IRS' Efforts to Evaluate the Section 1203 Process for Employee Misconduct and Measure Its Impacts on Tax Administration

Congress has long stressed the importance of proper treatment of taxpayers by the Internal Revenue Service (IRS). This emphasis was a major impetus for the IRS Restructuring and Reform Act of 1998, which included numerous additional protections for taxpayers. Among these was Section 1203, which defines 10 acts or omissions for which an IRS employee is to be fired. Most, but not all, of the acts or omissions involve mistreatment of taxpayers, such as by falsifying information or by harassing them. At the same time, Congress has been concerned about IRS's ability to administer the tax laws, including whether the Section 1203 provisions could hamper IRS's enforcement efforts by having a "chilling effect" on IRS employees' willingness to take appropriate enforcement actions against noncompliant taxpayers. Related concerns are whether the IRS and the Treasury Inspector General for Tax Administration (TIGTA) process for reviewing allegations made against employees is too time consuming and inconsistent, and whether all the Section 1203 provisions should be retained. In February 2003, we recommended that IRS evaluate the effectiveness of changes it made to speed up and otherwise improve the review of Section 1203 allegations. Congress is now considering legislation that would amend Section 1203 by, for example, deleting the requirement that IRS employees be fired for failing to file a tax return on time when they are owed a refund. This report responds to a Congressional request for information on IRS's Section 1203 process. Specifically, Congress asked for the (1) statistics on Section 1203 allegations and related actions taken; (2) status of any changes to the Section 1203 process and actions taken on our previous recommendation to evaluate the process; and (3) actions taken and data collected to measure the effects of Section 1203 on tax administration, particularly IRS's enforcement programs.