organization of the irs prac and proc_r12... · § 3:1 function and authority of the internal...

Chapter 3

Organization of the IRS

§ 3:1 Function and Authority of the Internal Revenue Service§ 3:2 Former IRS Organization§ 3:3 Overview of the 1998 Reorganization§ 3:4 IRS Oversight BoardChart 3-1 IRS Organization Chart: May 2016§ 3:5 Department of Treasury and the Commissioner of Internal Revenue§ 3:6 IRS National Office§ 3:7 Chief Counsel§ 3:8 Appeals§ 3:9 Taxpayer Advocate Service (TAS)

§ 3:9.1 TAS Overview§ 3:9.2 Using the Taxpayer Advocate Program and Taxpayer

Assistance Orders (TAOs)§ 3:9.3 TAS Organizational Structure

[A] TAS Casework Function[B] TAS Systemic Analysis and Advocacy

§ 3:10 Examination: Four Operating Divisions§ 3:10.1 Wage and Investment (W&I) Operating Division

[A] Taxpayer Characteristics[B] Organizational Structure[B][1] Communications, Assistance, Research and

Education (CARE)[B][1][a] Media and Publications[B][1][b] Stakeholder, Partnership, Education, and

Communication[B][1][c] Field Assistance Operations Overview[B][2] Customer Account Services (CAS)[B][2][a] Submission Processing[B][2][b] Accounts Management (AM)[B][2][c] Joint Operations Center (JOC)[B][3] Compliance

§ 3:10.2 Small Business/Self-Employed Operating Division

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[A] Taxpayer Characteristics[A][1] Overview[A][2] Small Businesses[A][3] Self-Employed and Supplemental Income Earners[A][4] Other SB/SE Taxpayers[B] Organizational Structure[B][1] Communications and Stakeholder Outreach (CSO)[B][1][a] Taxpayer Assistance Centers (TAC)[B][2] CAS Organization[B][2][a] Submission Processing[B][2][b] Accounts Management (AM)[B][3] Compliance Organization[C] Stakeholder Relationship Management (SRM)[C][1] Issue Management Resolution Systems

§ 3:10.3 Large Business & International (LB&I)[A] Taxpayer Characteristics[B] Organizational Structure[B][1] The “Future State”[B][2] Nine Practice Areas

§ 3:10.4 Tax Exempt and Government Entities (TE/GE) OperatingDivision[A] Taxpayer Characteristics[B] TE/GE Organizational Structure[C] Employee Plans (EP) Organization[D] Exempt Organizations (EO)[E] Government Entities (GE) Organization[E][1] Tax Exempt Bonds[E][2] Federal, State, and Local Governments (FSLG)[E][3] Indian Tribal Governments[F] Process-Based Organizational Segments[F][1] TE/GE Customer Education and Outreach (CE&O)[F][2] TE/GE Rulings and Agreements[F][3] TE/GE Examinations[F][4] TE/GE CAS

§ 3:11 Office of Chief Counsel§ 3:11.1 Organizational Structure

[A] Associate Chief Counsel Offices[B] Division Counsel and Field Counsel

§ 3:12 Appeals§ 3:12.1 Organizational Structure

[A] Appeals Operating Division Structure§ 3:13 Joint Committee on Taxation (JCT)§ 3:14 Office of Professional Responsibility (OPR)§ 3:15 CI§ 3:16 Place for Filing Notices§ 3:17 IRS Fax Guidelines

§ 3:17.1 General Guidelines§ 3:17.2 Specific Guidance on Use of Faxes in Tax Administration

Processes

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IRS PRACTICE AND PROCEDURE DESKBOOK

§ 3:18 Freedom of Information Act (FOIA) Public Liaisons§ 3:19 IRS VITA Grant Program§ 3:20 IRS Whistleblower Office§ 3:21 E-Services for Tax Professionals

Taxes are what we pay for civilized society.

Oliver Wendell Holmes, Jr.,U.S. Supreme Court Justice

§ 3:1 Function and Authority of the Internal RevenueService

The Internal Revenue Service (the “Service” or IRS) is a bureau ofthe Department of the Treasury and is under the immediate directionof the Commissioner of Internal Revenue. The Commissioner isresponsible for the general superintendence of the assessment andcollection of all taxes imposed by any law providing internal revenue.The IRS is the agency by which these functions are performed.1

More specifically, the types of taxes over which the IRS hasjurisdiction include:

(1) Income and profit taxes imposed by Chapters 1 and 2 of theInternal Revenue Code of 1939 (the “1939 Code”) and incometaxes imposed by subtitle A of the Internal Revenue Code of1954 (the “1954 Code”) and income taxes imposed by subtitleA of the Internal Revenue Code of 1986 (the “Code” or the“1986 Code”).

(2) Estate taxes imposed by Chapter 3 of the 1939 Code, Chapter 11of the 1954 Code, and Chapter 11 of the 1986 Code.

(3) Gift taxes imposed by Chapter 4 of the 1939 Code, Chapter 12of the 1954 Code, and Chapter 12 of the 1986 Code.

(4) The tax on generation-skipping transfers imposed by Chapter13 of the 1954 and 1986 Code.

(5) Excise and other taxes imposed by Chapters 41 through 44 ofthe 1954 and 1986 Code.

1. 26 C.F.R. § 601.101(a). Part 601 of Title 26 of the Code of FederalRegulations, the Statement of Procedural Rules, is often referred to asthe Commissioner ’s Rules.

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§ 3:1Organization of the IRS

(6) Employment taxes.

(7) Various sales taxes collected by return.

(8) Various excise taxes collected by return.

(9) Various excise taxes collected by sale of revenue stamps.

(10) Stamp taxes.2

To practice effectively before the Service, practitioners must have athorough working knowledge of the IRS organization to help maneu-ver successfully through the system. This chapter details the variousfunctions and divisions that comprise the IRS organization.

In 1998, the Service underwent a significant reorganization as aresult of IRS Restructuring and Reform Act of 1998.3 Consequently,while a detailed description of the old organization would not be inorder, a brief description is appropriate as some of the IRS guidanceand case law still make reference to the old organizational structure.For example, the use of the title “District Director,”4 which wasabolished in the aftermath of the IRS reorganization, can still be foundin IRS guidance. In addition, some seasoned practitioners have troubleacknowledging the changes and continue to refer to the old system asif it is still in existence.5

§ 3:2 Former IRS Organization

Until its reorganization that began in 1998, the IRS was organizedon a national, regional, and local level. Led by the Commissioner, taxpolicy was made at the National Office, in Washington, D.C. Toimplement this policy, the country was broken down into regions;the regions were broken down further into district offices. During amajor reorganization that took place in 1995, these seven regions wereconsolidated into four. Each region was headed by a Regional Com-missioner. Within each region were district offices. At one time therewere a total of sixty-three district offices, which were reduced innumber to thirty-three during the 1995 reorganization and ten ServiceCenters located throughout the country processed taxpayer returns.

2. Treas. Reg. § 601.102.3. Pub. L. No. 105-206, § 1001, 112 Stat. 685 (1998) [hereinafter “’98 Act”].4. Id. at n.6.5. As seasoned practitioners, the authors still have problems with some

aspects of the reorganization. For example, as a result of the reorganizationthe IRS tried to be more taxpayer friendly and typically refer to taxpayersas “customers.” Call us old-fashioned, but we still believe our clientsare taxpayers and not customers of the Service. However, we do appreciatetreating the clients in a more friendly manner, although, we predict thosedays are quickly passing.

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§ 3:2 IRS PRACTICE AND PROCEDURE DESKBOOK

In most cases, the taxpayer and practitioner dealt with the IRS atthe district level, which was subdivided into various divisions: Exam-ination (Audit), Collection, Criminal Investigation (CI), and theProblem Resolution Office.6 District Counsel represented the Com-missioner in any Tax Court litigation. There were thirty-three officeswhich corresponded with the number of district offices. Of course, ifcounsel requested a ruling, correspondence would be with the ChiefCounsel’s National Office. Similarly, if an administrative appeal wassought, contact would be with the Regional Office of Appeals. Thus,with exception of a ruling request or an administrative appeal, mosttaxpayer-practitioner contact with the IRS was done at the district level.

§ 3:3 Overview of the 1998 Reorganization

The National Commission on Restructuring the IRS made recom-mendations and provided conclusions to Congress and the Commis-sioner. The Commission determined that the former structure was toocumbersome and non-responsive to taxpayer needs and demands. TheCommission’s key recommendations were

(1) that a new entity for congressional oversight be created toensure that members of Congress had sufficient informationabout the Service to make informed tax policy and adminis-trative decisions;

(2) that a Board of Directors be created for a term of five-yearperiods;

(3) that the Commissioner, appointed by the Board for a five-yearterm, will be given greater flexibility in hiring, firing, andsalary decisions;

(4) that the Service receive stable funding;

(5) that the Service address training, operations, technology,culture, and taxpayer education;

(6) that the Service update IRS technology and treat taxpayerinformation as a strategic asset to improve its customerservice and compliance functions;

(7) that the Service plan to make paperless filing the most con-venient way for taxpayers to file their returns within the nextten years;

6. The Problem Resolution Officer evolved into the Taxpayer Advocate, whichfurther evolved into the Office of the National Taxpayer Advocate.

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(8) that further steps take place to improve taxpayers’ ability torecover damages for wrongful actions on the part of theService, and real efforts be made to protect taxpayers fromunnecessary dispute with the Service before they occur; and

(9) that the tax law be simplified to reduce the burden ontaxpayers to comply and to facilitate tax administration.

As a result of the reorganization the IRS abandoned its geographicorganizational structure and reorganized into four operating divisions,each charged with end-to-end responsibility for serving a set oftaxpayers with similar needs. The four operating divisions are:

(1) Wage and Investment (W&I);

(2) Small Business-Self Employed (SB/SE);

(3) Large Business & International (LB&I); and

(4) Tax Exempt and Government Entities (TE/GE).

These operating divisions are supported by two service organizations:Information Systems and Agency Wide Shared Services (providingcommon services such as facilities and procurement).

In addition, to the operating divisions the IRS also has otherdivisions. Appeals and the National Taxpayer Advocate are nationwideorganizations that provide separate specialized independent channelsfor taxpayers. CI has sole responsibility for the investigation ofcriminal violations of the tax law and, for the first time, operates asa “line unit” within the IRS.7 Chief Counsel provides tax advice,guidance, and legislative services to all components of the IRS, andrepresents the Commissioner in any Tax Court matter. The NationalOffice, smaller than in the organizational model before the 1998reorganization, continues to set broad policy, reviews plans and goalsof the operating units, and develops major improvement initiatives.8

As part of the reorganization the IRS adopted a new guidingprinciple for examinations to be Service + Enforcement = Compli-ance. The IRS’s mission is to “provide America’s taxpayers top qualityservice by helping them understand and meet their tax responsi-bilities and by applying the tax law with integrity and fairness toall.” To help ensure fair treatment to taxpayers and to help taxpayersunderstand and meet their tax responsibilities, the IRS has committed

7. Under the old organization model, Criminal Investigation employeesreported to the local district director. As a result of the newest reorganiza-tion, Criminal Investigation employees report to the Chief of CriminalInvestigation in Washington, D.C.

8. IRS Organizational Blueprint 2000 at 1-13.

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to identify and deal with compliance problems earlier in its process.This involves identifying issues early, educating taxpayers, and usingeducational letters to inform taxpayers of problems and to allowtaxpayers to correct problems on their tax returns without IRSenforcement actions.9

§ 3:4 IRS Oversight Board

The IRS Restructuring and Reform Act of 1998 created an IRSOversight Board (the “Board”)10 to effectuate significant changes inIRS management and oversight in an effort to better serve the publicand meet the needs of taxpayers.11 The Board is composed of ninemembers: six members who are not otherwise federal officers oremployees and who are appointed by the President with the consentof the Senate; the Secretary of the Treasury, or, if the Secretary sodesignates, the Deputy Secretary of the Treasury; the Commissionerof Internal Revenue; and one member who is a full time federalemployee or a representative of employees and who is appointed bythe President with the consent of the Senate.12

The Board members are appointed without regard to politicalaffiliation and solely on the basis of their professional experienceand expertise in one or more of the following areas: management oflarge service organizations; customer service; federal tax laws includ-ing tax administration and compliance; information technology; orga-nization development; the needs and concerns of taxpayers; and theneeds and concerns of small businesses.13 The Board’s general respon-sibility is to oversee the IRS in its administration, management,conduct, direction, and supervision of the execution and applicationof the internal revenue laws and related statutes and tax conventionsto which the United States is a party.14 Additionally, as part of itsoversight functions, the Board is to ensure that the organization andoperation of the IRS allows it to carry out its mission. Nevertheless,

9. See INTERNAL REVENUE MANUAL 1.1.1.1 (The IRS Mission) (06-02-2015)[hereinafter IRM]. Compare to the previous mission statement: “Thepurpose of the Internal Revenue Service is to collect the proper amountof tax revenue at the least cost; serve the public by continually improvingthe quality of our products and services; and perform in a mannerwarranting the highest degree of public confidence in our integrity,efficiency and fairness.” The new mission statement is more “customer”focused and does not make any reference to collection of revenue.

10. The ’98 Act, § 1101(a), amending I.R.C. § 7802.11. S. REP. NO. 105-174.12. I.R.C. § 7802(b)(1), amended by ’98 Act, § 1101(a).13. I.R.C. § 7802(b)(2)(A), amended by ’98 Act, § 1101(a).14. I.R.C. § 7802(c)(1)(A), amended by ’98 Act, § 1101(a).

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the Board has no responsibilities or authority with respect to the devel-opment and formulation of federal tax policy relating to existing orproposed internal revenue laws, related statutes, and tax conventions;specific law enforcement activities of the IRS, including complianceactivities such as examinations, collection activities, and criminalinvestigations; specific procurement activities of the IRS; or specificpersonnel actions (except as provided in section 7802(d)(3), relatingto recommendations to the President of candidates for appointmentas the Commissioner of Internal Revenue, and review of the Commis-sioner ’s selection of IRS senior executives).15

The Board’s specific responsibilities are to review and approvestrategic plans for the IRS, including the establishment of missionand objectives, standards of performance, and annual and long-rangeplans; to review the operational functions of the IRS, including plansfor modernization of the tax system, plans for outsourcing or man-aged competition, and plans for training and education; to recommendto the President candidates for appointment as the Commissioner; toreview the Commissioner ’s selection, evaluation, and compensationof IRS senior executives, and review and approve the Commissioner ’splans for any major reorganization of the IRS; to review and approvethe budget request of the IRS prepared by the Commissioner; and toensure the proper treatment of taxpayers by the employees of theIRS.16 Special rules apply to ensure that Board members generally donot have access to taxpayer return information.17 Congress intendedthat this new management structure will bring greater expertise inneeded areas, and more focus and continuity that will help the IRSbecome an efficient, responsive, and respected agency that acts appro-priately in carrying out its functions.18

§ 3:5 Department of Treasury and the Commissioner ofInternal Revenue

The Treasury Department is the executive agency responsible forpromoting economic prosperity and ensuring the financial security ofthe United States. The Service is just one of ten bureaus in theDepartment of the Treasury. Administration and enforcement of theinternal revenue laws are carried out by or under the supervisionof the Secretary of the Treasury.19 Most of the revenue functionshave been delegated to the Commissioner of Internal Revenue by

15. I.R.C. § 7802(b)(2)(A), amended by ’98 Act, § 1101(a).16. I.R.C. § 7802(d)(1)–(5), amended by ’98 Act, § 1101(a).17. I.R.C. § 6103(h)(5), amended by ’98 Act, § 1101(b).18. S. REP. NO. 105-174.19. The Treasury Department’s Office of Tax Policy and IRS issue a Guidance

Priority List each year to identify and prioritize the tax issues that should be

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means of Treasury Department orders and Treasury regulations.Although certain functions regarding the internal revenue laws havenot been delegated to the Commissioner such as tax legislationgenerally originates with the Secretary, whose principal technicaladviser is the Assistant Secretary for Tax Policy. The Secretary of theTreasury is advised by a General Counsel of the Treasury and by anAssistant General Counsel, who is also the Chief Counsel of theInternal Revenue Service and its chief law officer.20

Pursuant to section 7803, the Commissioner is appointed for a five-year term and appointed by the President with the advice and counselof the Senate. Unlike for previous Commissioners, prior managementexperience is now a requirement for the position and since therestructuring the Commissioners have been businessmen rather thantax lawyers or tax specialists. The Commissioner shall have theduties and powers as the Secretary of Treasury may prescribe includ-ing the power to administer, manage, conduct, direct, and supervisethe execution and application of the internal revenue laws, as wellas recommend the nomination or removal of a Chief Counsel.The 1998 Act gave the Commissioner more control over the admin-istrative function of the Service.

§ 3:6 IRS National Office

The National Office is located in Washington, D.C., and makes themajor tax law decisions and provides guidance for Service personnel.The National Office is comprised of the Office of the Commissioner ofInternal Revenue, assisted by the Deputy Commissioner, who in turnoversees the Chief Headquarters Operations, the Chief Financial Officer,the Chief Information Officer, Chief Management and Administration,Chief Taxpayer Service, and the Chief Compliance Officer. In addition,the National Office includes the Chief Counsel, the Appeals Head-quarters, and the National Taxpayer Advocate. Also, Commissioners ofthe four operating divisions have their offices in the National Office.

§ 3:7 Chief Counsel

Pursuant to section 7803(b)(2), the duties of the Chief Counselinclude the following:

addressed through regulations, revenue rulings, revenue procedures, notices,and other published administrative guidance. The Guidance Priority Listfocuses resources on guidance items that are most important to taxpayersand tax administration. On August 9, 2013, the 2013–2014 PriorityGuidance Plan was released which contained 324 priority projects forallocating resources.

20. See sections 7601, 7801(b)(1) and (b)(2).

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(a) Legal adviser to the Commissioner and Service personnel;

(b) Provide legal opinions for rulings and technical advice;

(c) Prepare, review, and assist in the preparation of proposedlegislation, treaties, regulations, and Executive orders forlaws affecting the Service;

(d) Represent the Commissioner in tax cases in the U.S. TaxCourt; and

(e) Determine which civil tax actions should be litigated andprepare recommendations for the Justice Department.

The Chief Counsel reports to the Commissioner and the GeneralCounsel of the Treasury on tax advisory matters and interpretations oftax law and litigation. However, where tax policy matters are con-cerned, the Chief Counsel reports to the General Counsel of theTreasury.

§ 3:8 Appeals21

The mission of the Appeals Office is to resolve tax controversieswithout litigation on a basis that is fair and impartial to both thegovernment and the taxpayer and in a manner that will enhancevoluntary compliance and public confidence in the integrity andefficiency of the Service.22 Since 1927, Appeals has provided taxpayersthe ability to request23 an administrative review and have their caseassigned to an IRS Appeals Officer for resolution.24 Practical experi-ence has proven that it is in both the IRS’s and the taxpayer ’s favor toresolve any unresolved disputes through negotiation and settlementwith the Appeals Office. Technically, Appeals is “the only adminis-trative function of the Service with the authority to consider settle-ments of tax controversies, and as such has the primary responsibilityto resolve these disputes without litigation to the maximum extent

21. For additional discussion of Appeals, see chapter 14, AdministrativeAppeal.

22. The IRM provides policies and regulations for all IRS employees. See IRM1.2.1.1 Policies of the IRS Handbook (9-4-2007); IRM 8.1.1.1 Accomplish-ing the Appeals Mission (02-10-2012).

23. After receiving a thirty-day letter issued by the examination division thetaxpayer may file a protest initiating the administrative review process—see chapter 14, Administrative Appeal.

24. Taxpayers’ only other option would be to initiate the litigation processwhich tends to be a timely and costly process. For discussion aboutlitigation, see chapter 15, Tax Court Litigation and Claims for Refunds.

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possible.” Appeals review is the last administrative chance for thetaxpayer and the Service to attempt to resolve a dispute before the casegoes forward as a deficiency action in the Tax Court or a refund suit ina federal district court or the Court of Federal Claims.

§ 3:9 Taxpayer Advocate Service (TAS)

The IRS Restructuring Act of 1998 created the Office of TaxpayerAdvocate25 as a separate function within the IRS. The TaxpayerAdvocate Service (TAS) is an independent organization within theIRS whose employees assist taxpayers who are experiencing economicharm, who are seeking help in resolving tax problems that have notbeen resolved through normal channels, or who believe that an IRSsystem or procedure is not working as it should. TAS is not asubstitute for established IRS procedures or the formal appeals pro-cess, nor can the National Taxpayer Advocate reverse legal or technicaltax law determinations. A taxpayer may seek help from the advocatebut, in the final analysis, will prevail only upon showing that the IRSaction or position in question is improper.

TAS consists of Case Advocates, who personally assist taxpayersin resolving their problems with the IRS. To qualify for this personalassistance, taxpayers must be experiencing economic harm or signifi-cant cost (including fees for professional representation), have experi-enced a delay of more than thirty days to resolve their tax issue, or theyhave not received a response or resolution to the problem by the datethat was promised by the IRS. In addition, the TAS identifies systemicproblems that exist within the IRS and, to the extent possible, pro-poses changes in the administrative practices and identifies potentiallegislative changes which may be appropriate to mitigate such prob-lems. These observations and proposals are presented to Congress eachyear in the National Taxpayer Advocate’s “Annual Report to Congress.”

§ 3:9.1 TAS Overview

The 105th Congress strengthened the independent role and en-hanced the responsibilities of the National Tax Advocate,26 known asthe TAS within the IRS. To begin adapting to this new independence,the TAS created a new mission: “We help taxpayers solve problems

25. The Office of the Taxpayer Ombudsman was originally created by the IRSin 1979 to serve as the primary advocate within the IRS for taxpayers. In1996, Taxpayer Bill of Rights 2 [hereinafter TBOR 2] amended I.R.C.§ 7802 (the predecessor to I.R.C. § 7803), replacing the Office of theTaxpayer Ombudsman with the Office of the Taxpayer Advocate.

26. See I.R.C. §§ 7803(c), 6212(a), and 7811(a), amended by ’98 Act,§ 1102(a), (b), and (c), respectively.

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with the IRS and recommend changes that will prevent the problems.”To support this new mission, the Advocate organization articulatednew roles and responsibilities for all of its managers and employees:

• To effectively represent the interests of individual taxpayers indisputes with the IRS;

• To quickly and accurately address taxpayer problems when thereis a failure of systems, policies, or procedures;

• To operate with the utmost independence while continuing towork toward the IRS mission;27

• To continuously drive procedural, systemic, and legislativechanges to benefit taxpayers;

• To effectively communicate with and educate stakeholders andtaxpayers to ensure awareness of Advocate services; and

• To solicit feedback from taxpayers and key stakeholders aboutIRS problems.

As part of its duties, the National Taxpayer Advocate is mandated tosubmit an annual report to Congress.28 The report is to:

(i) identify the initiatives the Office of the Taxpayer Advocatehas taken on improving taxpayer services and InternalRevenue Service responsiveness;

(ii) contain recommendations received from individuals withthe authority to issue Taxpayer Assistance Orders (TAOs)under section 7811;

(iii) contain a summary of at least twenty of the most seriousproblems encountered by taxpayers, including a descriptionof the nature of such problems;

(iv) contain an inventory of the items described in (i), (ii), and(iii) for which action has been taken and the result of suchaction;

(v) contain an inventory of the items described in (i), (ii), and(iii) for which action remains to be completed and the periodduring which each item has remained on such inventory;

27. The precursor to the TAS was the local Problem Resolution Officer (PRO),a position created in the mid 1970s. The problem with this was that thePRO reported directly to the local district director (prior to the IRSreorganization, the nation was divided up into thirty-three districts). Theconflict of interest, while not created intentionally, was nonethelesspresent. Today, the TAS operates fully independently from the IRS. Eachlocal Taxpayer Advocate reports directly to the National Taxpayer Advo-cate, who reports directly to Congress. See I.R.C. § 7803(c)(4).

28. I.R.C. § 7803(b)(3)(B).

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§ 3:9.1Organization of the IRS

(vi) contain an inventory of the items described in (i), (ii), and(iii) for which no action has been taken, the period duringwhich each item has remained on such inventory, thereasons for the inaction, and identify any Internal RevenueService official who is responsible for such inaction;

(vii) identify any TAO which was not honored by the IRS in atimely manner, as specified under section 7811(b);

(viii) contain recommendations for such administrative and leg-islative action as may be appropriate to resolve problemsencountered by taxpayers;

(ix) identify areas of the tax law that impose significant compli-ance burdens on taxpayers or the Internal Revenue Service,including specific recommendations for remedying theseproblems;

(x) identify the ten most litigated issues for each category oftaxpayers, including recommendations for mitigating suchdisputes; and

(xi) include such other information as the National TaxpayerAdvocate may deem advisable.29

In the 2015 Annual Report, the Taxpayer Advocate set forth itsdetermination of the Most Serious Problems Encountered by Tax-payers as:30

IRS Future State Vision: Implications for Today and Tomorrow

• TAXPAYER SERVICE: The IRS Has Developed a Comprehen-sive “Future State” Plan That Aims to Transform the Way It Inter-acts With Taxpayers, But Its Plan May Leave Critical TaxpayerNeeds and Preferences Unmet.

• IRS USER FEES: The IRS May Adopt User Fees to Fill FundingGaps Without Fully Considering Taxpayer Burden and the Impacton Voluntary Compliance.

• FORM 1023-EZ: Recognition As a Tax-Exempt OrganizationIs Now Virtually Automatic for Most Applicants, WhichInvites Noncompliance, Diverts Tax Dollars and TaxpayerDonations, and Harms Organizations Later Determined toBe Taxable.

• REVENUE PROTECTION: Hundreds of Thousands of Tax-payers File Legitimate Tax Returns That Are IncorrectlyFlagged and Experience Substantial Delays in Receiving Their

29. I.R.C. § 7803(b)(3)(B)(ii).30. http://taxpayeradvocate.irs.gov/reports/2015-annual-report-to-congress/

full-report.

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§ 3:9.1 IRS PRACTICE AND PROCEDURE DESKBOOK

Refunds Because of an Increasing Rate of “False Positives”Within the IRS’s Pre-Refund Wage Verification Program.

• TAXPAYER ACCESS TO ONLINE ACCOUNT SYSTEM: As theIRS Develops an Online Account System, It May Do Less toAddress the Service Needs of Taxpayers Who Wish to Speak Withan IRS Employee Due to Preference or Lack of Internet Access orWho Have Issues That Are Not Conducive to Resolution Online.

• PREPARER ACCESS TO ONLINE ACCOUNTS: GrantingUncredentialed Preparers Access to an Online Taxpayer AccountSystem Could Create Security Risks and Harm Taxpayers.

• INTERNATIONAL TAXPAYER SERVICE: The IRS’s Strategyfor Service on Demand Fails to Compensate for the Closure ofInternational Tax Attaché Offices and Does Not SufficientlyAddress the Unique Needs of International Taxpayers.

Problems That Undermine Taxpayer Rights and Impose TaxpayerBurden

• APPEALS: The Appeals Judicial Approach and Culture ProjectIs Reducing the Quality and Extent of Substantive Adminis-trative Appeals Available to Taxpayers.

• COLLECTION APPEALS PROGRAM (CAP): The CAP Pro-vides Inadequate Review and Insufficient Protections for Tax-payers Facing Collection Actions.

• LEVIES ON ASSETS IN RETIREMENT ACCOUNTS: Cur-rent IRS Guidance Regarding Levies on Retirement AccountsDoes Not Adequately Protect Taxpayer Rights and Conflictswith Retirement Security Public Policy.

• NOTICES OF FEDERAL TAX LIEN (NFTL): The IRS FilesMost NFTLs Based on Arbitrary Dollar Thresholds RatherThan on a Thorough Analysis of a Taxpayer ’s FinancialCircumstances and the Impact on Future Compliance andOverall Revenue Collection.

• THIRD PARTY CONTACTS: IRS Third Party Contact Proce-dures Do Not Follow the Law and May Unnecessarily DamageTaxpayers’ Businesses and Reputations.

• WHISTLEBLOWER PROGRAM: The IRS WhistleblowerProgram Does Not Meet Whistleblowers’ Need for Informa-tion During Lengthy Processing Times and Does Not Suffi-ciently Protect Taxpayers’ Confidential Information FromRe-Disclosure by Whistleblowers.

• AFFORDABLE CARE ACT (ACA)—BUSINESS: The IRS FacesChallenges in Implementing the Employer Provisions of theACA While Protecting Taxpayer Rights and MinimizingBurden.

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• AFFORDABLE CARE ACT (ACA)—INDIVIDUALS: The IRSIs Compromising Taxpayer Rights As It Continues to Admin-ister the Premium Tax Credit and Individual Shared Respon-sibility Payment Provisions.

Problems That Waste IRS Resources and Impose Taxpayer Burden

• IDENTITY THEFT (IDT): The IRS’s Procedures for AssistingVictims of IDT, While Improved, Still Impose Excessive Bur-den and Delay Refunds for Too Long.

• AUTOMATED SUBSTITUTE FOR RETURN (ASFR) PRO-GRAM: Current Selection Criteria for Cases in the ASFRProgram Create Rework and Impose Undue Taxpayer Burden.

• INDIVIDUAL TAXPAYER IDENTIFICATION NUMBERS(ITINs): IRS Processes Create Barriers to Filing and Payingfor Taxpayers Who Cannot Obtain Social Security Numbers.

• PRACTITIONER SERVICES: Reductions in the PractitionerPriority Service Phone Line Staffing and Other Services BurdenPractitioners and the IRS.

• IRS COLLECTION EFFECTIVENESS: The IRS’s Failure toAccurately Input Designated Payment Codes for All PaymentsCompromises Its Ability to Evaluate Which Actions Are MostEffective in Generating Payments.

• EXEMPT ORGANIZATIONS (EOs): The IRS’s Delay inUpdating Publicly Available Lists of EOs Harms ReinstatedOrganizations and Misleads Taxpayers.

Problems That Contribute to Earned Income Tax Credit Noncom-pliance and Recommendations for Improvement

• EARNED INCOME TAX CREDIT (EITC): The IRS Does NotDo Enough Taxpayer Education in the Pre-Filing Environmentto Improve EITC Compliance and Should Establish a Tele-phone Helpline Dedicated to Answering Pre-Filing QuestionsFrom Low Income Taxpayers About Their EITC Eligibility.

• EARNED INCOME TAX CREDIT (EITC): The IRS Is NotAdequately Using the EITC Examination Process As an Edu-cational Tool and Is Not Auditing Returns With the GreatestIndirect Potential for Improving EITC Compliance.

• EARNED INCOME TAX CREDIT (EITC): The IRS’s EITCReturn Preparer Strategy Does Not Adequately Address theRole of Preparers in EITC Noncompliance.

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§ 3:9.2 Using the Taxpayer Advocate Program andTaxpayer Assistance Orders (TAOs)

Generally speaking, the Taxpayer Advocate can offer assistance if,as a result of the application of the tax law, the taxpayer: is suffering,or about to suffer, a significant hardship; is facing an immediatethreat of adverse action; will suffer irreparable injury or long termadverse impact; has experienced a delay of more than thirty days toresolve the issue; or has not received a response or resolution by thedate promised. Additionally, a taxpayer may contact the TaxpayerAdvocate if all established systems or procedures have failed to operateas intended to resolve the problem or dispute.31

The assistance that the Advocate may offer includes, but is notlimited to, the issuance of a TAO.32 This important function of theAdvocate’s office should always be considered by practitioners wherethe taxpayer is facing significant hardship and traditional methods ofdealing with the problem have not been successful.33 Thus, forexample, the Taxpayer Advocate may issue a TAO to direct an IRSunit to release a taxpayer ’s property from levy, or to review a decisionmade in an innocent spouse case.34

Importantly, the Taxpayer Advocate has been delegated authority tofully resolve a large number of taxpayer cases without having to referthe cases to other parts of the IRS. This authority will generally permitemployees of the TAS to take the same actions as IRS CustomerService Representatives in cases that qualify to be in the TAS. Thisincludes adjustments and other account-related interactions that theIRS has with taxpayers. Thus, the TAS personnel are now able toresolve many issues themselves, eliminating the time-consuming stepof referring such matters to other functions in the IRS. This newauthority supplements the authority provided to the NationalTaxpayer Advocate by statute. To secure a TAO, counsel must com-plete a Form 911, “Application for Taxpayer Assistance Order,” andattach a validly executed Power of Attorney (Form 2848). A completelist of all Taxpayer Advocate offices, including telephone numbersand fax numbers may be found in Publication 1546. A twenty-fourhour toll-free telephone number (877-777-4778) is available to con-tact the Advocate.

31. I.R.C. § 7811(a)(2), (3).32. The terms of a TAO may require, among other matters, the IRS to release

property or cease certain collection action. See I.R.C. § 7811(b). For furtherdiscussion, see chapter 16, The Collection Process.

33. As to what constitutes “significant hardship,” see I.R.C. § 7811(a)(2). Seealso discussion in chapter 16, The Collection Process.

34. IRS News Release IR-2001-12 (Jan. 24, 2001). For discussion of the TAO incollection matters, see chapter 16, The Collection Process. For discussionof innocent spouse rule, see chapter 13, Civil and Criminal Tax Fraud.

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§ 3:9.3 TAS Organizational Structure

As a result of the IRS Restructuring and Reform Act of 1998,35 allemployees in the advocate organization report directly to the NationalTaxpayer Advocate, who reports to Congress. The intent is to providetaxpayers with an independent perspective and a second review.36 TASis organized around two major functions: the Casework Function andthe Systemic Analysis and Advocacy Function. The Casework Func-tion is responsible for resolving individual taxpayer problems thatmeet Taxpayer Advocate criteria. The Systemic and Advocacy Functionis responsible for working with the operating divisions to identifysystemic problems, analyze root causes, implement solutions, andidentify potential problems with new systems and procedures.37

[A] TAS Casework FunctionThe Casework Function is organized geographically with at least

one Taxpayer Advocate in every state and every campus. There are nineArea Advocates responsible for managing all local Taxpayer Advocates;seven oversee the local offices and two oversee the campus.38 Toeffectively accomplish the casework, three types of positions have beendeveloped: Associate Advocate (AA), Senior Associate Advocate (SSA),and a Technical Advisor.39

Associate Advocate. The AA possesses extensive knowledge ofindividual and employment tax issues, return processing, liabilitydetermination, and collection procedures. In addition, they maintaina multifunctional perspective for resolving taxpayer problems using a“holistic” approach.

Senior Associate Advocate. The SSA possesses strong technical,negotiation, interpersonal, and conflict management skills. They havethe ability to make independent case judgments and act on decisions.Their focus is on more complex cases.

Technical Advisor. The Technical Advisor has strong interpersonal,negotiation and technical skills, including substantive knowledge ofcurrent tax law, regulations and IRS policies and procedures, compre-hensive knowledge of compliance procedures, and an understanding ofaccounting principles and business practices.40 All AAs and SAAs arecross-functional generalists handling problems from taxpayers in allbusiness units. The Technical Advisors are members of cross-functional

35. See ’98 Act, § 1102(a), (b), and (c). See also IRS Publication 1546, TheTaxpayer Advocate Service of the IRS (rev. 06-2016).

36. IRM 13.1.1.3.4 Local Taxpayer Advocate (LTA) Offices (04-01-2003).37. IRM 13.1.1.2 Philosophy of Advocacy (04-01-2003).38. IRM 13.1.1.3.4 Local Taxpayer Advocate (LTA) Offices (04-01-2003).39. IRM 13.1.1.3.4.2 Case Advocates (04-01-2003).40. IRM 13.1.1.3.4.1 Technical Advisors (08-21-2000).

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teams. Each geographical area has at least one team comprised ofrevenue agents and revenue officers that handle more complex cases.

Taxpayer problems are classified into “routine” and “complex,” withthe AAs handling routine problems and the SAAs and TechnicalAdvisors responsible for the complex cases. A case is classified asroutine or complex based upon set criteria. For example, a case with asingle issue that can be resolved with standard procedures with nosignificant hardship would most likely be classified as routine. A casemight be classified as complex if there are multiple issues or signifi-cant cross-functional issues, if the taxpayer has a dispute with theoperating division, or if the taxpayer faces a significant hardship as aresult of the IRS action.

[B] TAS Systemic Analysis and AdvocacyThe Systemic Analysis and Advocacy Function is aligned to operating

divisions’ Taxpayer Advocates. One Term Executive is assigned to theW&I and the TE/GE Operating Divisions, and a second Term Executiveis assigned to the SB/SE and the LB&I Operating Divisions. In addition,Grade 15 (upper level employees) Taxpayer Advocates are assigned toboth the W&I and the SB/SE Operating Divisions.

The majority of the TAS staff is assigned to the Casework Functionwith a smaller number assigned to work in the Systemic Analysis andAdvocacy Function and the National Office functions. The NationalTaxpayer Advocate developed an Internet-based program for submit-ting, to the office of Systemic Advocacy, systemic problems andsuggestions to improve tax administration. Suggestions and issuescan be communicated to the TAS Office of Systemic Advocacy byemail at [email protected], by sending the information viathe Internet at www.irs.gov/advocate/index.html. No specific taxpayerinformation is to be included in issues submitted. Issues should focuson systemic problems, not individual taxpayer cases. The TAS websiteis www.irs.gov/advocate/index.html and can be accessed to submit IRSsystemic, procedural, and operational problems.

§ 3:10 Examination: Four Operating Divisions

IRS has four key operating divisions: Wage and Investment (W&I)Division, the Small Business and Self-Employed (SB/SE) Division, theLarge Business and International (LB&I) Operating Division, and TaxExempt and Government Entity (TE/GE) Operating Division.

§ 3:10.1 Wage and Investment (W&I) Operating Division

W&I Operating Division is the first of the four operating divisions.

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[A] Taxpayer CharacteristicsThe W&I Operating Division serves individual taxpayers, including

those who file jointly, with wage and investment income only. Thesetaxpayers file a Form 1040 tax return with no accompanying schedules C,E, F, or Form 2106 and no international activity. Almost all of the incomefor this group of taxpayers is reported by third parties, and the vastmajority of taxes are collected through third-party withholding. Most ofthese taxpayers deal with the IRS only once a year and the majorityof these taxpayers receive refunds due to over-withholding. Because ofthird-party reporting such as W-2s and 1099s W&I taxpayers havehigh compliance. When there is a compliance problem, it is often dueto the taxpayer ’s confusion regarding tax law.

[B] Organizational StructureThe senior management team of the W&I Operating Division is

headed by a commissioner and deputy commissioner. Reportingdirectly to the office of the commissioner are directors of three majorfunctional organizations:

1. Communications, Assistance, Research and Education(CARE);

2. Customer Account Services (CAS); and

3. Compliance.

In addition, W&I is supported by the following staff functions:Strategy and Finance (S&F); Equity, Diversity and Inclusion (EDI);Communications and Liaison (C&L); Business Modernization (BMO);Return Integrity and Correspondence Services (RICS); Office of Pro-gram Coordination and Integration (OPCI).41 The IRS campuses(formerly called service centers), which receive and process tax andinformation returns, manage taxpayer accounts and conduct simpleaudits through correspondence, are aligned with the W&I OperatingDivision: Andover, Atlanta, Austin, Cincinnati, Fresno, Kansas City,and Odgen.42 Other functions that interface with W&I include theTAS, Area Counsel, CI, and Appeals.

[B][1] Communications, Assistance, Research andEducation (CARE)

The CARE organization is one of the three major functional organi-zations of the W&I Operating Division. CARE provides customers withthe information; support and assistance they need to understand and

41. IRM 1.1.13.1 The Mission of the Wage and Investment Division (10-07-2013).42. IR-2000-61 (Sept. 9, 2000). Under the former system, taxpayers submitted

returns based solely on geography, without regard to type of return.

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fulfill their tax obligations. CARE is focused on educating and assistingtaxpayers before they file their returns, assisting in filing returns andoffering face-to-face assistance after filing. CARE is organized aroundthree sub-units: Tax Publications; Stakeholder, Partnership, Educationand Communication (SPEC); and Field Assistance.

[B][1][a] Media and Publications

The Media and Publication group consists of three groups whichfocus on redesigning current forms, publications, and notices intoplain English to better meet taxpayer needs and communicate require-ments. These groups also work with Counsel to develop neededclarification of tax law and published guidance.

[B][1][b] Stakeholder, Partnership, Education, andCommunication

The SPEC organization is to assist W&I taxpayers in satisfying theirtax responsibilities “by building and maintaining partnerships withkey stakeholders who seek to create and share value by informing,educating, and communicating with our shared customers.”43 SPECdevelops educational materials for use in preparing, filing, and post-filing taxpayer interactions, developing products for use in marketingand working with local and national media to ensure that taxpayers areaware of tax law changes and IRS services.44

[B][1][c] Field Assistance Operations Overview

This office manages the Taxpayer Assistance Centers locatedthroughout the country. Field Assistance provides comprehensiveface-to-face assistance to taxpayers as well as assistance throughtelephone and written correspondence.45

The TRR also provides assistance, education, and compliancesupport to taxpayers and provides 100% of W&I’s field compliancesupport. The TRR is trained with cross-functional skills and knowl-edge needed to resolve the vast majority of tax law questions androutine compliance issues, such as responding to a notice or establish-ing an installment agreement. Cases involving complex examinationissues or requiring enforcement action are “subcontracted out” to theSB/SE Operating Division.

[B][2] Customer Account Services (CAS)

The second of the three major organizations within W&I OperatingDivision is CAS. CAS is responsible for taxpayer relationships through

43. IRM 22.30.1.1 What is Stakeholder Partnerships, Education and Commu-nication (10-01-2013).

44. IRM 1.1.13.1 The Mission of the Wage and Investment Division (10-07-2013).45. IRM 21.3.4.1 Field Assistance Operations Overview (10-01-2011).

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the filing process, including processing tax return submissions,payments, and refunds. In addition, CAS is responsible for providingtaxpayers with the information on the status of their returns orrefunds, and for resolving the majority of issues and questions aboutsettling their accounts. These responsibilities divide into two sub-units: Submission Processing and Accounts Management (AM). AMmanages the telephone inquiries of W&I taxpayers.46

[B][2][a] Submission Processing

Submission Processing activities include processing of paper andelectronic returns, tax payments, and refunds at seven processingcenters—Andover, Atlanta, Austin, Cincinnati, Fresno, Kansas Cityand Ogden. In contrast to the way business was done before thereorganization, taxpayers should notice little difference in these inter-actions, other than the ongoing migration toward electronic com-merce.47 Submission Processing has two support functions: Planningand Analysis, and Common Services. It also has five Technicalfunctions: Receipt & Control, Document Perfection, Data Conversion,Input Correction, and Processing Support. Planning and Analysis isresponsible for developing work and staffing plans in preparation forthe filing season, analyzing program delivery, and monitoring execution.

[B][2][b] Accounts Management (AM)

AM activities include responding to taxpayer technical and accountinquiries, resolving taxpayer account issues, providing account settle-ment (payment) options, and working related issues. Accounts repre-sentatives are able to provide tax law, account resolution, and paymentinformation across several platforms (phone, paper, electronic), whichshifts in response to changing taxpayer demands. Because W&Iaccounts representatives face a more limited set of issues due to thehomogeneous nature of the tax base, it is expected that these IRS employ-ees will become more effective across a broader range of functions.

[B][2][c] Joint Operations Center (JOC)

JOC provides service, support and technology for Operating Divi-sions and Functional Organizations to achieve their desired servicelevels for all telephone, correspondence and electronic media inquirieswithin agreed resource and staffing parameters.

[B][3] Compliance

The W&I Compliance function assists taxpayers in the determi-nation and fulfillment of their tax obligations by providing application

46. IRM 21.1.1.1 Overview (03-15-2013).47. IRM 1.1.13.8.3 Submission Processing (10-07-2013).

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of the tax law and by using a risk-based approach to exam and collec-tion. It manages the relationship with taxpayers who have a high riskof not paying or whose returns have a high risk of noncompliance.This organization utilizes “risk-based approaches” to collection actionsand examinations, design, conduct examination programs, and follow-upon collection cases.48

A risk-based approach to collection and examination will positionthe Service to differentiate between those taxpayers who are attempt-ing to comply but need assistance versus those that intentionally donot comply.

§ 3:10.2 Small Business/Self-Employed OperatingDivision

The second of the four operating divisions is the SB/SE OperatingDivision compromised of taxpayers that are fully or partially self-employed and small business owners.

[A] Taxpayer CharacteristicsThe taxpayers comprising the SB/SE Operating Division have

distinct characteristics and present unique problems for the Serviceand practitioners.

[A][1] Overview

The SB/SE Operating Division serves taxpayers which include fully orpartially self-employed individuals and small businesses. This group hasmore complex dealings with the IRS than wage and investment tax-payers. Typically, they have four to sixty routine transactions with theIRS per year and pay the IRS nearly $500 billion in cash, representingnearly 40% of the total cash collected by the IRS. This amount includespersonal and corporate income taxes, employment taxes, excise taxes,and withholdings for employees, each of which has filing and technicalrequirements. Since business income and a range of taxes are involved,compliance issues are also complex. The probability for errors, resultingin collection and compliance problems are greatest in this group becauseof the lack of withholding or information reporting and the large amountof cash paid. The result is much more frequent dealings with the IRS.SB/SE has approximately 57 million taxpayers, about 41 million self-employed persons, about 9 million small businesses with assets of lessthan $10 million and about 7 million filers of employment, excise,estate and gift returns.49

48. See www.irs.gov/pub/irs-utl/27877d00.pdf; IRM 4.17.1 Overview of Com-pliance Initiative Projects (02-25-2010).

49. http://www.irs.gov/uac/Small-Business-Self-Employed-Division-At-a-Glance.

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The SB/SE Division has five organizations:

• Collection Division—collects delinquent taxes and securesdelinquent tax returns.

• Compliance Services Campus Operations oversees operations ofthe Brookhaven, Philadelphia, Cincinnati, Memphis and OgdenCampuses.

• Examination Division assists taxpayers understand and meettax responsibilities and apply the tax law through Field andOffice Audit examinations.

• Specialty Taxes. Currently there are four market segments forwhich SB/SE has responsibility: Employment Tax, Excise Tax,Estate and Gift Tax and International Tax issues.

• Communications and Stakeholder Outreach’s (CSO) mission isto develop and deliver integrated strategic communicationsand educational products to employees and taxpayers and toour key partners in tax administration including practitionersand industry groups.

[A][2] Small Businesses

Small businesses are served by the operating division, includingcorporations and partnerships with assets less than or equal to$5 million. These businesses are separate legal entities, requiringseparation from the owners’ and managers’ personal obligations. Thereare approximately 57 million taxpayers that consist of:

• Small businesses (part-time, start-ups)

• Small businesses without employees (service providers,contractors)

• Small businesses with employees

• Taxpayers with rental properties

• Taxpayers with farming businesses

• Individuals investing in businesses (partnerships, S-Corps)

• Corporations, S-Corporations, & Partnerships with assets lessthan $10M

[A][3] Self-Employed and Supplemental IncomeEarners

The SB/SE Operating Division also serves self-employed and sup-plemental income earners with business-like characteristics. Thesetaxpayers are individuals filing income tax Form 2106 (businessexpenses) and schedules C (self-employed), E (rental properties androyalties), and F (farmer). Although these taxpayers are individual

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filers and, therefore, have characteristics similar to those in the W&IOperating Division, they have much more complicated tax issues.Self-employed and supplemental income earners have substantialdifferences with wage earners including: substantially higher incomes(nearly four times the average tax obligation and filing over twice asmany forms and schedules per return), requiring roughly twice as muchtime to prepare returns, and a much heavier reliance on paid taxpreparers. These factors not only increase the sophistication of thetax returns, but also increase the demand for IRS expertise. Althoughnot completely the same, small business and self-employed/supple-mental income earners have much in common. Both share the follow-ing characteristics: relatively limited resources for record keeping; closerelationships between business and personal transactions; similar sizeof operations; and frequent interactions with the IRS.

[A][4] Other SB/SE Taxpayers

The SB/SE Operating Division also has responsibility for servicinga third set of taxpayers: estate and gift taxpayers, fiduciary returns, andall individual taxpayers with international tax returns. The Serviceincludes these taxpayer groups in the SB/SE taxpayer based upon SB/SE’s geographical footprint which facilitates the hands-on documen-tation and valuation needed; SB/SE information systems already hadaccess to the historical records of these complex individual filers; andthe specialized legal knowledge required for these tax issues pertainin large part to small business ownership.50 In addition, SB/SE hasresponsibility for processing all tax returns, including income tax,employment tax, and excise tax returns, submitted by taxpayersserviced by the LB&I and TE/GE Operating Divisions. Lastly, SB/SEsupports taxpayer service needs of U.S. citizens living abroadthrough LB&I’s International Posts of Duty (PODs) and processes allindividual tax returns at centralized IRS campuses (formerly calledservice centers) to provide accountability and a single point of contactfor all processing of these returns.51

[B] Organizational StructureThe senior management team of the SB/SE Operating Division is

headed by a commissioner and deputy commissioner. Reportingdirectly to the office of the commissioner are directors of three majorfunctional organizations: Taxpayer Education and Communication(TEC); CAS; and Compliance. In addition, SB/SE is supported bythe following staff functions: Strategy & Finance; Finance; Strategy,Research and Performance Management; Business Systems Planning;

50. Id.51. Id.

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Management & Support; Communication; Human Resources;Learning and Education; E-Learning; and Administration. IRS cam-puses, which receive and process tax and information returns, managetaxpayer accounts, and conduct simple audits through correspond-ence are aligned with the SB/SE Operating Division: Brookhaven,Cincinnati, Memphis, Ogden and Philadelphia. Other functions thatinterface with SB/SE include the TAS, Counsel, CI, and Appeals. SB/SEHeadquarters are in Lanham, Maryland, and provides the strategicleadership to all three components (TEC, CAS, and Compliance)for the SB/SE organization. The geographic footprint of SB/SE is foundat each of these three major components, where it is broken downinto various areas, territories, and groups.52

[B][1] Communications and StakeholderOutreach (CSO)

The mission of CSO is to develop and deliver integrated strategiccommunications and educational products to SB/SE employees, tax-payers, and key SB/SE partners in tax administration and over othermatters IRS administers. These include federal, state, and local gov-ernmental agencies, practitioners, and industry groups. CSO is respon-sible for programs and activities in support of both the SB/SE and theIRS Strategic Plans, and also coordinates IRS’s National DisasterAssistance and Emergency Relief Program.

The three components of the CSO organization are CSO Head-quarters Operations are Stakeholder Liaison Headquarters, Audit,Liaison and IMRS Group or (ALI) and Headquarters OperationsSupport and Disaster Assistance.53

• Stakeholder Liaison Headquarters (SL HQ) mission is to buildand maintain practitioner, payroll and industry partnershipsboth internally and externally that positively impact taxpayerservice, burden reduction and tax compliance.

• The Audit, Liaison, and Issue Management Resolution SystemGroup (ALI) is responsible for three distinct programs. TheGAO/TIGTA Audit liaison program is responsible for establish-ing effective programs to facilitate the GAO/TIGTA audit pro-cesses for the SB/SE Commissioner, managing the SB/SEinventory of GAO/TIGTA audits, and serving as the primarySB/SE point of contact for these audits. Legislative Implementa-tion maintains the legislative program for SB/SE and servesas the operational liaison for legislative implementation anddevelopment of SB/SE legislative proposals and requests for

52. See IRS Organizational Blueprint 2000 at 3-17, 3-22, and 3-24.53. IRM 11.53.4 TIGTA/GAO (04-15-2015).

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published guidance. The Issue Management Resolution System(IMRS) group provides a streamlined and structured processthat facilitates stakeholder issue identification, resolution orresponse, and feedback to significant national and local stake-holder issues.

Headquarters Operations Support and Disaster Assistance serves asthe operation link between all SB/SE CSO components. CSO Head-quarters Operations Support and Disaster Assistance establishes andmaintains strategic plans, policies and standard procedures for CSOand monitors resource utilization. CSO Headquarters OperationsSupport and Disaster Assistance also oversees IRS’s involvement indisaster assistance and emergency relief activities.54

[B][1][a] Taxpayer Assistance Centers (TAC)

The IRS has more than 400 offices nationwide where taxpayers canwalk in and get face-to-face assistance. These IRS Taxpayer AssistanceCenters are a source for personal tax help when the tax issue cannotbe handled online or by phone.

Some of the common reasons taxpayers utilize the IRS TAC are:55

• Receipt of notices or letters;

• Tax Forms and many publications are available;

• Multilingual Assistance is offered to taxpayers in over 150languages;

• Place to make payments;

• Payment/Installment Agreements;

• Local TAC office can assist with the preparation of Form 2290,Heavy Highway Vehicle Use Tax Return, as well as acceptpayment, and provide needed receipts;

• Provide Individual Taxpayer Identification Number if the tax-payer is not eligible for a Social Security Number but needs tofile a tax return; and

• Request Copies of a Tax Return and Tax Account Transcripts.Federal tax return transcripts are free and are generally availablefor the current and past three years.

[B][2] CAS Organization

CAS is responsible for assisting taxpayers in submitting accuratetax returns and remitting the proper amount of tax. The focus is on

54. IRM 25.16.1 Disaster Assistance and Emergency Relief Guidelines (06-25-2012).

55. IRM 21.3.4.2 Standard Services in a Taxpayer Assistance Center (TAC)(10-01-2014).

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processing returns timely and accurately, assisting taxpayers withaccount specific questions, and adjusting their accounts when neces-sary. Business returns are processed at two submission processingsites: Cincinnati and Ogden. Additionally, to complete the AccountsManagement function, eight district phone sites are dedicated to thefive SB/SE AM sites: Buffalo, Pittsburgh, Richmond, Oakland, Denver,Cleveland, Indianapolis, and Nashville. There are also a number of siteoperations dedicated to SB/SE and which reports through the Compli-ance organization: Nashville, Brookhaven, Jacksonville, Philadelphia,Seattle/Portland, and St. Louis.56

The activities with CAS fall into either Submission Processing orAccounts Management.

[B][2][a] Submission Processing

Submission Processing activities include processing of paper andelectronic returns, tax payment, and refunds. The structure has twosupport functions (Planning and Analysis and Common Services) andfive Technical functions (Receipt & Control, Document Perfection,Data Conversion, Input Correction, and Processing Support).Planning and Analysis is responsible for developing work plans andstaffing plans in preparation for filing season, analyzing programdelivery, and monitoring execution. Common Services addresses theneeds related to personnel. Receipt & Control receives, sorts, androutes incoming correspondence to the appropriate area. DocumentPerfection corrects any errors in return information before returns arekey punched into the system. It also resolves issues related to taxpayername, address, and TIN. Data Conversion enters taxpayer data intoan automated system. Input Correction resolves errors from the dataconversion process and from unpostables. Processing Support includesfollow-up functions responsible for processing taxpayer payments,filing returns, and matching returns with data entered into theautomated system to identify errors before notices are sent.

[B][2][b] Accounts Management (AM)

AM activities include responding to taxpayer technical and accountinquiries, resolving taxpayer account issues, providing account settle-ment (payment) options, and working related issues. Service em-ployees (accounts representatives) are to provide tax law, accountresolution, and payment information across several platforms (tele-phone, paper, electronic), which will shift along with changing tax-payer demands. SB/SE accounts representatives are specifically trainedto resolve the routine and complex issues affecting this taxpayer base.

56. IRM 1.1.13 Wage and Investment (10-07-2013).

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It is hoped that this will enable these employees to become moreeffective at meeting the needs of a specific group of taxpayers acrossa broader range of functions.

[B][3] Compliance Organization57

The SB/SE Compliance Organization’s focus is to increase overallcompliance and is aligned by Examination, Collection, SpecialtyPrograms, Fraud/BSA and Campus Compliance Services.

• Examination helps taxpayers understand and meet tax respon-sibilities in applying the tax law.58

• Collection secures delinquent taxes and returns.59

• Specialty Programs deal with excise taxes, employment taxes,estate and gift taxes.60

• Fraud/ Bank Secrecy Act assists in both criminal and civilenforcement and conducts examinations to ensure businessesmeet all of their reporting and record keeping requirements;analyzing examination results and other data sources; andworking with SB/SE Stakeholder Liaison to identify thoseareas.61

• Campus Compliance Services manage post-filing collection,remote examinations, and manage the Insolvency programand Centralized Case Processing (CCP). Campus ComplianceServices, which formerly reported to the SB/SE Commissioner,are now divided between Collection and Examination. Thefollowing campuses are now aligned under Collection: Andover,Atlanta, Fresno, Kansas City, and Philadelphia.62

For compliance activities not requiring significant face-to-faceinteraction, the Service has established three functional groups withinthe Compliance Organization:

(1) Insolvency;

(2) Remote Examinations, which includes examinations con-ducted through correspondence and the automated systemused to detect underreporting of income (the Automated

57. For a more detailed discussion of examinations, see chapter 6,Examinations.

58. IRM 1.4.40.2.1 SB/SE Examination Structure (03-03-2015).59. IRM 1.1.16.12 Collection (06-01-2016).60. IRM 1.1.16.9, Specialty Programs (06-01-2016).61. IRM 1.1.16.10.2 Bank Secrecy Act (02-03-2015).62. IRM 1.4.17.1 Compliance Managers Overview (03-01-2006) and IRM

1.1.16 Small Business/Self Employed Division (06-01-2016).

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Under Reporter system—AUR, Automated Collection System(ACS), Remote Collection, which includes collection activitythat can be handled by telephone (the Automated CollectionSystem—ACS), Examination and Service Center CollectionOperation); and

(3) Case Processing (includes examination support and processing(ESP) and collection support)

For taxpayers requiring significant face-to-face interaction, theService has a field force which handles exam and collection activities.The compliance organization also includes a Compliance Supportfunction, which involves behind-the-scenes administrative work thatmust take place during the examination, collection, and lien process.

[C] Stakeholder Relationship Management (SRM)To better meet the needs of small businesses and self-employed

individuals, there is, within the SB/SE, the Stakeholder Liaison (SL)Office. This office designs, develops, and delivers educational productsand services focused on small business taxpayers’ needs.63

[C][1] Issue Management Resolution Systems64

The IRS established the Issue Management Resolution System(IMRS), to capture, develop, resolve, and respond to significantnational and local issues. When stakeholder organizations notify theIRS of concerns about IRS policies, practices, and procedures, SLresearches the issues to bring about resolution. IMRS also identifiesnationwide trends in the reporting, filing, and paying requirementsthat may necessitate changes to IRS processes and procedures.

SL employees are available to the payroll and practitioner commu-nity and stakeholder organizations to provide information throughoutthe year about IRS policies, practices, and procedures. SL involvementwith practitioner institutes, phone forums, and small business forumsstrengthens the IRS partnership with the tax professional communityand facilitates the exchange of information, ideas, and concerns.

§ 3:10.3 Large Business & International (LB&I)65

The third of the four operating divisions is the LB&I OperatingDivision.

63. See www.irs.gov/businesses/small/index.html; IRM 11.53.5.2 StakeholderRelationship Management (SRM) – Methodology (01-14-2015).

64. IRM 11.53.5.2.3 SRM - Issue Management Resolution System (IMRS)(01-14-2015).

65. For a more detailed discussion of LB&I, see chapter 7, Large CaseExaminations.

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[A] Taxpayer CharacteristicsThe LB&I Operating Division includes the largest filers, with assets

over $10 million. The LB&I business unit serves corporations, sub-chapter S corporations, and partnerships with assets greater than$10 million. These businesses are responsible for an annual taxliability of over $450 billion. Approximately 15% of these taxpayersare examined each year, and the largest of these taxpayers deal withthe IRS continuously.66

LB&I businesses generally have a large number of employees andin-house tax and finance organizations. They also may have access tolegal and accounting firms to assist with complex issues. Manycomplicated issues such as tax law interpretation, accounting princi-ples, and regulatory issues arise frequently, particularly those withinternational dimensions.

[B] Organizational StructureThe LB&I Division serves corporations, subchapter S corporations

and partnerships with assets greater than $10 million as well ascertain high-wealth individuals. These businesses typically employlarge numbers of employees, deal with complicated issues involvingtax law and accounting principles, and conduct business in anexpanding global environment. The LB&I Division has oversightover roughly 62,000 of the largest corporate filers,67 those with assetsover $10 million. Of the total amount of LB&I taxpayers, approxi-mately 15.3% are currently under examination.68 Needless to say, thelarger the taxpayer, the higher the percent of examination coverage.For example, approximately 93% of taxpayers with assets over $20billion and 45% of taxpayers with assets between $5 billion and$20 billion are continuously under examination,69 whereas only10.5% of taxpayers with assets between $10 million and $50 millionare under examination.70

LB&I is also charged with overseeing the implementation of theForeign Account Tax Compliance Act (FATCA) which was designed toimprove international information reporting, increasing internationaltransparency and compliance.

[B][1] The “Future State”

On September 17, 2015, LB&I division, announced major changesto its large business examinations and operational structure. The

66. Id.67. IRS’s Statistics of Income (SOI): IRS Data Book 2012.68. Id., Table 9a, Examination Coverage.69. Id.70. Id.

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“Future State” reorganization went into effect in February 2016 andwas designed to proactively audit companies in light of today ’s globalmarket. Over time, LB&I intends to migrate away from reliance onenterprise-wide coordinated industry case (CIC) examinations andfocus more on a nuanced based approach identifying and addressingcompliance risks. The changes are set forth in Publication 5125, LargeBusiness and International Examination Process,71 and incorporatedin its IRM provisions.72

From a structural perspective, one of the most significant changeswas returning to a single deputy commissioner rather than two (onedomestic and one international) and the replacement of “industries”with nine practice areas. Under the new structure, the LB&I DeputyCommissioner will report to the LB&I Commissioner. Reporting tothe Deputy Commissioner will be an Assistant Deputy CommissionerCompliance Integration, an Assistant Deputy Commissioner Interna-tional, and a Director of Program and Business Solutions. Alsoreporting to the Deputy Commissioner will be nine Directors ofPractice Areas. With this major shift in its structure, LB&I leadershippredicts it will take up to four years for the new concepts of itsoperations to fully evolve.

[B][2] Nine Practice Areas

The reorganization centers around nine “practice areas.” Four of thepractice areas will be organized geographically and appear to bestructured similar to the current five industry directors with Directorsof Field Operations (DFO) and Territory Managers (TM) constitutingthe management structure within the practice area.The other five practice areas (PAs) are delineated along technical orsubject matter lines:

• Pass-through entities

• Enterprise activities

• Cross-border activities

• Withholding and international individual compliance

• Treaty and transfer pricing operations

Under its new structure, the Global High Wealth Industry Groupwill report to the Compliance Practice Area, Director of Field Opera-tions in the Southwest. The Group, created back in 2009, centralizesand focuses its tax compliance efforts involving high-wealth individuals’financial, business, and investment arrangements. This program

71. See www.irs.gov/pub/irs-utl/p5125.pdf.72. IRM 4.46.1 through 4.46.1.6 General Information and Definitions (03-09-

2016).

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reviews everything connected to a single taxpayer, including trusts,private foundations, partnerships, equity-sharing arrangements, royaltyand licensing agreements, and privately held and related entitieswhere the taxpayer may have actual or beneficial ownership.

§ 3:10.4 Tax Exempt and Government Entities (TE/GE)Operating Division

The fourth and final operating division is the TE/GE OperatingDivision.

[A] Taxpayer CharacteristicsThe TE/GE Operating Division was created to serve the needs of

three very distinct taxpayer segments: Employee Plans (EP), ExemptOrganizations (EO), and Government Entities (GE). Approximatelythree million taxpayers ranging from small local community organiza-tions and municipalities to major universities, pension funds, stategovernments, and complex tax exempt bond deals fall within TE/GE.These organizations represent a large economic sector with uniqueneeds and are governed by highly specialized provisions of the tax law.Although generally paying no income tax, this sector does pay over$220 billion in employment taxes and income withholding andcontrols approximately $8.2 trillion in assets.73

EP comprises private retirement plans and public retirement plansthat control roughly $4 trillion in assets. EO comprise over 1.6 milliontax exempt organizations including an estimated 400,000 religiousorganizations controlling assets of over $2.4 trillion. GE includesoutstanding tax exempt bond issues with a total value of $1.8 trillion,88,000 federal, state, and local entities, and over 550 federally recog-nized Indian tribes.74

[B] TE/GE Organizational StructureThe TE/GE Operating Division, based in Washington, D.C., is

headed by a commissioner and a deputy commissioner. Reportingdirectly to the office of the commissioner are three functional organi-zations: EP, EO, and GE. Each functional organization is headed by adirector. TE/GE has approximately three million taxpayers rangingfrom small local community organizations and municipalities tomajor universities, huge pension funds, state governments and parti-cipants of complex tax exempt bond transactions. TE/GE taxpayerspay more than $220 billion in employment tax and income taxwithholding and control $8.2 trillion in assets.

73. See www.irs.gov/government-entities/tax-exempt-government-entities-division-at-a-glance.

74. Id.

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• Employee Plans taxpayers represent private and public retire-ment plans with approximately $4 trillion in assets.

• Exempt Organization taxpayers represent more than 1.6 milliontax exempt organizations—including about 400,000 religiousorganizations—with approximately $2.4 trillion in assets.

• Government Entities taxpayers include outstanding tax exemptbonds with a total value of approximately $1.8 trillion, 88,000federal, state and local entities, and over 550 federally recog-nized Indian tribes.

TE/GE is Comprised of Three Distinct Business Divisions: EP; EO;and GE.

Although the Customer Account Services function is centralized,three key processes serve as the foundation for each of the threefunctional organizations (EP, EO, and GE). These three processesare: the Customer Education and Outreach Process; Rulings andAgreements Process; and Examination Process.

The geographic footprint of the examination workforce of the TE/GE Operating Division is widely dispersed throughout the nation.For the EP and the EO segments, the examination workforce is man-aged through six geographic areas: Northeast, Mid-Atlantic, GreatLakes, Gulf Coast, Central Mountain, and Pacific Coast. The locationof examination groups are found within the boundaries of each area.Due to the small number of resources and the newness of the GE seg-ment, these programs are managed as national programs with variousposts-of-duty.

[C] Employee Plans (EP) OrganizationThe EP organization serves a wide range of private and public

retirement plans with approximately $4 trillion in assets. Theseinclude all types of qualified plans, money purchase plans, and 401(k)plans. EP taxpayers also include tax-sheltered annuities (403(b) plans)and government retirement plans (457 plans). Tax practitioners withvarying degrees of expertise in employee benefits law represent thesetaxpayers. Most of these taxpayers file an annual information return(Form 5500). In addition, most plan sponsors file requests for deter-mination letters to confirm the tax-qualified status of the plan. Theserequests are typically filed when the plan is first established andas necessary thereafter, consistent with tax law changes and planmodifications.

[D] Exempt Organizations (EO)Exempt Organization taxpayers represent more than 1.6 million tax

exempt organizations including about 400,000 religious organizations

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with approximately $2.4 trillion in assets. EO taxpayers representa diverse segment ranging from churches and small local clubs tolarge national organizations. Common types of exempt organizationsinclude charities, churches, private foundations, trade associations,unions, and social clubs. The tax law governing these organizationsis highly specialized and differs depending on the type of exemptorganization in question.

[E] Government Entities (GE) OrganizationThe GE segment comprises three distinct sub-segments: Tax

Exempt Bonds; Federal, State, and Local Governments; and IndianTribal Governments. Government Entities taxpayers include out-standing tax exempt bonds with a total value of approximately$1.8 trillion, 88,000 federal, state and local entities, and over 550federally recognized Indian tribes. These governmental taxpayers aresimilar in that they are generally not subject to income tax at theentity level and they have special relationships with the federalgovernment.

[E][1] Tax Exempt Bonds

The first taxpayer sub-segment in GE is Tax Exempt Bonds. Over$1.8 trillion is currently invested in tax exempt bonds, which are typi-cally issued by a government entity. The bond deals vary in size andcomplexity, and the governing tax law is highly specialized. The Servicerecognizes that these taxpayers need services tailored for their varyingeconomic and legal sophistication.

[E][2] Federal, State, and Local Governments (FSLG)

The second taxpayer sub-segment is federal, state, and local govern-ments. While not subject to federal income tax, these entities oftenhave significant tax responsibilities arising from their status asemployers, such as employment tax withholding and reporting.They may also have other tax issues such as excise taxes and EPissues. These taxpayers, the Service believes, need highly tailoredservices at least in part due to governmental budgetary and legislativecycles. The FSLG provides assistance through individualizedinstruction focused on employment tax withholding, reporting andfiling requirements, assistance for information return reporting forpayments to vendors, guidance on other federal tax-related issues, andparticipates in educational seminars and workshops at national andlocal levels.75

75. See www.irs.gov/government-entities/federal-state-local-governments/federal-state-local-governments-a-closer-look.

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[E][3] Indian Tribal Governments

The third sub-segment in GE is Indian Tribal Governments. Thesetaxpayers have a special government-to-government relationship withthe United States under individual treaties, Supreme Court decisions,and Presidential Executive Orders. There has been a significantincrease in interaction between these taxpayers and the IRS in recentyears. Increased economic development by the tribal governments,especially but not exclusively due to gaming activities, has raisedfederal tax issues relating to governments as employers, distributionsto tribal members, and the establishment of governmental programs,trusts, and businesses. The IRS recognizes that services on the verywide range of federal tax issues must be tailored with the specialgovernment-to-government framework. The overall goal of this officeis to use partnership opportunities with Indian tribal governments,tribal associations, and other federal agencies to meet the needs ofboth the Indian tribal governments and the federal government and totry and simplify the tax administrative process.76

[F] Process-Based Organizational SegmentsFor each of the three functional organizations (EP, EO, and GE),

there are three key processes which serve as the foundation for each ofthe three organizations. These three processes are: the CustomerEducation and Outreach Process (CE&O); the Rulings and Agree-ments Process; and the Examination Process.

[F][1] TE/GE Customer Education and Outreach(CE&O)

The CE&O Process is an organization within TE/GE and focuseson helping taxpayers understand their tax responsibilities. To assist informulating educational products, CE&O staff routinely interact withExaminations and Rulings and Agreements. In addition, it is expectedthat Examinations will provide insight into the level of success thateducational efforts are having on compliance. A variety of deliverymechanisms are used. These include websites, conferences, workshops,newsletters, and publications specifically designed to reach the intendedaudience. The TE/GE examinations staff, located throughout thecountry, are also used to assist in the delivery of taxpayer educationand outreach services and products.77

76. See www.irs.gov/government-entities/indian-tribal-governments/about-itg.77. IRM 1.1.23.5.1 EO Customer Education and Outreach (12-27-2013).

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[F][2] TE/GE Rulings and Agreements

The Rulings and Agreements Process provides a strong emphasis onup-front compliance programs, such as the determination program,voluntary compliance programs, and the private letter ruling program.These programs focus primarily on taxpayer-initiated requests forpre-transactional confirmation of the tax results. They also includemechanisms that allow taxpayers to correct self-identified complianceproblems. The Service believes that a separate Rulings and Agreementsfunction facilitates a greater emphasis and shift to front-end compli-ance strategies.78

[F][3] TE/GE Examinations

The Examinations Process focuses on identifying and correctingnoncompliance. The Examination Process is customized within eachtaxpayer segment and uses compliance checks, correspondence exams,and on-site examinations, as appropriate. To facilitate face-to-faceinteractions, Examinations staff are located throughout the country.The Service expects Examinations to develop a strong partnership withCE&O, as well as with Rulings and Agreements. This, it is hoped, willensure that noncompliance trends are identified by the Examinationsstaff and will be used in the development of proactive outreach andeducation initiatives, as well as up-front compliance programs.79

[F][4] TE/GE CAS

CAS focuses on efficient processing of taxpayer filings as well asproviding accurate and timely responses to taxpayer telephone inquiresand correspondence. It is hoped that the centralization of taxpayerinquiries in Cincinnati will enhance the quality and efficiency of thetaxpayer service TE/GE provides. The Ogden campus has been desig-nated to handle all TE/GE taxpayer filing.

§ 3:11 Office of Chief Counsel

The Chief Counsel of the IRS is the chief legal officer of the IRS and isthe legal advisor to the Commissioner of the IRS on all matterspertaining to the interpretation, administration and enforcement ofthe internal revenue laws and related statutes, as well on non-tax legalquestions.

Counsel’s work includes: preparation of legislative proposals, draft-ing regulations, rulings, and other published guidance; handling cases

78. IRM 1.1.23.5.2 EO Rulings and Agreements (12-27-2013).79. IRM 1.1.23.5.3 EO Examinations (12-27-2013).

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in Tax Court and the Bankruptcy courts; and providing specific legaladvice and determinations to taxpayers and various IRS functions,both before and after returns are filed.80 Counsel coordinates theService’s position in litigation with the Service and the Departmentof Justice and prepares recommendations concerning defense, settle-ment, appeal, or certiorari; and coordinates other matters with theDepartment as required. The Office reviews and coordinates plead-ings, motions, briefs, settlement documents, notices of appeal, andany other material prepared in connection with United States TaxCourt litigation. The Office processes petitions and complaints, briefs,actions on decision, and other matters.

The Office of Chief Counsel also develops policy, procedure,directives, Chief Counsel Notices, Litigation Guideline Memoran-dums, and Chief Counsel Directives Manual provisions. Counsel’soffice issues Technical advice, and other legal advice responding toquestions raised by Service personnel and reviews booklets, trainingmaterials, Audit Technique Guides, Coordinated Issue Papers, AppealsSettlement Guidelines, forms, publications and instructions. Anotherfunction it provides is the issuance of letter rulings and generaltechnical information letters in response to requests from taxpayersand provides guidance on legal matters involving the IRS in the areasof claims, labor and personnel law; ethics and general government law;and public contracts and technology law.

§ 3:11.1 Organizational Structure

As discussed earlier, the chief legal advisor of the Service isdesignated Chief Counsel. Reporting directly to the Chief Counsel isa Deputy Chief Counsel (Technical) and a Deputy Chief Counsel(Operations). Reporting to the Office of Chief Counsel are ten Asso-ciate Chief Counsel Offices and Division Counsel.81

[A] Associate Chief Counsel OfficesThe technical organization of the IRS consists of ten Associate

Chief Counsel Offices: Income Tax & Accounting; Passthroughs &Special Industries; Corporate; Finance & Management; FinancialInstitutions & Products; International; Procedure & Administra-tion; General Legal Services; TE/GE; and Criminal Tax.82 With theexception of International, each of these technical divisions is furthersub-divided into various branches organized primarily according to tax

80. See www.irs.gov/uac/office-of-chief-counsel-at-a-glance; IRM 33.1.2 ChiefCounsel’s Legal Advice Program (06-02-2014).

81. IRM 1.1.6.1.1 Organization of the Office of Chief Counsel (02-03-2012).82. IRM 1.1.6.1 Chief Counsel for the Internal Revenue Service (06-18-2015).

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law technical subject areas required by the Internal Revenue Code.These offices are located in Washington, D.C.

[B] Division Counsel and Field CounselThere are five Division Counsel offices, one to mirror and serve

each of the four IRS operating divisions and one for Criminal Tax.83

Although DC are not divided among industry lines, LB&I AreaCounsel are placed geographically to coincide with the industryaggregations. For example, an Area Counsel in the northeasternUnited States aligns with the Financial Services Industry of LB&I.The Area Counsel serve as counsel to the Industry Directors andfacilitate interchange with the technical counsel (Associate ChiefCounsel Offices) in the National Office. In addition, there is a DCoffice designated Criminal Tax.

DC offices are managed by an Area Counsel or Associate AreaCounsel. Most IRS attorneys are designated as Field Counsel andassigned to one of the DC. It is expected that this specialization willhelp the attorneys develop greater expertise in the specific areas of thetax law most relevant to the needs of the particular operating divisionthey serve. It is also anticipated that it will encourage development ofstrong working partnerships between the Field Counsel and theexecutives, managers, and employees of the operating division theysupport. Although that may be true in practice, the restructuring hascreated fiefdoms (LB&I, SB/SE, TE/GE, and W&I) thereby limitingCounsel attorneys’ experience to these issues and procedures uniqueto their business division. Before the restructuring Counsel attorneyswere cross-functional and received a variety of trial experience inmultiple disciplines.

Field Counsel represent the IRS in the Tax Court and Bankruptcycourts and provide legal advice to operating division personnel. AreaCounsel and Associate Area Counsel are to be located at forty-nineposts of duty throughout the country.84

§ 3:12 Appeals85

The IRS Office of Appeals is the alternative dispute resolutionforum for any taxpayer contesting an IRS compliance action. TheAppeals mission is to resolve tax controversies, without litigation, ona basis which is fair and impartial to both the Government and

83. The four operating divisions are: Wage and Investment; Small Businessand Self-Employed; Large and Mid-Size Business; and Tax Exempt andGovernment Entities.

84. IRM 1.1.6.15.1 Area Counsel (LB&I) (01-12-2011).85. For a more detailed discussion of Appeals see chapter 14, Administrative

Appeals.

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the taxpayer and in a manner that will enhance voluntary complianceand public confidence in the integrity and efficiency of the Service.Independent by statute, Appeals provides taxpayers an impartialadministrative review of their cases after an examination of a returnis complete or collection action is proposed.86

§ 3:12.1 Organizational Structure

[A] Appeals Operating Division StructureAs part of the last IRS reorganization,87 Appeals was redesigned by

type of taxpayer. Appeals reorganized its staffing into a headquartersand three operating units that align with the larger IRS operatingdivisions. Appeals Headquarters is responsible for addressing Appeals’strategic needs, while the operating units will focus on providingservice to different segments of taxpayers. There are numerousAppeals Offices across the country. The person assigned to a particularmatter is referred to as an Appeals Officer.

Appeals Officers are assigned into a geographic-based structuredivided into East and West. The key positions consist of Field andArea Directors, Team Managers, Specialists, Appeals Team Case Leaders(ATCL), and Area Directors. Field Directors are responsible for onehalf of the country (East and West). Area Directors report to the FieldDirectors and have ten to twelve Appeals Team Managers that report tothem. Each Team Manager has approximately ten to twelve AppealsOfficers and/or Settlement Officers reporting to them. Specialists are ingroups of their own as part of the Field Structure. For example, Inter-national Specialists and Computation Specialists serve two specialtyArea Directors. ATCLs report to Team Managers. There are seven teamsof ATCLs, all reporting to a single ATCL Director, located in LosAngeles, California.

The type of cases handled by Appeals include:

• Appeals of the decisions of business unit commissioners, gen-erally involving income, profits, estate, gift and excise tax(except those imposed on alcohol, tobacco and firearms);

• Docketed United States Tax Court cases under the jurisdictionof Appeals;

• Appeals of collection actions (liens, levies, seizures and termi-nation or denial of installment agreements);

• Offers-in-compromise;

• Trust fund recovery penalty appeals;

86. See www.irs.gov/uac/appeals-at-a-glance.87. IRS Restructuring and Reform Act of 1998.

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• Penalty appeals;

• Employment taxes;

• Refund claims;

• Over-assessments; and

• Pension plans and exempt organizations.

§ 3:13 Joint Committee on Taxation (JCT)88

In 1926 Congress enacted legislation providing for a CongressionalJoint Committee on Internal Revenue Taxation. The name of thiscommittee was changed in 1976 to the Joint Committee on Taxation(JCT). The JCT monitors the operation of the IRS and its adminis-tration of the tax laws. The JCT’s duties are set forth in section 8022which include consideration of possible changes in the tax lawsleading to their clarification, simplification or revision to preventundue hardships or the granting of unintended benefits. In addition,concerns over the potential for corruption and favoritism promptedthe enactment of section 6405 which provides the JCTwith oversight(as opposed to approval) authority over refunds of income, estate andgift taxes, and certain excise taxes in excess of a statutorily prescribedamount.

A refund or credit subject to Joint Committee review can arise fromeither an examination or the service center forwarding to the fieldunpaid claims or tentative allowances in excess of the jurisdictionalamount. The examiner is responsible for determining whether a casefalls under Joint Committee jurisdiction. The fact that a return orexamination must be reported to JCT does not alter the nature of theexamination that may be conducted, nor does it limit the examiner ’sability to survey the returns if this is the action deemed appropriate.The present jurisdictional amount is $5 million for C corporationsand $2 million for all other taxpayers the aggregate of the net amountof the refund(s) and previously assessed interest attributable thereto.89

The IRS Joint Committee Specialist groups are headquarteredin Manhattan and Chicago, with additional specialists located inOakland, Evansville, Boston, and Philadelphia. These groups overseethe preparation of Joint Committee reports for all examined/surveyedcases, regardless of the business operating division. A specialist re-views the case files for procedural and technical accuracy and preparesthe report that is submitted to the JCT. Once the approving official hassigned the report, it is forwarded to the Joint Committee Program

88. For a more detailed discussion of Joint Committee on Taxation, seechapter 7, Large Case Examinations.

89. IRM 4.36.2.4.1 Inclusion of Interest in Jurisdictional Amount (09-22-2015).

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Analyst in LB&I Performance, Quality and Audit Assistance forprocessing and transmission to the Refund Counsel Office of the JCT.

The JCT staff attorneys (also known as Refund Counsels) willreview the Joint Committee report, the revenue agent’s report andother documentation, as deemed necessary. Should the Refund Coun-sel have questions, they are usually resolved informally through phonecalls or e-mails to the Joint Committee Specialist. In some instances, awritten inquiry may be issued. Upon being notified that the staffattorney has no further questions or concerns, the case is released andthe unpaid jurisdictional overpayments are processed. In the event theJCT disagrees with or questions the position taken in the report, therefund is, generally, as a matter of agency policy, not processed pendingthe resolution of the dispute.

§ 3:14 Office of Professional Responsibility (OPR)

The OPR90 enforces the regulations governing the practice ofattorneys, certified public accountants (CPAs), enrolled agents, en-rolled actuaries and appraisers before the IRS as set forth by theTreasury Department (Circular No. 230). In addition, OPR reviewsapplications from individuals who wish to become enrolled agents orenrolled actuaries. OPR is a part of Treasury that has been delegated tothe IRS and reports directly to the Commissioner. The authorizingstatute is not title 26, but rather is found at 31 U.S.C. § 330. Thatstatute gives the OPR broad authority to “regulate the practiceof representatives before the Department of the Treasury” forincompetence, disreputable behavior, or for violation of our regulationswhich are found at 31 CFRTitle 10, commonly known as “Circular 230.”

OPR establishes and enforces consistent standards of competence,integrity and conduct for tax professionals (enrolled agents, attorneys,CPAs, and other individuals and groups covered by Circular 230) andsupports the IRS strategy to enhance enforcement of the tax law and toensure that attorneys, accountants and other tax practitioners adhereto professional standards and follow the law.

§ 3:15 CI91

The mission of CI, formerly known as the Criminal InvestigationDivision (CID) is to serve the public by investigating potentialcriminal violations of the Internal Revenue Code and related financial

90. For a more detailed discussion of OPR, see chapter 2, Ethics of TaxPractice.

91. For additional discussion of CI, see chapter 13, Criminal and Civil TaxFraud.

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crimes in a manner that fosters confidence in the tax systemand compliance with the law.

CI investigates potential criminal violations of the Code and relatedfinancial crimes. CI developed a Compliance Strategy to assist inidentifying, developing, and investigating cases in an effort to fosterconfidence in the tax system and compliance with the law. The IRSbelieves that maintaining public confidence in the fairness of thetax system is vital to effective tax administration and the publicityof criminal tax cases demonstrates the IRS’s commitment to ensuringthat everyone is paying their fair share of taxes.

CI’s headquarters is based in the National Office and is headed by aChief, Criminal Investigation. Special Agents-in-Charge (SACs) reportdirectly to the Headquarters through the Directors of Field Opera-tions. There are more than thirty SACs, and they are responsible forreferring cases to the Criminal Tax Section of the Tax Division, JusticeDepartment. CI works closely with the various operating divisions andChief Counsel attorneys.

In 2016, CI has approximately 3,500 employees worldwide, 2,500of whom are special agents whose investigative jurisdiction includestax, money laundering and Bank Secrecy Act laws. While other federalagencies also have investigative jurisdiction for money launderingand some bank secrecy act violations, IRS is the only federal agencythat can investigate potential criminal violations of the Code. CIspecial agents are trained to recover computer evidence. Along withtheir financial investigative skills, special agents use specializedforensic technology to recover financial data that may have beenencrypted, password protected, or hidden by other electronic means.

Compliance with the tax laws in the United States relies heavily onself-assessments of what tax is owed. This is called voluntary com-pliance. When individuals and corporations make deliberate decisionsnot to comply with the law, they face the possibility of a civil audit orcriminal investigation, which could result in prosecution and possiblejail time. CI believes that publicity of these convictions provides adeterrent effect that enhances voluntary compliance. Criminal Inves-tigation’s conviction rate is one of the highest in federal law enforcement.

§ 3:16 Place for Filing Notices

Certain provisions of Title 26 of the Code of Federal Regulationsdirect taxpayers to file elections, statements, and other documentswith offices or officials that have been eliminated in the recent InternalRevenue Service reorganization. The Service has issued notices toadvise taxpayers of the proper address for filing certain elections,statements, and other documents with the Service as a result of the

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reorganization, including with respect to offices or officials that nolonger exist as part of the reorganization. If a taxpayer files an election,statement, or document as directed in existing regulations, the Servicewill forward it to its proper filing location. The Treasury Department andService intend to issue revised regulations that will take into account therecent Service reorganization. In addition, until such time, the Serviceintends to periodically update taxpayers (through updated notices orother means of communication) regarding where elections, statements,and other documents should be filed.92 On September 16, 2004, finalregulations were issued to reflect changes in the organizational structureof the IRS, but do not make substantive changes to taxpayer ’s currentability to hand-carry returns to a local IRS office.93

§ 3:17 IRS Fax Guidelines

The IRS has established fax guidelines with the intent to make iteasier for practitioners to correspond with the agency. The guidelines,which became effective October 1, 2003, expanded the list of docu-ments and information the IRS will accept via fax. The new guidelinesapply only to taxpayers and their representatives who are engaged inan ongoing contact with the IRS, such as an examination or resolvingquestions about tax returns that are being processed. The fax can takeplace only after a discussion with the IRS employee who is requestingthe information.94

These general guidelines are applicable to all divisions of the IRS andcover operations related to income tax, employment tax, excise tax,estate tax, gift tax, and generation skipping tax, as well as tax-exemptand employee plans determinations. While the IRS has previouslyaccepted forms via fax in limited situations, the new guidelines per-mit an expanded number of forms and other types of documentationto be submitted by fax in the course of many return-related inquiries.95

§ 3:17.1 General Guidelines

These general guidelines are applicable to all divisions and coveroperations related to income tax, employment tax, excise tax, estatetax, gift tax, and generation-skipping tax, as well as tax-exempt andemployee plans determinations.

92. For latest IRS notice and list of all addresses, see IRS Notice 2010-53,2010-2 C.B. 182, which revoked Notice 2003-19, 2003-14 I.R.B. 703.

93. T.D. 9156, 69 Fed. Reg. 55,743 (Sept. 16, 2004).94. IR-2003-119 (Oct. 9, 2003).95. Id.

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• Filing of original tax returns via fax will only be allowed as partof a return perfection process (for example, securing missingschedule or a missing signature) initiated by the IRS or in thepost-filing/non-filing activities. Tax returns can be received viafax as part of return perfection even if a taxpayer signature isrequired, provided that IRS contact with the taxpayer has beenmade and documented.

• Submission of documentation, forms, letters, and returns re-lated to post-filing/non-filing inquiries and interactions can beallowed via fax based on taxpayer or IRS request unless there is aspecific prohibition.

• The IRS will not acknowledge faxes received from taxpayers inthe course of tax administration activities by a return fax.

§ 3:17.2 Specific Guidance on Use of Faxes in TaxAdministration Processes

The following list provides examples of documents the IRS willaccept via fax. Note, however, the list is not all inclusive.96

• EIN Requests (Form SS-4)

• Power-of-Attorney (Form 2848)

• Taxpayer Authorization (Form 8821)

• 1120S Election (Form 2553)

• Return/Transcript Requests (Form 4506)

• Request for Public Inspection or Copy of Exempt or PoliticalOrganization IRS Form (Form 4506-A)

• Foreign Certification Requests

• Appeals Conference Requests

• Responses/documentation needed to resolve filing or post-filingquestions or correspondence.

The following specific documents/forms/letters can be accepted byfax if contact has been made with the taxpayer by phone or in personand the taxpayer history file is documented with the date of contactand notation is made that the taxpayer wishes to send the document/form/letter by fax:

• Requests for Innocent Spouse Relief (Form 8857)

• Taxpayer Statement About a Refund (Form 3911)

96. Id.

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• Injured Spouse Claim (Form 8379)

• Installment Agreements (Form 433-D)

• Collection Information Statement—Wage Earner (Form 433-A)

• Collection Information Statement—Business (Form 433-B)

• Early Referral Requests

• Fast Track Mediation Requests

• Request for Collection Due Process Hearing (Form 12153)

• Letter to designate a payment

• Letter to request non-filing of lien

• Letter to request lien release

• Letter to request lien withdrawal

• Letter to request non-assertion of penalty

• Letter to provide reasonable cause statement

• Supporting Statement to Correct Information (Form 941C)

• Election by a Small Business Corporation (Form 2553)

Consents to assess additional tax (Forms 4549, 870, and others) of$25,000 or less can be accepted by fax if taxpayer contact has beenmade and the case history documents the date of contact and thedesire of the taxpayer to submit the consent by fax. Consents to assesstax in excess of $25,000 should be secured with original signaturesthat are delivered in person or by mail.

Taxpayer closing agreements involving tax amounts of $25,000 orless can be accepted by fax if taxpayer contact has been made and thecase history documents the date of contact and the desire of thetaxpayer to submit the consent by fax. Closing agreements for taxamounts in excess of $25,000 should be secured with original signa-tures that are delivered in person or by mail.

EP and EO determination letter applications will not be accepted viafax.

Determination Letter Requests related to income tax, gift tax, estatetax, generation-skipping transfer tax, employment tax and excise taxmatters will not be accepted via fax.

Consents to extend the statute of limitations for assessing tax(Form 872, SS-10, and other consent forms) will not be accepted viafax in normal operations.97

97. Id.

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§ 3:18 Freedom of Information Act (FOIA) Public Liaisons

On December 14, 2005, President Bush issued Executive Order13392, “Improving Agency Disclosure of Information.” In the order,the President directed agencies to ensure a citizen-centered andresults-oriented approach to Freedom of Information Act (FOIA)procedures.98 To comply with part of Executive Order 13392, theOffice of Disclosure has posted a listing of the FOIA Public Liaisonsand the FOIA Requestor Campus contacts online. That informationis reproduced immediately below. The FOIA has been amended anumber of times, most recently by the Openness Promotes Effective-ness in our National Government Act of 2007 (OPEN).

FOIA requestors may have questions or want to know the status oftheir request. Initial inquiries should be directed to the FOIA Reques-tor campus where the request was submitted. Following responsefrom the center staff, FOIA requestors who require more informationor assistance may contact the IRS Disclosure Manager, who serves asthe FOIA Public Liaison for that center. The Public Liaison can assistwith reducing delays, explaining the status of the request, and resolv-ing disputes. The campus and Public Liaison may be reached at thecontact number provided for each Disclosure Office.99

§ 3:19 IRS VITA Grant Program

The Volunteer Income Tax Assistance (VITA) Grant Program100 isan IRS initiative designed to promote and support free tax preparationservice for the underserved, in both urban and non-urban locations.Service is targeted to low-to-moderate income individuals, personswith disabilities, the elderly, and limited English speaking. IRS awardsmatching grants each year to organizations that offer free tax prepara-tion services during the tax filing season at locations in all 50 statesand the District of Columbia. Congress appropriates this funding tosupport the Volunteer Income Tax Assistance Program.

This Grant Program is intended to provide direct funds to organiza-tions to:

• Enable VITA Programs to extend services to underserved popu-lations in hardest-to-reach areas, both urban and non-urban;

• Increase the capacity to file returns electronically;

98. For Freedom of Information Act, see generally 5 U.S.C. § 552. For makingFOIA requests, see http://www.irs.gov/uac/IRS-Freedom-of-Information;Treas. Reg. § 601.702. For more information about FOIA, see chapter 5,Taxpayer Access to IRS Information.

99. Go to www.irs.gov/uac/IRS-Disclosure-Offices for current addresses andphone numbers.

100. See www.irs.gov/individuals/irs-vita-grant-program.

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• Enhance volunteer training; and

• Significantly improve the accuracy rate of returns prepared atvolunteer sites.

§ 3:20 IRS Whistleblower Office

The Tax Relief and Health Care Act of 2006 (TRHCA) establishedan IRS Whistleblower Office101 to administer the new WhistleblowerProgram.102 A discussion of both the program and the office isdiscussed in chapter 13, Civil and Criminal Fraud.

§ 3:21 E-Services for Tax Professionals

In April 2007, the IRS instituted “e-services for tax profes-sionals.”103 This is a suite of web-based products that will allow taxprofessionals (Circular 230 practitioners104) and payers to conductbusiness with the IRS electronically. These services are availabletwenty-four hours a day, seven days a week from just about anycomputer with an Internet connection. E-services are not availableto the general public. Only approved IRS business partners, such ase-filing tax professionals and payers, are eligible to participatein e-services. All tax professionals are encouraged to register fore-services.

101. TRHCA, Pub. L. No. 109-432, § 406.102. I.R.C. § 7623(b)(1)–(6), as added by the TRHCA, Pub. L. No. 109-432,

§ 406.103. IRS efile Application and Participation, www.irs.gov/pub/irs-pdf/p3112.pdf.104. All Circular 230 practitioners who qualify as Attorneys, CPAs, or Enrolled

Agents will have unlimited access to the incentive products listed abovewhether they e-file their client returns or not.

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