite~ ,~tzr±~ i~arhn2r.A at .1J1'tr
~ ?~1TX&L~ ~2~D SU~EZ j tL)
UNITED STATES ATTORNEY
Nognffpr~ Dtsmtc-r op
September 17, 1974
Commissioner, Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, D.C. 20224
Re: v. United States
1 ~.
C~ntiemen:
The plaintiff in the referenced action has filed
suit against the United States under the Federal Tort
Claims Act for damages allegedly incurred as a result
of the nogligent and careless supervision of evloyees
at the Veterans Administration Hospital in
Among other items, the plaintiff claims loss
of income due to his total inability to work as a result
of the alleged severe personal injuries. ~e accordin~iy
request, pursuant to the provisions of Title 26, C.F.R,
S3Ol.6l03(a)-l(h), that you provide us with photostatic
copies of the income tax returns of
and any related papers, for the years 1968-1973. For
your information and assistance in furnishing the returns,
please be au~ ~ that plaint~r resi ie.~ .~.
Mr. Social
Security Number is
Our use of documents furnished in response hereto
will be limited to the purpose for which requested and
~` SEP 19 ~974
CP:D
PAGENO="0081"
77
Page 2
will under no condition be made public except to the
extent that publicity necessarily results if used in
litigation. Access to the documents, on a need-ro-know
basis, will be limited to those attorneys or employees
of this office who are actively engaged in the pending
litigation, or other Federal employees assisting therein.
Persons having access to the documents ~zi1l be cautioned
as to the confidentiality of the information they c~ntaia
and of the penalty provisions, of §7213 of the Internal
Revenue Code and Title 18, United States Code, §1905,
regarding the unauthorized disclosure of such information.
If you need any further information, you may contact
Assistant L'nited~States Attorney at
to whom the case is assigned.
~ truly vonr~~
,7 United States Attorney
cc:
57-236 0 - 75 - 6
PAGENO="0082"
78
S(p
U 1974
C? F)
Ynitof St~its~ Attorney
~iort~urn L~istrict of
Doar Mx.
In ro: v. ~nito1 States
rivil ~ ( ;~n,
1r ronooe to your lottor of 5oter~?r 17, 1974, we
h~we aut::oriz~ our ~i'~trict ir~-'ct~r ir~ to
furr~i~-~ ;ou ccj~ics of t~o r o~to*T Jocinonts.
Coior of r~turrs i~forr~tion availahlc `:111 be
furnis~v~c~ oi~t~ r t~o ur: ~c:i fi~ in your l~ttor,
ar~ ~zit~ t.~.-. un:crst~nc~irp: t~r~ t~ic~ uill strictly
in a:cor.T~:c~ %*it~, a~f~ su~joct to t~io ii it~tior~ of, th~
aisclns~-r~ ~`rovisions of: `f~e Int~rnn1 f:ievcnu.~ Co~-~ ertain-
ing to Co if:~tiality an~ t:~xo~yor ri~:hts of ~riv'cy.
l~ ot~or F~c1era1 o:. o"~o3 are assir,nof tc ~rur office
to assist is t~ii~ mv tj~t1C~ Cr in ~u~5C:u~ uitiC~OtiCfl,.
ple~st coutmon t~c'~ tiat ~ tox isforuit ion s;ou1~ rjot
use'i or cinso~inaLed for ~i-iy ot~ar purjose.
If we can be of fu~~r ---sistonce, picase lcit us kricur.
Sincerely,
Otac~
!Iorac~ J. Fite
Actin.; C'iiof, ~isrlosuro Staff
Offica of As'~ist:rit Co~..::i5cioncr
cc: DD-. (Co~np1~ance)
PAGENO="0083"
79
Disclosure
Limitations
Unauthorized disclosure,
printing or publishing of any
Federal return, copy, or part
thereof, or information there~
from, is punishable by fine or
imprisonment and dismissal
from office or employment. See
section 7213, Internal Revenue
Code and section 1905,
Title 18 U.s.c.
Internal Revenue Service
Notlco 129 (1-70)
GPO o43-16-79468-1 360-581
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Numberof
Numberof
Numberof
Federal agency requests
taxpayers
returns
Department of Agriculture
Bureau of Alcohol, Tobacco, and Firearms
Department of Commerce
3
1
1
5
2
5
U.S. Customs Service
1
3
Federal Deposit Insurance Corp
Federal Home Loan Bank Board
1
5
12
50
General Accounting Office
Interstate Commerce Commission
1
2
`342
9
Department of Justice (other than U.S. attorneys)
U.S attorneys
Department of Labor
384
1,594
1
3,228
4,448
2
Securities and Exchange Commission
17
93
Renegotiation Board
1
11
Totals
2,012
8,210 29, 529
`Returns were not furnished; selected information was extracted from the returns by IRS and furnished to GAO.
Note-The reasons given by these agencies for requesting returns are summarized in the attached pages.
SUMMARY on REASONS FOR REQUESTS OF FEDERAL AGENCIES FOR INCOME TAX
RETURNS
Department of Agriculture
Investigations under the Packers and Stockyards Act into possible illegal pay-
ments to employees.
Bureau of Alcohol, Tobacco and Firearms
Investigation involving the manufacture and sale of ammunition, and the
dealing in firearms without a Federal license, in violation of the Gun Control
Act of 1968.
Department of Commerce
Because of the sensitivity of the position for which an individual is being
considered.
U.$. Customs service
Official matter involving the collection of customs duties.
Federal Deposit Insurance Corporation
Investigation of allegations concerning the sale of shares of stock which had
been pledged to a bank as collateral for a loan, and which were subsequently
determined to represent stolen securities.
Federal Home Loan Bank Board
Investigations made pursuant to authority granted under Section 407(m) (2)
of the National Housing Act, as amended (12 U.S.C. 1730(m) (2)), into apparent
conversions and misappropriation of association funds, wrongdoing by associa-
tion officers in the area of unaccountable and unjustifiable travel and entertain-
ment expenses, and possibility that employees and officers of the Board may
have used resources of the association for their personal enrichment and may
have benefited substantially from transactions involving the association.
General Aocounting Office
Review of the effectiveness of the Department of Housing and Urban Develop-
ment procedures for income recertification for the section 236 Rental Housing
Assistance Program. (Returns were not furnished. Certain information was
extracted by IRS and furnished to GAO.)
Interstate Commerce Commission
Investigations of regulated motor carriers under the jurisdiction of the Inter-
state Commerce Commission.
Department of Justice
The Attorney General__Investigations into violations of various Federal
statutes; drug enforcement programs; investigations by Watergate Special
Prosecution Force.
80
INCOME TAX INFORMATION REQUESTED BY FEDERAL AGENCIES WHICH WAS AUTHORIZED UNDER
26 CFR 301.6103(a)-i-CALENDAR YEAR 1974
1~
12
178
`342
45
10,446
18,062
386
21
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81
Antitrust Division.-Possible violations of antitrust laws, Truth in Lending
Act, Clayton Act, etc.
Civil Division.-LitigatiOn involving the United States Government; rede-
termination of excess profits on renegotiable contracts.
Civil Rights Division-Employment discrimination suits under Title VII of
the Civil Rights Act of 1964.
Criminal Division.-Strike Force investigations ; Grand Jury investigations;
combatting fraud; narcotics targets; possible violations of various Federal
statutes; possible violations of securities regulations; bribery cases, and other
criminal investigations.
Land and Natural Resources Division.-Condemnation proceedings, court
cases.
United States Attorneys
Official investigations involving violations of various Federal statutes, includ-
ing investigations of bank fraud, mail fraud, bribery, bankruptcy, embezzlement,
etc. ;~ collection of judgments; litigation against the United States; Grand Jury
investigations; violations of narcotics laws; determination of debtors' where-
abouts and ability to pay.
Department of Labor
For use in a lawsuit.
Securities and Exchange Commission
Investigations into violations or possible violations of the federal securities
laws.
Renegotiution Board
To enable the Board to perform its duties under the Renegotiation Act of 1951,
as amended.
PROCEDURE AND ADMINIsTRATIoN
§ 301.6103(b) Statutory provisions; publicity of returns and lists of taxpayers;
inspection by States.
SEC. 6103. Publicity of returns and lists of taxpayers. * * *
(b) Inspection by States-(1) State Officers. The proper officers of any State
may, upon the request of the governor thereof, have access to the returns of any
corporation, or to an abstract thereof showing the name and income of any
corporation, at such times and in such manner as the Secretary or his delegate
may prescribe.
(2) State bodies or commissions. All income returns filed with respect to the
taxes imposed by chapters 1, 2, 3, and 6 (or copies thereof, if so prescribed by
regulations made under this subsection), shall be open to inspection by any
official, body, or commission, lawfully charged with the administration of any
State tax law, if the inspection is for the purpose of such administration or for
the purpose of obtaining information to be furnished to local taxing authorities
as provided in this paragraph. The inspection shall be permitted only upon
written request of the governor of such State, designating the representative of
such official, body, or commission to make the inspection on behalf of such of-
ficial, body, or commission. The inspection shall be made in such manner, and at
such times and places, `as shall be prescribed by regulations made by the Secre-
tary or his delegate. Any information thus secured by any official, body, or com-
mission of any State may be used only for the administration of the tax laws
of such State, except that upon written request of the governor of such State any
such information may be furnished to any official body, or commission of any
political subdivision of such State, lawfully charged with the administration of
the tax, laws of such political subdivision, but may be furnished only for the
purpose of, and may be used only for, the administration of such tax laws.
§ 301.6103(b)-i Inspection by States.
(a) Corporation returns of income tax or unemployment tax. Under the pro-
visions of sections 6103(b) (1) and 6106, the proper tax officers of a State shall
have access, upon application made in accordance with the provisions of this
paragraph, to the returns filed by any corporation with respect to the taxes
imposed by chapters 1, 3, and 6 of the Code and with respect to the unemploy-
ment tax imposed by chapter 23 of the Code, or to abstracts of such returns.
Application for access to the return of any corporation, or abstracts thereof,
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82
Commissioner of Internal Revenue, Washington 25, D.C. The application shall
set forth the reason why access is desired; the names and official positions of
the officers designated to have such access; and, with respect to each return to
which access is desired, the name and address of the corporation filing the return,
the kind of tax (income tax or unemployment tax) reported on the return, and
the taxable year covered by the return.
(b) Income tax retnrns-(l) In general. Income tax returns filed with re-
spect to the taxes imposed by chapters 1, 2, 3, and 6 of the Code shall, upon
application made in accordance with the provisions of this paragraph, be open to
inspection by any official, body, or commission, lawfully charged with the ad-
ministration of any State tax law, or any properly designated representative of
such official, body, or commission, if the inspection is for the purpose of such
administration or for the purpose of obtaining information to be furnished to
local taxing authorities as provided in section 6103(b) (2). The application shall
be made in writing and signed by the governor of the State and shall be ad-
dressed to the Commissioner of Internal Revenue, Washington 25, D.C. The
application shall state-
(i) The title of the official, body, or commission by whom or which the in-
spection is to be made;
(ii) By specific reference, the State tax law which such official, body, or com-
mission is charged with administering and the law under which he or it is so
charged;
(iii) The purpose for which the inspection is to be made; and
(iv) If the inspection is for the purpose of obtaining information to be fur-
nished to local taxing authorities, (a) the title of the official, body, or comnmis-
sion of each political subdivision of the State, lawfully charged with the admin-
istration of the tax laws of such political subdivision, to whom or to which the
information secured by the inspection is to be furnished, and (b) the purpose for
which the information is to be used by such official, body, or commission.
(2) Returns filed in internal revenue district within or including ~tate-(i)
General inspection. Permission may be granted by the Commissioner to any State
for general inspection of returns of the taxes imposed by chapters 1, 2, 3, and 6
of the Code which are filed in an internal revenue district within or including
such State. If such general inspection is desired, the application made to the
Commissioner in accordance with subparagraph (1) of this paragraph shall
include a statement that general inspection is desired of returns filed in the
internal revenue district or districts within or including the State with respect
to the taxes imposed by chapters 1, 2, 3, and 6 of time Code. Permission granted for
the general inspection provided for in this subdivision shall continue in effect
until such time as the Commissioner by w-ritten notice to the governor of the
State provides that such inspect:ion w-ill be permitted only on the basis of
periodic applications therefor. The governor shall supply to the district director
with whom the returns to be inspected were filed a written list of the names of
the individuals designated to make the inspection on behalf of the official, body,
or commission named in time application to the Commissioner, and shall keep
such list current by appropriate deletions or additions as may be necessary.
(ii) Ii~spection of specific returns. Permission for the general inspection pro-
vided in subdivision (i) of this subparagraph includes permission to inspect a.
specifically identified return when desired. However, a State interested only in
examining the returns of particular taxpayers may inspect such returns on
written application therefor to the Commissioner. The application in such case
shall state, in addition to the information outlined in subparagraph (1) of this
paragraph, the name and address of each taxpayer whose return or returns it is
desired to inspect, the taxable year covered by each such return, and the names
of the individuals designated to make the inspection on behalf of the official,
body, or commission named in the application.
(3) Returns filed in other internal revenue districts. In the case of returns
filed with the Director of International Operations or in an internal revenue
district other than one within or including the State requesting the inspection,
permission for the inspection provided for in subparagraph (1) of this para-
graph will be granted only with respect to specifically identified returns. The
application for such inspection shall be made to the Commissioner as provided in
subparagraph (1) of this paragraph and, in addition to the information outlined
in such subparagraph and in subparagraph (2) (ii) of this paragraph, shall
specify the internal revenue district or office in which the returns to be inspected
are believed to have been filed.
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83
(c) Time and place of inspection. The internal revenue officer (district director
or Director of International Operations) with whom the returns were filed is
authorized to make such returns available in accor.dance with permission granted
by the Commissioner pursuant to this section. Such officer shall set a convenient
time and place for the inspection. The inspection will be permitted only in the
presence of an internal revenue officer or employee and only in an office of the
Internal Revenue Service during the regular hours of business of such office.
(d) Definition of return. For purposes of section 6103(b) and this section, the
term "return" includes information returns, schedules, lists, and other written
statements filed with the Internal Revenue Service which are designed to be
supplemental to or to become a part of the return, and, in the discretion of the
Commissioner, other records or reports containing informtaion included or
required by statute to be included in the return. An application for exemption
from income tax under section 501 (a) filed by an organization described in
section 501 (c) or (d) in order to establish its exemption is not a return for
purposes of section 6103(b). For provisions opening to public inspection exemp-
tion applications with respect to which a determination has been made that the
organization is entitled to exemption from income tax under section 501 (a), see
section 6104(a) and ~ 301.6104-1.
(e) Cross reference. For additional provisions relating to inspection of re-
turns on behalf of States, see paragraph (d) of § 301.6103(a)-i. For penalties
for unauthorized disclosure of information, see section 7213.
Mr. HELsTosIcI. Could I `ask two questions which can be responded
to later?
That is-the seizures in respect to levies, in which you virtually put
people out of business, and jeopardy assessments.
[The following was submitted for the record:]
LEVY AND SEIZURE
Section 6331 of the Internal Revenue Code provides that when the taxpayer
neglects or refuses to pay the delinquent tax within ten days after notice and
demand for payment, levy action may be initiated.
We realize that the power the Congress gave to levy to collect taxes must be
judiciously used. For this reason, our collection procedures are designed to
secure voluntary payment whenever possible. After a tax is assessed, the law
only requires that one notice be sent. It is our normal practice, however, to send
four notices to individual income taxpayers and three notices to business tax-
payers. The last notice in each case clearly states that levy action will be taken
if the liability is not paid.
Generally, there are only two exceptions to this notice procedure. First, in the
case of large employment tax liabilities the only notice issued is the statutory
notice and demand. This exception exists primarily to I)rOtect the Government's
interest in the trust fund area. Tax money withheld from employees' wages and
salaries belongs to the employees from whom it is withheld and to the Federal
Government, to whom it is payable, not to the employer. The employer holds it
in trust and cannot use the money of others to compete with other businesses who
do observe the filing requirements of the law. The notice procedure in large
employment tax cases also reduce,s the possibility of further tax delinquencies
pyramiding to the point where the taxpayer can no longer satisfy the total
liability.
The second exception to the standard notice procedure involves jeopardy
assessments. These are used sparingly and care is taken `to avoid excessive and
unreasonable assessments. Jeopardy Assessments are limited to amounts which
reasonably can be expected to protect the Government; and each must receive the
personal approval of the District Director.
In the routine case, more than three months will have elapsed from the date
of the first notice before levy action is taken. During this period, the taxpayer has
an opportunity to contact us to raise a question about the correctness of the
liability or to bring to our attention that payment of the tax liability would
create hardship. Where reasonable dou'bt is raised as to the validity of `the assess-
mnent, levy action is deferred while a determination of the correctness is estab-
lished. If appropriate, the assessment may be abated, or missing credits may be
located and applied. Where the taxpayer establishes, through submission of
financial data, that payment of the amount due would create undue hardship on
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84
the taxpayer or his family, efforts are made to arrive at a payment arrangement
based upon the taxpayer's ability to pay.
Where the taxpayer has refused or neglected to respond to our notice or where
the response was inadequate, levy action is taken. Section 6334 of the Internal
Revenue Code exempts from levy:
1. Wearing apparel and school books;
2. Fuel, provisions, furniture and personal effects, which in aggregate do not
exceed $500 in value;
3. Books and tools of a trade, business or profession which do not exceed $250
in the aggregate;
4. Unemployment benefits;
5. Undelivered mail;
6. Annuity or pension payments under the Railroad Retirement Act, benefits
under the Railroa.d Unemployment Insurance Act, special pension payments
received by a person whose name has been entered on the Army, Navy, Air
Force and Coast Guard Medal of Honor role, and annuities based on retired or
retainer pay under Chapter 73 of title 10 of the United States Code;
7. Workmen's compensation; and
8. So much of salary, wages, or other income if the taxpayer is required by
judgment of a court of competent jurisdiction, entered prior to date of levy, to
contribute to support of his minor children.
Beyond the levy exemptions provided by statute, the IRS has established, for
practical purposes, many administrative exemptions. Currently these exemptions
include:
1. Public welfare payments;
2. Allowances for governmental training and skill development programs;
3. Salaries and wages in definite hardship cases;
4. Insurance policies, as a general rule, with a face value of $1,000 or less;
5. Except in the most flagrant cases, benefit income such as Social Security,
VA pensions, GI benefits, etc.
In enforcing collection through levy action, the following service policies are
provided:
(1) "The Code authorizes the service of as many successive levies on the same
or other income, property, or rights to property, as may be necessary to fully
satisfy the tax liability. However, sound judgment should be exercised and the
service of successive levies on the same source of income, or type of property,
should be so timed as to avoid undue hardship to the taxpayer and/or his family.
(2) "With the exception of certain statutory deductions (social security,
income tax withholding, civil service retirement, etc.) a levy legally attaches to
the gross amount of the accrued wages or salary. However, in the interest of
administrative expediency, a levy will be considered as attaching only to the
"take home" pay of the delinquent taxpayer unless it is determined that the
taxpayer is voluntarily allotting his pay to an extent that would defeat the pur-
pose of the levy.
(3) "Whenever a taxpayer raises a question or presents information creating
reasonable doubt as to the correctness or validity of an assessment, reasonable
forbearance will be exercised with respect to collection provided (1) adjust-
ment of the taxpayer's claim- is within control of the Service, and (2) the
interests of the Government will not be jeopardized thereby.
In effecting levy action, primary consideration is given to levy on such property
as wages, salaries and bank accounts, since the proceeds can be applied directly
to the taxpayer's delinquent account. Where levy on such property does not fully
satisfy the tax liability and the taxpayer still neglects or refuses to make pay-
ment or arrangements to pay as appropriate, property not readily convertible to
cash will be considered for levy. Levy on this type of property, which is usually
in the taxpayer's possession, is referred to as a "seizure."
From time to time, we have been criticized for seizing going businesses to
collect employment taxes. It is our procedure to initiate seizure to a going
business only when every reasonable effort has been made to collect the delin-
quent taxes on a voluntary basis and no other reasonable alternative is available.
In many cases it is the only action available to prevent the continued pyramiding
of employment tax liabilities. However, in cases involving nursing homes or
hospitals no seizure action will be taken until we are assured that the patients
will be provided for. A seizure of a business can be released at any time prior to
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85
sale if the taxpayer makes satisfactory arrangements to liquidate its liability
(even through partial payments) and can show the ability to meet its current
tax obligations.
Mr. ALEXANDER. I would be delighted to return.
TAX SIMPLIFICATION AND PENSION ACT OF 1974
Mr. VANIK. I have two questions.
I was wondering what bars there would be, or why we could not get
recommendations that you have or the agency has for simplification
and why those recommendations shouldn't come directly to the Joint
Committee or the Ways and Means Committee or this subcommittee
instead of coming around through a circuitous route. Is there some-
thing that precludes our getting your recommendations?
We have a common desire to simplify the whole process, and we
would like to have those recommendations come directly from the
agency.
Mr. ALEXANDER. I am sure that the Treasury shares that desire com-
pletely, and our job, of course, is tax administration. Tax policy has
been reserved to the Secretary and Assistant Secretary for Tax Policy,
and we think that is the appropriate course, and we think those recom-
mendations will get to you because we know that the Secretary is
strongly onboard on this issue.
Mr. VANIK. We have a common desire to direct our efforts toward
simplification. I think you are in the best position to facilitate the
flow of those recommendations, so that we can make statutory changes.
I have one other question.
Last year in tile Pension Act, the Congress created a new IRS Office
to deal with pension plans and exempt organizations. As I understand
it, the formula in that act provides for an authorization of about $75
million for the operation of that office in fiscal 1976. Is that allocation
enough for you to carry on the business that is involved in that new
responsibility?
Mr. ALEXANDER. That allocation would be enough, Mr. Chairman.
We will be presenting our budget request.
Mr. VANIK. You asked for $75 million in fiscal year 1976; is that
right?
Mr. ALEXANDER. We are not asking for quite that much, Mr. Chair-
man. We will be presenting our budget request to the House Appro-
priations Committee on Monday, and I would be glad to supply a copy
of the material that we are submitting to that committee for your
record.
[The material referred to follows:]
BUDGET DATA FOR EMPLOYEE PLANS AND EXEMPT ORGANIZATIONS-PROPOSED FISCAL YEAR 1976
Employee
plans
Exempt
organizations
Total EP
and EO
Positions
Man-years
Amount (in thousands)
1,229
1,196
$26, 963
919
879
$19, 496
2, 145
2,078
$46, 459
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Mr. VANIK. Well, our concern is that that part of the new law is
very carefully monitored, and it is going to be helpful to the com-
mittee and the Congress if that is carried out.
I want to say on behalf of the committee~, and the members present
today, that we very much appreciate your very fine spirit of coopera-
tion. We are going to do everything that we can to work with your
agency, to help bring about the best kind of administration and the
best kind of relationship between the Congress and the Service, which
you so ably represent.
Thank you very much.
Mr. CLANOY. Before we adjourn I would like to raise a procedural
matter. What is going to be the procedure for members of the sub-
committee to receive notice with respect to meetings of the subcom-
mittee? Will that be done by the regular staff of the Ways and Means
Committee?
Mr. VANIK. We really haven't worked that out. Until it is resolved,
I will see that you are advised by Mr. Vaughan.
Mr. CLANCY. If Mr. Vaughan advises me by phone or personally,
then I, in turn, will have to notify the Republican members?
Mr. VANIK. We will notify all of the members of the committee.
The committee is adjourned.
[Whereupon, at 10 :10 a.m., the subcommittee was adjourned, subject
to call of the Chair.]
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87
[The following questions and answers were submitted for the
record:]
EXHIBIT A
QUESTIONS SUBMITTED TO THE INTERNAL REVENUE SERVICE BY THE Houss WAYS
AND MEANS OVERSIGHT SUBCOMMITTEE
TAXPAYER ASSISTANCE
Question 1: What are the highlights of this Springts taxpayer assistance
programs?
fp~~: The 1975 objectives for the Taxpayer Service Program are
(1) to improve the quality of service, (2) to meet the needs
of special groups of taxpayers, and (3) to make taxpayer service
more convenient and accessible. We plan to accomplish these
objectives by continuously improving on program direction,
availability of services, and quality of service.
Program Direction
This is the first filing period with the new district tax-
payer service organization. We are confident there will be
greater involvement and concern leading to quicker identifica-
tion of problem areas and appropriate resolution. Emphasis is
being placed on toll-free telephone service, walk-in service,
correspondence, and special programs; e.g., elderly, low-income
groups and taxpayer education programs. This year we are using
fewer temporary taxpayer service representatives than were used
last year. On the other hand, we have increased the number of
average permanent TSR positions from 1,822 in FY 1974 to an
estimat~d 2,077 for this fiscal year.
Some of the other significant elements which help to define
program direction include referral and call-back service, improved
research tools and equipment, and assistance in the preparation
of returns, particularly through self help.
Availability of Services
All TSRTs are expected to be able to provide the toll-free
telephone number, address locations of local taxpayer assistance
facilities and the hours of operation of each location in the
district upon request.
Extended office hours - we have made a concentrated effort
to gear extended hours to local needs.
Off-site locations - as in past years, major efforts have
been applied this year by the Service to use off-site locations
to reach those taxpayers, in particular the elderly and low-
income, who for one reason or another cannot come to an IRS
office and do not have access to a telephone. To meet these
kinds of situations, our field offices are encouraged to use
storefront locations near the people to be served and easily
accessible by public transportation. There are approximately
300 temporary locations in use this filing period.
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-2-
Quality of Service
Our definition of quality taxpayer service includes providing
on a year-round basis courteous, responsive, and accurate answers
to taxpayer inquiries and timely resolution of tax problems in a
manner which the taxpayer can understand. As mentioned earlier,
we have minimized the use of temporary TSR's. Conversely, we have
increased our permanent TSR staff. This in itself should improve
the quality of the service provided. Beyond that however, we are
employing several other management tools e.g., monitoring of
telephone calls, sample test calls, walk-in shopping with sample
tax problems, on-line observations of walk-in service and review
of Service prepared/reviewed returns.
The design of the FY 1975 Taxpayer Service Program is set forth
in Manual Supplement 62G-l ~-Cxhib4±*).
Question 2: Are you monitoring the quality of taxpayer assistance being
provided this spring? What percentage of error are you finding?
What steps are being taken this spring to reduce that error
factor?
?~l~': Yes, we are monitoring the quality of taxpayer assistance
being provided this spring. We are using two basic approaches:
1. Field Management has installed quality control programs
using such techniques as test calls, telephone monitoring,
review of returns prepared, observation of walk-in ser-
vice, and shopping. Feedback from the field indicates
the following. The ranges in error rates reflect the
fact that the tests were made in a variety of different
district offices; other possible explanations are the
experience and training of different TSR's, management
emphasis on a particular method of quality review.
test calls l57~ to 25%
telephone monitoring 47~ to 10%
*returns reviewed 4% to 30%
*Many of the errors have no tax consequence, e.g., the
inadvertent omission of the foreign bank account
checkoff block.
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-3-
2. Our Internal Audit function conducts shopping trips
to field offices using test packages for returns
preparation; they also place test calls to our tele-
phone assistors. In neither instance is it revealed
who they are. Internal Audit is now in the field
reviewing prepared and assisted returns which have
been processed through locally established Quality
Review Programs. Findings will be compared to the
initial reports to determine the effectiveness of
Quality Review Programs.
Reports resulting from these two approaches are furnished
all levels of management. The following representative actions
have been taken as a result of these two quality monitoring
efforts:
1. Regional Commissioners have held conference calls with
their District Directors to discuss major problem areas
and ways of correcting them. Regional memorandums have
stressed specific procedures and controls, especially
quality review, monitoring, referral, probing.
2. Districts heve increased the scnplinp ef returns pre-
pared. They have also effected immediate feedback,
through local publications, supervisor-employee meetings,
and recurring training sessions on major problem areas.
3. The National Office sends teletypes to all regions on
a continuing basis, calling attention to major problem
areas surfaced by Internal Audit.
Question 3: How much training do the Taxpayer Service Representatives receive
before they start answering the phones?
~~pj~: All new permanent TSR's receive at least the Basic Course
(5 weeks) before they are permitted to answer the phones. While
individual TSR's may be assigned to the phones immediately after
completion of the Basic Course, this should not normally occur
until after completion of an additional three weeks on-the-job
training.
Temporary TSR's receive three weeks of training before the
filing period. Ordinarily, they are not used on telephones.
However, when it is necessary to use temporary ~ on telephones,
they should be as-signed only if they have experience and training
comparable to a permanent TSR and have demonstrated the ability to
perform at a level comparable with that of a permanent TSR.
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90
-4-
Incumbent TSR's, returning temporaries, and Revenue Officers
receive one week of Refresher Income Tax Law Training. Revenue
Agents and Tax Auditors detailed to the Taxpayer Service Program
receive three days of Refresher Training.
Question 4: In previous years, you used a large number of temporary personnel
to help with taxpayer assistance. Assistant Commissioner Barron
has said that you found that "it is too great a burden on the
temporary personnel to have to grasp the kinds of information in
the training session and to be immediately or shortly thereafter
put in a very rapid fire environment in terms of questions."
What is your present policy on temporary help? What do you do
with taxpayer assistance representatives after the April rush is
over?
~ Fewer temporary Taxpayer Service Representatives will be used
in Taxpayer Service in FT 1975 than in FT 1974. This fiscal year,
approximately 600 temporaries are being used in our field offices,
while we had over 1,200 last year. On the other hand, we have
increased our permanent TSR workforce from 1,822 average positions
in FY 1974 to an estimated 2,077 average positions in FY 1975.
When it is necessary to use temporary TSR's in a tax assistance
area, out field offices have beer, instructed to assign tcroporary
TSR's only if they have experience and training comparable to a
permanent TSR and have demonstrated the ability to perform at a
level equal to that of a permanent TSR. Some of our temporary TSR's
have worked for a number of previous filing seasons and have gained
this experience and training. Generally, however, temporary TSR's
are assigned to receptionist and clerical duties such as tax forms
distribution.
After the "April rush" is over, permanent, full-time TSR's
are fully occupied with such activities as responding to taxpayers'
inquiries regarding notices received, fiscal year returns, amended
returns, refund and adjustment actions. Seasonal ~ are placed
in a non-work status when their employment is not needed, and
temporaries are laid off.
Question 5: How many "temporary satellite" taxpayer service offices have been
set up for this filing period? How many last spring?
~ For this filing period, we have established almost 300 temporary
satellite offices, including eight movable (Trailers/Taxmobiles)
offices. We used approximately the same number for the last filing
period.
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-5-
Question 6: What bilingual tax assistance is provided?
~ Nearly nine hundred bilingual employees are available to
Taxpayer Service for the filing period. The principal languages
are Spanish, German, French, Italian. However, many other lan-
guages are represented by at least one employee assigned or
available to Taxpayer Service for filing period. In addition to
assistance on the telephone or walk-in areas, our bilingual TSR's
conduct VITA classes (voluntary income tax assistance) in the
Spanish language. We have also issued the following publications
in Spanish:
556-S Audit of Returns, Appeal Rights, and Claims
for Refund
579-S Guide for Preparing the Individual Federal
Income Tax Return
586-S The Collection Process
806-S Roadmaps of Forms 1040A and 1040 for 1974
832-S Coursebook for VITA Instructions
Question 7: We understand that last year you undertook a survey of some 14,000
taxpayers to determine if they were satisfied with the taxpayer
assistance they received from IRS. What are the results of this
survey?
~ That survey was designed to measure reaction to various
aspects of our Taxpayer Service Program and to identify possible
needed improvements. A copy of the survey results are enclosed
(see Exhibit,,4).
Question 8: What will the new tax act we are considering today, with hig~g~
minimum and standard deductions, mean in terms of reducing the
number who need IRS or private tax preparer services? Will this
result in budget savings to IRS?
~n.i~: The increases in the minimum standard and percentage standard
deductions, contained in the "Tax Reduction Act of 1975," will
cause about 5 million returns to be switched from itemizing to
the standard deduction. This includes approximately 2.5 million
returns with adjusted gross income of under $10,000.
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-6-
Information from tax year 1972 returns shows that about
52.7 percent of the returns with income under $10,000 and with
itemized deductions were completed by tax preparers. In con-
trast, 36.9 percent of the low income returns with a minimum
or standard deduction were completed by tax preparers. Applying
this information to the 2.5 million low income taxpayers who may
switch from itemized to standard deduction results in a reduction
in the number using tax preparers of only 400,000. For taxpayers
with incomes over $10,000, 45.6 percent of the returns with
itemized deductions and 45.1 percent of the returns with a minimum
or standard deduction were completed by preparers. Hence, little
change is expected for this group.
On the basis of this information, we feel that there will
not be a significant reduction in the number of taxpayers who
will utilize the services of return preparers as a result of
the increase in the standard deduction provided in the "Tax
Reduction Act of 1975. The impact on tax practitioners and the
Service is likely to be small and should be largely offset by
taxpayer service requirements generated by the estimated3 mil-
lion new returns that will be filed under the earned income credit
provision in the new law.
QWestion 9: We understand that many of the telephone calls into taxpayer
service offices are monitored by supervisory personnel. Should
not this fact be noted in the telephone directories under the
number for taxpayer services?
~p~: We believe that we have effectively noted the fact that tele-
phone calls in taxpayer service offices are monitored by highlighting
the following statement on the front page of the tax package:
"To help us provide courteous responses and accurate
information, IRS supervisors occasionally monitor tele-
phone calls. No record is made of the taxpayer's name,
address or social security number except where, at the
taxpayer's request, a follow-up telephone call must be
made."
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Question 10: The Service has put a great deal of money and effort into the
taxpgygg service program. ~`~y not stai~d behind it? For
example, in Octobgg,,1973, the Houae Government Operations
Coteç~g~se~d a ro~t (93-6pp) which, among other things~
recommended that:
The IRS hold itself bound by whatever services the
Service Representative is authorized to
p~g~g~rm for the taxpayer and clearly `indicate to the
taxpayer what the boundaries of those authorized
services are. The IRS cannot succeed in persuading
taxpayers to utilize and rely on the assistance_pt
TSR's if the Service itself refuses to rely on such
assistance.
Could you comment on this proposal?
~..aix: TSR's accept the statements made to them by taxpayers without
substantiating receipts, records, etc. They do not, nor are they
required to, perform an audit or examination of returns which they
assist in preparing. The TSR's will, however, bring to the tax-
payer's attention any items claimed on the return which are clearly
not allowed by law as constituted. `Taxnayer Service is not intended
to be an audit or enforcement function.
To avoid any possible taxpayer misunderstanding over present
policy and the nature of IRS assistance, a disclaimer has been
prepared for posting in IRS offices, noting that returns prepared
with IRS assistance are subject to mathematical verification and
to audit in the same manner as all other returns.
Question 11: Why, degpite increasing assistance being offered by IRS, do about
50'/~ of the taxpayers still turn to private preparers? Have you
conducted a survey? It may be that the public views the IRS as
an enemy, does not believe that you will volunteer information
about deductions, etc. It might be wise to conduct a survey of
1,000 taxpayers who use private services and ask them why? It
may be that you are throwing money into taxpayer services - - and
will never get a higher rate of utilization.
Has any consideration been given to separating Taxpayer Services
into a separate agency - - a sort of ombudsmen - - which might be
located in Post Offices or Social Security offices -- and which
would be identified in the public mind as an agency which will
go to bat for the taxpayer with the IRS - - rather than being pRrt
of IRS?
*1 ~ 2 ~ (.7
168
57-236 0 - 75 - 7
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-8-
There is no simple answer to the question as to why tax-
payers turn to private preparers, but information available to
us does not support the idea that the Service is viewed as the
enemy.
After the last filing period, some 14,000 randomly selected
taxpayers were surveyed about the IRS Taxpayer Service Program.
Among those who indicated they knew IRS taxpayer assistance was
available but did not use it, only about 7.5 percent gave as
their reason that they would "rather get help from someone other
than IRS." Surveying taxpayers who used only private services
is an interesting concept which will be considered for a future
Survey.
Rather than separate Taxpayer Service into a separate ombuds-
man agency, we have concentrated our efforts on improving the
effectiveness and efficiency of the taxpayer service provided by
IRS. We believe a truly high-quality Taxpayer Service Program
can be achieved within IRS, and we are directing our efforts to
this goal.
Specifically, we have taken the following actions, among
others, to enhance the Taxpayer Service Program:-
1. nearly doubled the number of Taxpayer Service employees;
2. extended the length of training and upgraded the content
considerably;
3. put into effect the nationwide toll-free telephone system;
4. established the new district organization, giving Taxpayer
Service equal status with the other functions and increased
visibility to the taxpayer;
5. activated about 300 temporary locations to offer taxpayer
assistance; and
6. assigned to Taxpayer Service nearly 900 bilingual employees
available for filing period assistance.
We think the Service's efforts are beginning to pay off.
About 90 percent of the taxpayers surveyed who used our taxpayer
assistance found it helpful and the number of taxpayers who use
our assistance inóreases each year.
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-9-
New initiatives are being pursued to further strengthen
the Taxpayer Service effort. We are developing procedures to
make clear to the taxpayer that the Taxpayer Service district
organization is the focal point for receiving and resolving
taxpayer problems not resolved through existing procedures.
We are also considering establishing a Problem Resolution
Service to provide a focal point for the receipt and resolution
of taxpayer problems not resolved through existing procedures.
This should afford a greater opportunity to improve our assis-
tance and be more responsive to taxpayers with serious problems.
As this consideration becomes more substantive and firm, we
will inform the Subcommittee as to its organization, procedures,
and operations.
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-10-
Qpgstion 12: In testimony before the Senate Appropriations Committee last
ygar, Secretary Simon seemed to indicate that in terms of
taxpayer services
We (the Treasury) couldn't fill out all of the forms
because this would cost a tremendous amount of money~
If we attempted to fill out ourselves in the Internal
Revenue Service all of the forms . . . would involve
ppwards of $200 million.
Can this figure be accurate? If so, since nearly 50h of the
~~çpayers pay private practitioners approximately $600 million
to fill out tax returns, why not have the IRS fill out all
forms? It is estimated half of these forms are filled out
-- yet result in the loss of about $80 million throug$~
tax deductions. An aide to the Secretary indicated that there
has been no study of char~ging~ taxpayers for this service?
Would it be possible to provide all taxpayers with assistance
in filling out returns perhaps charge a S5 fee and then have
the Federal government guarantee the accuracy of the return?
~y: Secretary Simon's testimony before the Senate Appropriations
Committee last year referred to an IRS projection of ~270 million
for filling out all individual tax returns. This figure was
based upon actual filings in 1973. An updated estimate based
upon returns filed in 1974 would exceed $300 million. There are
studies underway which examine, in greater detail, the costs of
preparing returns by IRS personnel and the comparative error
rates of IRS versus commercially prepared returns. This effort
will also estimate the amount of income lost from the returns
sampled.
The question on the possibility of guaranteeing the accuracy
of the returns prepared is a complicated one. Those taxpayers
filing lO4OA's or those filing standard deduction 1040's present
no real problems because very few supporting records are required.
On the other hand, because IRS personnel must rely on taxpayer
statements, even without substantiating receipts or records, it
is presently impossible to guarantee the validity of the deductions
reported on itemized returns. IRS can, of course, assure the
mathematical accuracy and can bring to the attention of the tax-
payer those items being claimed on the return which are clearly
not allowed by law. Taxpayer Service Representatives do not, how-
ever, perform an audit or examination of returns which they assist
in preparing. Such an approach would significantly increase the
time and costs related to providing this service.
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-11-
Question 15: It seems that a great deal of the problem of providing taxpayer
assistance is caused by the crush of people filing on April 15.
As a result, the IRS haa to hire extra people who may not be
fully trained. There ia an extra burden on the Poat Office and
on all IRS peraonnel. Why not change the tax filing date ao that,
say, one aixth of the public files every month during the first
half of the yeur. Or it could be recuired, that everyone must
file within ten days of their birthday.
This type of idea has been proposed before. The Service points
to a number of problems. However, have you calculated how much
could be saved through reduced personnel, more accurate filings
~j taxpayers and reduction in the April 15 crush which results
in late refunds and interest payments to the public?
Reply: The Service has considered several proposals aimed at
relieving the crush of return filing under the present April 15
deadline. Some of these proposals involve assigning taxpayers
specific filing periods on a monthly or quarterly basis in much
a way as to spread the flow of returns throughout the year, or
at least over a substantial part of the year. Under such
proposals, the assignment of filing periods would be on the
basis of birthdays, social security numbers, surnames, or some
similar method, with a proportional allocatacn of taxpayers to
each filing period. A discussion of the problems associated with
such proposals was submitted to the hearings before Senator
Montoya in July 1971+ (Senate Hearings Before the Committee on
Appropriations, Internal Revenue Service, Taxpayer Assistance and
Compliance Programs, FY 1975, pp. 799-801).
The proposals that the Service has examined present problems
relating to equity among taxpayers and to administrative and
compliance complexities; however, in recognition of the potential
advantages of a system which would spread the filing of returns
over a longer period of time, we are reexamining the matter in an
effort to develop a workable proposal. The current study will
include a cost-benefit analysis which will attempt to recognize
the interests of the Service, taxpayers, tax practitioners,
information return preparers, the Postal Service, etc.
PAGENO="0102"
98
-12-
Question 14: It has been said that the moat important thing we could do to
help the taxpayer is siaplif~he tax code. In 1973, the
Administration submitted a number of proposals for the simpli
fication of individual returns. Could you provide a list of
five or six areas where we might be able to provide corporate
tax simplification?
nh: Our first and foremost concern in this area of simplification
has been with individual, nonbusiness taxpayers. These are the
people who are in greatest need of assistance and who account for
the overwhelming bulk of the services provided by commercial tax
preparers and IRS assistors. Next in priority would be farmers
and individual proprietors filing Schedules F and C, respectively.
Then partnerships and corporations, which are more likely to have
ready access to professional help in the preparation of tax returns
and maintenance of the related accounting records, should be con-
sidered. We have not yet had an opportunity to focus on the
specifics of corporate tax simplification, but some areas which
deserve serious consideration are: (1) the complexity of capital
gains taxation, (2) the differences in the treatment of income
deductions for corporations as compared with that for individuals,
and (3) tax treatment of foreign income.
~pgstionl5: Who is in charge of and who are the members of the IRS Tax Forms
Coordinating Committee? What are they doing now?
~gj~~: The Tax Forms Coordinating Committee is chaired by Erwin H.
Schuler and is comprised of representatives from each Assistant
Commissioner's office and Chief Counsel. These individuals are
listed below:
George Bousselaire (Chief Counsel)
David Bunch (Planning and Research)
Leonard Caracciolo (Administration)
James Dillon (Employee Plans and Exempt Organizations)
David Williams (Compliance)
Raymond Lardy (Accounts, Collection and Taxpayer Service)
William Rankin (Intelligence)
Gilbert Slomowitz (Technical)
Liaison is maintained with personnel in the Office of Tax
Analysis and the Tax Legislative Counsel in the Treasury Department.
PAGENO="0103"
99
-13-
The Tax Forms Coordinating Committee is involved in the
ongoing task of reviewing forms, form letters, notices, etc., to
make sure they will receive the maximum acceptance by the tax-
payer and permit effective control and processing by the Service.
The Committee strives to keep the forms prescribed for use by the
Service at a minimum, and to see that they are designed for the
greatest possible effectiveness. An important task at the present
time is to ensure that the provisions of the Tax Reduction Act of
1975 are properly included in the revision of forms, letters, and
notices.
~estiqpj~: Where are the most mistakes made on filing an individual a~4J,A
filing~a corporate tax return?
One of the most frequent mistakes a taxpayer makes in computing
a tax return is checking the marital status code. This error, how-
ever, is resolved in service centers' editing and perfecting of the
return, with a taxpayer contact made when necessary.
Through April 5, 1975, there were a total of 968,910 math
errors on 1040 returns detected by computer. Approximately 38.6F
(374,253) were Tax Computation errors; (e.g., using the wrong tax
table) l77,6~O or l8.3~ were linked to Total Deductions; 125,292
or l2.9F were Overpayment or Balance Due errors.
Of the Form 1040A returns processed through April 5, 1975,
there were 434,833 math errors, of which 239,827 or 55.27~ were
Tax Computation errors; 109,852 or 25.3F were Overpayment or
Balance Due errors; and 59,645 or 13.7F were related to Excess
FICA.
This kind of information is not readily available concerning
the corporate returns since we do not routinely capture such data.
PAGENO="0104"
100
-14-
TAX PREPAPERS
Question 1: The members of the Committee recently received a letter from the
National Society of Public Accountants which discussed the problem
of tax return preparers and said
"The scope of the problem is by no means diminished
today, some years later. In fact, the complexities of
increasing involvement by individual state and other
turisdiction entities and the emergence of certain
commercial tax preparation advertising practices are
creating new problems.
Wbuld you agree that the tax return preparer problem is still
serious?
j~jy~: Generally, compliance by return preparers has improved and
our program to deter unscrupulous preparers is geared to the needs
of each district. We are completing the third year of our program
to monitor compliance among tax preparers and we believe that our
program has had a significant impact on the voluntary compliance
and practices of the return preparer. Public awareness of our com-
pliance efforts has been heightened by the publicity we have received
through the news media, the large number of public contacts, and
tax returns audited. We recognize that some compliance gaps still
exist, and that compliance is a recurring problem among the rela-
tively small number of unscrupulous preparers who purposefully and
surreptitiously attempt to circumvent our compliance efforts. We
will continue to focus on these noncompliance areas by maintaining
the Return Preparers Program according to the seriousness of the
problem in each district and preserving the level of compliance
achieved during the past three years.
In cooperation with the Federal Trade Commission, the Service
has been able to curb false and misleading advertising abuses and
other unfair trade practices by commercial return preparation
firms. At the local district level, preparers have been contacted
to have advertising material deleted or clarified and local news
releases have been issued to correct or refute misleading informa-
tion. Flagrant and purposefully deceptive practices have been
referred to the Federal Trade Commission. Cease and desist orders
obtained by the Federal Trade Commission have had a positive
influence on the preparer industry.
PAGENO="0105"
101
-15-
Legislative changes have also helped. One of the unfair
trade practices that was prevalent in the preparer industry a
few years ago was the preparer's failure to treat tax informa-
tion received from clients as confidential. Enactment in 1971
of Section 7216 of the IRC making disclosure of a client's tax
information a misdemeanor has effectively curbed this abuse.
Question 2: What proportion of the tax return preparers surveyed this year
have been submitting inaccurate or fraudulent returns?
~f2i~: Approximately 700 return preparers were contacted in 1974
through "shopping." This is a method of identifying suspect
preparers where an IRS agent poses as a client and with a pre-
determined set of income, deductions and a cover story goes to
a preparer for preparation of a return.
Of 570 hypothetical returns prepared in this manner during
the 1974 program, 157 or 28% cohtained what appeared to be indi-
cations of possible fraud. These hypothetical returns were not
actually filed, therefore could not be used~ as evidence in a
criminal action. However, suspect preparers were identified in
this manner. Returns prepared by suspect preparers and filed by
c1ien~ taxpayers were subsequently screened for exemination
Based on these examinations and preliminary criminal investiga-
tions of actual returns prepared by the suspect preparer and
filed by the client taxpayer, approximately 50% of the 157 cases
were closed for lack of potential as criminal cases. The remainder,
about 14% of the "shopping" cases, are currently under investigation
or have been recommended to the Justice Department for prosecution.
Question 3: The 1973 Annual Report of the Commissioner stated that "between
January, 1972 and June 30, 1973, the Intelligence Division filed
complaints, arrested or obtained indictments against 420 tax
return preparers. By the time of the 1973 report, 209 preparers
had either been convicted or pleaded guilty." What has been the
action since the 1973 report?
Since June 30, 1973 an additional 154 preparers have been
either convicted or pleaded guilty. As of December 31, 1974 the
inventory of criminal actions pending indicates 38 have been
indicted and await trial, 93 cases have been recommended for
prosecution and 79 are still under investigation.
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102
-16-
Status of Criminal Actions as
of December 31, 1974
FY 1972 FY 1973 FY 1974
Program Program Program Total
Convictions or Guilty Pleas 275 88 - 363
Acquittals & Dismissals 37 30 - 67
Pending Trial (Indictments) 22 15 1 38
Total Criminal Actions 1/ 334 133 1 468
Prosecution Recommended
and Pending 9 54 30 93
Open Investigations 1 12 66 79
Investigations Closed for
Lack of Potential 342 318 74 734
Total Investigations 686 517 171 1,374
1/ As of December 31, 1974, many 1973 and 1974 cases had not
progressed to Indictment and Trial status.
Audit of Returns
FY 1972 CY 1973 1/ CY 1974 1/ Total
Completed Examinations 195,156 121,832 39,797 356,785
Total Additional Tax and
Penalties Recommended $38.4 M $24.7 M $9.0 M $72.1 M
1/ As of January 31, 1975
Q~estion4: Isit true that you are having a more difficult time winning
these cases now? Under the Consolidated Program Tax Return
Preparers, 1972-1974, there has been a real fall-off in trial
successes. For example, in 1972, you obtained 275 convictions
and 37 acquittals. In 1973, however, you obtained only 88
convictions and lost 30 cases.
j?j~..~: There is more difficulty in achieving successes in the Return
Preparers Project now than in the earlier stages of the project.
As of December 31, 1974 the number of successes realized per
PAGENO="0107"
103
-17-
assignments initiated in each of the program years 1972, 1973
and 1974, was 275, 88 and 0 respectively. Actual successes
realized in each of these calendar years, respectively, was
115, 191 and 57. The "fall-off" in statistics from 1972 through
1974, however, resulted in large part from the overall success
of the project. There was increased awareness by the public to
the problem of returns preparation and there was improved com-
pliance by the preparers themselves, many of whom made abrupt
changes in the tactics they used in preparing fraudulant returns.
This created new problems for us in identifying suspect preparers
and new fraud patterns. Consequently, criteria for making these
identifications, case assignments and prosecution recommendations
were progressively tightened for these years. We are now more
selective in all of these areas as evidenced by the following:
Calendar Year
1972 1973 1974
Case assignments made 686 517 171
Cases closed for lack of criminal
potcnti~1 342 318 74
Open cases 1 12 66
~ion 5: Last year, in considering tax reform legislation, the Ways and
Means Committee tentatively adopted a proposal to regulate tax
return preparers. This provision did not pass. Would itj~q~p
the Service and protect the public if we tried to pass this
~~p~ision on an emergency basis? If the Service would indicate
a need for this provision, we might be able to obtain its con
sideration as a separate bill under Suspension of the Rules in
time for next year's tax season.
p~y: The Service tontinues to favor legislation along the lines
of the aborted Tax Reform Act of 1974, which contained the
Administration'5 recommendations for regulating tax return
preparers, and hopes Congress will see fit to enact these pro-
posals into law.
We are particularly interested in the civil penalty sanctions.
These included a $100 civil penalty for each case involving negligent
or intentional disregard of rules and regulations and a $500 civil
PAGENO="0108"
104
-18-
penalty for each case involving willful understatement of lia-
bility. The existing penalty structure does not provide an
appropriate deterrent for unscrupulous preparers or for tax-
payers who utilize their services. The only sanctions available
under present law are the criminal provisions - - principally
Section 7206(2) of the Code -- which make it a felony to will-
fully aid or assist in the preparation of a false or fraudulent
return, and which impose fines of up to $5,000 and imprisonment
of up to 3 years. Criminal prosecution of preparers is an
extremely difficult and costly deterrent. There is a need for
civil sanctions that are less severe and easier to administer
than criminal penalties. Conceptually, the proposed penalties
would resemble the civil negligence and fraud penalties imposed
by Section 6653 of the Code for underpayment by the taxpayer.
If the legislation is passed, it would be our intention to
apply a penalty only in situations where there is a clear-cut
pattern of abuse by the return preparer. A penalty would not
be asserted where the understatement is due to bona fide dif-
ferences in judgment or technical interpretation between the
preparer and the Service, or where the understatement is caused
by inadvertent errors in computation. Moreover, preparers will
not be charged with duties of care as extensive as that imposed
upon taxpayers; thus, preparers will not be expectod to colloct
all relevant facts if the taxpayer does not furnish them or to
verify those that are furnished.
~p~stion6: What is the status of the IRS master computer file on tax return
p~parers?
~p~: The computer file of preparers has been discontinued in view
of high maintenance costs in relation to the benefits derived.
The prime cost involved the identification and preparation for
input to the computer file of preparers' names and identifying
numbers from the 40 million returns prepared by someone other
than the taxpayer. The data file was designed to permit computer
identification and saturated audit coverage of returns prepared
by any preparer suspected of noncompliance. We believe that
selective screening and "shopping" of preparers identified by.
our regular examination programs at the local district offices
and a random sampling of preparers will maintain compliance at
a lower cost.
PAGENO="0109"
105
-19-
Question 7: In November, 1974, the FTC took two actions against tax return
preparers for improper advertising. Have you referred any
advertising cases to the FTC this year?
We have made one referral during the current filing period,
a potential violation of a cease and desist order previously
obtained by the Federal Trade Commission against a commercial
tax preparer.
PAGENO="0110"
106
Exhibit A
Departn~ent of the Treasury / Internal Revenue Service / Washington, DC. 20224
Commissioner
June 2~, 1974
Dear Taxpayer:
I would like to ask for your help.
The Internal Revenue Service would like to know more about
the problems that taxpayers have in filling out their income tax
returns and the kinds of assistance they need. We would very
much appreciate your taking a few minutes to fill out the enclosed
questionnaire and returning it in the postage-paid envelope.
Please understand that your name was chosen completely at random.
We do not want you to sign the questionnaire, and we will have no way
of knowing which completed questionnaire is yours. What you say will
be combined with the views of all the others in the survey to give us
a statistical report that will not personally identify you or any
other individual.
There is certainly no obligation for you to fill out the ques-
tionnaire if you do not wish to do so. Since the questionnaire is
being sent to only a small number of taxpayers, however, it would
be very helpful if we had your views.
Thank you for your help.
Sincerely,
Commissioner
PAGENO="0111"
107
iaxpaytw Opinion survey
IRS çaovides tao rely 0 r.300 dIferot oO/S. icor cf
these you may h.tca orAl eoout aIry ohm). otre s you
Please aeseoer oo tarry of the fu))ossrcd questrc5 es
epply to you
(A) At the time you preyeod your tee retre rh:s year
forbad it preroerrd).O) 0 be 0.N10O
toll-lice tao Oalp by ~~eoom)
1 :J Yes
2 C] No)Skp0000esthe F)
f~) 00.5 Oil u~ 1:00 coot about this tea ?eiirpirore
1 C] FrieeI. teighoor
2 C] Radio
3 C] tao lcnrrr irrstrucrioes
4 C] Employer. moo
~ 0: Nes.cpa000, r'ilgOOoe
6 C] TV
7 C] Dent recall
8 C] Other )eoylai1l __ -
IC) Withior rho prost crc yours. race yoc trlecaceod
IRS to ask a tao gcnst0r10
1 C] Yes
2 ~J Ne)SkiptoQestiOc El
0) Hoe )relp°u) ems rho erosucer you recncoa to your
quest or?
1 [3 Very helpful
2 C] Secerosiat helillul
3 C] Not helprcl
4 C] I ucas rot ale te cc000lOtC roy cr11.
Skip to Queutco F.
(E) Who base yoc ore cs.rd 05 tcloptroO tao assis
rece dsiro~ the pest too oea(s)
` L Thmee..ooeoreertto
2 [J My quostoO seerrro,i too ccplc1lcl I:
ask lay plotre
3 [] ft diutot occur to roe to call
4 C] I d)drtt hace true tr!ophcrre rourober
5 C] I eoooid rather yet help roe sor000'e 0th
than IRS
6 C] Other (P1 east ee plain sr last pace 1
mare space is oeedril.l
(F) At ole tee you aryorod yosr tao ret.r' .0 -
or had it pe0mrri1 id yoc koyo
an IRS off
1 C] Ses
2 C] No (Skip to Ocrstioo Ml
)G) Hone did you lot ct rat lP.S acudos u
too qotrstlO)°S yr laspo010rs Soc cut or 1
office?
iC] Fr iood en globe
2 C] Radio
3 C] Tosforericstruotioos
4 C] Emoloyrr. urrlOo
5 C] Neosspaarr. ereoaece
6 lr Telecision
7 C] Duet Recall
8 C] Other )Eoplaiel ____________________
(HI Hone you cisityd en lOS oi'ice sithir he lair
test) yeers to got rorip 10 1 Or qcl5tco lOot
juSt to pick ci u moo or ybocatrool
1 C] Yes
C] No Ship to Gueston 1)
These 1eStiOtrs should loot acse.ooed 0, the teopeyar on
faottlly eooidiat sir ropaio-I tO
If saiome cotS Ic cue tory por)erled ci's ietutrr fs
yoaJoooooo.1d0t~oe,01t00~~h0tOb0
23 plok ~ 1 heqA
6)3.1
6.2
4.8
1.6
6.7
18.0
83.2
16.8
11.5
19.0
23.9
1.8
21.4
32.2
14.4
9.5
13.0
87.0
61.4
38.6
3.9
23.6
23.0
L.a
23.9
45.3
8.8
Jy.9
33.9
66.1
55.0
32.0
9.1
3.9
PAGENO="0112"
(If How woold yoc descrrhe the attitude of the IRS
employee tnan wOoer ~or soorjnt holpi
1 Friznrdly, coroteous
2 I Unfriendly. iiscorurtnoors
3 LJ Don't recall
(21 Hose helpful wet the IRS employee you telked to?
1 ~ Very helpful
2 [ Scerrewhat helpful
3 [J Not helpful
(K) Within the past tsrro yeas, hace yos bad an IRS
employee actually fill cst your retuen cr you?
1 [J Yes,fiilednutpartof it
2 ~ Yes, filled Out all of it
3 ~ No
Skip to Qrestic.n M,
(1) What is you renz:nn fc" not huing vrw'ed on IRS
office foe too help within the past too yeas?
1 ~j Thee was no neon to
2 ~ The IRS office boseticar is inc0000rient
3 c~ I did not krcss where the cff~ce is locatoof
4 ~ The IRS olfice horns are not cocoon ieet
5 ~ I ssosfd eether gnt help horn soenenr-n ether
than IRS
6 [j Other lP!erne rrspiain: hO last cant
more space is ceededi
(MI Wrthii the past two yours, bane you ~sd any too
nfurmatron poL ton Ion-nt than the COtton-
Irons that cone rstn yos? tao (Corel?
1 ~J Yes, IRS poblioationls~
2 3 Yes, conneeciol lncr-your'nntf
publication(s; Sky to oSoeston 01
3 ~ No (Skip to Qrnsti~o 01
(N) Hose did boo t.rd ocr that IRS tao* ie'aere3too
publications are aoarlable?
I ~J Friend, nnsghbur
2 J RadIo
3 c~ Tao loon instructions
4 ~ Employer, union
5 ~ Nelss'naper, rnugezine
8 ~ Telenisino
7 ~ Don't Recall
8 ~ Other lEoplainl ______________________
108
88.1
7.6
4.3
60.2
30.1
9.7
0.2
6.7
85.1
67.2
8.0
4.4
6.3
8.1
15.3
20.1
13.2
70.7
9.4
8.9
44.0
4.7
15.8
14.8
9.7
16.4 _______________
(0) What too for-rn did you file thrs year?
34.9 1 ~ 1040A Ishoet fermI
65.]. 2 ~ 1040
(F) Did you itenrize yost deductions or take the
standard deduuion1
50.3 1 ~ Itemized dnnocticos
49.7 2 i:~ Standard doducrion
(03 Who prepared your ran return this ynar?
47.0 1 ~ Myself
7.9 2 ~ Family MnnUet, Relatine
3.5 ~ Neighbor, Friend
1.3 4 ~ IRS Office
20.1 5 ~ Lawyer, Aocountao
17.2 6 ~ Coeerneecial Tao Sernice
3.0 7 ~ Other Ipinase eoplernl ______________
(RI Did yno recnina your tao (ones in the nor 1 lbs
year?
89.8 1L:Jnes
5.0 2 EJ Yes, but I lr~d to use a different tnt-n
5.2 3~jNo
PAGENO="0113"
109
vow $erra,,s.t Not nor,
M.tpful Hateful Hatotur
-~ (1) (2) (3)
3. IncreaSe emphasis tsr El El El
pooidrrg toll-free
talep000e ass.Stance 4~,2 -38.3 17.5
4. Espand tax education El El El
pr~geams 0 ~ 56.1 29.3 14.,6
5. Provide addtiooal El. El El
assistance is PS
offices vntfre;oeniogs 50.9 37.5 11.6
6. S~mplify instrurCtinos El El El
and tax information
publicatioss 80.7 15.7 3.6
7, Actually prepare re- El El 0
turns for sore taxpayers
34.9 35.9 29.2
8. Ptovido more Question- 0 El El
Answer type columns
* in magazines and 38.7 38.8 22.5
newspapers
9. Set op terrprrrarl ps El El El
off ices fee tao
assistance during the 61.5 28.0 10.5
filing period mm shop
ping centers yr other
to, Cther lUse the space El 0 0
belcezu and any
additional spec'
any suggsSt000 for rmew 10.7
or improved sercices
IRS might provide to
help taxpayers.)
If yost seed them, is it crorcamrient trw you to get
tree or reflerent tao teems?
63.0 t U Van
25.1 2 1 J Don't Know - I ruse not neaded to
11.9 3) No
IT) What yrotr epprocimotu yearly income?
16.4 t 4j ~ncier 05,000
30.7 2 ~ 05.000 to 09.99$
46.4 ~ $10,000 to $24,999
6.~ 4 ~ 825.000 or more
(U) How would you describe the area in which you
fine?
41.]. t ~ Urban lie a city or large town)
42.4 2 ~ Subrrrban lwimhin normal commuting
distance of a city or large town)
16.5 3 Rural rot in a city, large town, or their
suburbs)
(VI Wtrut kinds of imposemnents in taxpayer sernrce
do you throk ifS should o~ to sake in order to
best help r.aopayers likn yourself?
Mark for each itt-n whether you believe it would
be "uery helpful,' "uomnewrrat helpful." or "nut
very helpful.") -
(1) 2) (3)
I. Develop aids to 0 El El
simplify tao-related
recordkeeprng during 64.2 27.5 8.3
the year
2, Work with state El El El
offrcials to provide bath
Oednraiardstat:tas 51.6 32.0 16.4
57-236 0 - 75 - 8
PAGENO="0114"
110
Attachment i
Taxpayer Opinion Survey
RESPONSE BY LOCATION OF RES IDENCE These qoestoes should be eosrsered by the t yet or
I dy .O!)eI tol orperel tIhu yerc~ tao retort.
If trace cr501 ysor (a ly (aelortet yca retort (0
Urban Suburban Rural y, cci Ike ~a ~ ~ to ewe qo~toas.
(41.2%) (42.4%) (16.4%) ....Io~I1.ol.1~epae(doceu. lilt
foe you to f~lo a lao cc!o(o ((IS yetr~
(i) `Not necessary to file this year.. ." pooro CkiiI'SOOe oaedaeticqdcstr000aae
3 Ire arc losed eeoc lope.
1.3 1.4 1.7
IRS po,ides tan help in marcy different tsa'1s~ Spare of
these ~ say hacc 030ur about art cal obes you
nay act haoe osco ca did cot keys me toO abe.
Please aesrsnr es marry of the follewieg qoestioes as
epply to you
(A) (Al At rca Imp yap ra'erctred yrca Sac retcc this year
toll-Scee toe help by telephone'
1 61.0 62.6 60.9 ~ Yes
2 39.0 37.4 39.1 2 J NolSkiptoQsestioeF)
(B) It) Hcnddrco rico out abost tSi~ fe tyopcoee
1 6.8 5.4 ~ E~ Frieac eeigRmbor
2 22.1 25.6 21.6 2 ~ Radio
3 23.6 23.6 19.9 LJ Toe (cern ircstroctioes
4 1.6 0.9 1.4 4 Employer. soled
5 25.1 24.2 20.8 U Neaspaperecagaziee
6 44.5 43.6 51.5 6 J TV
7 10.0 8.3 7.2 7 Dent recall
8 4.9 5.0 3.8 e ~ Otrucrleupieol
(C) (Cl Ilithie 15- past to yrcars. hace you teeptconeo
IRS to ask a tao qcreston?
1 33.8 36.6 27.9 1 ~ Yes
2 66.2 63.4 72.1 2 [~ Na Skip to Question El
(D) (DI ssas the answer you receroed to yore
1 57~5 53.1 52.9 1 [j Veryheipful
2 29.6 33.0 36.5 2 J lute-hat helpful
3 8.5 9.8 8.8 3 fl Net helpful
4 4.4 4.1 1.8
4 ~T I sos eat able to cceeplete es call.
Skip to Question F.
PAGENO="0115"
111
Urban Suburban Rural
(F) At the tro-re yoc poepared poor too trtcre thrS year
toe had t p arcitt did car kaor I~(S ascrald
tars qoestaoes fcc teepryrra shy sated
an IRS of iice~
1 E3 Yes
2 ~ No (Skip to Goestion MI
(G) Hors dii yoc tied rat rot IRS per des alp eth
tao qaestiocs toe taopiyers oho isit a ((S
office?
1 ~ Friend, neighbor
2 [2 Radio
3 [j Tao fore oSttUCtiOttS
E2 Ertrploryee. cniotr
5 [2 Neaspaper, teagazarte
6 [2~ Television
7 [2 Don't Recall
8 ~J Other (Eoplain( _______________________
(H) Heoe yoc osled err IllS office sithin the past
too gears tar pat holy pith a tan qlstioe (not
jest to pick op a toter ce pabhoation)?
1 [2 Yes
2 [2 NolSkipt00005tior 1
(E) Why ((ace yes nra osed the teltrpeoere tao assist-
errce dr iag the pest to prat?
62.2 1 L Ttsetetsaseoteredto
8 .0 2 (j My qontition seat-road too coeplicated to
ask by photo
3 [2 ft didn't occor to ne to cell
4 [2 ) didot ((ace the telephooe eurtrber
5 [2 I ascarId rather get help (tore soereore ott-ret
than (OS
6 [2 Other (RI ease cc plein; se lest page 1
core space as needed.)
(E)
1 70.4
2 6.0
3 5.1
4 1.2
5 5.3
6 16.8
(F)
1 84.0
- 2 16.0
(C)
1 12.9
2 17.3
3 24.2
4 1.8
5 22.9
6 31.5
7 14.6
8 10.1
(H)
1 14.1
2 85.9
69.0
~5.9
3.4
1.6
° 8.0
17.3
85.3
14.7
10.7
20.9
24.5-
1.8
21.1
32.0
14.7-
8.9
12.3
87.7
7.7
2.9
6.1
20.3
76.4
23.6
10.1
17.4
21.8
2.1
19.1
34.8
13.5
9.4
12.3
87.7
PAGENO="0116"
112
- - Urban Suburban Rural
Ill Hoc cold yy~ jcs~'fe? the art~tude of the IRS
peylsync hoe ahc.ce you sought help?
1 * 90.1 86.0 89.6 1 Foilyccuctsue
2 5.8 9.0 8.5 2 Ulledly.disCcurtaaS
3 4.1 5.0 1.9 3t]D~frecall
(if Hoe helpful met the IRS employee you telked to?
1 66.0 54.0 60.4 1 EJ Very helpful
2 27.6 33.8 27.4 2 E Scceeahat helpful
3 6.4 12.2 12.2 3~) Nothelpful
(K) * (~) Withie the past too yeps. hasa you had an IRS
employee actusTy fill out you. return fcc you?
1 10.2 7.0 1 ~ Yes.filledoutpertof it
2 6.7 6.1 6.9 2EJYOs,fifledounallofit
3 83.1 86.9 87.6 3 ~ No
Skip to Question M.
(L) IL) What is yyur ease for non houleg cisited an IRS
office fcc tao help sithin the past two ye&S'
1 69.7 .68.1 59.7 ~ Thceewasnoseedto
2 5 . 5 8. 3 13. 2 2 ~ The IRS office locetiue is incoecenleet
3 2. 6 3 . 8 10. 2 3 EJ I did nyt keyes here the cffice is located
4 6. 2 6 . 6 6 . 3 4 ~ The IRS office hsps are eat conweeieet
5 7. 7 8 .5 7.6 5 I could nether pet help free scenennee other
then IRS
6 15.8 14.4 15.5 6 EJ Other lPlcasecoplaicl: usa last page if
mccc sp.tce is needed)
(M) (MI Within the cant too years, hone yoo used any tao
iefcamation publications loIhnn thee the instruc-
tions that cye,ee,irh your tan torn)?
1 18. 5 22 .8 18. 1 1 ~ Yes. IRS publicationfsl
2 12.0 15.4 10.9. 2 ~ Yes, cemrnercieffeoe-qooeremeet)
publicatioelsf (Skip to Questise 01
3 72.8 66.9 74.0 ~ NolSltiptoQuestiun 01
PAGENO="0117"
* - Urban Suburban
(N)
.1 11.2 8.2
2 8.5 8.7
3 42.2 47.4
4 3.9 4.6
5 16.7 14.4
6 15.6 13.0
7 10.4 9.5
8 15.9 16.2
(0)
1 37.5
2 62.5
(P)
1 47.2
2 52.8
(Q)
1 46.8
2 7.6
3 3.5
4 1.7
5 20.4
6 17.4
7 2.6
(R)
1 89.7
2 4.9
3 5.4
(N) Hen vd you ti.? Oct thOt ia~ tan
publications are acarluble0
1 j Friend. neighbor
2 ci RadIo
3 [] Tao forte instctioos
4 ~ Employer. cfl)Ort
5 ~ Nemnspaper. rnagezine
6 ~ Television
7 E Dont Recall
8 ~ Ctlmer (Eupluin)
10) Whet ten fore did yos file this year?
1 ~ 1040A (shot forte)
2 ~J 1045
(F) Did yes iteirmize yonr dedvctovS or take the
standaod dedacion?
i ~ Itemized deductions
2 Standard deduction
10) WOo mepared your lax return ths year?
1 ~ Myself
2 ~ Family Meeter. Relative
3 ~ Neighbor. Friend
4 ~ IRS Office
5 ~ Lamer. Accoceteet
6 J Ccnneremcie) Ten Service
7 [] Other (Flease enp)ein)
113
Rural
8.1
10.5
39.9
6.5
18.1
19.4
8.9
17.7
39.2
60.8
44.1
55.9
41.5
7.8
4.5
1.5
*23.2
17.5
4.0
89.8
5.5
30.6
69.4
55.9
44.1
49.7
8.4
3.2
0.9
18.2
16.7
2.9
90.2
5.0
4.8
)R) Did you receive your tao (veers ri the ream) this
year?
i ~JYes
2 ~ Yes, but I had to use a dilferent I ormrm
4.7 *
PAGENO="0118"
(U)
1 100.0 0.0 0.0
2 0.0 100.0 0.0
3 0.0 0.0 100.0
(v)
VH -- Very Helpful
SH -- Somewhat Helpful
NH -- Not Very Helpful
1
2
VH 64.8 64.5
SH 27.9 26.8
NH 7.3 8.7
(SI It yce. and t~e. 5 4 coeceorient f~ yoc to get
none no ddfereet tao hems?
1 ~J Yes
7 ( Don't Kncss - I hare not needed to
3 j No
IT) What is b000 ep~noo(erete yeerly income?
1 LTJ Under 35.000
2 ~ 95000 to $9,999
3 ~ $10,000 to $24,999
4 ~ 025.000 or more
(VI What kords cf retO-ocereets 0 taopayer sersice
do yoc thek IRS shold toy to rake n order to
best help taop.nyers Ske yorself'
(Mark for each ten er-y0000 yoc beece U
be "eety help?)" `scc,neUat help?," or "not
sety he(pfu(,"(
114
Suburban Rural
* - Urban
(s)
1 65.6
2 23.8
3 10.6
(T)
1
2
3
4
62.7
24.9
12.4
12.9
26.6
52.5
8.0
17.3
33.4
42.9
6.4
57.8
28.5
13.7
22.0
34.3
40.5
3.2
(U) Hots eooc(d yea describe the areo 0 oshich yos
I ~ Urban (in a city or (Urge tome)
2 ~ Suborben (*ithin mo-real contorting
distance of a c4y or large tosso)
3 1T floral (cot in a city, large toar. or their
suborbsf
VH 52.3
SH 31.7
NH 16.0
61.7
28.8
9.5
52.2
32.0
15.8
50.9
32.4
16.7
(1) (2) 131
1. Decefopacis to [:3 ~ [J
smohfy tao-related
recordkeeping darimg
the year
2. Work noth state ~ Ci E
n(fclo(s to no-ode bath
Federal and state tao
assstance in the same
PAGENO="0119"
115
- Urban Suburban Rural
3 1) (2) (3)
VH 44.2 42.6 47.8 ~os E
SH 37.8 39.6 36.6 ceosithpioll~lee
NH 18.0 17.8 15.6 telephooeassstaoce
VH 56.2 56.3 55.1 4.Etpaodtaoedccatioo ~
SH 27.7 28.8 29.7 ~o~a~s schools
NH 14.1 14.9 15.2 5 ~p add~tiooal fl ~
VH 53.5 49.7 47.5 assistoocei~lRS
SH 35.7 39.2 37.6
NH 10.8 11.1 14.9
6 VH 81.0 80.4 80.7 5Si~~plifyl~SttcChOOS Li
SH 15.3 16.1 15.6
NH 3.7 3.5 3.7
VH 37.5 32.7 34.5 7.ActooilYpePo~e~~- ~
SH 35.8 34.9 38.6
NH 26.7 32.4 26.9 8P~ooide so~eQceStioO- Li ~
8 VH 39.0 39.3 35.9 AoS~se~t5peCOlc~O~s
SH 38.7 38.2 40.8
NH 22.3 22.5 23.3
VH 62.3 61.8 58.9 9Setuptp~~~ylRS
SH 26.9 28.3 29.8 assstace dc~g the
NH 10.8 9.9 11.3 ft~speod~ shop-
pioc ceh~e~b c~ C~hO~
10 5.0 5.0 1.9 10. Othet Use the space
beicosasdasc
adtht',cl space
atty scctqeStoeh Ice
o' ,teçassed sets/ices
IRS ttty3ht psoc/te to
help taopcyets.)
PAGENO="0120"
116
~~QNSE BY INCOME CATEGORY
Under $5,000- $10,000- $25,000
$5,000 $9,999 $24,999 or above
j16.27n) (30.67v) (46.67~) (6.57~)
i) `. . .not necessary to file this year..
2.0 1.6 1.2 Q.l
64.2 59.9 52.7 42.3
25.6 28.7 33.7 40.4
5.8 8.0 9.7 13.5
4 4.4 3.4 3.9 3.8
These questions should be artstserod by rIm taopeyer or
faooII eet1;o, eltu )eopacd this ynse tao rettan.
utbtle yo~g lovely Ieynrmt y(o% tettsn Ire
(e;(su! Os,, %O(It!o&t dos tatuot. If
hot otossaty to ye a do a tao roturo thou year.
poaasvurrvck this boo ate vrurrr the qoarstioertasre
tee eeclosed envelope.
IRS provides tan help on mOry differevt mays. Some of
these you may have k'tevo vuout aid used others you
may root have used ut did tot hours mere asailable.
Please arrssser as many of t he follorsiog questions as
apply to you
(A) At the trove oou re-oared yea tat retorr toy sear
(or had it veputeu,. dd coo kours IllS offered
toll-free tao help by telep(-u"re?
(~ yes
2 ~ No (Skip to Question Fi
18) Hoe did coo fiord out about this frea telep*rooe
1 ~ Friersi neighfror
2 ~ Radio
3 [) Ten form instructions
4 ~ Employer. urrirtn
5 ~ Nesrospaper, ma9azioe
6 ~ TV
7 ~ Duet recall
8 L] Other leopleirol
IC) Withio the pest too years, have you teletdroned
IRS to ask a tee question?
1 [ Yes
2 [~ No (Skip to Question E)
0) Hose hrtptul sees the aoossser you received to yore
question?
1 [J Very helpful
2 ~ Someeshet helpful
3 D Not ho)pfut
4 ~ I osas rot able to complete my call.
Skip to Question F.
Taxpayer Opinion Survey
Attachment 2
A)
66.2 69.3
33.8 30.7
50.3
49.7
8.2
20.4
24.5
0.6
19.8
44.1
7.3
6.5
59.5
40.5
5.2
21.7
21.3
1.3
19.7
47.7
7.4
4.4
1
2
B)
1
2
3
4
5
6
7
8
C)
1
2
(D)
1
2
3
5.9
25.5
23.9
1.3
26.5
45.4
9.5
4.3
4.8
21.9
22.7
1.2
31.9
36.7
12.7
6.8
27.9 29.6
72.1 70.4
37.7 41.7
62.3 58.3
PAGENO="0121"
(E) Why have yoc eon osed thos telephone tao assoot-
coca donirtg ha pest tsp yO&5?
There coos no voted to
2 U My qaastioe sooctod too cotcphcated to
ask by pfoove
3 ~ It didvt occur to eta to caY
4 ~ didott have the tele~roee number
[] moold rather gvt help Icon sooceoce acer
thee IRS
6 ~ Other (Please no plain: use last page if
more space is evaded.)
117
Under $5,000-. $10,000- $25,000
$5,000 $9,999 $24,999 or above
E)
1 77.2 68.4 67.3
2 3.6 7.5 6.0
3 4.1 6.4 4.4
4 1.5 2.1 1.6
5 4.4 4.6 7.5
6 14.2 16.6 18.8
F)
1 72.8
2 27.2
G)
56.6
8.6'
1.3
0.0
24.3
93.9
6.1
6.1
20.1
23.4
0.9
25.5
24.0
22.8
12.2
13.9
`86. 1
79.8
20.2
12.5
17.4
22.3
2.3
18.4
33.6
13.1
8.5
88.0
12.0
10.5
20.7
25.4
1.9
23.9
32.5
15.0
8.9
1 15.6
2 15.3
3 23.6
4 1.1
5 17.3
6 31.9
7 10.4
8 12.3
F) At the tine ye', xepvotd your tao to tote phis year
c had it porcutO. cd cv kr (IS
aesaoer tao quesucos Ic' tepee-ores ho voted
ao IRS office0
1 ~ Yes
2 [J No (Skip to Question Ml
IC) Hoc-c did you (ito) oct that IllS ycycdos help beth
tan qcestiovs fur tavpuyers 0.0 os~t ae IllS
office?
1 ~ Friend. neighbor
2 ~ Radio
3EJTOfvta,insttoti000
~ U Employer. ueioet
5 ~ Necespapet. eoagazitte
6 ~ Television
7 ~J Dont Recall
8 ~ Other )Eoplain(_ _________________
)Hl Have you esitod cot PS office outhit the past
tooo years to get help etc a tav (Icestioe let
jest on plot, up a Pbrer vt putorllcaOoni?
1 UJYes
2 ~ P40 (Skip to Qaestioe LI
1 14.2 13.2 12.7
2 85.8 86.8 87.3
PAGENO="0122"
118
Under $5,000- $10,000- $25,000
$5,000 $9,999 $24,999 or above
86.4
7.5
6.1
87.6 91.6
8.7 4.2
3.7 4.2
66.8 54.2 44.9
25.0 35.1 .40.8
8.2 10.7 14.3
(05 e,~ld yco des&:r:oO he attoode of the IRS
1(050 ochon y.c coehI h05p?
1~ Fr,oly,colcooc
2 Unfriendly. disccsatocS
3 ] Dontracell
(J) Hoe helpful was the IRS errployee you talked to?
1 El Very helpful
2 ~ Sorneechet helpful
3 [ Not helpful
I)
1
2
3
J)
1
2
3
0
1
2
3
1
2
3
4
5
6
91.3
.5.2
3.5
69.3
22.8
7.9.
17.1
15.8
67.1
73.5
6.4
5.1
3.8
5.5
13.7
0.0
0.0
100.0
(K)
Withio the past toSs yees, haoe you had an ITS
eerployee actually fill ccl your return for you?
9.1
5.6
1 [J Yes filled out part of it
7.1
3.6
2 El Yes, filled oct all of it
83.8
90.8
3 ~J No
Skip to Qoestion Y,
(1)
What is your rnason ft not h acing csond an IRS
office for tao help withn the past tue yees?
69.1
7. 7
65.8
8 .9
58.9
5 . 6
1 El Theewasnoneedto
2 El The IRS ofice locatioc is ircoocenient
5. 7
6 . 8
3 . 5
7 . 3
1. 9
3. 7
3 TJ I did not knon cshee the office is located
4 T1 The IRS office hours a:e nut conoernent
f)
1
11.9
6. 1
14.4
13.7
9 . 0
152
25.3
15 . 2
226
~
~
36.2
5 El I eocld rather get help from somneome other
then IRS
6 11 Other IPleose mo plain; use last page 1
wore spa cc se ededl
(Ml
Within the past oco ycoms, hate you used any ten
information pcblicatwcs lotler than time iestruc-
.:bo~t::~::::lbrdl0
2
6 .6
6 .4
17. 0
35 . 1
2 El Yes, ceennercial lnon.gonetnnettl
psblicationlsl ISkip to Qcestcn 0)
3
83.2
81.0
63.0
43.4
El NolgkiptoQuestion 01
PAGENO="0123"
119
: Under $5,000- $10,000- $25,000
~ $9,999 ~ 99 or above
N)
1 12.4 11.9
2 8.9 11.4
3 30.2 39.1
4 2.5 3.8
5 14.9 16.2
6 16.8 20.2
7 11.4 8.8
8 22.8 14.4
R)
1 88.3
2 3.8
3 7.9
8.0 7.6
8.2 6.3
49.0 51.4
5.5 4.9
15.6 16.0
12.9 9.7
9.5 10.4
15.2 18.8
50.7
18.1
1.1
49.3
81.9 98.9
31.7
67.7
92.9
68.3
32.3
7.1
44.2
50.9
48.2
9.3
3.9
0.6
5.2
2.3 - 0.0
2.0
0.5
0.0
18.1~
20.3
43.1
17.7
19.5
6.4
*
3.5
2.6
1.7
88.7
90.7
92.5
4.7
5.6
6.4
(N) ions dd coo tn-4 Oct tout yy tax
puohcatioes axe a,aloie
1 Li Friend, eeighbea
2 ~ Radio
3 LI Tax teem inStruCtiOns
4 ~ Employer, union
5 ~ Newspaper. rnagnzine
6 ~ Tetenisioe
7 ~ Don't Recall
8 ~ Other (Explain)
(0) What tan team did you tile this year?
1 ~ 1040W (sycet form)
2~1O40
(RI Did you itemize yoor deductions or take the
standard deduc~iOe?
1 ~ Itemized deductions
2 ~ Standard deduction
(Of Who ~epared yost tax rnturn this year?
1 ~ Myself
2 [j Family MenWer, Refatioa
3 ~ Neighbor, Friend
4 ~ IRS Office
5 ~ Laanyei, Accountant
6 ~ Commercial Tax Seruica
7 ~ Other (Please mc plain) _________________
(RI Did you receise your tax forms in the mail this
year?
1 ~ Yes
2 ~ Yes, but I had to use a different team
3 ~ No
0)
1 67.9
2 32.1
P)
1 15.8
2 84.2
Q)
1 42.6
2 20.0
3 5.5
4 3.0
5 12.3
6 13.3
7 3.3
PAGENO="0124"
(s)
$5,000- $10,000- $25,000
$9,999 $24,999 or above
1 56.7 59.3 66.8 70.6
2 32.2 28.9 21.3 15.7
3 11.1 11.8 11.9 13.7
(`r)
1.
100.0
0.0
0.0
0.0
2
0.0
100.0
0.0
0.0
3
0.0
0.0
100.0
0.0
4
0.0
0.0
0.0
100.0
(u)
1 44.0 44.9 38.0 39.9
2 33.6 36.7 47.7 52.1
3 22.4 18.4 14.3 8.0
VH -- Very Helpful
SH -- Somewhat Helpful
NH -- Not Very Helpful
1
-- VH 63.2
SH 29.5
NH 7.3
VH 58.6 57.3 1~7.5 36.7
SH 30.1 30.9 33.8 29.7
NH 11.3 11.8 18.7 33.6
1 ~ Ucder $5,000
2 ~ 95,000 to 09,999
3 ~ OlO,000to024,999
[:J $25,000 or ecote
(If) Hess aooald you describe the area it ashich you
1 ~ ((thee (it a city or large tassel
2 ~ Scborbae (acithie ecreral coecutieg
distacce of a cty or large toun(
3 ~ Rural (cot in a city, large toss, or their
suburbs)
)V) Weat kieds of itytoecents c Saopayer sercice
do you thick IRS shold try to cake 0 cdar to
best help taoçiyes Ike yourself?
(Mark for each ite sheher you bele'e it scald
be "aery he(pfal," `sceohat helpful," or "cot
cer, helpfu(."l
120
TJotder
If you ad the, a 1 ceceiect (a you to get
or dffareet tao fore,?
I Li ~
2 ] Doe't Kec's - I hoe cot oeeded to
3 J No
(fl What Is your apçoaeate yearly iecete?
(V)
62.7
29.8
7.5
64.8 67.9
26.8 19.3
8.4 12.8
121 13)
El El
(1)
1 Dece(opdids to El
seplily taota(ated
recordkoepieg daring
the year
2. Work stitf' state ~ El El
officials to e,ocide both
Federal acd state tao
office or location
PAGENO="0125"
121
* Under $5,000- $10,000- $25,000
~QQ~ $9,999 $~4,999 or above
3
(1) (2) (3)
VH
SH
541
34.8
500
35.5
390
41.5
294
38.8
dgUf
eIephoseass~staace
NH
11.1
14.5
19.5
31.8
4
VH
SH
62.3
25.8
59.0
29.3
53.4
30.3
45.5
31.6
4 Eapaed taa edncation
peog'aensn~sCP'oo)S
VH
5
VII
SH
11.9
52.7
37.9
11.7
56.4
34.1
16.3.
49.0
39.0
22.9
34.3
41.6
5,Pecyndeadditicna)
assstasce ic IRS
oftices ictbeecencogs
oeoe~se,kecds
E
NH
6
VH
9.4
80.6
9.5
80.7
12.0
80.7
24.1
`
78.8
6. Si,cplify inst,oct~ons
and tan Itoemation
SH
16.5
15.4
15.6
17.4
.
~b)icanons
NH
VH
SH
NH
8 VH
SH
NH
2.9 3.9
,
41.2 40.5
37.0 35.6
21.8 23.9
37.9 40.3
39.0 37.2
23.1 22.5
3.7
30.7
36.7
32.6
38.9
39.6
21.5
3.8
24.1
28.5
47.4
33.6
38.9
27.5
.
7. Actoa)Iy peepa'e re
rurnsfnemceetaepayers
8ProcidernoreQoestion-
Answerty~oecotannnS
necssçaperS
E
)J
`
VH
SH
NH
65.5
27.0
7.5
67.4
24.0
8.6
58.4
30.3
11.3
46.5
33.1
20.4
~. ~et op tenporary IRS
r~~~ng the
)ihngpeniodcn shop-
pnngcenters orother
10
2.1
3~1
5.7
1.2
1o.Qther(Usethe space
be)crs and any
add~toca) space
any suggestions toe nc,s
or ienp-oced saroices
IRS mght xoo~de to
help taopayers.(
E ~
~ E
PAGENO="0126"
PAGENO="0127"
IRS OPERATIONS AND TAXPAYER ASSISTANCE
MONDAY, APRIL 14, 1975
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT,
COMMITTEE ON WAYS AND MEANS,
Washington, D.C.
The subcommittee met at 4:19 p.m., pursuant to notice, in room 2325,
Rayburn House Office Building, Hon. Charles A. Vanik (chairman
of the subcommittee) presiding.
Mr. VANIK. The committee will now be in order.
We are again pleased to have Commissioner Alexander before the
subcommittee. We appreciate the cooperation of the Commissioner
and his staff in meeting with the committee on the important matters
of the administration of the Nation's tax laws.
I want to point out :tha:t we have, been delayed, because we were
just putting through a very important piece of legislation in the full
committee. Our work there had to be completed before we could move
to subcommittee business.
STAFF SURVEY OF IRS TAXPAYER ASSISTANCE
We are interested in a number of items related to taxpayer assist-
ance and taxpayer service provided by the IRS and others. We would
hope that today we could discuss the level of assistance being provided
the American taxpayer and the quality of that aid.
Each year various groups and newspapers test the quality of service
provided by the IRS. They submit a series of tax questions to your
service representatives and invariably receive a wide variety of
answers.
In early February I requested the subcommittee staff to begin call-
ing certain IRS local offices throughout the Nation, and pose certain
tax questions provided me by the Library of Congress. The questions
were relatively simple, the type that middle-income taxpayers might
well ask. We did not ask for a dollar calculation, only a yes or no or
whether the item in question was deductible. The staff was able to
make about 124 calls to 17 different places in that many States.
I am most concerned about the high level of wrong answers. My staff
received 32 wrong answers out of the 124 calls made. This represents
an accuracy rate of only 75 percent. In at least 20 of these 32 wrong
answers, the IRS agent did not probe for further details to clarify the
initial question.
These were not trick questions but simple questions. They contained
enough information in the initial question for a correct ruling. On 10
(123)
PAGENO="0128"
124
occasions, questions were referred to a technician or scheduled for a
callback.
How does that compare with your experience in the Pentagon, Mr.
Pike?
Mr. PncE. Mr. Chairman, I would simply say that statistically if
you want a rough guess that is about 331/3 percent better accuracy
than we used to get from the Pentagon.
I am not sure if Mr. Clancy would agree with me. But that is my
view.
Mr. CLANCY. No; I wouldn't agree with you. I received accurate
information.
Mr. PIKE. You always got accurate information?
Mr. CLANCY. I wouldn't say all the time. But on a number of
occasions I did.
Mr. PIKE. On a number of occasions I did too. About 50 percent of
the time.
Mr. VANIK. Our staff was concerned about delays in encountering
an agent. In all, 31 calls were placed on hold before being connected
with an agent. These delays ranged from 11/2 minutes to 8 minutes.
Delays of 6 to 8 minutes were not uncommon.
I might say that we have that experience in airline reservations and
other things. We sometimes have to wait 8 or 10 minutes.
On one occasion the IRS office closed while keeping the caller on
hold for 141/2 minutes.
However once the calls were connected with an agent, calls were only
delayed three or four times while the agent researched the answer.
Generally, despite the delays and relatively high rate of error, the
agents were found to be most courteous and helpful. Only on one or
two occasions were the agents rude or hurried. They frequently offered
to give extra information `and send necessary forms to the caller.
I would also like to say that staff visits to your walk-in taxpayers
services in Detroit and here in Washington revealed a very smooth flow
and courteous treatment of the taxpayers.
Any mistake in advice, however, which hurts the taxpayer is wrong.
We urge that you redouble your efforts to upgrade the quality of the
taxpayer assistance program.
I would also like to ask you your views on the taxpayer return pre-
parer's legislation tentatively adopted by our committee last year but
which never reached the floor of the House.
We are interested in what type of oversight you are providing of the
private taxpayer industry and whether or not you are finding an in-
crease in the level of accuracy of the returns they prepare, and most
importantly, whether you feel the tax return preparer's legislation is
needed to help protect the~ public against unscrupulous private tax re-
turn preparers.
If you feel that legislation is needed before the next tax season we
will certainly try to refine the language and move it through the Ways
and Means Committee as soon as possible.
If a tax return preparer's provision is included in the major tax
reform bill, it will probably not reach the President's desk until the
middle of next year. You may feel that quicker action is needed. I
would personally be interested in receiving a cost/benefit study of the
possibility of staggering the date on which Americans must file their
taxes.
PAGENO="0129"
125
We have the "Ides of March." But for most Americans the 15th of
April is the day to beware and it makes April sometimes for so many
of us the cruelest month of the year. It is a day which is approached
with anxiety and fear. The idea of 200 million Americans having to
file their taxes by one day seems sort of reminiscent of the days of the
Roman Empire when Caesar Augustus made everybody travel back to
the place of their birth to be taxed. There must be a better way.
I would appreciate it if the Service would provide an analysis of all
extra costs created by having a single filing date: the extra employees,
the untrained advice these temporaries provide, the overtime pay.
Perhaps more impoi~antly, we would like to hear your views on how
the new tax act will affect the complexity of next year's tax forms.
We would like to hear your views on the need for tax simplification for
both individuals and business.
There is an "Alice-in-Wonderland" quality of speaking to a volun-
tary tax system, when nearly half of the Nation's taxpayers feel that
they must get or pay others to help them complete their own returns.
I believe that the tax system and support for it is being smothered
by the endless. forms, instructions and complexities of present tax law.
The American taxpayer is not only overwhelmed by the Federal tax
forms, he is overwhelmed by the State and county and other forms. We
are wondering what IRS can do to get us toward a one-stop service,
something that would take care of everything.
Before we proceed to these questions I would like to raise several
issues.
First of all we are honored to have submitted for the hearing a state-
ment on taxpayer assistance and services by Senator Joseph Montoya,
chairman of the Senate Treasury Appropriations Subcommittee. Sen-
ator Montoya is one of the first Members of the Congress to really
raise some of the questions about IRS procedures and services. He is
one more than any other who started the concerns which we hope to
further explore today.
SUBCOMMITTEE BUSINESS
For those who came in late, I want to be sure and introduce Mr.
Eugene Malone, who will serve as minority counsel.
We are happy to have you with us, Mr. Malone, on this committee.
We expect to work as a team. Majority and minority staff are expected
to work as one group, working toward a common goal. So we hope we
will work very well together.
Third, in reviewing the transcripts of our past two hearings with
the Commissioner, it is obvious that we are developing a very important
series of documents.
We would hope that after several more specific subject hearings with
the Commissioner and other outside witnesses, we can print these hear-
ings as the proceedings on the Internal Revenue Service. We are re-
ceiving many requests for the transci~ipts. We can't supply the demand.
Specifically, the reasons for which are unclear to me, the hearings
on March 26 with the Commissioner regarding how the IRS is investi-
gating certain recent charges was marked as an "executive session."
This means that no one can see these transcripts except a Member of
Congress or an aide, accompanied by a Member.
There were no names of individuals mentioned in this hearing. It
57-236 0 - 75 - 9
PAGENO="0130"
126
does provide valuable information about the national policies of IRS
in handling internal investigations.
Therefore I would like to move, under the committee rules, that we
vote to include that hearing in our public record.
If this is acceptable, then we can begin to circulate these transcripts
for correction of grammatical errors and the addition of material for
the record.1
Is there any objection to having that record opened up?
Do you have any, Mr. Commissioner?
Mr. ALEXANDER. No. I thought that was an open hearing, Mr.
Chairman.
Mr. VANIK. Each member has before him a memo from the staff as
to possible inquiries which the committee may want to undertake in a
new `area. I would appreciate it if you would indicate your feelings
about this with a yes or no and return them to me later this afternoon.
The fifth item of business is that several television stations have
been interested in possibly filming some or all of our oversight hear-
ings with the Commissioner.
This is a matter of course which would have to be approved by the
full committee. But I would appreciate your comments on whether
the subcommittee itself would be `amenable to such request.
Needless to say, we would not support the televising of any hearing
involving "Operation Leprechaun." I believe there is just too much
opportunity there for sensationalism in that investigation. There is a
danger that the names of innocent persons might be mentioned.
But in the hearings such as today, where we deal with taxpayer serv-
ices, things that are a matter of interest to the general public, I would
certainly see no problem with television.
But I leave that to your vote.
Can we have a reaction from the committee now on the televising
of just general information hearings?
What is your feeling?
Mr. PIKE. My initial reaction, Mr. Chairman, would be that in gen-
eral they would be so dull in their content that you wouldn't get a
television station in here taking pictures with a crowbar.
Mr. VANIK. That would be a matter for their determination. In other
words, we would just leave it to their discretion as to whether or not
they would want to.
Yes, Mr. Pickle?
Mr. PICKLE. I would be agreeable to the filming of hearings of the
subcommittee but on condition that such action be voted by the rules
of the House at least a day in advance of the hearings. In this way, we
could he selective about when we are having televised hearings.
Mr. CLANCY. Yes, Mr. Charman, I think we should comply with the
rules.
Mr. VANIK. In other words we would have to go to the full corn-
mititee. But if there is any request, then we can submit it to the com-
mittee and see how the parent committee feels about the request that
we might have.
I take it there would be no reaction as far as members of the com-
mittee are concerned, providing there was some interest by the media
in pursuing it.
Mr. VANDER VEEN. I think, Mr. Chairman, there would be no ob-
jection. But it should be looked at on a case-by-case basis.
1 The record of this hearing will be printed at a later date.
PAGENO="0131"
127
Mr. VANIK. I think that is consistent with the concensus of the com-
mittee, yes.
Mr. Commissioner, there have been revelations in the past week
about wiretapping, particularly in the Miami area, and a new develop-
ment, which is the "iRS school for drinking."
I don't know if we have a counterpart to this on the Hill here. But
if there is we don't officially talk about it.
I would like to say that if you would care to comment on either of
these two issues or submit comments for the record before going into
the subject of today's hearing, you are welcome to proceed.
STATEMENT OF HON. DONALD C. ALEXANDER, COMMISSIONER,
INTERNAL REVENUE SERVICE; ACCOMPANIED BY WILLIAM E.
WILLIAMS, DEPUTY COMMISSIONER; ROBERT H. TERRY, AS-
SISTANT COMMISSIONER FOR ACCOUNTS, COLLECTION, AND TAX-
PAYER SERVICE; SINGLETON WOLFE, ASSISTANT COMMISSIONER
FOR COMPLIANCE; ANITA ALPERN, ACTING ASSISTANT COMMIS-
SIONER FOR PLANNING AND RESEARCH; AND BURKE WILLSEY,
ASSISTANT TO THE COMMISSIONER
Mr. ALEXANDER. I would be glad to comment on both those issues
very `briefly, Mr. Chairman.
First I would like to introduce my companions here.
On my left is Mr. William E. Williams, Deputy Commissioner.
On my right is Mr. Robert Terry, Assistant Commissioner for
Accounts, Collection and Taxpayer Service.
Beyond Mr. Williams and behind him is Anita Alpern, Acting
Assistant Commissioner for Planning and Research.
To Miss Alpern's left is Mr. Singleton Wolfe, Assistant Commis-
sioner for Compliance.
Behind and to the right of Mr. Terry is Burke Willsey, my assistant.
Mr. VANIK. I want to say, Mr. Commissioner, that we were inter-
ested in having this hearing much earlier. But we didn't want to in-
terfere with the normal business that you had of getting this year's
receipts in. I hope they are coming in substantially to the degree that,
we have expected. I hope we meet our expectations of estimiated re-
ceipts. We are counting on your office to helping achieve that goal.
WIRETAPS
Mr. ALEXANDER. We will do our best, Mr. Chairman, with a little
help from the economy and the Congress. But you can be sure that
with the friendly and reasonable and effective attitude that I hope all
personnel in IRS are dedicated to, we will seek to collect what is due
and no more.
We will seek to process tax returns efficiently, promptly, early and
correctly `and seek to get refunds out to the vast majority of the Amer-
ican individual taxpayers to whom they `are due and seek to get rebates
out to almost all of the more than 80 million individual taxpayers. We
will seek to comply with the rest of the Tax Reduction Act of 1975
including devising new forms; I was working on that yesterday.
You mentioned two items, Mr. Chairman, that have been in the press
lately. As usual in April the IRS is not going unnoticed.
PAGENO="0132"
128
One of these relates to wiretaps. We have a flat prohibition against
wiretaps. I believe that the IRS is composed of some very fine people
who are trying to do a difficult job well. I think the vast majority of
our people are abiding by the rules that govern the IRS and its people.
I cannot say that there may not have been some aberration, some
inadvertent or perhaps advertent violation in some way, direct or in-
direct, of our rules. We have not only the rules that govern the other
law enforcement agencies in this country but a special rule for IRS:
No wiretaps. And we mean to enforce that rule.
Mr. VANIK. How long has that been in effect?
Mr. ALEXANDER. The alleged wiretaps mentioned in this particular
allegation, I am not certain, Mr. Chairman.
Do you know, Mr. Wilisey?
Mr. WILLSEY. The allegations that have surfaced in the press con-
cerning possible wiretaps are relatively vague. There have been some
allegatioiis that they have continued up until recent times. But there
has beeii quite a lack of specificity as to when particular incidents
may have occurred.
Mr. CLANCY. What was the date of that? May I ask?
Mr. WILLSEY. Of the prohibition against wiretaps?
Mr. ALEXANDER. The prohibition against wiretaps is almost 10 years
old. It was in effect long before I became Commissioner.
Mr. VANIK. Commissioner Cohen, 1965.
Mr. ALEXANDER. Yes. That happens to be an important ye.ar in that
respect, Mr. Chairman, 1965.
The "school for drinking" which was mentioned in the press this
morning in New York and I guess this afternoon in Washington, was
training for a selected few undercover agents. The incident that was
mentioned in the press occurred in 1965.
Mr. VANIK. Was that press story 1965?
Mr. WOLFE. That was 1965.
Mr. VANIK. It had the appearance. of something that occurred
yesterday.
Mr. ALEXANDER. That particular incident did not.
Mr. WILLSEY. The incident to which the press stories referred oc-
ciirred in 1965.
Mr. ALEXANDER. There was a somewhat generalized allegation in the
story this morning that some of this particular type of training-
which would seem not only inappropriate but also in most cases un-
necessa.ry-continiied through 1969. We have not found evidence of
any such continuation.
Mr. Wolfe?
Mr. WOLFE. That is right. That was the last one that they conducted
which involved that type of endeavor.
Mr. ALEXANDER. Mr. Chairman, that is all I have at this point on
these two matters.
Mr. PIKE. Mr. Chairman, I would just like to say that if you read
this Times article closely-and I did see it coming down in the plane
this morning-it does say the classes usually had 12 to 15 agents and
"IRS records confirm 4 classes were conducted from 1965 to 1973."
Can you tell us whether that was `the total number of classes which
were conducted?
PAGENO="0133"
129
Mr. ALEXANDER. I cannot because I do not know of my own knowl-
edge. I know that there were very few. IRS has more than 80,000 em-
ployees. In 1965 it had fewer.
Mr. PIKE. Mr. Commissioner, I just want you to know I am wholly
on your side. I do hope. this committee won't go tramping off investi-
gating every newspaper story that comes along because I just think
that you can take a thing of this kind and obviously it is newsworthy
and obviously it is titillating and obviously people like it as news.
But I just can't get that excited.
Mr. VANIK. I think, Mr. Commissioner, we clear the air on some-
thing by getting your responses and finding out precisely what is in-
volved. I think it is very useful to do that to be sure that this kind-
that the impression doesn't go on that this kind of thing goes on
today. It is not modern. It is not part of our tax system. I feel much
better about this explanation and this knowledge about the time and
the circumstances that have occurred since that time.
Mr. PIKE. Mr. Chairman, if I can just wind up, if I had learned to
handle liquor and women at an early age properly I probably would
have gone into some useful occupation.
IRS TAXPAYER SERVICE
Mr. ALEXANDER. At this point I am a little uncertain how to de-
scribe the occupation that I would like to bring up. It is not my occu-
pation. It is our taxpayers' service function, which is a very important
part of tax administration.
We are delighted to see the interest of this Oversight Committee
in this function. We have done much to strengthen and improve our
taxpayer service function in the last 2 years; but we have a long way
to go.
We are quite concerned about the central problem of quality. We
have made our own studies this year as we have in the past of the
quality of the service that we are giving the American public as well
as the courtesy and the progress of that service.
We make studies monitoring telephone calls. That is the only effec-
tive mangement tool that you have to handle a bank of telephone calls.
We make studies through our people acting as taxpayers and pre-
senting not only questions but presenting themselves for help with
their returns.
We make studies in reviewing returns prepared by our IRS or with
IRS assistance. or with IRS review.
We are concerned about this problem of quality. We are concerned
about the training that we have been able to give TSR's, those who
have the responsibhity of assisting taxpayers prepare their tax returns.
We have done something about it and we are going to do more.
We have done something about it in cutting down the number of
temporary employees that we have had from about 1,200 last year to
about 600 this year. These temporary employees have received only 3
weeks training. They are instructed to handle only the simplest ques-
tions, only the easiest questions that are presented to them and to
refer difficult questions to those with more training, to those who are
more experienced, those with more ability to handle the tough ques-
tions that taxpayers frequently send to us.
PAGENO="0134"
130
These are probably the type of questions that normally our inspec-
tion people would ask when they went around to check up on the qual-
ity and courtesy of our training and that the committee staff asks. We
need to have more permanent taxpayer assisters.
We are implementing career ladders for these people, the journey-
man grade 9 that is necessary for attracting and retaining people with
the skills and judgment and abilities necessary to perform this very
important part of tax administration.
Obviously we do need to have good facilities and we need to have
facilities placed where people can get to them. We also need to have
them open at times that people can get to them. We need to encourage
people to call us up.
Mr. VANIK. Do you have off-hours? What about off-hours? After
regular office hours.
Mr. ALEXANDER. We certainly need to have facilities open off-hours
when people will take advantage of those facilities. It is costly to the
public without material benefit to the public, however, if we keep our
facilities open till 10 but nobody shows up after 7 at night.
Our facilities have been open these last two Saturdays and some
other Saturdays in various places. This should be greatly helpful to
the public that it is our responsibility to serve.
People can call up after hours, sure, or before hours. We are going
to have a review of every aspect of our taxpayers' service work of every
part of this job, of how we do it and where we perform it and when
we perform it. We will analyze it within the next few weeks with a
view toward improving our service and getting more and better service
to more people next year.
We think that with the new taxpayer service organization, which
is separated from collection, in 19 districts is a separate division, with
this organization getting off the ground and with additional qualified
people on a career ladder that will do a much better job for the Ameri-
can public next year than we have been able to do this year.
Mr. PICKLE. Mr. Chairman?
Mr. VANIK. Mr. Pickle?
Mr. PICKLE. Let me ask Mr. Alexander what level of pay or classifi-
cation do these people receive-the ones who answer questions by the
public? Are they low? Average? Medium? What GS rating do they
have?
Mr.. ALEXANDER. In putting into effect this new career ladder they
will be 5, 7, and 9 in the GS ratings, parallel to our present tax audi-
tors. They are bel~v our revenue agents, of course.
This will mean a step upward in the present scale of our TSR's.
Mr. PICKLE. What are the 5's, 7's, and 9's in terms of dollars so we
will have some idea?
Mr. ALEXANDER. Five starts at $8,500; 7, the first step is $10,520; 9,
$12,841 at step 1, in the GS scale.
Mr. VANIK. Mr. Clancy?
ERROR FACTOR IN TEST CALLS
Mr. CLANCY. Mr. Chairman, I am delight.ed to he.ar the Commis-
sioner say that he intends to expand and improve this type of service.
I think it is very necessary that we do that.
PAGENO="0135"
131
When we talk about the margin of error, what has been your experi-
ence as far as the taxpayer assistance program is concerned today?
What is the margin of error that you have found?
Mr. ALEXANDER. The margin of error in certain tests we have made
is not greatly at variance with the 25 percent rate that the chairman
mentioned.
Mr. Terry?
Mr. TERRY. It depends on the kind of service that we are testing. If
we are testing the returns preparation we have found a rather high
error rate on our test questions.
Of course they don't cover the whole range of possible problems.
They focus in on some of the more difficult problems, things we are
trying to get improvement in.
On the telephone monitoring we do we see lower error rates because
here the questions that are more general; they don't focus in on some
of the tougher parts of the tax law.
Mr. VANIK. What is the error rate for the private preparers?
Mr. TERRY. For the private preparers?
Mr. VANIK. Yes. What would the error rate be on that?
Miss ALPERN. We are currently setting up, Mr. Chairman, a system
for obtaining information on the incidence of errors occurring in our
returns preparation and review program. This information will be
compared with similar data from a separate study involving taxpayer
prepared and commercially prepared returns. We expect to complete
our studies by the spring of next year.
Mr. ALEXANDER. Based upon some of the figures that were used in
the past with respect to private preparers or a selected sample of
private preparers, they are already suspect. They do no~ meet the
quality and integrity that one would and should expect that industry
to evidence.
So there are various figures in the records of our appropriations
hearings and elsewhere for the 1972 and 1973 filing years, tax years,
actually, filing years 1973 and 1974, which show a rather high rate of
error, much higher than what we are talking about here.
But that is from a sample selected with the belief that sample would
evidence a high rate of error.
Mr. Wolfe, would you care to supplement that?
Mr. WOLFE. For example in 1972 of those returns we examined and
audited involving returns prepared by these preparers we had a 77
percent change rate, in 1973 it was a 79 percent change rate, in 1974 it
was an 83 percent change rate.
Mr. VANIK. I wonder if your studies would include something on the
accuracy rate of individuals to see how he or she compares in a sample
study to see what the change rate would be for returns in which the
taxpayer is actually doing the work himself as compared to returns
completed by private tax return prepare.rs.
Mr. ALEXANDER. Actually, Mr. Chairman, to some extent Mr. Wolfe
and I are getting ahead of our topic. We are getting to the topic of is
tax preparer legislation necessary? Mr. Wolfe and I are convinced that
it is.
But Mr. Terry was discussing the variances that we have in error
rates depending on particular circumstances and types of questions.
PAGENO="0136"
132
Mr. TERRY. It is our experience on the test calls that it is about 15
to 25 percent depending on the particular district and the locale that
we are making the calls to. So that confirms your findings.
In our telephone monitoring, where the supervisor or designated
TSR is listening in on the conversations that come in from the tax-
payers at large, our error rates range from 4 to 10 percent. This is the
general run of questions that are being received in our district, offices.
On the returns we have prepared, the error rate has ranged from 4
percent up to 30 percent. We are very much concerned with this par-
ticular area.
Commissioner Alexander indicated that we were going to conduct
a study before the end of April that will focus on this problem.
Mr. ALExANDER. Some of those errors in these returns we reviewed
are of the no-tax-consequence variety such as where somebody hasn't
checked a box. We think that returns should be perfect. We like to
make them this way. But we won't always succeed.
IRS TRAINING PROGRAM
Mr. CLANCY. Mr. Commissioner, do you have, any plans to upgrade
your training program for these people who aie engaged in the. assist-
ance program?
Mr. ALEXANDER. Yes, we do. We are going to examine the entire
training program, Mr. Clancy. We have ma#erially changed the train-
ing program for permanent TSR's, permanent taxpayer assistants, in
the last year.
`We have added to that program. And we propose to employ, instead
of temporaries, so-called WAE's. These people are actually part-time
permanents. They have. the advantage of permanent status with the
Government although they work only part of the year. We have had
great success in our service centers in employing these people. WTe pro-
pose to take them on and to give them more and better training than
we have been able to give the temporaries that w-e have employed.
Mr. CLANCY. What do they do the other part of the year?
Mr. ALEXANDER. They are off. They work only part of the year. The
housewife that. wants to supplement the family income b~~t is unable to
work, say, during the. summer time when the children are out of school
caii work during the. filing period. We have been lucky in being able to
hire some dedicated people. that come back to us year after year in our
service centers.
`We hope. w-e can attract some of the same sort of people to do' this
important work.
Mr. `V'ANIK. I see., Commissioner, no reason why you shouldn't use
some of the retired personnel that want to work for a few months to
be able to live on their retirement. I see nothing w-rong with that. They
can come in under contract.. They have the talent. They have the train-
ing. I think we could get a valuable person at a short-term cost to the
Government.
Mr. Pickle?
Mr. PICKLE. I w-anted to ask one question. You have outlined some
general plans that you `have, hopes `and objectives you w-ould like to
see. achieved.
PAGENO="0137"
133
Do you have a pamphlet, a booklet, or a manual on taxpayer services
that would be. available to this committee so we might know overall
what your plans are? Is that too much detail? The reason I raise the
question is I would like to know what are your plans. You have men-
tioned a few this afternoon and they sound pretty good.
I would like to know what you ai'e trying to sell, what you are trying
to convince the public. With that as a background, my next question
to you is what do you want from us? What do you need from this com-
mittee? What do you need from the Congress?
It is good for us to hold these meetings and for us to bear-pop you
questions on why haven't you done this or what do you think about
this. It seems to me like we should approach this first on a positive
basis. What do you want from us?
I am convinced that there is a great deal more that needs to be done
in taxpayer services. But rather than pull it out one at a time, it seems
to me that you could be thinking in terms of what you want to ask
this committee or the Congress to give you so we can get it done. Do
you have plans in written form so that we can know what you are try-
ing to carry out?
Second, what do you want, what do you ask of the Congress?
Mr. ALEXANDER. The answer to your first question is that we do have
our plans in written form. We will get them to you. We will be glRd
to send you our program letter. We will be glad to send you the other
parts of our manual in which we describe our new organization and
in which we describe what we intend to do and how to go about it.
[The documents follow:]
PAGENO="0138"
134
~-
supplement ~ 49G-27
5(15)G -47
lIP ~msssr~ se®sJ Internal Revenue Service 67G-3
December 13, 1974 Taxpayer Service Program -- Fiscal Year 1975
Section 1. Purpose
This Supplement provides guidelines for regional, district, and service
center officials responsible for the Taxpayer Service Program for Fiscal ~J
Year 1975.
Section 2. Program Objectives
.01 The 1975 objectives for the Taxpayer Service Program are:
1 To improve the quality of service;
2 To meet the needs of special groups of taxpayers; and
3 To make taxpayer service more convenient and accessible.
.02 Specific program objectives, along with additional objectives, are
outlined in Section 2 of Manual Supplement 5(15)G-4l, CR 67G-2, Fiscal
Year 1975 Taxpayer Service Scheduling Guidelines, dated July 30, 97lI.
Section 3. Program Direction
.01 General. The four major areas of program emphasis are:
1 Toll-Free Telephone Service
2 Walk-In Service (D
3 Correspondence
4 Special Programs
a Elderly
b Low-Income Groups
c Taxpayer Education Programs
.02 Staffing
1 Staffing should consist of full-time Taxpayer Service Represen-
tatives (TSR's) When Actually Employed (WAE's), Temporaries, Audit details, ~
and, where necessary, Collection personnel. Details from Audit are not to
exceed the man-years provided for the Taxpayer Service Program in the Audit
Examination Plan. Fewer temporaries should be used on the Taxpayer Service
Program than were used last year. To the extent possible, returning tempor-
*aries should be converted to MAE's. Districts will provide adequate well-
trained backup staffing to make sure that:
Distribution:
IRM 0300, 0420.7, 1(12)82, 1(17)00, 4900, 5(15)00, 6200, and 6700
PAGENO="0139"
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Section 3 -- Cont.
a Necessary expertise is available for immediate referral
and resolution of questions beyond the tax law knowledge and skill level
of the front-line assistor.
b Unanticipated workloads are effectively handled.
2 Details from Audit and Collection during the non-filing period
should be kept at a minimum.
3 In subordinate offices, it may be necessary to detail Collec-
tion personnel to the Taxpayer Service Program. However, before Collection
personnel are detailed to the program, MAE's, itinerant TSR's, RA's, or
Tax Auditors should be considered.
4 Bi-lingual TSR's should be provided to serve non-English-
speaking taxpayers where needed.
.03 Referrals and Call-Backs. If a full, complete and correct
response cannot be given, the taxpayer should be directed to an IRS
employee who can answer the inquiry or arrangements made for a call-back.
Call-backs on inquiries which must be researched should be made within one
workday of the inquiry.
.04 Research Tools and Equipment. All assistors should have readily
available research and reference tools, such as IDRS, Publication 17, and
a Microfiche reader where provided by the National Office. Adding machines
are a necessity in all preparation and review areas.
.05 Toll-Free Telephone Service. District management is responsible
for planning and installing a system which provides sufficient manpower on
telephone lines to maintain an effective level of telephone taxpayer ser-
vice. District offices should install evaluation and monitoring systems as
a basis for timely identifying and improving telephone service which is
consistently ineffective or inadequate.
.06 Walk-in Service. To the extent feasible, walk-in areas should
have a receptionist and/or some other person (temporaries or MAE's) to help
direct walk-in traffic and perhaps assist in handing out forms, publica-
tions or answering very basic tax questions. All employees servicing tax-
payers' walk-in inquiries should prominently display a name badge at all
times.
1 Taxpayer assistance walk-in contact areas should be arranged
considering available space, the volume of anticipated traffic, and other
necessary factors, to provide help according to the type of assistance
requested as follows:
a Forms and publications requests;
b Taxpayer inquiries with no preparation of returns;
c Preparation of individual income tax returns, Forms lO4OA
and 1040 without itemized deductions or schedules attached;
d Preparation of Form 1040 with all of the necessary and
related schedules and attachments.
Manual Supplement
PAGENO="0140"
136
Section 3 -- Cont.
e Self-help area where at least one technical employee will
be assigned. This employee will monitor the self-help area and be available
to taxpayers who may need some limited assistance in preparing their own
returns.
2 The office layout should be designed to afford maximum privacy
to taxpayers.
3 Supervisory personnel should be available to provide information
or assist in the resolution of complaints if the taxpayer so requests.
Supervisors should have their names displayed prominently.
4 Taxpayer Service posters, Publications 840 and 840A, should be
displayed in locations visible to all taxpayers receiving assistance.
5 Taxpayer Service office locations should be planned i~ accord-
ance with instructions set forth in Section 3(10)0 of 1PM 1(22)70/, Tax-
pgyer Service Toll-Free Telephone Systems and Walk-In Facilities flandbook.
In particular, walk-in assistance should be in high population density areas
and located on the main floor level, i.e., directly accessible to the
exterior public thoroughfare, on the same level.
.07 Assistance in the Preparation of Returns
1 Self-Help
a Self-help is a method of providing tax information and
assistance which offers the taxpayer maximum opportunity to learn to prepare
his own return. This will be accomplished by a positive approach to the
taxpayer's problem and by providing him all the guidance and tools necessary
to complete his return. This method will continue to be stressed during all
phases of the Taxpayer Service Program.
b Returns prepared under the self-help concept should not
normally be signed by the TSR. If the taxpayer requests, the return should
be reviewed as in Section 3.073 and stamped "Reviewed, but not audited."
2 Service Preparation of Returns
a The Service will prepare returns in any one of the following
circumstances: if the taxpayer appears to be incapable of using self-help
methods; if the taxpayer is unwilling and requests that the Service prepare
his return; or when working conditions permit such an expenditure of time by
Service personnel.
b As a general rule, the preparation of returns by Service
personnel will be limited to Forms lO4OA and 1040 without business schedules
(C and F); however, District Directors may alter this due to local needs or
circumstances.
c Generally, tax returns are prepared only if the taxpayer
provides the necessary information in an orderly manner, except in those
cases where the taxpayer is clearly incapable of doing so. Taxpayers should
not bring their receipts and check stubs into the office and expect to have
the tax return prepared. Form 5033, Worksheet for Preparation of Form 1040,
is being revised for use by taxpayers to ease the preparation of their tax
returns.
Manual Supplement
62G-1, 03G-32, 04G-23, l(12)G-155, 1(17)G-62, 49G-27, 5(15)G-47, 67G-3
PAGENO="0141"
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-4-
Section 3 -- Cont.
3 Review of Returns Prepared without Service Assistance. Any
return submitted by a taxpayer for review should be reviewed, stamped, signed
and dated in accordance with the procedures in 4 below. As a general rule,
it will not be the Service's practice to perform a review service for com-
rnercial preparers.
4 Disclaimer and Signature Stagns
a Service employees should stamp and sign those Forms 1040A and
1040 which they have prepared or reviewed. The signing of tax returns by
IRS employees will not affect the Service's right to audit these tax returns.
The assistor should make the taxpayer aware that the return may still be
subject to audit and that the return will be subject to math verification.
b The original and taxpayer's copy should be stamped, signed
and dated regardless of whether the taxpayer takes the original return with
him or leaves it at the office for forwarding to the appropriate service
center.
c If in the course of returns preparation or pre-filing review
taxpayers insist on claiming clearly unallowable deductions or exclusions,
they should be advised that the Service does not regard these items as
allowable. If they insist on claiming these items, the assistor should not
complete further preparation or review their returns. Such returns should
not be signed by Service employees as either preparer or reviewer.
d Two types of disclaimer stamps are being provided for employ-
ees assisting in the preparation or review of tax returns. The stamp
imprint should be placed in the lower right corner over the space allocated
for "Preparer's signature (other than taxpayer)", on either, as applicable,
page 1 of Form 1040 or page 2 of Form lO4OA.
e The stamps being furnished include the appropriate office
location codes set out in Attachment 2 to Manual Supplement 67Gl, effective
July 1, 1974,and read as follows:
"Reviewed, but not audited and "Prepared, but not audited
IRS ,, ____________________________IRS
(Two-digit office location code) (Two-digit office location
code)"
f Special care should be used in stamping returns to make sure
that the type of stamp and office location code are clearly identifiable.
g Red ink stamp pads should be utilized with the disclaimer
stamp for easy identification during processing.
5 Count of Returns. An accurate count should be kept and reported
by all personnel giving walk-in taxpayer service of individual and other tax
returns prepared and reviewed. Appropriate reporting instructions are con-
tained in Attachment 3 to Manual Supplement 68G-3, dated November 21, 1974.
Manual Supplement
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Section 3 -- Cont. 5 -
.08 Corrdspondence
1 Timely and efficient handling of taxpayer correspondence is an
integral part of an effective Taxpayer Service Program. Local management is
responsible for making sure that replies are made to all taxpayer correspond-
ence within five days of receipt. Whenever possible, this correspondence
should be answered by telephone.
2 Correspondence which cannot be answered by telephone or fully
replied to in writing within five days must at least be acknowledged. To
the extent possible, taxpayers should be furnished a final written reply
within ten days after acknowledgement.
3 If correspondence or a telephone call is received from other
than the taxpayer, or a person who has on file a power of attorney to act for
the taxpayer, IRN 1272, Disclosure of Official Information Handbook, should
be checked before replying. As a general rule, no disclosure of confidential
tax information should be furnished other persons unless a written waiver
has been obtained from the taxpayer authorizing the disclosure in question.
4 Forms 5260, Quick Notes, should be utilized where possible
(see MS 5(l5)G-42, CR 68G-2, dated July 26, 1974).
.09 Special Programs. It is essential that a vigorous effort be
undertaken to reach and assist those who most need help.
1 Elderly Program
a In recent years, the major thrust of taxpayer assistance
efforts for the elderly has been the Volunteer Income Tax. Assistance (VITA)
program. Even though every effort should be made to assist the elderly
through volunteers, districts should also make an effort to reach as many
older taxpayers as possible through other means.
b Districts should strive to provide service to those areas of
the community in which there is a high concentration of elderly residents.
TSR's may be sent out to provide assistance at nursing homes, hospitals,
Leisure World locations, and State Welfare offices.
c In dealing with elder1~' taxpayers, special emphasis should
be given to the Form W-4. TSR's should explain the W-4 to these taxpayers
and assist them in completing a new form if necessary to adjust their with-
holding to a more realistic level and lessen the financial impact of filing
their returns.
d Retired taxpayers should also be alerted to the fact that
by filing a Form W-4P with their pension source, taxes can be withheld from
their pension income. This simple step may relieve many elderly taxpayers
of their obligation to file estimated tax returns on Form 1O4OES.
2 Tax Assistance for Low-Income Taxpayers. Districts should mak~
an expanded effort to reach and assist low-income taxpayers, preferably in
their own communities. The difficulties encountered by most taxpayers are
frequently compounded in the low-income community by a lack of basic educa-
ticn and/or an inability to communicate in the English language. For these
reasons, it is imperative to make an extra cf fort to reach into these areas
to provide assistance. Again the VITA program can be a primary vehicle
for providing this service. Districts are encouraged to seek the involvement
of community organizations, make use of taxmobiles, and establish additional
satellite offices where needed. Emphasis on a correct W-4 should also be
considered in all low-income contacts. (See Section 3.091.)
Mmmd! Supplement
~2G-i, )3~-32, `:;-2~, ~ I(i7)~-~2; /~~27, 5(15);_47, a?G-3
PAGENO="0143"
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Section 3 -- Cont.
3 Taxpayer Education Programs
a Taxpayer Education Programs are a vital part of the Service's
voluntary compliance function in administering the tax law. The various
adult education, high school, tax institute and volunteer assistance pro-
grams have proven their ability to reach a broad cross section of the tax-
paying public and affect the quality of a large number of returns with a
minimum investment of Service manpower.
b Added emphasis on and participation in Taxpayer Education
Programs is expected this year. Districts should place primary emphasis on
establishing and expanding programs for elderly and low-income taxpayers,
e.g., VITA. Specific guidelines for all Taxpayer Education Programs,
including VITA, are contained in TRW 1(12)82, Taxpayer Education Handbook.
Section 4. Availability of Service
.01 General. All TSR's should be able to provide the toll-free tele-
phone numbers, address locations of local taxpayer assistance facilities
and the hours of operation of each location in the district upon request.
.02 Regular Hours
1 Walk-in - Districts should provide full-time walk-in taxpayer
assistance at all locations which have a permanent full-time TSR.
2 Telephone Service - The hours of toll-free telephone service
should be widely publicized and every effort should be made to encourage
taxpayers to use the service.
3 Certain days should be established and publicized for taxpayer
service in accordance with local need for those offices which are not staffed
with a full-time TSR. However, if employees are in these offices on other
than "designated days", doors will remain open and telephones will be
answered to help taxpayers who call or make a personal visit. When such
offices are closed, Publication 607, Federal Tax Information, is available
for posting on doors to inform taxpayers shen and where help may be obtained.
.03 Extended Hours of Service
1 A concerted effort should be made to gear extended hours to
local area taxpayer needs. The ~ historical experience, knowledge
of needs and availability of resources should be considered. Districts
should utilize change in duty hours and staggered hours or the use of over-
time for the work force to accomplish extended hours.
2 Publicity informing taxpayers of the types of service being
offered at the nearest site available to them must be coordinated with
Public Affairs Officers.
.04 Service Center Taxpayer Service
1 In view of the security problems inherent in providing walk-in
assistance in service centers, this service will be discontinued by the end
of Fiscal Year 1975. Necessary steps must be taken to redirect walk-in
activity from service centers to district offices which are staffed and
Manual Supplement -
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Section 4 -- Cont.
equipped to provide walk-in assistance. Some suggested steps which should
be considered in accomplishing this goal are: publicity directing taxpayers
to district offices; displaying signs directing taxpayers to the nearest
offices providing walk-in assistance; and installing a telephone at the
center's entrance which a taxpayer may use to call the toll-free number for
assistance. In instances where a taxpayer appears at a center demanding
assistance, it should be provided; however, the taxpayer should be advised,
for future inquiries, of the nearest IRS location which regularly provides
walk-in assistance.
2 Although the toll-free telephone network has been implemented
nationwide, service center employees continue to receive telephone inquiries.
To the extent possible, service center employees should answer these ques-
tions or refer them to employees with the appropriate expertise within the
service center. In either case, at the conclusion of the call, the caller
should be advised of the availability of toll-free telephone service and
given the toll-free number(s).
.05 0ff-Site Locations. Over the past several years, major efforts
have been made by the Service to use off-site locations to reach those
taxpayers, in particular the elderly and low-income, who for one reason or
another cannot come to an IRS office and do not have access to a telephone.
In those instances, storefront locations near the people to be served and
easily accessible by public transportation should be used whenever possible.
Taxmobiles are another excellent method of providing service. Whichever
method is used, it is extremely important to schedule work hours
in the evening and on the weekends so that more people will be able to
utilize our services. Little "city halls" where joint Federal, State and
city tax service may be provided should also be seriously and actively
pursued.
Section 5. Quality of Service
.01 Achieving of Quality
1 Quality Taxpayer Service means providing on a year-round basis
courteous, responsive, and accurate answers to taxpayer inquiries and timely
resolution of tax problems in a manner which the taxpayer can understand.
Additionally, quality service is also provided when we admit we do not know
the answer and refer the taxpayer to someone more knowledgeable.
2 Districts should develop a year-round plan for maintaining
quality taxpayer service. The plan should include monitoring of telephone
calls, sample test telephone calls, walk-in shopping, on-line observations
of walk-in service and review of Service prepared/reviewed returns.
3 Results from the various methods of quality review should be
fed back to employees for on-the-job training purposes. In addition,
incorrect answers or new procedures should be discussed with all employees
on a daily basis. Early morning (or other appropriate times during the day)
for discussion sessions are an excellent method of feeding information to
employees. This should be done on a year-round basis. Special emphasis
should be placed on the "most frequently asked questions" to attain a
high-quality peogram.
Manual Supplement -
620-i, 030-32, 040-23, 1(12)0-155, 1(17)0-62, 490-27, 5(15)0-47, 670-3
PAGENO="0145"
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Section 5 -- Cont.
.02 Monitoring Quali~y
1 Telephone Service
a Monitored calls are those in which a Taxpayer Service super-
visor or his delegate listens to the conversation between the taxpayer and
the assistor.
b Employees providing telephone service assistance should be
notified of the possibility that supervisory personnel will be monitoring
and/or sampling calls from time to time, for program evaluation purposes.
All appropriate telephones are to be clearly identified with a gummed label
stating, "This telephone is subject to monitoring for the purpose of spot-
checking taxpayer service work." The label should be placed so that the
telephone user will have knowledge of the monitoring and sampling possibili-
ties. The tax package will also contain a statement advising the taxpayer
that calls for tax information are subject to monitoring.
c Sample calls are those initiated anonymously by the Taxpayer
Service supervisor or his delegate who poses test questions to an employee
assigned to duty in the telephone contact area.
d A sample form (see Attachment 1) has been designed for
purposes of recording all pertinent data and information to check the
accuracy, completeness, and uniformity of responses of both monitored and
sampled calls. Also, telephone courtesy and responsiveness to new programs
should be determined and recorded.
e Districts and regions should conduct telephone monitoring
and sampling activities on an on-going basis year-round as part of their
overall evaluation program. In this way, feedback and corrective actions
(such as training and briefing sessions) can be taken where necessary as
well as identifying program problem areas requiring adjustments-
2 Walk-in Service
a Shopping techniques have proved workable for providing
program and management information. District management should formulate
sample tax problems to test the ability of walk-in service personnel to
prepare an accurate, thorough individual income tax return. For this
monitoring technique to be effective, the identity of the Service employees
who will pose as taxpayers mast be unknown to those who will be doing the
actual preparation of the return. Taxpayer Service managers should select
the shoppers and develop a schedule of offices to be shopped. Taxpayer
Service group supervisors should know that their employees will be shopped
but should not be informed of the locations and schedules. Shoppers should
attempt to put themselves in the place of the taxpayer. They should note
the visibility and clarity of directional signs, the availability and dis-
play of forms, the length of waiting periods, the helpfulness and courtesy
of the assistors, and other pertinent factors, in addition to judging the
technical accuracy of the final product.
r b On-line observations will be the most frequently used
method of monitoring the quality of assistance that employees provide tax-
payers in the walk-in area. It will be the on-line supervisor's responsi-
bility to see that it is accomplished in such a way as to cause the least
disturbance to the two principals. Supervisors should avoid being drawn
Ma,ual Supplement
PAGENO="0146"
142
Section 5 -- Cent.
into the conversation between the taxpayer and the TSR. It is difficult
to give any hard and fast guidelines for on-line monitoring the walk-ins,
but supervisors should attempt to stay in the background. Technical
accuracy and completeness of responses should be evaluated as well as
general meet-and-deal qualities. The physical layout of each office and
the resourcefulness of the supervisor will determine the effectiveness and
validity of this monitoring technique. Although no formal reports or tally
sheets have been prescribed for on-line monitoring, it is expected that
supervisors use the knowledge they gather to provide both positive and
negative feedback to employees.
c Review of Returns Prior to Filing. An additional means to
evaluate the accuracy and completeness of our service is to utilize the
results of the review of returns prepared in the subordinate office. Super-
visors should ensure that reviewers notify them if they find patterns or
trends developing, regardless of who prepared the return. Supervisors
should then provide feedback to front-line personnel. Supervisors should
also conduct spot-checks of reviewed returns to ensure that the review
procedures themselves are being conducted in a quality fashion.
Section 6. Personnel Evaluation
.01 No special filing period performance evaluation on Form 3861 will
be required for permanent Taxpayer Service personnel or for details-in.
Appropriate forms will continue to be prepared when necessary to meet other
requirements (e.g., competition for merit promotion).
.02 Employees derailed-in for the filing period should be counseled
by the supervisor to whom the employee is detailed on their performance in
the Taxpayer Service area, and informed that this information will also be
corrmiunicated to their Supervisor of Record. The information may then be
considered by Taxpayer Service in accepting employees for details for the
following year.
.03 The Supervisor of Record will decide how to use this information
when preparing the official performance evaluation (Form 3861, the approp-
riate contractual appraisal form, or recordation). The Supervisor of
Record must remember that before information received from the supervisor
to whom the employee was detailed can be used to support a personnel action
or decision, it mast be declared as "recordation" and the employee must be
given a chance to rebut the information. Otherwise, the information cannot
be used.
.04 Temporaries should be evaluated in accordance with IRM 0430.22:(3)
and42l:(6) of IRM 0431, ~l~5 igo~LsG~jde to Performance Appraisal.
Section 7. Training
.01 General
1 As a result of the expanding scope of taxpayer service activity
and the high level of competence expected of employees, districts should
place a strong emphasis on available training courses. A list of the
courses required for FY 1975 is contained in Attachment 2.
a For those test districts equipped with Microfiche, the train-
ing materials are scheduled to be available in mid-December 1974.
Manual Supplement
620-1, 030-32, 040-23, 1(12)0-150, 1(17)G-62, 49G-27, 5(15)0-47, 670-3
PAGENO="0147"
143
- 10 -
Section 7 -- Cont.
2 Scheduling of training is at the discretion of regional and
district managers. However, training sessions should be held as close as
possible to the time the employee will use his training.
.02 On-The-Job Training (OJT)
1 To fully prepare TSR's to provide quality service, managerial
personnel should make certain that new employees receive a thorough orienta-
tion upon entering on duty, a minimum of three weeks OJT immediately follow-
ing Phase I of the Basic Training for TSR's, and sufficient OJT throughout
their first year to give them a full opportunity to learn and demonstrate
their ability to handle the job. The ratio of OJT coaches to new employees
should normally not exceed one to five, and each coach's normal work assign-
ments should be reduced by 20 percent for each trainee assigned.
2 General instructions regarding the role of the supervisor, the
district training officer, and the OJT instructor are outlined in the
Development Guide of the Basic Course for TSR's, Training No. 3025-01, and
the OJT Guide for the Post-filing phase of the basic TSR training course,
Training No. 2228-25.
Section 8. Public Affairs
.01 General. Public Affairs has provided a tax information program
for 1975. Highlights of this campaign are:
1 A major emphasis on the availability of taxpayer assistance;
2 An information campaign geared to increase taxpayers' awareness
of special provisions of the tax law affecting students, part-time workers
and the elderly.
3 A continuation of the publicity program encouraging taxpayers
to file early.
4 A continuation of the campaign advising taxpayers of their
option to designate a portion of their taxes to the presidential Election
Campaign Fund.
.02 Taxpayer Service managers and Public Affairs Officers should work
together to plan the public information effort in support of the program.
Extensive local publicity on the availability of toll-free service, the
"most frequently asked questions' and extended hours is critical to a
successful district program.
.03 Free publications on specialized tax subjects should continue to
be widely disseminated and publicized.
Section 9. Tax Forms, Publications and Other Related Materials
.01 Again this year, all individual income tax packages will be
mailed directly from the printer. (See MS 1(17)G-61, CR 1(19)G-78 and
5(15)G-46.)
.02 The bulk mail-out to practitioners will be the responsibility of
the districts. However, the Kansas City Service Center will handle this
bulk mail-out for all districts in the Nidwest Region and the Wichita District.
Manual Supplement -
PAGENO="0148"
144
- 11 -
Section 9 -- Cont.
.03 An order blank will be included in all 1974 income tax packages
to allow taxpayers to order additional tax forms and publications from the
district offices. The quantities of free tax publications have been
appropriately increased to meet the demands expected to be generated by
the turn-around order blank. Every effort should be made to handle these
requests within a 24-hour turn-around.
.04 Document 5044, Listing of Items Available for Taxpayer Assis-
tance, has been distributed to each district office. Each district should
determine the quantities of each item needed and order them so that they are
in place by January 1, 1975. Signs and Posters highlighting free taxpayer
service and information should be prominently displayed in the walk-in and
forms distribution areas.
.05 Publication 17, Your Federal Income Tax (1975 Edition), and
Publication 334, Tax Guide for Small Business (1975 Edition), will be given
away without charge to individual taxpayers this year on a single copy
basis. Publicity relating to this matter should be kept'Sow key." Each
individual tax package states that "Single Copies . . . may be obtained
without cost from most IRS offices." Instructions for distribution of
these documents are contained in MS 1(17)0-60, CR 1(12)0-154, CR 5(15)0-45,
dated Movember 25, 1974.
Section 10. Forms
Form 5066, used in accordance with the instructions contained in
superseded MS 5(15)0-29, CR 1(12)0-148, CR 1(17)0-54, CR 490-24, dated
January 15, 1973, (error, should have been 1974), will not be used this year.
Section 11. Effect on Other Documents
.01 The following Manual Supplements are superseded and the corre-
sponding cited annotations to the IR Manual for these Supplements should
be removed;
Superseded Supplements Prescribed Annotations
Cross in "Effect" to be Re-
Principal Number i~T~~ence(s) Date moved from 1PM
5(15)0-24 030-19 and September 28, 1973 0300.444
490-21 4970
5(15)23
5(15)0-25 040-il October 5, 1973 0420.7 (Text 110)
5(15)00
5(15)0-26 1(12)0-146 and October 26, 1973 5(15)20; 1(12)02.
and 490-22, and Cha~tors 400, 506
Amend. 1 Amend. 1 November 23, 1973 6O0~; and 4970
Amend. 2 Amend. 2 January 11, 1974
Amend. 3 Amend. 3 January 17, 1974
5(15)0-27 1(12)0-147, and December 11, 1973 5(15)26
and 490-23, and 5(15)30
Amend. 1 Amend. 1 January 28, 1974
5(15)0-29 1(12)0-148 January 15, 1973 (in
1(17)0-54, and error for 1974)
490-24 -
Manual Supplement
620-1, 030-32, 040-23, 1(12)0-155, 1(17)0-62, 490-27, 5(15)0-47, 670-3
PAGENO="0149"
145
- 12 -
Section 11 -~ Cont.
~Mpgrseded Supplements Prescribed Annotations
Cross in `Effect' to be Re-
Principal Number Reference(s) Date moved from IRM
5(15)G-32 49G-25 February 1, 1974 5(15)14 and 4970
and and
Amend. 1 Amend. 1 May 10, 1974
.02 The following INN segments are supplemented by the instructions
herein and annotations by pen and ink referring to this Supplement should
be made as indicated below:
1 IRM segments
0300.444,
0300.451:
1(17)50, 4970,
5(15)14, 5(15)20, 5(15)26, 5(15)30
2 Handbooks
IRM 0420.7, Taxpayer Service Trai:iiiig Programs Handbook Text
110; and IRM 1(12)82, Taxpayer Education Handbook, Toxt 400, 500, 6C0.
3 Manual Supplements
J(iD)U-41, CR 6/G-2, dated July 30, 1974
.03 This supplemonts INN 6200 (to be issued).
/ / I:
/ 1/
Stanley ~oldberg ~
Director,
Taxpayer Service Division
Attachments
Manual Supple~nent
620-I, 030-32, 060-23, 3(12)0-155, 1(17)0-62, 430-27, 3(13/0-47. ~77-3
PAGENO="0150"
146
Attachrrmnt 1 to MS62G-1, CR: 03G-32, 01+0~23, 1(12)G-155, l(17)G-62, 1+9G-27, 5(15)0-47,
670-3
Sample Worksheet
TPJF.PT4ONF TAXPAYER RF.R\JTGP
2. Date
1. Office Location Month Day
3. Time of Review
a. From To b. Total Tine
I
4-
Employee
5. Reviewed By
a. Name
. Category Code c. Grade
6. 7.
Monitoredl
or Sample~Cefer-
8.
Call-
Completed Calls 11. [
9. 10. 4/) Length of Call
Satis- Unsatis- (minutes and ~r
12.
ype of Inquiry
13.
Multiple
Questions
Call
ral
(J)
Back
(jf)
factory factory
(~J) oJ1~ d
qtim of minutes)
b
c d e
(1) if yes
14.
TOTAL
Manual Supplement
PAGENO="0151"
147
Attachment 1 -- Cont. (1)/to MS 620-1, CR: 030-32, 040-23, 1(12)G-155, 1(17)0-62,
49G-27, 5(15)0-47, 670-3
Procedures and Instructions for
Completing Sample Worksheet
All telephone taxpayer inquiries received will be subject to sampling and telephone review
1. Office Locations.
2. Date. Enter month/day. Example: 02-05 for February 5.
3. Time of Review.
a. From - To. This will be measured from the time of pick-up for the first call re-
viewed to the time of pick-up of the last consecutive call in the review.
b. Total Time Difference. Actual tine (in minutes) measured from beginning to end of
4. Employee.
a. Name of employee (do not enter taxpayer's name).
b. Category Code. This will be one of the following:
1) Permanent TSR's (Prior filing period experience)
2) Permanent TSR's (No prior filing period experience)
3) Returnee temporary TSR's (Prior filing period experience)
4) WAE's (Prior filing period experience)
5) WAE's (No prior filing period experience)
6) Interviewers and Revenue Representatives (Prior filing period experience)
7) Revenue Agents (Prior filing period experience)
8) Tax Technicians or Office Auditors (Prior filing period experience)
9) All other types of employees including Interviewers, R/O's, R/A's, T/t's, or 0/A's
without prior filing period experience.
In categories four and six through eight above, "prior filing period experience" refers to
the performance of Taxpayer Service on a regular, but nut necessarily full-time, basis.
c. Grade. All employees, enter their grade in these boxes.
5. Reviewed By. Show name.
6. Monitored or Sample Call. Indicate the number in sequence of the particular call being
7. Referral. If the employee being reviewed refers the inquiry to another individual (tech-
nical back-up, Audit, etc.) for response, a check (,() will be placed in this column. The
referral may be in the form of an actual call transfer, or it may be a written referral.
8. Call-Back. If the employee being reviewed cannot provide immediate response to an in-
quiry, but obtains the taxpayer's name and phone number for call-back, a check (ui) will be
placed in this column. (If office procedures do not provide f or call-back by front-line
taxpayer service personnel, them any taxpayer inquiry which cannot be completed immediately
will be referred, and a check (I') wilt be entered in the Referral column.)
9. Satisfactory Response. Defined as follows:
a. Employee comprehends caller's question quickly.
b. Response is given in a clear and concise fashion and is correct.
c. No unnecessary, unsolicited information is offered.
d. Employee gives name and is courteous on telephone.
Manual Supplement
PAGENO="0152"
148
Attaclirne t 1 -- Coot. (2) to MS 620-1, CR: 030-32, O1+G_23, 1(12)0-155, 1(17)0-62,
~90-27, 5~15)O-47, 57G-3
If the employee being reviewed completes the inquiry in a satisfactory manner, a check (J)
will be placed in this column. Only completed (answered) inquiries will be rated here for
quality of response.
10. Unsatisfactory Response. If the response of the employee being reviewed is considered
unsatisfactory for any of the above (9a,9b,9c, or 9d) reasons, a Check (1) will be placed
in the appropriate "unsatisfactory" column. In the event a response is judged unsatis-
factory for more than one reason, th e revi ewer will check the 5/lIDLe reason considered most
serious. As in 9 above, only completed (answered) inquiries will be rated here for quality
of response. NOTE: Every call will require a check mark (and only one) in columns 7,8,9
or 10.
11. Length of Call. The actual length of each call including referrals and call-backs will
be measured from pick-up to disconnect. Time will be measured in minutes and quarters of
minutes (e.g., 2.5 minutes).
12. /ype of Inquiry Code. This will be one of the following:
a. Prefiling, tax related, question or questions
b. Returns preparation and/or revs* cv
c. Postfiling, ret urns related, question or questions. This includes refund inquiries,
Service Center bills and notices, etc.
d. Administrative, i.e., office hours, forms request
e. Other, such as District Office Audit and Collection cases, etc.
A check (1) will be placed in the appropriate column for each inquiry handled including re-
ferrals and call-backs.
13. 3/i/tile Questions. The purpose of this category is to attempt to identify multiple
inquiries related to more than one taxpayer entity, e.g., practitioners or individuals pre-
paring more thanone tax rcturm. If the taxpayer's inquiry involvesaseries of distinct
questions rathee than pme or two related inquiries, a check (n") will be placed in this
column. If a check 5/) is placed in this column, then multiple type of inquiry codes as
applicable will be checked in Col. 12. In the case of multiple questions, if it is necessary
to refer or call-back on one of more of the questions, that call will be checked as a refer-
ral or call-back (Col. 7 and 8). In the se cases no entry will be made in columns 9 or 10,
even though satisfactory response may have been given to some of the caller quvstions. En-
tries will still berequired in columns 11 and 12.
14. The total number of check (8') for each of the following columns ,aill be indicated across
line 14: Columns 6,7,8,9,10 (a,b,c,d), 12 and 13. No total will be indicated for column 11.
Manual Supplement
PAGENO="0153"
149
Attachment 2 to MS 620-i, CR: 030-32, 040-23, 1(12)0-155, 1(17)0-62, 490-27, 5(15)G47,
670-3
Permanent TSR Training Courses
Course No. 3026 Basic Course for TSR's (Pre-Filing Period) - 5 weeks (including 1 week
(Former No. simulation) followed by 3 weeks of OJT.
2228a) This course consists of 62 lessons and is aimed at preparing new re-
cruits to provide accurate responses to individual income and employ-
ment tax questions, including the preparation and review ef returns.
Course No. 3027 Basic Course for TSR's (Post-Filing Period) 3 weeks
(Soon to be issucd This course deals with complex issues such as investment credit, alien
fon;r No. 2228k) clearance, penalties and interest, gift tax, notice stuffer, ADP and
IDRS.
Course No. 3028 Advanced Course for TSR's - 3 weeks
(Former Jo. This course is designed to prepare TSR's for more technical aspects of
2232) tax law and to enable them to achieve a skill level comparable to Tax
Auditors.
Temporary and Refresher Courses
Course No. 3029 Training for Temporary TSR's - 3 weeks (including 1 week simulation).
(Former Jo. This course for new tempo is geared toward the newly limited temporary
2235) position.
Course No. 3030 Refresher Income Tax Law Training (Incumbent TSR's, Returning Tencoraries
(Former No. and Revenue Officers)- 5 days
2233) This course is designed to cover changes in tax law and new Revenue
Rulings, and to focus on tax areas where feedback indicates employees
need more training.
Refresher Training (Revenue Agents/Tax Auditors) 3 days
((~p93ement Courses
Course No. 3031 Functional Practices Training for Taxpayer Service Supervisors and
Nonagers - 3-5 days. This course, new this year, is gearei to
overall direction of the Taxpayer Service Program. It includes
segments on the philosophy of the Progron: selection, training and
development of employees: staffing needs; and reporting.
All group managers, branch and division chiefs should attend this train-
ing before the filing period.
Additional C nurses aisd Aids
Course No. 9928 Basic Instructor Training - 2 weeks
All TBR's who will be instructing TSR courses this year and who have
not previously completed Basic Instructor Training should attend this
Course No. 3025--OS Basic Course fur TSR's -- Development Guide
This guide outlines OJT for TSR's and has been updated to give more
attention to evaluation and feedback.
Mannal Supplement
57-236 0 - 75 - 10
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150
62G-1, AmencLl
03G.32 A,snnd. 1 49G.27. Arced. 1
S upplernent 040-23, A,,,~sd, 1 5)15)G-47, Arced. 1
1(12)G.155, Arced. 1 67G-3 Areed, 1
1)17)0.62, Arced. 1
Internal Revenue Se~vlce
January 22, 1975 Taxpayer Service Program -- Fiscal Year 1975
Section 1. Purpose
This Amendment modifies Attachment 1 of the basic Supplement regarding completion of the
sample worksheet for recording telephone taxpayer service performance.
Section 2. Background
.01 When Toll-free Telephone Service was implemented, one of our objecti'.'es was to pro-
vide year-round courteous, responsive and accurate answers to taxpayer inquiries. A major
objective for Fiscal Year 1975 is to improve this service over past years.
.02 This year districts have been reques ted to develop a year-round plan for monitoring
the quality of telephone service. To assist them, a sample worksheet has been designed for
purposes of recording all pertinent data and information to check the accuracy, completeness,
and uniformity of responses of both monitored and sampled calls.
.03 The sample sssrksheet, us addition to recording data regarding the results of the
monitoring procesc,has a block for the name of tise reviewer (monitor). We deem it important
that districts inclade with the name, the job title and grade of the reviewer. This data
will be used by management to determine the validity of the judgmental decisions made by the
reviewer of tise accuracy of TSR responses to taxpayers' inquiries, recorded in blocks 9 and
10 uf tile sample worksheet.
Section 3. Modification of Attachment 1
7c:~d, 1150 5 os ;~tenk:.ent 1--ConS. (1), `Trceedc~er end InctInctionI for Cmmpletirc
GeeSe GosGiteet" So need itevinn.ed Sc: Ceo nenc, jclsCetl'(e.e., cC. II'?, TeA. tSsl, etc.)
~YCT~On~ZT iffect on Other Documents
Ytie amends Attachment 1--Cont. (1) of IAnuci Sugplccest SAG-i, CS 071-72, Ql3_7C,
1(12)G-55, i(I7)G-5~t !e9G-27, 5(iy)G-57 cr9 t7G-7, doted December 17, 1975. This "effect'
ctsuld h~ :ennotcted by con end ink on thet Supelereent cities reference to this Amendment.
~ `~
Stanley illdberg
Director,
Taxpayer Service bivision
Distribution:
Gill Q Ce, 05? .12, 1(111)??, 2~1?)00. GIG . CII )0C,EIGIC nd 5101
PAGENO="0155"
151
62G-1, Amend. 2
B3G-32. Amx,d, 2 49G-27. Amond. 2
supplement 1(12)G15~Amoxd. 2 5(1:~G4~A,,,~,,d 2
1(17)G.62,Am,xd.2
Internal Revenue Se~ice
January 27, 1975 Taxpayer Service Program -- Fiscal Year 1975
Section 1. Pqpppqp
This Amendment is to clarify the meaning and intent of Section 3.03, Referrals and
Call-Backs, of the basic Manual Supplement dated December 13, 1974.
Section 2. Clarification of Time Element for Call-Barks
.01 Most call-backs on inquiries shoold be made within one workday of the inquiry.
However, there are circumstances that make it impossible to respond to a taxpayer'
inquiry within one workday.
.02 Circumstances that are recognized as preventing a one workday responseinc lode the
fo 1 loving:
Additional information is reqoired from the taxpayer as a result of
Subsequent developments;
2 Extensive technical research is required before making a response;
3 Original tax return most be secured from the Federal Records Center or
4 Inquiry must be referred to the service center or other out-of-division
referral points; and
5 Peak workload periods prevent the expenditures of na~power for irexediate
call-backs.
.03 Other situations may occur which would also prevent responding to a taxpayer's
inquiry within one workday. If it appears that a call-back can not be made within five
workdays, the taxpayer should be notified of the status of his inquiry. Management should
monitor pending inquiries to make sure that no backlog occurs unnece ssarily.
Section 3. Effect on Other Documents
This supplementa Section 3.03 of MS 620-1, CR 03G-32, CR 040-23, CR 1(12)0-155,
CR 1(17)0-62, CR 490-27, CR 5(15)0-47, CR 670-3, dated December 13, ;974, which should be
t t d by p d k T py~rvDv
Distribution:
1101 0300, 0920.7, 1(12)52, 1(37)01, 4900, 5(15)00, 6200, and 6700
PAGENO="0156"
152
5(17)G-119,
supplement 167G-2
Internal Revenue Service
July 30, 1974 Fiscal Year l9~5 Taxpayer Service Scheduling
Guidelines
Section 1. Purpose
This Supplement provides guidelines for developing work schedules for Taxpayer Service
for FT l9~.
Section 2. Objectives and Program imphasis
.01 The primary objective of Taxpayer Service in FT 1975 is to continue the program
of improving the quality of service provided taxpayers by: ____
1 Evaluating and revising Taxpayer Service training programs. CD
2 Evaluating and modifying the nationwide toll-free telephone system.
3 ~psnding the Integrated Data Retrieval System.
4 Implementing the Stuffer Program.
5 Reviewing form letters, notices, end similar IRS material.
6 Evaluating the curren~ locations to determine if the: are suitably located.
02 Additional objectives for Taxpa~er Service in FT 1975 are:
1 To increase our cepacit~ to help taxpeero meet in need such as elderl:-, low-
income, end non-fliglish peaking, b1 improving training and education programs, preparing
additional plain and foreign language publications, and h: encoureging recruitment of bi-
lingual TSR's.
2 To increase the range of :ear-round assistance the Taxoe;er Service organization
provides for the taxpayer so that it becomes the IRS focal point for helping the taxpayer.
3 To establish an appropriate district office organizational structure to reflect
the present role, responsibilities, and workload of Taxpayer Service within the Internal
Revenue Service.
.03 The aforementioned Taxpayer Service objectives will be accomplished by the Regions E~
and Districts through the following means:
1 Providing taxpayer service at locations that are easily accessible to all tax-
payers in environments designed to project the public service image. Off-site, sstellite `~
locations will be established to the extent necessary based on actual and experienced local
taxpayer needs.
CD
Distribution:
101 0(14)7, 5(l3)D~, 5(17)O0-(1~)9) end 6700
PAGENO="0157"
153
-2-
Section 2.--Cont.
2 Establishing office hours that afford the taxpayers the maximum opportunity to
uae Taxpayer Service facilities during the filing period. Extended office houra will be
scheduled for the filing period based on actual and experienced local needs. Particular
attention should be given to the needs of taxpayers located in geographic areas with special-
ized problems, i.e., densely populated urban areas.
3 Maintaining a year-round, nationwide toll-free telephone system for taxpayers
to call IRS.
4 Providing a pre-fiing quality review of all returns for both completeness and
accuracy at the taxpayer's request. (These returns will be stamped "reviewed, but not
audited.")
5 Providing technically competent and service-motivated personnel to assist tax-
payers in preparing their returns through either Self-help or full preparation of the tax-
payer's return, as appropriate.
a Taxpayer Self-help will continue to be stressed during all phases of the
Taxpayer Service Program.
b Service personnel will fully prepare returns in any one of the following
circuinstances
(1) If the taxpayer is incapable of using self-help methods;
(2) If the taxpayer appears capable but is unwilling and insists that
the Service prepare his return; and
(3) When working conditions permit such an expenditure of time by Ser-
vice personnel.
6 Securing and maintaining a high degree of quality in all aspects of the Program,
both technically and in the manner in which it is offered. Regions should review and con-
sider Internal Audit reports from prior years and other indicators of quality to meet this
goal.
a The 1975 Filing Period Plan of Action for Taxpayer Service is being devel-
oped in the National Office to implement a program directed toward improving quality.
b Each region and district will develop a plan of action based on the
National Office plan of action geared toward the responsibilities of the regions and districts.
We continue to encourage and promote the self-analysis currently being
carried out in some districts. All districts should regularly evaluate public response to
filing period and non-filing period Taxpayer Service programs, including both telephone and
face-to-face contacts. Any necessary sampling techniques may be developed locally, but
should include distribution of the Taxpayer Service Questionnaire (Form 5066) to walk-in
taxpayers during the filing period.
7 Providing adequate managerial and supervisory attention to the function to make
sure that Taxpayer Service is of the highest quality.
Section 3. Workload S
.01 FY 1975 workload for each region should be based on Nay 1973 - April 1974 actual
workload figures plus an addition for anticipated growth. See Section 6.07.
Manual Supplement
PAGENO="0158"
154
Section 3.--Cont. - -
.02 All workload experience should be adjusted to reflect management's reasonable
expectations. It is likely that the rate of growth experienced in the 1974 filing period
over 1973 will continue.
.03 The expanded workload for the Stuffer Programs for notices and RSC and C letters
is anticipated for each region as follows:
Additional Workload (000's)
(Telephone Contacts)
Notices Letters Total
North-Atlantic 344.4 59.5 403.9
Mid-Atlantic 287.7 49.7 3374
Southeast 342.3 59.1 401.4
Central 252.0 43.5 295.5
Midwest 266.7 46.1 312.8
Southwest 270.9 46.8 317.7
Western 315.0 54.4 369.4
010 il.0 3.6 24.6
Section 4. Manpower
.01 The permanent and temporary man-years reflected in the schedules should be the
same as those in your PT 1974 Operating Financial Plan.
.02 The manpower figures shmwn herein should be used for planning and scheduling par-
poses only. These guidelines and allocations are subject to change when the FY 1975 Budget
and the full impact of the 1974 Filing Period are known.
.03 If the FT 1975 Congressional Budget increases are anproved, we plan to allocate
248 part-time nan-~-earp to hire permanent part-tine employees to staff outlying posts of
duty on a pre-scheduled tour mf duty. For funding purposes, permanent part-time employees
are paid from other than full-time, permanent funds. (Sub Object Class Code 1130) Subor-
dinate offices will be staffed to the maximum extent possible with permanent part-tine TSR's.
1 The 140 additional temporary man-years allocated to the regions in FT 1974 will
be converted to 108 part-time man-years for hiring of part-time TSR's.
2 140 man-years of the expansion provided in the FT 1975 budget will also be
allocated to hire permanent part-time TSR's.
3 The total 248 man-years planned for this purpose will be apportioned to the
regions fer staffing outlying posts of duty based upon the needs projected in the Part-time
Permanent TSR Study which was completed during FT 1973.
.04 The new Taxpayer Service organization was implemented on July 1, 1974.
1 Additional manpower authorized due to the reorganization is one manager and
one secretary per district. These additional 116 positions nationwide will be funded from
the FT 1975 budget expansion.
2 The combined Collection and Taxpayer Service organization will be split into
Collection and Taxpayer Service functions by apportioning the staffing based on prior
experienced manpower usage.
Manual Supplement Official Use Only
~3s3a~a, 5(14)0-61, 5(12)7-119, 670-2
PAGENO="0159"
155
-4-
Section 4.---Con~.
.05 The use of detailed personnel on the Taxpayer Service Program should be kept to
the minimum necessary during the first half of FY 1975. If an unusual trend emerges in the
level of the Taxpayer Service workload during the first half, the District Director, with
regional concurrence, should take the necessary steps to provide the required skilled man-
power resources and the region should advise the National Office accordingly
.06 Additional personnel needed to perform Taxpayer Service duties will be provided
by details of Audit personnel. Details from Audit will be composed of approximately 65
percent Tax Auditors (one-half experienced Tax Auditors and one-half new recruits). The
remainder will be Revenue Agent new recruits. Details from Audit should be limited to
the number contributed in FT 1974 (515 direct man-years nationally including training);
the breakout by region follows:
NA MA SE C MW SW H 010
81 g4 38 71 67 76 94 2
1 Details from Audit during the non-filing period will be kept to the minimum
possible.
2 In outlying posts of duty staffed only with Revenue Officers, it may be neces-
sary to detail Revenue Officers to the Taxpayer Service Program. However, before Revenue
Officers are detailed to the program, consideration should be given to using itinerant
TSR's, permanent part-tine TSR's, or Tax Auditors.
3 Details to the Taxpayer Service Program from Collection will be kept to the
mimsimizum possible.
4 All personnel assigned to the Taxpayer Service Program should have demonstrated
a potential for the high-quality performance of these duties and should have indicated a
willingness to serve in this program. In detailing experienced personnel to the program,
preference should be given to those with previous successful details to the Taxpayer Service
Program.
.07 Fewer Temporary TSR's will be utilized on the Taxpayer Service Program in FT 1975
compared to FE l9~4. Ordinarily Temporary TSR's will not be used on telephones. However,
in instances where it is necessary to use Temporary TSR's, they should only be assigned if
they have experience and training comparable to a permanent TSR and have demonstrated the
ability to perform at a level comparable with that of a permanent TSR.
.08 Regions and districts should consider the manpower impact in their outlying posts
of duty resulting from workload shifts from one location to another caused by program changes
such as the implementation of toll-free service which directs phone calls to a centralized
location. The region should use all possible means to minimize the impact of these program
changes such as careful allocation of attrition hires, redeployment of TSR' a on a voluntary
basis, and reassignment of TSR's to provide for the efficient use of personnel.
.09 Taxpayer Service Representative participation in the Volunteer Income Tax Assis-
tance Program and Taxpayer Education Program should be expanded, as necessary. Any expan-
sion of the role of TSR's in these programs should be coordinated through the local Training
Office and identified in the narrative comments supporting the work schedules.
Section 5. Training Schedules
.01 Any incumbent TSR's who did not receive Advanced TSR Training prior to or during
FT 1974 should receive this training as soon as possible during the first half of FT 1975.
The maximum amount of training possible should be scheduled during the first quarter using
Manual Supplement
PAGENO="0160"
156
Section 5.-Cont.
FT 1974 training materials.
.02 Assuming that TSR attrition has been hired by July, some Recruit TSR Training
courses should be scheduled during the first quarter of FT 1975. The revised version of the
Pre-Filing TSR Course will be available on September 1, 1974. Any training scheduled before
that date will need to be conducted with FT 1974 training materials. All pre-filing train-
ing should be scheduled for completion by the end of the second quarter. Schedules should
reflect training of the anticipated expansion hires as noted in Section 5.06.
.03 Basic Instructor Training courses and Instructor Workshops for Recruit TSR
Training should be scheduled as early as possible in the first quarter of FT 1975.
.04 Training for Managers of Taxpayer Service should be completed as soon as possible
during the first half. Your schedules should reflect this training.
.05 Advanced TSR Training for TSR's newly hired for FT 1975 should not be scheduled
in FT 1975.
.06 For the purpose of planning training during FT 1975, the following courses sisuld
be scheduled:
1 Recruit TSR Training (Recruit Permanents, full-time and psrt-time) -- 11 weeks
(Simulation Training is incorporated into Phase I -- 5 weeks, OJT -- 3 weeks, Phase II --
3 weeks);
2 Temporary TSR Training (Recruit Temporaries) -- 3 weeks (Simulation Training
is incorporated - 1 week);
3 Refresher TSR Training (Incumbent TSR's and Returning Temporaries) -- 1 week;
4 Training for Details-in (Collection and Audit) Since many Audit personnel
will be new recruits who have just received current tax law training, they will probably
need less tax law training for Taxpayer Service duties. However, Audit personnel who have
not had current tax law training should be scheduled for the training time necessary to
update their tax law knowledges. As required, detailed personnel shiuld be scheduled for
training to familiarize them with current tax forms, Taxpayer Service reporting require-
ments, public relations training, etc.
5 Advanced TSR Training (Incumbent TSR's) - 3 weeks;
6 Training for Managers of Taxpayer Service (All Taxpayer Service Managers) -
minimum 1 week, maximum 2 weeks;
7 Basic Instructor Training (All incumbent TSR' a who will be instructing TSR
Courses) - 2 weeks.
.07 For the purpose of planning training during FT 1975, the following tentative man-
year allocations should be considered.
1 The tentative rtstribution of budget expansion man-years follows:
HA MA SE C ?M SW W 010 NO
Man-Years 76 72 54 54 5P 53 81 5 5
Manual Supplement
5(1.5)0-41, 5(14)0-61, 5(17)0-119, 670-2
PAGENO="0161"
157
Section 5.-Cont.
2 Permanent part-time TSR's should be allocated to thoae subordinate offices with
a need for less than one full-time, year-round TSR.
3 Only 250 temporary man-years for temporary Taxpayer Service Representatives will
be scheduled for training in FT 1975.
.00 No employee will be assigned or detailed to the Taxpayer Service Program unless
that employee has received the appropriate training outlined above for FT 1975.
.09 For training purposes, the Audit manpower used during FT 1974 ould be rolled
over. Details of Audit manpower during the non-filing period should be kept to the minimum.
.10 The above Training Guidelines are for planning purposes only. They will be sub-
ject to change when the funds available for training next fiscal year are known. Official
training guidelines will be issued later by the Assistant Commissioner (Administration).
Section 6. Scheduling Procedures and Timing
.01 Schedules will be prepared utilizing the listing of Taxpayer Service Activity
codes in Attachment 4.
.02 The attached Taxpayer Service Work and Manpower Planning System Worksheets (see
Attachments 1-3) will be used to estimate Taxpayer Service workload and to plan the man-
power necessary to accomplish this workload.
.03 Schedules will include both direct and indirect activities and overhead for the
Taxpayer Service Program. They will also show soheduled details both in and out of the
Taxpayer Service Program, and scheduled training for all employees assigned or detailed to
the Program.
04 In those districts where Taxpayer Service remains under the direction of the
Chief, Collection and Taxpayer Service Division, all ozerhead time pertaining to the office
of the Division Chief will be reported as Collection overhead, in accordance with Collection
procedures.
.05 Taxpayer Service function scheduling and reporting periods will coincide with the
fiscal month scheduling and reporting period concept, a calendar showing the fiscal months
including the number of workdays for FT 1975 is contained in Attachment 5.
.06 Work schedules should be prepared and the originals forwarded through the regions
to reach the National Office no later than July 15, 1974.
.07 District narratives are very helpful in validating schedules and should be
forwarded together with the work schedules through regions to the National Office. These
narratives should explain reasons for variations from past experience together with any
operating decisions at variance with these guidelines which may have influenced the sched-
uling process. Narratives should include identification and explanation of the growth
factors and rate of growth projected. They should include a computation of man-years for
estimated training for the expansion hires. Districts should also inform the National
Office of their allocation of man-years to hire permanent part-time TSR's.
Manual Supplement
PAGENO="0162"
158
Section 7. Effect on Other Documents
.01 This supplements ISO 5~l14)7O, 5~lt)9O and 1(15)00. This `effect should ~e
annotated by pen and ink beside the text cited, with a reference to this ~upp1enient.
Also, this supplements IRE 6700 (to be issued).
.02 This supersedes Manual Supplements 5J5)G-22, CR 7lh(G-5u, dated Ceptembee 7,
1973, and Amend. 1, thereto, dated December 3, 1973. This duo supersedes ub97.5 cf
IRE 5(17)00, IDRI Handbook.
(Accounts, Collection, and Taxpayer Service)
Manual Supplement
5(15)G-4l, 5(14)0-61, 5(17)0-119, 670-2
PAGENO="0163"
159
Attachment 1 to MS 5(15)0-41, CR 5(14)0-61, 5(17)0-119 and 670-2
Taxpayer Service Work and Manpower Planning System Worksheets
1. ~g~9gg - The Taxpayer Service Work and Manpower Planning System Worksheets
(Forms 5145 and 5146) are designed to provide a uniform, logical means for
estimating workload and planning the manpower staffing to service this work-
load. In addition, the Program emphasis continues to be on quality per-
formance of duties as well as providing services needed. The worksheets
currently provide for the projection of additional manpower needed to provide
this quality service.
2. Forms - Form 5145 (Report Symbol NO-ACTS:T-120) is the Semiannual Worksheet.
Form 5146, bearing the sane Report Symbol, is the Monthly format, providing
identical data. See Attachments 2 and 3.
3. Format - The separation of Taxpayer Service and Collection functions in the
field necessitated revision of the Form 5145 and Form 5146 formats used
during FE 1974. The revised forms provide for estimates of Direct and
Indirect Activities and Taxpayer Service Overhead. Total hours for both
details-in and out of the Taxpayer Service Program, along with Training
scheduled for all employees assigned or detailed to the Pdogram should be
shown.
4. Activities - Formerly, Taxpayer Service Operations and their Codes were
listed in the Collection Division Planning System Handbooks. Attachment 4
provides a new list of Taxpayer Service Activity Descriptions and new Code
numbers. These Activity Codes should be used in estimating data for de-
veloping the Work Schedules for FE 1975. Effective July 1, 1974, (Fl 1975)
the new Activity Codes will be used for reporting Taxpayer Service work
performed.
Careful attention should be paid to the Activities listed. They have
been revised to reflect a more accurate picture of actual duties performed.
In the past some of the Operations encompassed several duties, all reported
under one Operation Code number. Using the new Activity list, these will
now be scheduled and reported under individual Activity Codes.
5. ~ons
a. Record the actual volumes for the comparable months of the prior year
for the Direct Activities provided.
b. Estimate your volume for these Direct Activities for the same months
this year.
c. Estimate your current year processing rate, keeping in mind Program
emphasis on quality.
d. Divide your estimated volume by your units per man-hour rate. Record
this answer for each of the Direct Activities in the Estimated M/H
column. Total these columns.
e. In the section below, break these figures down by category of employee
who will be performing these Direct Activities. Also record estimated
hours to be utilized as Details-out of the Program.
Manual Supplement
PAGENO="0164"
160
Attachment 1-Cont. to MS 5(15)G- 41,CR 5(14)G-61, 5(17)G-119 and 67G-2
f. Record man-hours actually expended last year on Indirect Activities
(when possible) and Overhead. If no determination can be made for
actual hours spent on the new Indirect Activities (from Fl 1974
records), skip these spaces.
g. Estinate man-hours to be spent this year on Indirect Activities as
listed, and Overhead. Total Indirect Activities and Overhead items.
h. Use remarks section to indicate any unusual circumstances or clarify
statistics used.
Note: Revised drafts of Forms 5145 and 5146 will not be printed and
distributed. Reasonable facsimiles or cooies of Attachments
2 and 3 will be acceptable for submission of your report figures.
Manual Supplement
5(15)G-41, 5(14)0-61, 5(17)0-119, 670-2
PAGENO="0165"
M~ths sf ths~sgh...............197_ ~
Esfissst~d ~sh~sss
Si
N-
1~
-5
_____ -5
N-
Rsp~t Sys~bN NOACTS: T-120
d b (N dTa (Pave Se ce Sem an at Wa k a d Ma powe Pta ng System Wo ksheet
S~wsif 1,2.
a C a d UMHJ ~: d
Sis-MathS~ssssy
7. Oth~s
8. Mgt/C(s~is9
Cwtssts Estiss~~t~d This Ysss
9. Lass
EstisystydMssHssss
0. Tassg
(f( Defsi(s-ssf
Ny. 5145 (DsN 674(
MHasss by Cstwssy sf Esssplsyss
Tas( Ossshs~d
Ryassks
(s(Pys~y~t Tsspsyfs SsMsf Rsp 51(55 (TSR(
(b( Tsapssssy TSR a Psytissa Psaststtt TSR
Dttsilsis (Cyl(tytiyy(
(dl Dyttilsit Asdit (Tsthttitd(
Dytsils-it Asdit (Othtt)
Othss
Dtasatst st tN- Tast (~tt~~tI RtSTfla' S5f~TN5_____,
PAGENO="0166"
M~ttth _________________ 197
Eltitttltld ttttt-hyttt-~
Si
A-
Ii)
lu
)/tptyt Sytttb~I NO-ACTS: T-120
Taxpayer Service Monthly Work and Manpower Planning System Worksheet D~tttvt
Pt~pttbd by ~ ~,td lit/I) Dttl
Apptty,yd by (N~t,y1 tyd lit/I)
DAwi
AItit,itil$
MIttth tf
IldAIlt Attititiw
lId Otttht~d
CtlttIt~
Ettittttttd
Mttt-h~tts
1. WAlt-itt
4. 1) tt~t~th tttd Rttv/ittitttt (Flttf.)
2. Phyyl-i/t
5. Mvyiot:ttgtttdRttitt~tt
3. Cttyttpyttd~ttyt
6. Pyb/iy
Stwvl 1, 2,
7. Othtt
Mtttthly Stttt,ttvty
lAth 114(1111 Avtititiw
8. Mdldgl//ttllt/C)ylithI
Cttyttytt Ettiytold Thit `(111
9. Lt~t~
Ettiy/htId M/tt-HI/yt
10. Tttittittg
MItt-HI/Itt by Clttgtty EtIlpilylt
Tttttl OlIthIld
Id) Pttttttttyttt Titptypt S/I/i/I Ryptytvttdtill (TSR)
vy~tkt
/5) Tptttp~tttty TSR It Pty-titttp Pptttttttyt TSR
(t) Ott/iN-it (Ctt)Itytiytt)
5/ Dttti/t-it A/IdA /1115/ill))
)t) DsA)t-it A/IAN )Otht)
/)) Dptd/)t-A/It
Othtt
Fvytt 5146 )Dtdtt 6-74)
S/phtttltttltt//lTtPdt/tty-)tt1ll/)R//IP////P Sytt'itt
PAGENO="0167"
163
Attachment 4 to MS 5(15)0-41, CR 5(14)G-61, 5(17)0-119 and 170-2
Service Activities
DIRECT ACTIVITTIS
010 WAlE-IN Report both Hours and Units - All Riployees
Unit count represents each Taxpayer contact
1. Interview (eac~h contact is dounted).
2. Prepare or assist in preparation of returns, documents, issue
Form 809 receipt, if necessary.
3. Prepare and transmit forms or documents for processing or research.
4. Determine what form or document taxpayer needs, and furnish same.
(This includes preparation of Form 4190, if necessary.)
020 PHONE-IN Report both Hours and Units - All Eaployees
(Unit count may be taken from register)
Note: If register count is available, supervisor will read and
record total number of calls received on her form. Each
employee will then record only hours.
If no register is available, or register is inoperative,
employees are required to keep individual count of calls.
1. Interview and/or call back (each contact is counted).
2. Prepare and transmit forms or documents for processing or research~
3. Determine what form or document taxpayer needs, prepare Form 4190,
and transmit to distribution point.
030 CORRESPONDE390S Report both Units and Hours -- Taxpayer Service Persosnel only
Incoming and response are counted as one unit
1. Review letters, requests for information, etc.
2. Perform related research (including IDRS).
3. Reply to taxpayer (by phone or letter).
4. Type response, where appropriate.
INDIRECT ACTIVITIES
035 RESEIRCH AND
nemmTTTmTnM (Ps'vcPPan~ Report Hours only- Taxpayer Service Personnel
only
Note: Research that can be performed while taxpayer is on the phone
or waiting should not be reported under this Activity Code.
"On-the-spot" research should be reported under the Direct
Activity being performed.
1. Receives unresolved taxpayer problems from those employees providing
front-line services, for purpose of additional research.
Manual Supplement
PAGENO="0168"
164
Attachment 4-Cont.(1) to MS 5(15)0-41, CR 5(14)0-61, 5(17)G-.-119 and 670-2
2. Performs detailed research using all possible techniques and
materials, including microfilm, IDRS, transcripts, copies of
returns, documents, etc.
3. Prepares necessary documents for inputting information to
correct account, when needed.
4. When research has been completed, all data will be returned to
the original employee contacted for call back of resolution to
taxpayer.
040 ONITORING AND REVIRd (By Taiçp~yer Service Personnel only) Report Hours only
1. Review returns prepared in IRS offices, by or with the assistance
of IRS personnel.
2. Monitor incoming taxpayer calls to assess quality of service rendered.
3. Act as technical back-up reference point for employees providing
walk-in or telephone service to taxpayers.
Note: TSR review of returns prepared by the taxpayer, or by an agent
of the taxpayer, should not be reported under this Activity
Code. This should be reported under Code 010, Walk-in.
045 MONITORING AND REVINd (By Details-in ONLY) Report Hours only
1. Review returns prepared in IRS offices, by or with the assistance
of IRS personnel.
2. Monitor incoming taxpayer calls to assess quality of service rendered.
3. Act as technical back-up reference point for employees providing
walk-in or telephone service to taxpayers.
Note: TSR review of returns prepared by the taxpayer, or by an agent
of the taxpayer, should not be reported under this Activity -
Code. This should be reported under Code 010, Walk-in.
050 PUBLIC INFO}0~1AUON Report Hours only
To be reported by Taxpayer Service employees £L1f
Includes tine spent in preparation and coordination
of materials
1. Speeches
2. Interviews
3. Public (group) Instruction Sessions
055 Qfl~ Report Hours only- Taxpayer Service Personnel only
1. Thavel to posts of duty to perform itinerant duties or delivery
of Your Business Tax Kit.
Manual Supplemenn
5(15)0-41, 5(14)G-61, 5(l?)G-1l9, 67G-2
PAGENO="0169"
165
Attachment 4-Cont. (2) to MS 5(15)0-41, CR 5(14)0-61, 5(17)0-119 and 670-2
2. Update technical information (i.e., Manual issuances, TIR's,
TAX NTWS, etc.).
3. Report all other tine not reportable under any other Direct,
Indirect or Overhead Activity, such as distribution of questionnaires.
OVERHEAD ACTIVITIES
060 REPORTS PREPARA RE Report Hours only- Taxpayer Service Personnel only
1. Preparation of Reports, Time Cards, Travel Vouchers
(Individual daily tine and Activity reports of employees are
not included).
070 MANAGOSTITI Report Hours only- Taxpayer Service Personnel only
1. Management/Supervisory Duties
2. Related Clerical Duties
3. Study and Filing of reference material
4. Attendance at conferences and meetings
5. Related travel
080 ~ Hours only- Taxpayer Service Personnel only
Report sll leave except LWOP, Compensatory and Holiday Tine
090 TAXPAYER SERVICE T715~3G Hours Only - All employees
1. all formal Claxsfuu!!~ training time, including instructor time.
2. Trainee time on OJT
3. Tmvml time related to training
Note: Instructor time on OJT is charged to the direct operation.
095 DEPAILS-O~ Hours only- All Employees
Report all tine detailed out of Taxpayer Service to another functional
activity - This includes work performed on IDA's, TOT's, forms dis-
tribution, etc. (The name of the functional activity should be shown
in the remarks qection of Form 4980, i.e., Collection, Audit, etc.)
List of Employe~ Reporting Categories
P4~manent TS~
Temporary TSR or Part-tine Permanent TSR
TPS Management/Supervisory
TPS Clerical
Details-in (Collection)
Details-in Audit (Technical)
Details-in Audit (Other)
Manual Supplement
57-23e 0 - 75 - U
PAGENO="0170"
166
Attachment 5 to MS 5(15)0-41, CR 5(14)G-6i, 5(17)G-119 and 670-2
TAXPAYER SERVICE FINCTION
FY1975 FISCAL MONTHS FOR BOTH
SCHEDULING AND REPORTING PURPOSES
Dates
Sunday Through Saturday (Inclusive)
Holiday (1) June 30, 1974 - July 6
19 Days July 7, - July 13
153 Man-Hours July 14, - July 20
July 21, - July 27
20 Days July 28, - August 3
160 TMao-Hours August 4, - August 10
August 11, - August 17
August 18, - August 24
Holiday (1) August 25, - August 31
24 Days September 1, - September 7
192 Man-Hours September 8, - September 14
September 15, - September 21
Seatember 22, - September 28
Holiday (1) September 29, - Ottober 5
19 Days tmctober 6, - October 12
157 Man-Hours October 13, - October 19
October 20, - Dctober 26
Holiday (1) October 27, - November 2
19 Days ~ovember 3, - TMovember 9
1S2 Mon-Hours TMuvember 10, - November 16
November 17, - November 23
Holiday (2) °ovember 24, - November 30
73 Days December 1, - December 7
184 lan-Hours December 8, - December 14
December 15, - December 21
December 22, - December 28
Manual Supplement
5(15)G-41, 5(14)G-61, 5(17)0-119, 67G-2
PAGENO="0171"
April 27, - May 3
May 4, - May 10
May 1.1, - May 17
May 18, - May 24
Holiday (1) May 25, - May 31
24 Days Tune 1 , - Tune 7
192 Man_Hp~irn lone 9, - June 14
June 15, - Tune 21
June 77, - June 28
167
Attachment 5-Cont. to MS 5(15)G-4', CR 5(14)G-61, 5(17)0-219 and 670-2
1974 - Tannary
1915 - Tanuary
- January
- January
Deceeber 79
.Tanuary 5,
January 17,
January 19,
January 76,
February 2,
February 9,
February 16,
4, 19'5
Ti
75
- February 1
- February 8
- February 15
- February 77
Holiday (1)
19 Days
157 Man-Hours
Holiday (1)
19 Days
15~ Mon-Hours
25 Days
700 `Tan-Houru
20 Days
160 5lan-Hourn
20 Dayn
1613 Man-Hours
February
March
March
March
73, - March 1
2, - March 8
9, - March 15
16, - March 22
23, - sTarch 29
1.2
19
26
March 30, - April
Aunt 6, - April
April 13, - April
April 20, - April
Manual Supplement
PAGENO="0172"
168
1CC-76
sup~ement
- memal Revenue Service
ivy 13, 1274 Festmzctureof the Distriot ~
dervice Division Action Date:
See Section 8
Implementation Dates:
Section 1. Fur one See Section 9
Cl This Mannat 3uppleoent provides guidelines for restructuring the organization of
the district Collection end Taxpayer iervice Division to accommodate the present role,
responsibilities, and workload of the Taxoayer Service Program within the districts. The ~
primary purpose of this document is to provide guidelines for the permanent year-round
organization and staffing of the Taxpayer Service Activity. Each year specific scheduling
guidelines are issued by the National Office Taxpayer Service Division which provide addi- ~
tional information concerning expanded staffing during the filing period.
.02 This Manual Supplement also authorizes the reorganization of the Office Branch
within the present Collection and Taxpayer Service Division in each district office to ___
facilitate the implementation of the Integrated Data Retrieval System (iDRs).
Section 2. Background
The organization and functions of the district Collection and Taxpayer Service Division ~
as outlined in IBM 1110 are based on functions and organizational requirements existing
prior to the installation of IDRS. In addition, since the existing district Collection and
Taxpayer Service Division was established, significant changes have taken place in both the (j~)
size and complexity of the Taxpayer Service workload and the number and types of programs
to which the Service is committed. Such changes necessitate a realignment of the district
Collection and Taxpayer Service Division.
Section . Authority
-I'
.01 Regional Commissioners are authorized to restructure the organization of the (0
Collection and Taxpayer Service Division in district offices in accordance with the pro-
visions of this document.
.02 If a Regional Commissioner believes that a modification to the organization
specified in this Manual Supplement would better meet the needs of the Taxpayer Service
Activity in any district in his region, he should submit his proposal for the Commissioner's
or Deputy Commissioner's consideration in accordance with IBM 1141.6.
03 Organizational charts are shown in Attachment 2, and functional statements are o
included as Attachment 3. Attachment 1 shows the grades for Taxpayer Service managerial
positions.
Section 4. Organization
.01 General. Both the new Taxpayer Service organization and the Office Branch should
be substructured into as few organizational entities as practicable. Dialler size sections
within the Office Branch should be organized only when the supervisor is responsible for ~
employees performing a variety of functions, i.e., a combined Analysis and Computer Services
Section, and then only when there are sufficient full-time employees to warrant separate
sections. Any substructuring will be employed only to the extent necessary to avoid over- (D
extending the span of control.
Distribution:
IBM 1100 and 1341
PAGENO="0173"
169
-2-
Section 4--Cant.
.02 Super DistrictsJ~~l7 Distfict Director) -_Tpxpayer Servics
1 A separate Taxpayer Service Division will be established in those districts
with GS-17 District Directors. In these districts, the former Collection and Taxpayer
Service Division will then be known as the Collection Division.
2 The Taxpayer Service Division will be substructured into the appropriate number
of Taxpayer Service Representative (TSR) groups; the grade level for TSR Group Ilansgers will
be OS-lU.
03 Other Districts - Taxpayer Service
1 The remaining districts will establish a Taxpayer Service Branch within the
present Collection and Taxpayer Service Division.
2 The Taxpayer Service Branch will be substructured into the appropriate number
of TSR groups; the grade level for TSR Group Nanagers will be GS-lO.
.04 Size of Groups - Taxpayer Service
1 The size of TSR groups will vary among districts due to factors such as
geographic dispersion and size of district. Groups should have an authorized staffing of
12 to 35 permanent positions. This range is designed prinarily to provide for smaller -
groups in situations where geographic dispersion is a factor i.e., where a substantial
portion of the group, at least three employees, is located away from the group headquarters
office. Under most other conditions, groups generally should have permanent authorized
staffing of 15 positions.
2 Districts will not establish a group substructure unless they have enough
permanent authorized positions to justify at least two groups. Generally, TSR groups are
authorized as foflows: less than 24 positions - no group, 24 to 35 positions - two groups,
36 to 47 positions - three groups, etc.
3 In those subordinate offices with two or more TSR's but not a sufficient number
to esta~lish a TSR group, districts should designate a Senior TSR aho will act as a "working
manager" for the Taxpayer Survice Program at that location.
4 The Chief, Taxpayer Service Division/Branch,is both line and functional super-
visor of TSR's in the headquarters and Area offices and functional supervisor in the Sone
and Local offices. Designated Senior TSR's will provide line supervision of TSR's in Zone
and Local effiees.
.05 Office Branches - Collection
1 Large districts will generally establish three sections in the Office Branch:
an Analysis Section, a Computer Services Section and an Interview Section. Office Groups
in some Type II Field Branches may also be substructured if the number of full-tine posi-
tions warrants it. (See Attachment 2.)
2 Medium-sized districts will usually establish two sections in an Office Branch:
an Analysis and Computer Services Section and an Interview Section. In some medium-sized
districts, separate Analysis and Computer Services Sections may be warranted at the head-
quarters office location. Office Groups in some Type II Field Branches may also be sub-
structured if the number of full-tine positions warrants it. (See Attachment 2.)
Manual Supplement
PAGENO="0174"
170
Section 4--Scn~.
3 In small districts, the Office Branch will handle all functions. Substruc-
turing is not contemplates unless the number of full-tine positions its the branch in
sufficient. to warrant it. Two sections, en Ans5ysls and Computer Services Section end an
Interview Section may then be established. (0-s Attachment 2.)
4 The Chief, Office Branch/Group, is lire supervisor of Interviewers and Revenue
Representatives Sr Area Offices and functional supervisor of these employees in Zone and
Local offices. Designated Resonue Officer Group Managers will provide line supervision for
Interviewers and Revenue Representatives in Zone and Local offices. However, District
Directors may provide for line supervision of these Office Branch employees located in
Zone and Local offices by the Chief, Office Branch/Group, where the best interests of the
Service require such an arrangement.
Section 5. Classification of Positions
01 Managerial grades ad positions in the Taxpayer Service activity are shown in
Attachment 1. Position Descriptions with evaluation statements are being prepared and will
be issued by the National Office.
.02 Standard Position Descriptions and Classification Guidelines for the Office Branch
under IDRS were issued in MS 130-58, CR 110-73, dated July 24, 1972. Classification Guide-
lines for Revenue Representative positions are included in MS 13G_68.* Text 3l(33).1(20) -
3i(33).l(23) and 31(33).l(27) - 31(33).l(29) of IBM 1341, Handbook of Position Classifica-
tion and Duelification Standards and Guidelines, contains Standard Position Descriptions for
the Revenue Representative positions. COB 030-22 and 510-100
Section 6. Staffing -- Taxpayer Service
.01 Staffing for the Taxpayer Service activity will consist of permanent TSR's on a
full-time or part-tine tour of duty, details-is, and filing period temporary TSR's.
.02 Beginning in FE 1976 it has been determined that all Audit manpower detailed to
the Taxpayer Service Program will he Tax Auditors. During FE 1~75, sixty-five percent still
be Tax Auditors (5~5 experienced, 50/ new recruits). The remainder will be Revenue Agent
.03 Support positions presently located in the Office Branch are multifunctional with
responsibilities for both Taxpayer Service and Collection functions. Any of these positions
which are clearly identifiable as Taxpayer Service or Collection positions should be placed
in their appropriate organizational component.
Section 7. Fiscal Implications
The National Office will fund two positions per district; the Taxpayer Service Division
Chief and one secretary in Super Districts, and the Taxpayer Service Branch Chief and one
secretary in all remaining districts. The remainder of the funding required for the District
Taxpayer Service organization will be financed within the regional Activity 2400 budget
allocation.
Section 8. Reports en Implementation
Each region should submit a plan for the re'strmcture of its district Taxpayer Service
organizations to the Director, Taxpayer Service Division, for his information 30 days from
the date of this Manual Supplement. The report should include a joint ARC (ACTS) -
Regional Personnel Branch estimate of the imp4ct of this reorganization on the Collection
Manual Supplement
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171
Suction 8--ct ~1
mcd Taxpayer Service Division Office Branch grade structure in each district, and on any
other personnel Ouplicatiosa of the reorganization If any of the pernosnel axtiouc ruluire
union consultation at the national level, please indicate.
Oectior9,Jpnlementation Dates
The suggested target date for Implementation of the Taxpayer Service organIzational
changes is July 1, 1974. With resprct to the impact on the Collection activities, the on1~
required action at this time is the subeission of the report requested in Section 8. Sc
realize that due to personnel considerations or ether local conditIons this implementetior
Jute may rot he feasible. Therefore, regions should establish tarsal dates which reflect
their local situations; thin target date should be reflected in the regincal plans submutted
to the Director, Taxpayer Service Division.
Section 10. Effect or Other Documents
This supersedes TRW 1118.5, 1118.51, 1118.52, and 1118.53, and Exhibit 1118-2 - Exhibit
lll8-2-Cont. (2); and amends and supplements Exhibit 1118-1 and Text 430 of IRS 1341,
Handbook of Position Classification and Qualification Standards and Guidelines. It also
amends and supplements Manual Supplement 130-58, CR 110-73. This "effect" should be noted
by pen and ink beside the text and on the Exhibits and Supplements cited, with a reference
to this Supplement. This Supplement supersodec MS 110-49, and the printed annotations to
that Supplement at TRW 1118.52 and 1118.~1 and on the firer page of ixhibit 1118-2 should
be removed, cith a ran-and-inS reference to this Supplemenr.
c
Manual Supplement
PAGENO="0176"
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Attachment 1 to 155 11G-75, Ca 13G-70
Grades for Taxpayer Service
GS-17 District Directors GS-16 District Directors
Manhattan New Orleans
Los Angeles Springfield
Chicago Louisville
Newark Oklahoma City
San Francisco Des Moines
Detroit Denver
Brooklyn GS-l4 Portland ~/ GS-l2
Philadelphia Division Wichita Branch
Jacksonville Chief Birmingham Chief
Boston Phoenix
Cleveland Albany
Baltimore Columbia
Dallas Omaha
Austin Jackson
St. Louis Little Rock
Buffalo Parkersburg
Gs-16 District Directors GS-15 District Directors
Indianapolis Providence
Atlanta Salt Lake City ~/ GS-12
Cincinnati Augusta Branch
Richmond Albuquerque Chief
Pittsburgh ~/ GS-13 Honolulu
Greensboro Branch
St. Paul Chief
Milwauscee
Seattle
Hartford
Nashville Reno j~/
~/ GS-16 District Director, at least 400,000 ~3~~1mgton
taxpayer service inquiries, at least52S Portsmouth
permanent taxpayer service employees and Ab d 0/ G~ 11
at least 1,25 million individual returns filed Boise * Branch
~/ G0~l6 District Director, less than 400,000 Fargo Chief
taxpayer service inquiries or less than 25 Burlington
permanent taxpayer service employees*, but Cheyenne
at least .5 million individual returns filed Anchorage
~/ GD~l5 District Director, at least 300,000
individual returns filed
~/ G~l5 District Director, less than 300,000
individual returns filed
~/ Due to tSe size of its Audit function, Heno
has a G~lh District Director; -0550cr, for
taxpayer service pursoses it falls within
the criteria for o small district
* Projected Fl 0.975 nan-years
Manual Supplement
PAGENO="0177"
/ TAXPAYER SERVICE DIVISION (GS-1( District Director)
TAXPAYER SERVICE DIVISION CHIEF
GROUP MANAGER GROUP MANAGER GROUP MANAGER
APPROXIMATELY APPROXIMATELY APPROXIMATELY :~
15 PERMANENT 15 PERMANENT 15 PERMANENT
POSITIONS POSITIONS POSITIONS
PAGENO="0178"
COLLECIION DIVISION (GS-l7 District Director)
1)
0
9
n
9
Former Collection and Taxpayer Service Division
Separate Interview and Revenue Representative Sections may be established if
sulficient full-time positions at the headquarters office.
PAGENO="0179"
ANALVSIS***
SECTION
- COMPUTER
~ES
1
SECTION
REVENUE**~
REPRESENTATIVE
*Fosner Collection and Taxpayer
Service Division
**Office Groups without sufficient
full-time positions should not be
substructured.
L~EGRO~1
fi~iLYSIS A~~1
E COMPUTER SERV-
IGEP SECTION
INTERVIEW AND
REVENCJE
REPRES~~IVE
SECTION
- SPECIAL
PROCENJURES
STAFF
***Separate Analysis and Computer
Services Sections may be ebmb-~
lished if sufficient full-time
positions.
****Separate Interview and Revenue
Representative Sections may be
established if sufficient full-
time positions at the headquarters
or Area office.
COLLECTION DIVISION (GS-l7 District Director)
COLLECTION DIVISION CHIEF
CHIEF, OFFICE BRANCH
5,
a
0
n
PAGENO="0180"
CHIEF, OFFICE BRANCH
f
SECTION
SERVICES
L SECTION
INTERVIRE**
SECTION
I REVENUE**
L REPRESENTATIVE
* Collection Large District I, Taxpayer Service districts with at least 24
authorized taxpayer service positions.
~ Separate Interview and Revenue Representative Sections may be established if
sufficient full-time positions at the headguartess office.
3
COLLECTION AND TAEPAYER SERVICE DIVISION*
COLLECTION AND TAEPAYER SENVICE SPECIAL
DTIISION CHIEF PROCENVEES
_________ ________________ STAFF
n
I
PAGENO="0181"
a
n
COLLECTION AND TAXPAYER SERVICE DIVISION*
I.
**Separate Analysis and
Computer Services Sections
may be established if suf-
ficient full-time positions.
~Separate Interview and Revenue
Representative Sections may be
established if sufficient full-
time positions at the head-
quarters or Area office.
*Collection Large District II or Medium District II,
Taxpayer Service - districts with at least 24 authorized
taxpayer service positions.
PAGENO="0182"
COLLECTION AND TA)~AYER SERVICE DIVISION*
* Collection Nedi~cs District I, Taxpayer Service - districts with less than 24 authorized taxpayer service positions
** Special Procedures Staff
**~ Separate Interview and Revenue Representative Sections may be
established if sufficient full-time positions at the headquarters or Area
o~iice.
**** Separate Analysis and Computer Services Sections may be established if
sufficient full-time positions.
PAGENO="0183"
COLLECTION AND TAXPAYER SERVICE DIVISION (05-15 District Director)
* Special Procedures Staff
An Analysis and Computer Ser~ces Section and an
Interview and Revenue Reprenentative Section may
be established if sufficient full-time positions
at the headquarters office.
a
~li
CHIEF, OFFICE BRANCH**J
I
I
PAGENO="0184"
180
Attachment 3 to MS 11G-76, CR 13G-70
REVISED COLLECTION AND TAXPAYER
SERVICE FUNCTIONAL STATERENTS
1118.5 Collection and Taxpayer Service Functions
The organizational structure of the Taxpayer Service and Collection functions will
vary depending upon the size of the district. Specifically, a separate Taxpayer Service
Division and Collection Division will be established in the districts with GS-17 District
Directors. The Taxpayer Service function within the remaining districts will be organized
as a Taxpayer Service Branch within the Collection and Taxpayer Service Division. Attach-
ment 2 depicts the various organizational structures permissible for the Taxpayer Service
and Collection functions.
1118.51 Collection Division
The Collection Division is responsible for the receipt and transmittal of tax
returns and documents received in the district; the deposit to the credit of the Service
Center Director of tax remittances received in the district; the collection of delinquent
accounts through distraint, seizure, levy and other means; the securing of delinquent
returns; examination of offbrs in compromise basmd on doubt as to celleetibility of taxes
(except alcohol, tobacco and firearms taxes), offers in compromise of statutory additions
based on doubt as to liability (except alcohol, tobacco, firearms, employment and with-
holding taxes and specific penalties), and all offers in compromise of lO~ penalties. The
Division receives, acts on, and processes information pertinent to bankruptcies, receiver-
ships, assignments, reorganizations, probate proceedings, foreclosures and redemptions after
civil foreclosure, bulk sales, gifts and prizes, and dissolutions and initiates investiga-
tions for securing delinquent returns where necessary. The Division maintains files or
control records of payments received in insolvency, bankruptcy, and decedent cases and of
surety bonds and other collateral posted as security for tax liability. It also maintains
files and control records of property seized under distraint authority and takes appropriate
action with respect to seized property to ensure that proper legal action may be tinely
taken.
1118.511 Specinl Procedures Staff
(1) The Special Procedures Staff is responsible for furnishing advisory assist-
ance on technical delinquent collection and returns matters to the Chief, Collection
Division, Chief, Field Branch, Chief, Office Branch, and Group Supervisors; providing liaison
for the District Director with the Department of Justice, including the U.S. Attorneys, the
Chief Counsel and Regional Counsel on all collection matters; ascertaining tax liability and
filing of proof of claims in insolvency and decedent's estate proceedings; recommending
civil suits to enforce collection or to protect the ~ interests; processing civil
suits against the United States or the District Director; examining, reviewing and processing
seizure and sale reports; processing applications for discharge of property from the effect
of Federal tax liens and for certificates of non-attachment of Federal tax liens and certi-
ficates of subordination of the Federal tax lien; processing filed notices of Federal tax
liens and certificates of release; processing and maintaining executed collection waivers;
analyzing and deternining the sufficiency of various forms of collateral offered as security
for relfase of lien or postponement of collection action; furnishing technical advice and
assistance and reconsendations for or against entry into suitable escrow agreements for the
collection of delinquent accounts; reviewing recommendations for and holding conferences on
lO~5 penalty and transferee assessments; post reviewing of accounts reported as uncollectible;
reviewing recommendations and holding conferences on offers in compromise cases based on
inability to pay; cevies:ing applications for and holding conferences on extensions of tine to
pay estate tax; and nintainlog files and coutrol records on all the above typos of cases to
ensure that proper legal and othsr collection actions are taken timely.
Manual Supplement
PAGENO="0185"
181
Attachment 3--Cont. (1) to MS 110-76, CR 130-70
(2) In the majority of District Offices this function is organized as a separate
Special Procedures Staff. In small offices where the Special Procedures function is a
one-position job, it is placed organizationally within the Office of the Division Chief.
1116.512 Office Branch
The Office Branch effects the collection of delinquent accounts and secures
delinquent returns through demands made by correspondence, telephone or office interviews.
It safeguards the Government's interest, in appropriate cases, by causing the filing of
notices of tax liens and serving or causing the service of notices of levies. It transfers
to Revenue Officer groups those assignments which require field investigations or can be
more efficiently completed by field Revenue Officers. The Branch screens and assigns cases
and maintains assignment files. It prepares periodic reports of collection activities. It
receives and deposits to the credit of the Service Center Director remittances received in
the District Office. It also receives and transmits returns and documents received in the
District Office.
1118.513 Field Branch
The Field Branch is responsible for the management and control of five or more
Revenue Officer groups (Type I Field Branch), or three or more Revenue Officer groups and
an Office Group (Type II Field Branch). Within the assigned area, the Branch makes
collections of delinquent accounts and conducts a continuing program for the securing of
delinquent returns. It safeguards the Government's interest, in appropriate cases, through
the filing of notices of tax liens, and enforces collection by the serving of levies, and
seizure and sale of real and personal property. It recommends jeopardy assessments when
deemed necessary to protect revenue, civil actions to secure payment, suits to enforce
penalty for failure to honor levies, and penalty assessments as a means of collection or as
a method of obtaining compliance with existing laws and regulations. The Branch recommends
the issuance of certificates of discharge of property from the effects of tax liens, recom-
mends issuances of certificates of subordination of Federal tax liens, and conducts the
investigations necessary to support such recommendations. The Branch examines offers in
compromise based on doubt as to collectibility of taxes (except alcohol, tobacco and fire-
arms taxes), offers in compromise of statutory additions based on doubt as to liability
(except alcohol, tobacco, firearms, employment and withholding taxes and specific penalties),
and all offers in compromise of 10B4 penalties.
1118.52 Taxpayer Service Division
The Taxpayer Service Division is responsible for planning, managing, directing and
executing a comprehensive, districtwide, year-round taxpayer service program which will
provide full and responsive assistance to taxpayers with respect to all types of Federal tax
returns and tax questions. The Division provides authoritative, prompt, courteous, and
responsive services on taxpayer requests received via telephone, walk-ins and correspondence
regarding: (a) pre-filing questions; (b) assistance in preparing returns, including self-
help and actual preparation where the need exists; (c) assistance on questions relating to
notices, Corn letters, and other communicatCons received by taxpayers from the Service;
(d) assistance in the preparation of adjustment requests; and (a) assistance in specialized
areas, such as olien tax clearance. The Division performs detailed research and initiates
contacts with other offices (including service centers) to resolve issues raised by taxpayers.
The Divinion operates the district's toll-free telephone system and ensures a proper balance
of staffing between this activity and all other taxpayer service activities, and is respon-
sible for preparing periodic reports of taxpayer service activities.
Manual Supplement
57-236 0 - 75 - 12
PAGENO="0186"
182
Attachment 3--Cant. (2) to MS 11Br76, CR 13~7O
1118.53 Collection and Taxpayer Service Division
The Collection and Taxpayer Service Division is responsible for the receipt
and transmittal of tax returns and documents received in the district; the deposit to the
credit of the Service Center Director of tax remittances received in the district; the
collection of delinquent accounts through distraint, seizure, levy and other means; the
securing of delinquent returns; examination of offers in compromise based on doubt as to
collectibility of taxes (except alcohol, tobacco and firearms taxes), offers in compromise
of statutory additions based on doubt as to liability (except alcohol, tobacco, firearms,
employment and withholding taxes and specific penalties), and all offers in compromise of
lO~5 penalties. The Division receives, acts on, and processes information pertinent to
bankruptcies, receiverships, assignments, reorganizations, probate proceedings, fore-
closures and redemptions after civil foreclosure, bulk sales, gifts and prizes, and dis-
solutions and initiates investigations for securing delinquent returns where necessary.
The Division maintains files or control records of payments received in insolvency, bank-
ruptcy, and decedent cases and of surety bonds and other collateral posted as security for
tax liability. It also maintains files and control records of property seS red under dis-
traint authority and takes appropriate action with respect to seized property to ensure
that proper legal action may be tinely taken. Through the Taxpayer Service Branch Chief,
the Division piano and nanagea a comprehensive year-round taxpayer service program which
will provide full and responsive assistance to taxpayers. inch assistance is provided
by answering technical and procedural questions relating to both pre-filing and post-
filing conditions, assistance in the preparation of tax returns, assistance in and prepara-
tion of requests for adjustments, and issuance of certificates of compliance to departing
aliens.
1118.531 Special Procedures Staff
(1) The Special Procedures Staff is responsible for furnishing advisory assistence
on technical delinquent collection and returns matters to the Chief, Collection and Taxpayer
Service Division, Chief, Field Branch, Chief, Office Branch, and Group Supervisors; providing
liaison for the District Director with the Department of Justice, including the U.S.
Attorneys, the Chief Counsel and Regional Counsel on all collection matters; ascertaining
tax liability and filing of proof of clains in insolvency and decedent's estate proceedings;
recommending civil suits to enforce collection or to protect the Government's interests;
processing civil suits against the United States or the District Director; examining, re-
viewing and processing seizure and sale reports; processing applications for discharge of
property from the effect of Federal tax liens and for certificates of non-attachment of
Federal tax liens and certificates of subordination of the Federal tax lien; processing
filed notices of Federal tax liens and certificates of release; processing and maintaining
executed collection waivers; analyzicg and determining the sufficiency of various forms of
collateral offered as security for release of lien or postponement of collection action;
furnishing technical advice and assistance and reccrmmendations for or against entry into
suitable escrow agreements for the collection of delinquent accounts; revieeiing recorsoenda-
tions for and holding conferences on lO~ penalty and transferee assessments; post ree~ewing
of accounts reported as uncollectibJe; reviewing recommendations and holding conferences o:~
offers in compromise casms based on inability to pay; reviewing applications for and holding
conferences on extension of time to pay estate tax; and maintaining files and control records
on all the abc/s tymes of cases to ensure that proper legal and other collection actions are
taken timely.
(2) In the majority of District Offices this function is organized as a separate
Special Procedures Staff. In small offices where the Special Procedures function is a one-
position job, it is placed organizationally within the Office of the Division Chief.
Manual Supplement
PAGENO="0187"
183
Attachment 3--Cont. (3) to MS 110-76, CR 130-70
1118.532 Office Branch
(See 1118.512)
1U8.533 Field Branch
(See 1118.513)
1118.534 Taxpayer Service Branch
For the Chief, Collection and Taxpayer Service Division, the Taxpayer Service Branch
is responsible for planning, managing, directing and executing a comprehensive, districtwide,
year-round taxpayer service program which will provide full and responsive assistance to
taxpayers with respect to all types of Federal tax returns. The Branch provides authorita-
tive, prompt, courteous, and responsive services on taxpayer requests received via telephone,
walk-ins and correspondence regarding: (a) pre-filing questions; (b) assistance in pre-
paring returns, including self-help and actual preparation where the need exists; (c) assis-
tance on questions relating to notices, form letters, and other communications received by
taxpayers from the Service; (d) assistance in the preparation of adjustment requests; and
(a) assistance in specialized areas, such as alien tax clearance. The Branch performs
detailed research and initiates contacts with other offices (including service centers) to
resolve issues raised by taxpayers. The Branch operates the district's toll-free telephone
system and ensures a proper balance of staffing between this activity and all other taxpayer
service activities, and is responsible for preparing periodic reports of taxpayer service
activities.
Manual Supplement
PAGENO="0188"
184
Department Internal I ~
of the Revenue 13G-76
supplement Treasury Service 68G-6
April 30, 1979 ~gypgyer Service Blue Ribbon Program
Section 1. Pyyppyy
This Supplement provides instructions, guidelines and procedures for implementation of
the Taxpayer Service Blue Ribbon Program in district offices.
Section 2. Background
.01 Effective July 1, 1971, functional and nrogram responsibility for the year-round
Taspayer Service Program was assigned to the newly established Taxpayer Service Division in
the National Office.
.02 For Fiscal Years 1974 aed 1975, there were significant man-year increase allocated
to Taxpayer Service in district offices. For the FY 1974 filing period, each district
office appointed a Taxpayer Sers'ice Manager with sole responsibility for planning, directing
and executing the Taxpayer Service Program.
.03 Effective July 1, 1974, the District Collection and Taxpayer Service Division was
restructured to give Taxpayer Service separate organizational status.
.04 Within the past few years significant operational improvements have been achieved
within Taxpayer Service, including the installation of IDRS, completion of the toll-free
telephone network and use of extended office hours.
.05 In recognition of the additional responsibilities assigned to Taxpayer Service and
in view of the increasing demands from taxpayers and Congress, a study group was formed
early in Calendar Year 1974 to develop and implement a Taxpayer Service Blue. Ribbon Program.
Section 3. Taxpayer Service Blue Ribbon Study
.01 The study included provision for:
1 the establishment of a new occupatiun for Taxpayer Service, with new and
expanded duties and responsibilities, higher-level qualifications requirements, and an
improved grade structure. This new occupation is in addition to, not a replacement for, the
existing CS-962 Taxpayer Service Representative (TSR) occupation in Taxpayer Service.
2 an equitable and uniform method for the initial, one-time selection of incumbent
Taxpayer Service personnel to be reassigned to the new, higher-level occupation;
3 a caroer ladder which will permit the advancement of qualified Taxpayer Service
personnel from the entrance grade level to supervisory and management levels in Taxpayer
Service and tu other occupational areas; and,
4 the development of training programs consistent wiih work expectations.
Section 4. The New Occupation
.01 Through consultation with the Civil Service Commission, it has been determined that
the new Taxpayer Service occupation most closely resembles the present GS-526 Tax Auditor
occupation in terms of qualifications required. Therefore, as an interim measure, positions
in the new occupation will be classified in the CS-526 series (see also Section 5.06).
Distribution:
xi; 17.1. 7 xxi
PAGENO="0189"
185
Section i--Cant.
.02 Series
1 The CSC has revised the GS-526 Tax Technician Series definition to include
Taxpayer Service work. It now reads:
This series includes positions that involve technical work
concerning tax liability requiting discretion and independent
judgement in the application of (a) knowledge of pertinent tax laws,
regulations, and procedures; (b) analytical methods; (c) skill in
personal contacts with taxpayers and their representatives; and
(d) at the full working level, knowledge of elementary accounting.
The work includes examination or audit of tax returns to reach
decisions on correct tax liability, or technical assistance and
advice to the public on tax liability issues."
.03 It is anticipated that the work of the new GS-9 Taxpayer Service position will be
fully equivalent in level of difficulty and responsibility to that of the Tax Auditor,
05-9 (Tax Technician G5-526-9), and will require fully equivalent qualifications. The new
05-9 Taxpayer Service job will require, among other knowledge and abilities, these more
significant ones:
1 an extensive knowledge of the tax code and regulations (including tax laws and
regulations as they apply to business);
2 a familiarity with common business practices in the local area;
3 a knowledge of accounting,equivalent,t0 at least that taught in college
elementary accounting courses;
4 an ability to advise business people on how to maintain books and simple
accounting systems and how to use them to develop infor,satioo for tax purposes;
5 an ability to identify, extract, and evaluate information from a variety of
records and documents such as financial balance sheets, taxpayer account records, sales and
other contracto, documents of title and property sale, and others;
6 a knowledge of the Service Center data processing system in order to follow
a taxpayer's account through the system and to iostitute proper corrective action (e.g.,
request for adjustment, payment tracers, filing amended returns, release of freeze codes,
resolution of invalid account identification).
7 an ci ill ty to inforic grips abc at ix laws and asal fable tax setVlL cc;
8 an ability to assist taxpayers in any IRS related matter (i.e., acting as a
focal point for taxpayers who want to register complaints, suggestions, cii eroblems about
any aspect of the iRS) in addition to providing technital tax assistance
.04 Positions remaining in the GS-962 Contact Representative Serics will be utilized
1 augment GS-526 employees and thereby allow them to perform duties commensurate
with their grade level a greater percentage of the time;
2 provide a "bridge" into the new GS-526 occupation -- i.e., a means by which
05-962 employees can become qualified for the higher-graded positions in the GS-526 series;
3 provide an additional source of recruitment for the Gs-526 Taxpayer Service
occupation.
Manual Supplement
PAGENO="0190"
186
Sectioc ~-~Cost.
.03 Title
1 The organizational title for positions in the new GS-526 occupation will be
"Taxpayer Service Specialist" (TSS). The classification title will be "Tax Technician."
2 The organizational title for positions remaining in the CS-962 series will be
"Taxpayer Service Representative" (TSR). The classification title will be "Contact
Repres entative."
.03 Grades. The CSC has determined that the new TSS job is classifiable, at the full
working level, at GS-9, with CS-7 and CS-S developmental, and trainee levels, respectively.
Section 5. Position Management
.01 No goal or limitation has been established for the reallocation of TSR positions
to the GS-526 series; the number and location of GS-526 positions should be dictated by
~sown GS-5~6 workload. t~agement should carelully determine the availability of 05-5_i
Oeb're proposing toe establishment of positions in the GS-526 series.
.02 Local needs, and the skills and abilities of incumbent TSR's, will have an impact
on the number and location of positions initially filled in the new CS-526 TSS occupation.
Line managers have the primary responsibility for these determinations, with Personnel
responsible for advising and assisting them in carrying out their position management
responsibilities. Specific position management criteria that should be applied to the
establishment of TSS positions in the CS-526 series include: the need to concentrate
higher-graded (i.e., GS-526) work in as few positions as possible consistent with manage-
ment needs in terms of mission accomplishment; and the need to evaluate the total
organization (i.e., Taxpayer Service Branch or Division) in terms of effective utilization
of personnel resources, including the mix of 05-962 and CS-52i positions.
.03 Regions should provide position management assistance to districts and are
responsible for carefully reviewing plans to implement the Taxpayer Service Blue Ribbon
Program. legions should note that individual differences among their districts (e.g.,
geographic factors, population dispersion, etc.) may well result in valid differences
among them in the proportion of positions proposed for reallocation to CS-526.
.04 While it is expected that the bulk of the higher-level work previously performed
by GS-962-7 and 8 TSR's will now be performed by positions in the CS-526 series, there may
be a continuing need in some offices for CS-962 positions at CS-7. Specific situations
could include: small posts of duty, where substantial amounts of CS-962-7 work exist,
but There there is insufficient GS-526 work to warrant the establishment of a CS-526-9 TSS
posItion; and larger offices, where the number of CS-52i positions established is
insufficient to accomplish all of the work above the GS-962-6 level of difficulty. No SPD
has been established for such situations; continuing CS-962 positions above CS-6 should be
described and classified locally.
.05 By August 15, 1975, each region sho'ild notify the National Office,Personnel
Division, Attention A:P:P, of:
1 the number of permanent TSR's reassigned without promotion from GS-962 to
CS-526, by grade level and by full-time or part-time tour of duty;
Manual Supplement
PAGENO="0191"
187
tection 5--Cont. - 4 -
2 the number of permanent TSR' a promoted from GS-962 to GS-526 by grade level
and by full-time or part-time tour of duty;
3 the number of permanent TSR positions remaining in GS-962, by grade level and
by full-time or part-time tour of duty.
.06 Approximately one year after full implementation of the new GS-526 TSR occupation,
a study mill be conducted to determine whether these positions are functioninu as descciied
i f±e SPO's and to determine whether GS-526 is the most appropriate classification series
for these positions.
Section 6. Position ClassificatS-~~ion
.01 Non-Suoervisory, Position Desgyiyiion,s
1 SPD's 595, 596, and 601 reflect the GS-5, 7 and 9 levels, respectively, of the
new GS-526 TSS occupation. These SPD's are being published in IRM 1341, Handbook of
Position Classification and Qualification Standards and Guidelines. After TSR's have been
selected for positions in the new occupation, they should be placed on an SPD at the
appropriate grade level.
2 SPD'a 592, 593 and 594 describe the newly designed GS-962
TSR positions at the GS-4, GS-5 and Gs-6 levels, representing trainee, developmental and
journeyman levels, respectively. These SPD's are also being published in IRM 1341.
3 GPO's 559, 560, 561 and 562 will continue to be used ~ for incumbent GS-962
TSR's not selected for the new TSS GS-526 occupation and remaining in the GS~962 series.
Tinee iPD's will continue to be used until incumbents leave the mositions. Tliereadter,
thuow nit's will be abolished.
4 SPD 620 and 599 are special, limited-duration SPD's for employees at GS-962-6
and 0, selected for the new TSS GS-526 occupation, but not yet eligible for
promotion to GS-526-7 or 9. These SPD's are also being published in TSR 1341.
5 Incumbents classified to GS-962-8, and not selected for the GS-526 occupation,
will be kept on those locally developed position descriptions at GS-962-8. However,
GS-962-S positions should not be filled after present incumbents vacate them, and no new
GS-962-8 TSR positions should be classified.
.02 RAE and Temporary TSR Positions
1 Generally, filing-season-only positions should be established to do less
coaolex, high-volume Taxpayer Service work which does not equate to the duties and
responsibilities of the GS-526 TSS occupation. Classification of filing_season-only
positions will, therefore, probably be appropriate in the GS-562 series.
2 Positions established on a year-round basis but on other than a full-time
tour of duty may be classified to the GS-526 series where they meet the position management
and position classification requirements of this Manual Supplement.
3 Substantive qualifying experience gained by employees on other than year-round
full-time tours of duty (e.g., RAE's) may be considered, one prorated basis, in determining
eligibility for positions in the GS-526 TSS occupation.
.03 Q~pqrvisory Positions
1 SPO 602 has been developed for the first full supervisory level over work with
a base level of GS-526-9. The position is classified at the GS-526-11 level using SGEG,
Part II. Since this is a new position, eligible employees will have the opportunity to
compete for these Group Manager positions. If necessary, the position may be announced at
Manual Supplement
PAGENO="0192"
188
Section 6--Cont. 5
grade levels lower than OS-il, with the understanding that employees selected will progress
to the GS-1l level as they are eligible.
2 SPD 570, Supervisory Taxpayer Service Representative, GS-962-l0, will continue
to be used for the position of first-line supervisor over 06-962 work with a base level of
CS-?.
3 Taxpayer Service managerial positions above the first full supervisory level
will continue to be classified at their present series and grade, using existing SP0's or
locally developed position descriptions for these positions.
Section 7. Qualification Guidelines
.01 The basic qualification requirements for GS-526 TSR positions are the same as
those for GS-526 Tax Technician (Tax Auditor) positions and are found in 21(11)11 of
IRM 1341, Handbook 0f Position Classification and Qualification Standards and Guidelines.
.02 By agreement with the Central Office of the Civil Service Commission, and to make
the transition from the GS-962 series without unduly penalizing incumbent TSR a Specialized
Eicperience Requirement Mumber 1 is amended to include:
"experience in tax assistance work, including the actual preparation of returns and the
computation of tax liability, which required the application of pertinent parts of the
Internal Revenue Code and related regulations and procedures (but which did not require
a full professional loiowledge of accounting) when the experience has demonstrated
ability to (1) conduct analytical examinations, (2) make imaginative use of in-office
factfinding techniques, and, (3) develop effective public contact skills.'
.03 For GS-526 positions at GS~9 or above, accounting knoeledge at least equivalent to
44t~h± in college elemsntaro accounting courses is required. This requirement may be
met by successful completion of six semester hours (or the equivalent) of college accounting
courses, or business or commercial school courses, or by the successful completion of the
IRS correspondence courses in Fundamental and Constructive Accounting. A fuller explanation
of the accounting requirement is found in 21(11)11 of IRM 1341.
~ Incumbent 05-962 TSP's for promotion or Reassignment to the GS-526
.01 The screening and selection process will be conducted in accordance with 1PM 1861
(Servicewide Promotion Plan) and this Manual Supplement. In addition, districts will extend
the following provisions of Article 7 of the Multi-District ~reement (MDA) to this process:
Section 3A, Section 35, Section mA, Section mc, Section !~5, Section 6B, Section 6c,
Section 6o, Section 9, Section 10, Section 11 and Section 14. The remaining provisions of
Article 7 of MDA are not applicable.
.02 Initial competition for entry into new GS-526 series will be limited to incumbent
GS-962's because of ceiling restrictions within Taxpayer Service. (For filling vacancies,
see Section 10).
.03 All OS-962 TSR's, GS-5 and above, GS-4 TSR's eligible for promotion to GS-5, who
wish to be considered for positions in the GS-526 series should complete Form 4536, Appli-
cation for Promotion/Reassignment Consideration, and submit it to their servicing Personnel
Offices.
.04 All supervisors are required to prepare new performance evaluations (e.g., Forms
3861) prior to the screening process, which reflect performance with the past 12 months.
(Follow provisions of MS OLmG-5).
.05 All applicants will be evaluated by the Screening Panel by considering current
supervisory evaluations; pertinent awards; pertinent training and/or education; and the
results of a panel interview. Specific instructions for the Screening Panel are contained
in Attachment 1 to this Manual Supplement.
Manual Supplement
PAGENO="0193"
189
~ecticn 8--Ccnt.
.06 The Screening Panel will have the responsibility of screening all GS-962
candidates for positions in the new GS-526 TSS occupation.
.07 All GS-962 applicants who are selected for positions in the GS-526 series and are
fully eligible for promotion to Grades GS-526-7 or 9 should be promoted to those positions.
(At the GS-9 level full eligibility includes 6 hours of Accounting as well as the required
experience.)
.08 All GS-962 applicants at Grades GS-5 and GS-7 who are selected for positions in
the GS-526 series and are not fully eligible for promotion should be reassigpg4 to positions
in the GS-526 series at their present grades.
.09 GS-962 applicants at Grade GS-962-6 or 8 who are selected for positions in the
GS-526 series and are not eligible for promotion should be reassigned to the special,
limited-duration SPD developed for Grades GS-526-6 and 8.
.10 All employees selected for the new GS-526 TSS occupation wilt be expected to have
demonstrated the potential to advance to the GS-9 full-performance level.
1 Progressive promotion to the full-performance level will occur as employees
meet the qualifications requirements for the next higher grade, have the required time in
grade, and are certified by their supervisors as being able to perform the work at the
higher grade.
2 Generally, employees will remain in trainee or developmental positions for
approximately one year, or until fully eligible for promotion.
3 If for any reason an employee below the full-performance level is determined
to be not promotable after one year, he/she should be counselled in line with IRN 0431,
Supervisor's Guide to Performance Appraisal. This counselling should include the establish-
ment of a new individual training and development plan lasting no longer than one additional
year.
4 If the employee is not promoted by the end of this additional year, action
should be initiated to remove him/her from the GS-526 occupation by reassignment, demotion,
or separation, in line with Internal Revenue Service and Civil Service Commission require-
ments.
.11 Interview guidelines and sample questions will be transmitted separately to each
Regional Personnel Officer who will, in turn, furnish a supply to each District Personnel
Officer.
Section 9. Applicants Not Selected for Positions in the New GS-526 TSS Occupation
.01 The status of non-supervisory incumbents remaining in the GS-962 series will not
be adversely affected by the establishment of the neu GS-526 TSS occupation.
.02 Employees assigned to GS-962 positions on or before Nay 1, 1975 and not reassigned
to a GS-526 position may be given career promotions to GS-962-7.
.03 Incumbents of GS-962 positions not selected for positions in the new GS-526
occupation should be counselled on the reasons for their non-selection.
Manual Supplement
PAGENO="0194"
190
Section 10. Filling Future Vacancies
After the initial consideration of incumbent 05-962 TSR applicants, existing anti
future vacancies in the new occupation will be filled by concurrent consideration of quali-
fied applicants from all activities of IRS and applicants on PACE registers.
Section 11. Procedures
Detailed procedures covering the expanded work to be performed by TSS's will be
issued separately in IRM 5(15)50, Taxpayer Service Representative Handbook.
Section 12. Additional TSS Training
.01 The new duties to be performed by GS-526 TSS's will require additional training
beyond the Basic and Advanced TSR courses. It is estimated that at least an additional
week's training wilt be needed to prepare these employees to undertake such duties as:
providing tax planning information on the timing of sales of capital assets and
ordinary assets; recommending recordkeeping methods and accounting methods;
advising taxpayers on the selection of the most advantageous method of depreciation;
recommending use of the Income Averaging provisions; etc.
.02 The training material will be distributed to the field by May 15, 1975. The
program will be developed as a separate module for those employees who are screened into
the new positions; the module could also be added to the Advanced course.
.03 Additional information on this course will be provided as the course content is
developed.
Section 13. Implementing Actions and Completion Dates
.01 The target date for full implementation of the Taxpayer Service Blue Ribbon
Program is the beginning of Fiscal Year 1976.
.02 To meet the above date, the following actions must be taken:
Responsible Completion
Action Item Office Date
Select Screening Panel RC/DO 4/15/75
Issue Additional Training Material for TSS's NO 5/15/75
Complete Current Performance Evaluations
by First-Line Supervisors DO 5/1/75
Screen Incumbent TSR's RD/DO 6/1/75
Complete Additional TSS Training, As Required RO/DO 6/22/75
.03 Full implementation includes the preparation of the necessary Personnel actions
to complete the reassignment and promotion, as warranted, of Taxpayer Service employees who
are selected for positions in the new occupation.
Section l~. Supply of Form P1-0021
Initial distribution of Form P1-0021, Taxpayer Service Representative Screening
Procedure, will be made withOut requisition.
Manual Supplement
PAGENO="0195"
191
-8-
Section 15. Effect on Other Documents
This amends 21(11)11 of IRk 13141, Handbook of Position Classification and 8ualification
Standards and Ouidelines and supplements IRIS 5(15)50, Taxpayer Service Representative Handbook.
This effect should be annotated by pen and ink on the Handbooks, with a reference to this
Supplement. Also, this supplements IRIS 6800 (to he issued).
Manual Supplement
PAGENO="0196"
192
Attachment 1 to MS 5(15)0-51, CR 130-76 and 68o-6
Screening and Selection Process for
Taxpayer Service Representatives
The screening and selection process for the new 05-526 occupation in Taxpayer
Service will consist of two distinct elements: the Promotion Appraisal completed by
the supervisor worth a maximum of 60 points and the Screening Panel's evaluation worth
a maximum of 40 points. The total points in each element will be combined and will
constitute the final score for each candidate. Cutoff score for highly qualified will
be 71. No candidate with a score of less than 71 will be converted. Best qualified
will be determined based on assigned scores, in rank order. Bes4 qualified candidates
will be referred to the selecting official in alphabetical order. The number of candidates
selected for ccnvese n 11 be based on reel end projected workload requirements.
I. Performance Evaluation 60 Points
Evaluation Form (3061) has 12 factors, each rated 5, 4, 3, 2, or 1; a perfect
total score is 60. Add the ratings given on each factor, and the total of all ratings
then becomes the final score of the evaluation.
II. Panel Judgment 40 Points
Composition of Panel
The panel must consist of three voting members: two top or mid-level managers,
one first line manager and, if possible, should include a non-voting member from
Personnel. The top or mid-level managers may include a Division or Branch Chief
from any activity in the District, or the Taxpayer Service Program Manager, or above,
in the Regional Office.
Methods to be Used
The following methods or sources of information will be utilized in evaluating
applicants against the Promotion Criteria: current supervisory performance evaluation,
pertinent awards, pertinent training and/or education and the interview. Panel
members must insure that all sources of information are considered in determining the
final rating of each candidate.
Promotion Criteria
Promotion criteria are as follows:
1. Interpersonal Skill A. Ability to meet and deal with and explain
technical tax laws and regulations to a wide
variety of people, including some who may not
readily accept the advice given.
B. Ability to express thoughts in an effectual
and diplomatic manner both in oral and written
communications.
C. Ability to inhere groups about tax laws and
about the services available to tax-avers
at IRS.
2. Technical Super-use A. Demonstrates a sound lo-iowledge of basic accounting
principles.
Manual Supplement
PAGENO="0197"
193
Attachment l--Cont. (1) to MS 5(l5)G-5l, CR 135-7o and 68G-6
B. Possesses an extensive knowledge of tax code
and regulations and is able to advise taxpayers
in terms of how tax laws and procedures relate
to their present or future circumstances.
C. Keeps informed of changing laws and procedures.
D. Knowledgeable of pertinent information sources
and how to utilize them.
K. Possesses a thorough knowledge of IRS organi-
zation and functions.
3. Decision Making Skills A. Ability to evaluate data and to identify and
extract pertinent information from a variety
of documents.
B. Ability to determine what action would result
in the best solution to a taxpayer's problem.
C. Ability to discover and isolate potential tax
issues.
0. Ability to analyze issues pertaining to tax
laws and procodural matters, weigh alternatives,
and to arrive at a correct and logical answer.
4. Dependability A. Ability to handle contacts with individual
taxpayers and hake presentations to groups
whether on IRS premises or at off-site locations
in an independent manner, but keeps supervisor
apprised of significant matters.
B. Ability to effectively organize, plan and complete
assignments to maximize the utilization of tine.
C. Completes work assignments in such a manner and
with the degree of accuracy as to present an
exemplary image of the Service.
5. Adaptability A. Readily assimilates changes in regulations and
procedures.
B. Accepts special assignments and responds readily
to changes in plans and priorities.
C. Is resourceful in finding solutions to unusual
problems and is able to develop new approaches
and techniques when situations warrant.
Each criterion has a maximum point value of five and a minimum of one. The oanel
~aembera will individually assign point values for each criterion. The totals of these
assigned point values will then be averaged. (See conversion table for details).
Ratingu will be assigned on the following bases:
Outstanding Potential - 5 points, the candidate meets the full definition
of this factor fur the grade level indicated.
Manua' Supplement
PAGENO="0198"
194
Attachment 1--Coot. (2) to MS 5(15)G-51, CR l3G-76 and 68G-6
Very Good Potential - 4 points, the candidate nearly meets the full
definition for this factor at the indicated grade level. The candidate could meet
expectations with a minimum of guidance and experience.
Good Potential - 3 points, the candidate does not fully meet the expectations
of this factor for the indicated grade level. Additional experience and guidance is
required for the candidate to fully meet the definition of this factor.
Fair Potential - 2 points, the candidate does not meet the expectations of this
factor for the indicated grade level. The candidate possibly may meet the definition
of this factor with considerable training, experience, and guidance.
Minimal Potential - 1 point, the candidate presently does not possess the
ability to meet the definition of this factor for the indicated grade level even with
considerable training, experience and guidance.
Panel Score
Add the ratings given on each criterion to arrive at a raw score. Then, using
the table provided on the worksheet, determine the converted score.
III. The panel should then fully complete Form M-0021 for each applicant, per the
instructions contained on the form. (A copy of the form is included as part of
Attachment 1.)
Manual Supplement
PAGENO="0199"
195
Attachment 1--Cont. (3) to MS 5(15)G-51, CR 135-76 and 68s-6
1. This forowi 11 be fully coepleted on each candidate for entry into the new occupation. It will bevcne a persanent part of
the proection folder for docunsntatioe purposes.
2. Port A reflects the final score aooigned to the candidote by his/her oupervisor on the Proeotioe Appraisal. This is worth
a savisun of 6o pointo.
3. The table in Port B reflects across the top all the possible eoebinoti005 of conbined points aosigned by individual panel
sssbers. The values bolos ore the fully conputed scores for ooch evaluation writ orion including the averaging of points
assigned by panel oen,bsrs. The panel should total individidually aasigned snores and locate that total on the top line of
the table. The onaverted score show ld then be placed on the li no nec C to the appropriate criterion.
4. The narratics stotenent reflecting consensus of the panciSs final rating on oovh candidate aill ho coepleted in Pert C.
5. Panel ~enbcre ws* 11 sign under the statonont in Part C.
Each of 12 factors ~
Signvturo ra~n~*~at~ __
Forn P.0021 (4-75) lepartncvt of the Treasury - Intnrnal Rvvenun Service
Maeaal Sapplemeet
PAGENO="0200"
Manuai
nft~tt~1
Purpose
This transmits a revised statement of Service policy
for IRM 1218, Policies of the Internal Revenue Service
Handbook, approved by the Commissioner November
16, 1974.
Removal and Insertion of Pages
Remove:
P-5-l33 (Cont.) - P-5--154
Insert:
participating in conducting seizures. When TSRs have
time available from their primary function they are
expected to perform duties in support of other District
Office activities, such as telephone conlacts on RCP
leads, following up on TDIs, and office processing work.
Also, clarifying changes have been made concerning
Service preparation of returns for taxpayers.
Effect on Other Documents
Manual Transmittal 1218-24, dated November 6,
1973, is obsolete.
P.-5-133 (Cont.) - P-5-154
Nature of Changes
P-5-154 has been revised to provide that Taxpayer
Service personnel will not be assigned inventories of
TDAs, TDIs, or Audit examinations, or perform enforce-
ment duties, such as serving summonses or levies, and
JEREMIAH R. THo~m'soN
Director, Internal Management Documents Division
MT 1218-40 (12-16-74) IR Manual
Official Use Only
196
Interna' 1218-40
Revenue Date of Issue:
Service December 16, 1974
PAGENO="0201"
197
DeUnquent Accounts and Returns
P-5-133 (Cant.) Consideration svil! also be given any special circurtistances existing in the
case of a particular taxpayer, class of taxpayer, or industry, or sshich may
be peculiar to the class of tax involved.
Normally, application of the above criteria will result in enforcement of
delinquency procedures for not snore than six (6) prior years. Enforcement
beyond such prior period ssill not be undertaken scithout prior supervisory
approval. If delinquency procedures arc not to be enforced for the full
period of delinquency. prior supervisory approval must be secured except
svhere there would be no net tax due for the years for schich delinquency
procedures are not to be enforced, or when procedures are enforced for six
years and usill not be extended beyond the six-year period.
(P-5-134 - P-5-153 are reserved)
Taxpayer Service
P-5-154 (Appraved 11-16-74)
Service commitment to Taxpayer Serv- The Service is coiuurtiitted to a Taxpayer Service Prograiii which will
ice Program materially help taxpayers voluntarily comply scith tax lascs and assist them
in meeting their tax obligations svith as little burden as possible. The
resource requirements needed to fulfill this comumiuitment usill be given the
same level of consideration as requirements for other major Service Pro-
grams.
Information provided taxpayers on the The Service will develop and conduct effective programs to make avail-
application of the tax law able to all taxpayers comprehensive, accurate, and timely information on
the requirements of tax lasv and regulations.
Positive efforts will be made to detennine taxpayers' needs and to effec-
tively meet these needs. Information scill be provided through a variety of
means, including mnass media, taxpayer l)uiblications. and specially designed
programs, such as Understanding Taxes, Volunteer Incotmue Tax Assistance,
and tax institutes.
Taxpayer Service Personnel Duties Taxpayer ,6ervice personnel will not be assigned inventories of TI)As,
TDIs, or Audit examinations, or perfonu enforceiiuent duties, such as serv-
ing summonses or levies, and participating in conducting seizures. When
TSRs have tinue available frosui their primary function mhe~ are expected
to perforIii duties in support of other District Office activities, such as tele-
phone contacts on RCP leads, folloscing up sin Il)Is. and nffice processing
Self-help methods promote taxpayer Self-help mmuethiods provide assistance to taxpayers mu preparing their tax
voluntary compliance returns. They alloss the Service to expend the nuinimusuiiu amount of iimne
urovicling service to the mcuaxirnuimn number of taxpayers. Any assistance pro-
vided by self-help methods is intemuded to encourage and train a taxpayer
so that he svill be muuore capable of preparing his oscn return the next year.
In appropriate circumuustances, taxpayers will be assisted in group prel)ara-
tion scherein one or more TSR's oversee muuanv taxpayers during their siimuul-
taneous preparation of returns, but individually anssver troublesome
questions for those taxpayers.
MT 1218-40 (12-16-74) IR Manual
Official Use Only P-5-154
57-236 0 - 75 - 13
PAGENO="0202"
P-5-154 (Cont.)
198
Delinquent Accounts and Returns
Self-help methods emphasized
Service preparation of returns
The public impact of clarity, consis-
tency, and impartiality in dealing with
tax problems must be given high pri-
ority
Administrative procedures and forms
will be designed to minimize burden
on taxpayers
Assistance furnished to taxpayers in
the correction of accounts
Taxpayer Service considered in Pro-
gram effectiveness review
Inforrr ration and guidance on tax lass and regulations, as well as assis-
tance iii the reparation of tax returns. sri11 be provided for cant taxpayer
scho corrrrrrunicates scitli our offices seeking such services. Taxpayers are
encouraged to prepare their owrr Federal tax returns rs'henever possible.
If the taxpayer seeks Iteip frour the Service in preparing iris return, self-
help nrethocls svill be emphasized to conserve limited IRS resources.
The Service sri1! prepare returns in ant' one of the followittg circuor-
stances: if the taxpaYer appears to be incapable of using self-help methods:
if tire taxpayer appears capable brit is unwilling and requests mitat tire Sect'-
ice prepare his return; or when working conditions perriiit stint an expendi-
trire of time by Service personnel.
As a general rule, tire preparation of returns by Service personnel will be
lirrrited to Fonos 1040A and 104() scitirorit business schedrtles (C and F)
iron-ever, the I)istrict Director nay alter tins dtte to local needs or circumu-
stances, including his concltisions based upon an analysis of the particttlar
socio-econotnic patterns prevalent scithin his district. Departures front
this general mle trill be tirade scith the inrtention of encoriraging taxpayers
to rise the Service's self-help methods in subseqrient years.
Inn dealing scitir the taxpaying public, Service officials scill explain the
positiorr of mIre Service clearly and take actions in a way that scill enhance
voluntary corrrpliance. Internal Revenue Service officials and eiirployees
rrirrst hear in nrrinid that tire public irirpact of their official actions can irave
an effect on respect for tax law and on volninriary compliance far beyond
tire limits of a particular case or issue.
Recognizing the scope of tire contribution of tax~rayers to volrinrtarv corn-
lrliancr and mite efficiemrt ol)erationr of tIre tax svstemir, sl)ecif'rc attention sri!!
be givetr to isolating amrd debnning problems iii tax admmrinrstrationr scirich can
be solved by nninimirizing, to tire fnillest extent feasible, tire diffmcrilty of their
job.
Service officials sri!! take positive action to critically exarrirne the Sect'-
ice's forrrrs, procelrires and adrriinisnrative practices anti enstire they are
designed to nirinininize tire burden o~ commrpliancr on tire taxrraver as mdl as
ii lrros'i(le for sorunc! adrrrinistrationi rrf thu last and elTer'tive rise of
resorircem. Sitririltanieouslv, Service officials snill ensure that tint' potential
for placing iinrdrie burdens or denriands on tire taxpayer is recognized anti
as'oidenl.
Service officials arid emmululoveer ms-ill act objectivelu- arid exlrec!itiorislv to
correct error's arid discrepancies nt taxpaYers' acconints. Currrectiomrs rnlnicir
rvill i'esnilt rn a benefit to tIre taxhraver will he iranidled as exlietlitionislY as
those nr'lnicir ru-ill benefit tire Cos'ernnir-rrt. Sers'ice officials arid emmrplos'ees
dialing uvithu tire matter mill take es-cry actron tnmussihlm- icr correct tin'-
luroh)hmmn anrdl sr-ill assist the taxjraver to tire frrllr'st r'xtenut l)OSsihle in rrnrnk-r.
standing rnrcl inn takinrg ssiiatu-v-r action is reuiriin'ed of hit ii.
Efler-tiveness in rssnirinrg that thin' Secv'nr'e is respoursis'e to rsuxpas'ens' needs
us a ru-s!rrrmrsihilits of ;r II Sem's'rce rrfficrals in rh erurphovr'es arid surll tue trim-
sidei'cd itt res'iessinrg tIm' purl onrrrannr'r' of all Sers'ir u' p n'rmgrarurs arid urfhir'u's.
MT 1218-40 (12-16-74) IR Manual
Official Use Only
P-5-154
PAGENO="0203"
199
Mr. PICKLE. Is your manual in layman's language?
Mr. ALEXANDER. I am not certain.
Mr. PICKLE. You don't try to explain any tax law in your-
Mr. ALEXANDER. No. We have it in language that I can understand.
If I can understand it I think just about anybody can. I know you
could understand it, Congressman Pickle, if I can understand it.
Mr. PICKLE. I am trying to help you here.
Mr. ALEXANDER. I know you are. I am trying to be helpful because
I do think it is not written in jargon. A little jargon creeps in. When
you have an institution-any institution has its own jargon. We `have
our jargon. But we write these program letters to the extent we can so
that they can be understood by people who are not in the Internal
Revenue hierarchy.
Mr. Terry and I worked it over for about four drafts. I think it
can surely be comprehended.
`We would like to get the views of this committee on what we do
and how we do it.
`We have a fairly narrow line here between maximum service to the
taxpayers and interference with a profitmaking and thereby taxpay-
ing industry. We would appreciate guidance on that.
rfhere are some other things we need. We are looking for guidance.
W'e are looking for a chance to discuss with this Oversight Committee,
what we are doing and what w-e intend to do because if we are going
off in the wrong direction we would like to find out about it before
we get there. rather than afterward.
`We would also welcome a chance to tell you not only about what
we are doing but the problems we are encountering.
The major problem we are encountering in tax~)ayer service is the
complexity of the law, in trying to make certain that we understand
the law and that we can communicate that understanding effectively
to a taxpayer so the taxpayer can act properly on that understanding.
This is not easy.
Mr. CLANCY. Doesn't this go to simplification really?
Mr. ALEXANDER. It certainly does, Congressman Clancy. `We would
welcome simplification.
I know the Ways and Means Committee made some great steps last
year in reviewing certain of the suggestions and proposals that had
been made by Secretary Shult.z on May 30, 1973, with regard to basic
simplification of the tax form and basic simplification-as we see it as
the agency charged with the administration of the tax laws and telling
the people what the tax laws mean-is necessary to good taxpayer
service.
Mr. CLANCY. J~ you contemplate, Mr. Commissioner, any additional
suggestions with respect to simplification this year as compared with
last year?
Mr. ALEXANDER. That will be a matter for the Treasury to consider
and for the Assistant Secretary for Tax Policy, working under the
direction of the Secretary, to propose.
I think there will be additional suggestions al)art from those that
were made in 1973. Those were acted on to some extent in the tentative
decisions of the Ways and Means Committee last fall.
Those steps seemed to us in the Treasury highly desirable and would
be materially helpful in making the tax law more comprehensible to
taxpayers and better explainable by us.
PAGENO="0204"
200
Mr. CLANCY. The language, Mr. Commissioner, is very difficult
sometimes for expert tax attorneys to interpret. So if the expert at-
torney is having difficulty interpreting he has difficulty communicating
his interpretations to his client. When we talk about the ordinary per-
son who has not had that experience as far as legal background is con-
cerned it is much more difficult for him.
So I think we need simplification plus review of the Internal
Revenue Code to determine where we can adopt certain language that
is better understandable. I think this is important too.
Mr. VANIK. Mr. Helstoski?
LETTER RULINGS
Mr. IIELSTOSKI. I want to get some insight in terms of the possibility
of providing a tax advocate for the taxpayer, Mr. Commissioner.
Approximately how many audits are done annually by IRS?
Mr. ALEXANDER. Almost 2,200,000 last year, Mr. Helstoski. But I
think the number of audits of individual taxpayers was near 1,700,000
last year. This year we expect a slightly larger number.
So we have a large number of audits. We have a large number of
taxpayer contacts in the collection area, in the accounts area, a num-
ber far in excess of that two million.
Mr. HELSTOSKI. What does the difference between 1,700,000 and
2,200,000 represent?
Mr. ALEXANDER. That would be other types of audits, corporate au-
dits, audits of excise or employment taxes, audits of estates, and gift
taxes.
Mr. }IELSTOSKI. Many times corporations can avail themselves of
advisory opinions by IRS. This is usually done by letter and almost
constitutes a separate body of law that pertains to the particular cases
in question.
I wonder if an individual taxpayer can similarly avail himself of
this kind of opportunity in terms of advisory opinions. As a matter of
fact in many cases if the taxpayer goes to several IRS offices we may
get several different opinions. But when he is audited he will find none
of these opinions are binding.
Mr. ALEXANDER. The individual, like the corporation, can apply for
a letter ruling. That doesn't mean that a particular individual is going
to be able to take time or has the resources to make that application. We
are concerned about this aspect of our taxpayer servIce program.
If we were to provide, and could surmount the legal problems in so
providing, that the Internal Revenue Service would be bound by the
advice it gives over the counter and over the telephone to those who
come to us for advice we would find that we would in effect have to pre-
audit the taxpayers who came to us for advice.
That would mean that. the problem of quality that we have been dis-
cussing might be materially alleviated. But we would be serving a far,
far smaller constituency than we now serve. We just can't take that
time to preaudit. We would call people to bring in all their books and
records when they came to us for advice rather than come in and ask
us a question or call us on the telephone.
So we are aware of this facet of the overall problem that you men-
tioned and we are attempting to try to resolve it by giving better advice
to more people.
PAGENO="0205"
201
The other facet we are exploring now in a new development that
Mr. Terry is in charge of is thinking about a problem solvers' group by
having taxpayer assistants who would through this career ladder, we
think, gain experience and stature as they progressed through Internal
Revenue and undertake to assist people, not just in giving them advice
answering a tax question but also in trying to solve their problems.
Mr. TERRY. Yes. What we are exploring at the present time is setting
up a cadre of specialized taxpayer service representatives who would
receive intensive training in this kind of activity. They would receive
the problem from the taxpayer, identify what is needed to solve that
problem and follow through by referring the taxpayer to the right
location or getting the information together and going ahead and cor-
recting it. If it deals with our computer processes the taxpayer service
specialists should be able to take corrective actions themselves.
Another facet of this would be. to maintain controls so we h.ave a
followup and know that we have this problem in the house ~nd have
to do something with it.
It may be referred, for example, to collection or audit for action.
We are still exploring the type of follow through we need on this con-
trol so the taxpayer service specialist can determine the final disposi-
tion of the case.
Mr. HELSTOSKI. Many of these advisory opinions are in the form of
a letter to a particular corporation on a specific problem or question.
Are these published? Are these available to other corporations or
taxpayers for review so that they can compare their own situation
with the one in which that particular advisory opinion was rendered?
Mr. ALEXANDER. Some `of them are published. Many of them ~tre not
under present procedures.
We have proposed that our regulations be changed so that in the
future letter rulings of the kind that you have described will be made
generally available to the public with confidential information of cer-
tain kinds excised.
One of the facets we are now exploring is the extent to which we
should delete not only trade secrets and national defense secrets, if any,
contained in letter rulings but also confidential commercial and finan-
cial information of small and closely held corporations, and for that
matter individuals, that is sent to us.
As I mentioned, individuals as well as corporations can obtain these
letter rulings from us. We issue about 30,000 a year including requests
for changes in accounting me.thods and periods. We publish between
600 and 700 a year.
This process has been a matter of concern to the chairman and to the
Internal Revenue Service as well as to the courts.
Mr. VANIK. Mr. Commissioner, I was wondering-in the publica-
tion of these so-called opinion letter rulings, isn't it possible that they
could be published as hypothetical rulings without disclosing the tax-
payer?
There is no need to disclose the taxpayer. Is there?
Mr. ALEXANDER. T.o a considerable extent we are between the rock~
and the hard place, Mr. Chairman. We have been called on, and are
being called on now, by people who want to know about someone else's
ruling and they say they have a right to know and that under the
Freedom of Information Act we have a duty to disclose.
PAGENO="0206"
202
On the other hand we have a duty to retain private that which is
not diselosable under the Freedom of Information Act.
It is up to the courts, if the Congress doesn't act, to decide. at what
point disclosure ceases and nondisclosure begins. The basic right of
taxpayer privacy and the basic right of the public's right to know
result in a tension in this area that we are attempting to resolve at
this time.
Mr. HELSTOSKI. I can understand in a case of national security or
protection of patent rights or protection of trade secrets that there
should be no revelation of this kind of factual material by IRS in a
given ruling.
But outside of that with regard to that particular ruling, would that
apply to others even though they do not have access to it? These would
cover cases where someone may have the same type of situation but
not be knowledgeable about that letter ruling, that particular advisory
opinion.
My question is, does it become part of the IRS law in the admin-
istration of tax audits?
Mr. ALEXANDER. Letter rulings do not create precedent. But letter
rulings that plow new ground are part of our publications stream.
The transformation of a letter ruling into a published ruling or
revenue ruling is slow. It is awkward. It is difficult. It consumes more
time than I hoped it would.
We have tried to increase the flow of rulings passing from the pri-
vate stage to public view to speed up that flow. We have not made as
much progress as I had hoped we would.
We find that the problem of equal access to information, the prob-
lem of equal treatment of taxpayers similarly situated under the
Freedom of Information Act, can best be met through making avail-
able to the. public all of our future letter rulings with certain informa-
tion removed because the release of that information would not only
be not required under the Freedom of Information Act but it would
be improper in sound tax administration.
We are groping for that ground, that line, which should be drawn
between that which our agency should release and that which we
should withhold.
Mr. HELST05KI. In these individual returns after the preliminary
audit, Mr. Commissioner, how many of these go to a second stage for
the district or regional administrator to review and then finally to
the tax court?
I am not speaking of corporations because they can avail themselves
of experts in tax laws through the use of accountants and attorneys. I
am talking about the individual taxpayer.
Can you give me any estimate of that?
Mr. ALEXANDER. We. will have to supply exact information for the
record. It is my recollection that including corporate cases last year
there were just about 1,000 tax cases tried in the Tax Court. There
were about 400 tax cases tried in the district courts and an even smaller
number in the Court of Claims.
We had 2~20O,OOO total audits. I recollect the figure 1,700,000 in-
dividual audits. I will ask Mr. Wolfe for a correction on that figure
because he would have that.
Mr. WOLFE. It is about 1,900,000 this year.
PAGENO="0207"
203
Mr. ALEXANDER. It would be about 1,900,000 individuals.
Mr. HELSTOSKI. You are talking about the Tax Court, Mr. Commis-
sioner, aren't you?
Mr. ALEXANDER. Tax Court. District court.
Mr. HELSTOSKI. I am also talking about the intermediate level.
Mr. ALEXANDER. All right, the intermediate level, the appellate di-
vision and the district conference. As I recall less than 100,000 cases
go to district conference or conference of any kind.
Mr. WOLFE. It is less than that. It is about 37;000.
Mr. ALEXANDER. 37,000 in district confeience. But I think there are
over 30,000 that go to the appellate division including about 8,000
that skip district conference.
We have a very small number of cases that are not resolved between
the tax auditor or revenue agent on the one hand anid the taxpayer on
the other hand.
We have changed our procedures in an effort to provide the small
taxpayer, a taxpayer whose case involves less than $2,500 in refund
deficiencies per year, with easy access to a district conferee who now
has the power to settle the case with the taxpayer, taking into account
the ha~ards of litigation, to assume the taxpayer was in court, trying to
guess how the case would come out and settle that case for the small
taxpayer.
[Additional information follows:]
WORKFLOW IN IRS AND THE COURTS FISCAL YEAR 1974
Individual
returns All returns 1
Returns examined
District conference activity:
Cases received
Conferencecompleted
Number agreed
Agreed as a percent of total
Appellate receipts (all categories)
Nondocketed
Bypass district conference
Docketed
Appellate activity on cases not before the Tax Court (nondocketed):
Cases received
Cases resolved (agreed, paid or defaulted)
Cases resolved as a percent of total
Tax Court (includes appellate activity on docketed cases):
Total petitioned to Tax Court
Dismissed
Settled by stipulation
Settled by Tax Court decision
Decided by Tax Court by appealed
District courts:
Total filed in districtcourts
Settled in district courts
Decided by district courts
Court of Claims:
Total filed in Court of Claims
Settled in Courtof Claims
Decided by Court of Claims
Court of appeals:
Settled by courts of appeals decision
Favorable to Government
Favorable to taxpayers
Modified
Decided by courts of appeals but reviewed by Supreme Court
Settled by Supreme Court decision
1, 767, 000 2, 188, 000
27,031 36,587
26, 455 35, 759
18, 999 25, 302
71.8 70.8
18,133 30,066
10,965 21,267
25,944 8,033
7,168 8,799
10,965 21,267
9,447 18,508
86.2 87.0
17,168 8,799
1841 911
15,031 6,493
(3) 1, 100
(3) 257
(3) 1,009
(3) 478
(3) 407
(3) 124
(3) 74
(3) 64
(3)
(3)
(3)
(3)
(3)
(3)
363
250
96
17
I Income, estate, gift, employment, and excise tax returns.
3 Estimated.
3 Not available.
PAGENO="0208"
2)04
Mr. HELSTOSKI. Wouldn't it be better to institute a policy of tax
counsel for the taxpayer appearing before the district conference or
appellate division and also the Tax Court?
If the taxpayer is not a corporation or a wealthy individual he
wouldn't have access to people who are well versed in the tax law,
being restricted particularly by finances.
Mr. ALEXANDER. We would be encroaching on the private sector
there, Mr. Helstoski.
Mr. HELSTOSKI. Yes, but we have legal services in OEO.
Mr. VANIK. Mr. Rangel?
Mr. RANGEL. I don't have any questions, Mr. Chairman.
Mr. VANIK. Mr. Stark?
ACCURACY OF RETURNS PREPARED BY NON-IRS TAX PREPARERS
Mr. STARK. Can you identify any kind of a pattern from the returns
that come to you from, say, the non-CPA or nonprofessional tax pre-
parers? is there any difference in accuracy? Have you kept any
records on this?
Take H. & H. Block, for example, which is a large preparer. I don't
mean to pick on him specifically because I suppose there are others.
But do you have any indication of what kind of accuracy they have?
Mr. ALEXANDER. We think that most tax return preparers in the
commercial area do a pretty good job, a pretty competent and a pretty
ethical job. But we have trouble coping with those who lack compe-
tence, ethics or both. I don't know whether we have any statistics
which would separate one general category of preparer from another.
Mr. STARK. Have you given consideration to any kind of legislation
to regulate, license, or control the preparers?
Mr. ALEXANDER. We have. But we think the package that Secretary
Shultz presented on April 30, 1973, and which the Ways and Means
Committee took forward in its 1974 considerations would be a better
solution at the Federal level.
Licensing is being explored. Laws have been enacted in several
States and we are reviewing with interest the laws and the way they
will operate when implemented in the States.
We think that given the limited resources and given the need for
getting the most benefit at the minimum expenditure in manpower the
way to solve this continuing problem is to give us the additional tools
that we requested back in 1973.
Mr. STARK. Could you run through them for me briefly?
Mr. VANIK. You haven't changed your mind about anything we
recommended last year in our reform bill?
Mr. ALEXANDER. No. It is still the same package.
Essentially, Mr. Stark, this involves a $100 fine for a violation of
the rules and regulations that doesn't amount to fraud and a $500 fine
for a fraudulent return. These $100 and $500 fines are per return.
That would be materially discouraging to the unethical preparer.
In testifying before the Ways and Means Committee last May I
expressed a personal commitment and a commitment on behalf of the
Service that we would use these strong tools wisely. The committee
drafted a number of safeguards on the use of these particular tools.
PAGENO="0209"
205
What if someone disagrees with us? Let us provide an easy way to
litigate the question.
What if somebody is doing such a bad job as to create a very sub-
stantial problem for a number of taxpayers? Should we have the right
by injunction-again, carefully controlled-to prevent that person
from continuing to abuse the public? We think so. We asked for that
right.
We need certain legal requirements to make these tools workable. We
need to provide in the law that the tax return preparer will make a
copy of the return available and will give that copy to the one for
whom the return is being prepared. We need to refine the law so that
the tax preparer will sign the return and so that an identification
number of the tax preparer will be on the return and employers would
give us a list so we could match them up.
Mr. STARK. Or find them a year later.
Mr. ALEXANDER. Yes; that is correct, Mr. Stark.
Mr. STARK. Might that be incorporated in legislation to be intro-
duced in this session? I understand-
Mr. ALEXANDER. I don't believe so.
Mr. STARK [continuing]. I think this would probably be of interest
to our committee-to learn of the requirements that your department
would find useful, either in draft regulations or other form of
suggestion.
This is an area in which the public could use protection, and this
would also help you in your policing efforts. I don't think it necessarily
has to be part of an omnibus reform bill.
Mr. VANIK. That is precisely the point I was raising. Perhaps we
won't get an onmibus bill through in time to be useful next year. Per-
haps we ought to consider doing something separately.
Mr. STARK. I think it might be helpful. I know that standards are
discussed in States like California at great length. There is no reason
why we have to prevent anything the States could do. But to the extent
that we could agree on some general minimum standards in terms of
recordkeeping, I do agree with you that the large percentage of people
who hold themselves out to be tax preparers make an honest attempt
to do a yeomanlike job.
There are many abuses that come up where preparers dream up
exemptions to satisfy their client, to make him think he will get a
bigger rebate. Some sort of suggested format for that would be
useful.
Mr. ALEXANDER. I certainly share those views and would hope that
legislation of this kind could be considered by this committee.
Mr. STARK. I would appreciate it if you would submit that in the
form of a memo.
Mr. ALEXANDER. I would like to point out that this legislation would
call for cooperation with the States, assisting States like California
that have licensing statutes.
Mr. WILLSEY. The thrust of this proposal was adopted by the com-
mittee last year.
Mr. VANIK. All we have to do is break it out.
Mr. WILLSEY. All you have to do is take a look at what the corn-
mittee adopted last year.
PAGENO="0210"
206
TITLE Il-REVENUE SHARING ACT
Mr. VANnc. Mr. Commissioner, we don't want to impose on your
time and the time of your staff any longer. I was going to suggest that
we might terminate within another 5 or 10 minutes.
I have a question I want to bring out on title II of the Revenue
Sharing Act.
Is there any sign that the States are going to cooperate or work
with us in order to consolidate State returns or local returns and bring
them in line with the Federal returns so we can prevent the duplication
of returns?
What are the prospects of title II operating? I don't think a single
State has taken advantage of that, has it?
Mr. ALEXANDER. Not a single State has. There have been some nib-
bles from certain States. But not a single State has come forward to
us and told us that they would like to piggy-back.
Mr. VANIK. Are regulations issued?
Mr. ALEXANDER. The Treasury regulations have not yet been issued.
Regulations have to be considered by a number of different groups and
entities. I don't believe that consideration has been completed or draft
regulations issued.
Mr. VANIK. We took action in 1972. This is one of our problems, the
delay between statutory action and the regulation.
I can see why States are going to be reluctant about moving into an
area that we have not a.s yet provided regulations for.
Mr. ALEXANDER. That is correct. The problem undoubtedly is the
slowness of getting these massive regulations issued. We have been
doing our best to get these regulations out, Mr. Chairman, because,
among other things, in June 1973 I predicted to the State tax admin-
istrators that they would be issued by September of that year. It is a
little late now.
But we need to get those regulations out. I am not sure the States
will rush forward to take advantage of this even then because I think
their concerns are not so much with the procedures and the regulations
as they are the giving up of jurisdiction and people.
Mr. VANIK. Among the reasons we had for opposition was that the
level of IRS audits was too low and that the States needed to have
their own potential in this area.
How maily States are taking advantage of your offer to transfer or
exchange tax returns?
Mr. ALEXANDER. We have treaties with all but two. The two we don't
have treaties with are Nevada and Texas.
Mr. VANIK. What is the cost per return of implementing title II?
How much does it cost per return under title II?
Mr. ALEXANDER. The cost per return under title II itself is zero. A
suggestion was made at one time that there be a user charge of, as I
recall, $1.30 per return. That would require, I believe, a change in
title II.
Is that correct, Miss Alpern?
Miss ALPERN. That is right.
Mr. VANIK. Are you supposed to recover the cost of the service?
Isn't that the idea under title II?
PAGENO="0211"
207
Mr. ALEXANDER. It is my understanding, Mr. Chairman, that title II
involves a freebie.
Mr. VANIK. Completely free?
Miss ALPERN. That is right.
Mr. VANIK. TvVh'at is the cost per Federal return?
For example the Governor of Indiana said they only spend 61
cents for each $100 of tax collection.
In Wisconsin I think it is 77 cents.
So I think we ought to have a cost estimate as to the cost per Federal
return.
Mr. ALEXANDER. I think we are doing a little bit better than they
are when we look at the aggregate cost of the Internal Revenue Service
and the aggregate collected by the Internal Revenue Service.
The cost per return is something else again. I don't want to appear
querulous. But it depends on one's definition of "return." If we use
our narrowest definition, which gives us, what, about 126 million
returns, then the cost per return could be ascertained by dividing the
aggregate budget by 126 million.
I will supply this for the record.
Mr. VANIK. That would be helpful, because we have had inquiries
from some of the States on that.
[The information follows:]
RETURNS FILED, COLLECTIONS, AND COSTS, 1972 THROUGH 1974
Fiscal year
Returns
filed
(thousands)
Collections 0
(millions of
dollars)
perating cost
(millions of
dollars)
Operating
cost per
return filed
Cost of
collecting
$100
1972
1973
1974
112,000
116,940
121,609
$209,856
237,787
268,925
$1,127
1,162
1,313
$10.07
9.94
10.80
$0.54
0.49
0.49
Mr. VANIK. The States somehow have a feeling that they are operat-
ing with less cost if they don't take advantage of title II.
Mr. ALEXANDER. it is hard to see how they could do better than zero,
Mr. Chairman.
Mr. VANIK. If it is zero I would agree. But there is apparently some
misinterpretation as to the cost. Is there anything you have in mind
that could implement title II and make it more acceptable?
There is also some feeling that the Federal code is perhaps a little
bit easier on people than some of the State codes. I didn't realize that
that is a problem.
Mr. ALEXANDER. One of the problems that the State people have
indicated to me as I have been with them from time to time is that
they would be unwilling to agree to the Federal definition of "income"
or to the Federal computation of tax, one of the two requisites for
implementation of title II.
They are concerned about changes such as those in the recent Tax
Reduction Act of 1975, which might materially decrease their expec-
tations without decreasing their requirements for funds.
Mr. VANIK. In other words they would certainly be bound by what
we do in a rebate program and it would be a shortfall of revenue.
PAGENO="0212"
208
The thought passed through my mind about my own State. I was
wondering if it was wise for the Federal Government to give the tax-
payer some relief in order to stimulate the economy, maybe for the
same reason it might have been wise for the States to think about using
a similar approach.
Mr. WILLSEY. The States are pretty jealous of their prerogatives.
Mr. VANIK. They are pretty jealous of their revenues.
We might have to figure out what the revenue loss would be to the
States if they were using title II. That would be something that would
be useful for us in determining what course we ought to take.
I have just one further question. Will the 1975 act add new complex-
ities to the 1040?
Mr. ALEXANDER. It certainly will.
COMPLEXITIES POSED BY TAX REDUCTION ACT OF 1975
Mr. VANIK. How many new lines do you estimate on the return?
Are you going to print a bigger return?
Canada has a little pamphlet that I have here that is rather attract-
ive and easy to read. The New Zealand return which I have here-
though I don't think they collect as much as we do-is a very simple
return. It compares favorably with ours. It has got a lot more open
space.
What are you going to have to do to the 1975 return now to comply
with the law?
Mr. ALEXANDER. We are working on that right now, Mr. Chairman.
Some of this is still in doubt.
We hope, speaking from the myopic standpoint of tax administra-
tion, and we believe that the only thing that should be on a tax return
is that which is necessary to the determination of tax and the identi-
fication of the taxpayer.
But, assuming that we don't have to gather other information, neces-
sary for some purposes perhaps but surely unrelated to the tax system
on the return, we will be able to provide on a 1040A a short form which
is a little bit more complicated than the regular form by reason of the
new credits.
Our long form, 1040, is even more complicated because of the
addition of such items as the housing credit as well as the credit for
personal exemptions and the earned income credit.
Mr. VANIK. We are going to add some more. We are going to have
a credit for insulation, probably, in the energy bill and a credit pos-
sibly for automobiles that are energy-efficient. So you had better leave
space in your plans for two more possible things.
Mr. ALEXANDER. We have run out of space. Can we go back to the
New Zealand law?
Mr. VANIK. I think that you have given us generously of your time.
I want to say that we appreciate this discussion on the problem of tax-
payer services.
We will get back to you.
I want to say, Mr. Commissioner and members of IRS, that I have
been here for 21 years. As one member of this body I want to compli-
PAGENO="0213"
209
ment you for your efforts to be candid and frank. I think we have a
candor and openness now about the IRS that the American people
are going to appreciate as they recognize it.
I think it is quite apparent that you are all about the job of making
the Service a much more responsive body to the mandates of the
statute and also developing a sense of understanding with the great
body of American people that we jointly serve.
Thank you very much.
[Whereupon, at 5 :36 p.m., the subcommittee adjourned, to recon-
vene at the call of the Chair.]
0
PAGENO="0214"