IR-2013-62, June 24, 2013

WASHINGTON ― Internal Revenue Service Principal Deputy Commissioner Danny Werfel today issued a report outlining new actions and next steps to fix problems uncovered with the IRS’ review of tax-exempt applications and improve the wider processes and operations in place at the IRS.

The three-part report covers a wide range of areas Werfel and his leadership team examined during the past month. The report cites actions to hold management accountable and identifies immediate steps to help put the process for approving tax-exempt applications back on track. Werfel also outlines actions needed to protect and improve wider IRS operations, ranging from compliance areas to taxpayer service.

“It is critical that the IRS takes steps to ensure accountability, address the problems uncovered in recent weeks and improve the operations of the IRS to continue to carry out our critical mission on behalf of the public,” Werfel said. “We have made a number of changes already, more are in the works and even more will develop as we move forward.”

Importantly, the initial IRS review shows no signs of intentional wrongdoing by IRS personnel or involvement by parties outside the IRS in the activities described in the recent TIGTA  report.  However, the report notes that investigations are ongoing, and that the IRS is committed to a full fact-finding effort to provide the public answers to these and other important questions.

“The IRS is committed to correcting its mistakes, holding people accountable, and establishing control elements that will help us mitigate the risks we face,” Werfel said. “This report is a critical first step in the process of restoring trust in this critical institution. We have more work in front of us, but we believe we are on the right track to move forward.”

Werfel’s report, titled “Charting a Path Forward at the IRS: Initial Assessment and Plan of Action,” covers three primary areas:

Accountability. This covers the steps being taken to ensure accountability for the mismanagement described in last month’s Treasury Inspector General for Tax Administration (TIGTA) report:

• The report finds that significant management and judgment failures occurred, as outlined in the TIGTA report. These contributed to the inappropriate treatment of taxpayers applying for tax- exempt status.
• To address this, new leadership has been installed across all five executive management levels involved in the chain of command connected to these matters. In addition, the IRS has empaneled an Accountability Review Board to provide recommendations within 60 days (and later as needed) on any additional personnel actions that should be taken.

Fixing the Problems with the Review of Applications for Tax-Exempt Status. This part covers several process improvements underway to ensure that taxpayers are treated appropriately and effectively in the review of applications for tax-exempt status:

• The report outlines a new voluntary process to help certain applicants gain fast-track approval to operate as a 501(c)(4) tax-exempt entity if they are being reviewed for advocacy questions and  have been in our application backlog for more than 120 days. This self-certification process allows them a streamlined path to tax-exempt status if they certify they will operate within specified limits and thresholds of political and social welfare activities. In addition, the IRS has added new technical and program staff to assist with reviewing 501(c)(4) applications.
• The IRS also suspended the use of any “be-on-the-lookout,” or BOLO lists in the application process for tax-exempt status.

Review of IRS Operations and Risks. The report identifies a series of actions to ensure taxpayers that selection criteria across the IRS are appropriate and that taxpayers are aware of how they can seek assistance if they have concerns about the IRS. The report further outlines steps underway to ensure that critical program or operational risks within the IRS are identified early, raised to the right decision-makers and shared timely with key stakeholders:

• The report calls for establishing an Enterprise Risk Management Program to provide a common framework for capturing, reporting and addressing risk areas across the IRS.  This will improve timeliness in bringing information to the attention of the IRS Commissioner and other IRS leaders as well as key stakeholders to help prevent future instances of inappropriate treatment or mismanagement.
• Although there is no current evidence that selection criteria in other IRS organizations is inappropriate, the nature of the problems identified in the tax-exempt application process warrants a review of certain process controls within the IRS.  The IRS will initiate a comprehensive, agency-wide review of compliance selection criteria.  Results will be shared with the Department of the Treasury, the IRS Oversight Board, and the Chairpersons of the House Ways and Means Committee and the Senate Finance Committee.
• The IRS will initiate additional internal and external education and outreach about the role of the National Taxpayer Advocate in assisting taxpayers in resolving problems they encounter with the IRS.

In addition to posting the report on IRS.gov, the IRS will regularly update the progress made on the TIGTA report’s recommendations and provide other developments related to this effort.

Related Items:

• Recommended Actions — Status of recommended actions from the Treasury Inspector General for Tax Administration (TIGTA) on IRS’s Exempt Organizations (EO) Division (updated as appropriate)
• FS-2013-7, Highlights from the IRS Report
• FS-2013-8, IRS Offers New Streamlined Option to Certain 501(c)(4) Groups Caught in Application Backlog
• Additional information

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IR-2013-61, June 19, 2013

WASHINGTON — The Electronic Tax Administration Advisory Committee (ETAAC) presented its2013 Annual Report to Congress during a public meeting today. The report discusses five groups of recommendations on issues in electronic tax administration.

Highlights of the report include recommendations on the following key outcomes:

• Approve standards for security, privacy and fraud prevention
• Provide incentives for e-filing employment tax returns
• Expand access to data and online tools
• Leverage relationships in the electronic filing community
• Fund CADE 2 and the 1040 Modernized e-file (MeF) programs

“The IRS appreciates the committee’s hard work and efforts to help the agency improve electronic tax administration for all taxpayers,” said Carol A. Campbell, Director of the Return Preparer Office. “We look forward to reviewing the recommendations that ETAAC members have carefully crafted.”

The 15-member committee provides an organized public forum for discussion of electronic tax administration issues and the overriding goal that paperless filing should be the preferred and most-convenient method of filing tax and information returns.

“With extraordinary challenges facing all sectors of the federal government along with unprecedented budgetary constraints intensified by the 2013 sequester, ETAAC commends the IRS in effectively and efficiently addressing its strategic priorities and, in particular, the significant progress the agency has made toward achieving its 80 percent electronic filing goal,” said Alice Burnett, ETAAC Chair. “The committee further recommends the IRS continue its steadfast focus on fraud and identify theft prevention, as well as the development of additional online tools to better serve the taxpayer and tax preparation community.”

ETAAC submits an annual progress report to Congress each June. The IRS created the ETAAC in 1998 as required by the IRS Restructuring and Reform Act of 1998.

The report is the result of research and analysis as well as meetings with senior IRS executives.

Public comments on the report may be sent to etaac@irs.gov.

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