Appendix I

GAO recommendation

Establish a servicewide definition of taxpayer abuse or mistreatment and identify and gather the management information needed to systematically track its nature and extent.

Ensure that Tax Systems Modernization provides the capability to minimize unauthorized employees access to taxpayer information in the computer system that eventually replaces the Integrated Data Retrieval System.

Revise the guidelines for information gathering projects to require that specific criteria be established for selecting taxpayers' returns to be examined during each project and to require that there is a separation of duties between staff who identify returns with potential for tax changes and staff who select the returns to be examined. Reconcile all outstanding cash receipts more often than once a year and stress in forms, notices, and publications that taxpayers should use checks or money orders whenever possible to pay their tax bills, rather than cash.

Better inform taxpayers about their responsibility and potential liability for the trust fund recovery penalty by providing taxpayers with special information packets.

Provide specific guidance for IRS employees on how they should handle White House contacts other than those involving tax checks of potential appointees or routine administrative matters.

IRS action taken or planned

IRS has recently established a definition for "taxpayer complaints" and is now committed to establishing a complaints tracking process.

Issued a 12-point Information Security Policy to all IRS staff; published "High-Level Security Requirements;" and started development of an Information System Target Security Architecture.

Issued an updated memorandum to field staff regarding the highly sensitive nature of information gathering projects.

IRS is instructing its managers to conduct random unannounced reconciliations of cash receipts used by IRS staff who receive cash payments from taxpayers. Revised Publication 594, "Understanding the Collection Process," Publication 17, "Your Federal Income Tax," and the 1995 1040 tax package to encourage taxpayers to pay with checks or money orders, rather than cash.

Revised Publication 334, "Tax Guide for Small Business," and Circular E, "Employer's Tax Guide," to explain the potential liability for the trust fund recovery penalty if amounts withheld are not remitted to the government; and started including Notice 784, "Could You Be Personally Liable for Certain Unpaid Federal Taxes?" with the first balance due notice for business taxes. No actions taken or planned. Because we did not find instances of improper contacts, IRS is of the opinion that current procedures covering third-party contacts are adequate.

Requested top executives to review major issues the Ombudsman identified via the Problem Resolution Program that have resulted