Chapter 3 Opportunities to Improve Future IRS Some Nonfiler Case Work Could Be Done by Lower Graded Staff In a similar vein, an IRS business process reengineering team reviewed the collection process and made several recommendations, some of which were directed at reducing the time taken to resolve nonfiler cases by eliminating some notices and moving certain cases more quickly to a call site for attempted telephone contact with the taxpayer. As of July 1995, those recommendations were under consideration by IRS management. Nonfiler cases that cannot be resolved by ACS and that meet certain criteria are referred for investigation by field personnel-revenue officers in IRS' Collection function and, during the Nonfiler Strategy, revenue agents and tax auditors in IRS' Examination function. In 1993 and 1994, IRS' Examination function had about 18,000 revenue agents and tax auditors. Over that 2-year period, Examination redirected about 4,000 staff years to work nonfiler cases. Of the 140 cases we reviewed that had been closed by Examination in 4 IRS Although it helped IRS to reduce its nonfiler inventory and secure delinquent returns, the use of GS-11 and above Examination staff on nonfiler cases might have also contributed to an increase in IRS' audit rate for individual returns and a decline in the audit rate for nonindividual returns. For example, the audit rate for individual returns went from The percents add to 101 due to rounding. Chapter 3 Opportunities to Improve Future IRS 0.92 percent in fiscal year 1993 to 1.08 percent in fiscal year 1994, an increase that IRS has attributed to the Nonfiler Strategy." At the same time, however, the audit rate for corporate returns decreased from 3.05 percent to 2.31 percent. Although other factors may have contributed to that decrease, several of the revenue agents and Examination officials we interviewed in four district offices told us that if the GS-11 and above agents had not been doing nonfiler work, they would have been doing corporate audits. Examination officials in one district, for example, told us that because of the nonfiler work, the number of corporate audits done in that district decreased by about 10 percent. Although Examination officials, revenue agents, and tax auditors we interviewed in the four district offices we visited had several positive things to say about the Nonfiler Strategy and Examination's role therein, a common theme expressed by many of them was that much of the nonfiler case work done by revenue agents and tax auditors could have been done by lower graded staff. In one district office, for example, that view was expressed by the Chief and Assistant Chief of Examination as well as the two Branch Chiefs, one Group Manager, three revenue agents, and three tax auditors we interviewed. Our review of case files in the four districts led to a similar conclusion-that the nonfiler case work in those districts involved tasks that could be done by lower graded staff. Our case file reviews indicated that with some exceptions, the work done on those cases was not so complex that it required the expertise of higher graded staff. That perception was confirmed by several of the agents and auditors we spoke with in the four district offices who said that nonfiler cases were easier to work than audit cases and were not technically challenging. One reason why revenue agents and tax auditors might not have found nonfiler work technically challenging is that audits of returns secured from nonfilers during the Nonfiler Strategy were different from normal audits. As explained in an August 1992 document on the Nonfiler Strategy signed by the then Acting Commissioner, the nonfiler audit process was streamlined so that cases could be worked in a minimal amount of time. As noted in the document, audits of nonfiler returns were to be limited in scope, with the rule of thumb being "if the return makes sense, accept it." One presumed advantage of using revenue agents on nonfiler cases is that they are accustomed to making field visits to contact taxpayers. However, "Although the returns secured from nonfilers by Examination were often given only a cursory review by a revenue agent or tax auditor, IRS considered them audits for statistical purposes. Chapter 3 Opportunities to Improve Future IRS in only 15 percent of the cases we reviewed was there any evidence of a field visit, and an IRS analysis of 1,000 cases completed by Examination in one district office showed that a field visit was made in only 23 cases (2.3 percent). It is not our intent to second-guess IRS' staffing decisions for the Nonfiler Strategy. We do not know what options were available to IRS when it implemented the Strategy and, even if we did, second-guessing would serve no useful purpose. Our intent, rather, is to suggest, on the basis of our case reviews and our interviews of persons involved in doing those cases, that different staffing patterns might be appropriate for future nonfiler efforts, if any. Those patterns might involve (1) using lower graded revenue agents instead of GS-11s, (2) using more tax auditors or service center tax examiners instead of revenue agents, and/or (3) making greater use of paraprofessionals or administrative staff. The kinds of tasks that could be done by paraprofessionals or administrative staff, in our opinion, include such things as locating nonfilers, contacting them by telephone or letter, scheduling and rescheduling appointments, and preparing SFRS. In many of the cases we reviewed, for example, it was our perception that Examination's success in securing delinquent returns was due, in large part, to the agents' and auditors' persistence in contacting nonfilers by telephone and in following up with nonfilers when they missed an appointment or when returns or information they had promised to mail were not received. Because it did not appear that the person making the phone calls needed any special auditing skills, it seemed that IRS could achieve the same result by using paraprofessionals or other lower graded staff, leaving higher graded staff more time to audit. One of the district offices we visited had some experience using paraprofessionals. The Detroit District Office, in June 1994, trained 15 Accounting Aides, primarily grade 5, to help prepare reports and case files for nonfiler cases. The Detroit office reported such advantages as enhanced productivity, reduced nonfiler workload, and more time for revenue agents and tax auditors to do other duties. The average annual base salary of a GS-5 in 1995 (figured at step 6, the middle of the pay scale) was $21,827, compared with $33,070 for a GS-9 and $40,010 for a GS-11. Although our work focused on the use of Examination staff during the Nonfiler Strategy, it seems logical that our observations may also be pertinent to the use of Collection staff. Revenue officers range in grade Chapter 3 Opportunities to Improve Future IRS IRS Recently between GS-5 and GS-12, any of whom, according to Collection officials, might be asked to perform nonfiler investigations. IRS has three broad business objectives, the first of which is to increase voluntary compliance. 12 With that in mind, a key indicator of the success of IRS' nonfiler efforts, in our opinion, is the extent to which nonfilers brought into compliance remain compliant. As noted in chapter 2, our analysis and a broader analysis done by IRS showed that many of the nonfilers brought into compliance in 1993 did not file returns in 1994. IRS spent resources getting these nonfilers to comply only to have many stop filing 1 year later. When they are identified as nonfilers again, IRS must spend additional resources and begin the enforcement cycle again. IRS developed a strategy for dealing with these repeat nonfilers, whom we While the proposed strategy for dealing with recidivists calls for eliminating some notices, there is no mention of any intent to revise the language of the notices that will be sent. If the intent is to reduce the number of notices from four to two, for example, by simply eliminating the second and third notices and keeping the first and fourth, then the language in the remaining two notices might have to be revised to reflect the truncated process. Because a notice's content and format may affect the recipient's ability "The other two objectives are to (1) maximize customer satisfaction and reduce burden and We believe that the quicker IRS can make telephone contact with a Related to our views on telephone contact is our belief that IRS could use its enforcement resources more efficiently in dealing with nonfilers. We believe that it is to IRS' benefit to limit as much as possible the extent to which higher graded enforcement staff are doing work that could be done effectively by lower graded enforcement staff or even, in some instances, by paraprofessionals or administrative staff. As we discussed earlier, for example, successful closure of many of the cases we reviewed seemed to be due, in no small part, to the revenue agent's persistence in calling nonfilers. We see no reason why lower graded staff could not be just as persistent. We discussed this issue in a recent report entitled Tax Administration: IRS Notices Can Be Improved (GAO/GGD-96-6, Dec. 7, 1994). |