Almost Half Of IRS Compliance Decisions Overturned

by Mike Godfrey, Tax-News.com, Washington

21 April 2006

Almost half of the cases brought against taxpayers by Internal Revenue Service enforcement officers are overturned on appeal, according to a sample of cases studied by the Government Accountability Office.

Based on a review of 153 appeals cases, the GAO estimated in a report released Tuesday that 41 percent of the 102,623 cases closed in fiscal year 2004 were not fully sustained.

The GAO found that in more than half of those cases, examiners from the compliance division and officers in the appeals division applied tax laws and regulations differently.

The Appeals Office closes about 100,000 cases a year involving taxpayer disputes with the IRS's enforcement and compliance staff.

The GAO is encouraging improvements to an IRS program that provides feedback from the appeals division to IRS examiners, in order to improve the accuracy and quality of audits and taxpayer service.

The study was commissioned after a request from the Senate Finance Committee in 2004. Sen Max Baucus (D - Mon), the ranking Democrat on the committee, commented that the results of the study highlight a need for an "aggressive effort" to spot patterns and problems in the compliance division’s work.

“Better feedback from the appeals division on why these cases aren’t sustained should result in fewer mistakes and better service at the compliance level, and that’s the best outcome for American taxpayers," he stated.

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