IRS Data Gathering: I Couldn’t Have Said it Better Myself

Many taxpayers do not really understand that (1) IRS employees often ask for documentation that is not necessary, that is already in the IRS’ possession, or that the IRS could easily obtain; and (2) IRS employees are typically not clear (i.e., intentionally vague) when they request this information from taxpayers. I can tell you that this is the truth, but you don’t have to take my word for it.

The Treasury Inspector General for Tax Administration (TIGTA) is the agency tasked with auditing the IRS to help make the IRS more efficient. In one of its recent audit reports, TIGTA makes the following comment about how IRS employees often miss the mark [note: an “information document request” or IDR is one of the forms that the IRS examination employees use to “officially” ask taxpayers to turn over taxpayer records]:

In addition, in 35 of the 62 cases, the initial Information Document Requests (IDR) included unnecessary items or did not state clearly what was needed from the taxpayers. In all 35 cases, the revenue agents used the IDRs to request information that was already available in the case files or that could have been obtained through use of research tools readily available to the agents. In addition, in 10 of the 35 cases, the revenue agents did not state clearly what was needed on the IDR or did not specify the time period when requesting bank records. Taxpayer burden is increased when revenue agents request unnecessary information or are unclear about the information needed. We identified similar concerns in our review of the NRP study of individual taxpayers. The IRS agreed with our recommendation in that review and has completed the corrective action. We believe additional action is needed since this concern could exist on all examinations, not just NRP study examinations.

Having worked with many IRS employees, I have to say that these comments are right on the mark.

The worst IDR that I have read included a request for “All other personal and business financial records.” In that case the taxpayer was a small business owner who had a large storage shed full of financial records (the IRS examiner agreed to overlook the taxpayers inability to comply with the IDR after the taxpayer inquired as to whether the government could use its own forklift and heavy truck to help in the document copying process).

I would also that these exact same issues arise when IRS collections employees, not just IRS examination or audit employees, request taxpayer records. The IRS will generally start collecting information about taxpayers in the exam or audit function by means of the IDR. If the tax liability is not paid, the IRS collections employees will eventually start collecting the same information about taxpayers all over again (collections employees use the Form 9297, not the IDR, to collect this documentation).

One way to improve the efficiency of the IRS would be to provide the information collected by the examination or audit function to the collection function (at a minimum, the two functions should – but do not – share the same computer system!). This duplication no doubt slows down the tax collection process and imposes an additional burden on taxpayers. Perhaps TIGTA or the taxpayer advocate will add this to their agendas….