IRS has not reintroduced the use of codes or similar designations in taxpayer accounts suggesting that a taxpayer may be, in the wording once used within the agency, an "Illegal Tax Protester," the Treasury Inspector General for Tax Administration (TIGTA) said in a new audit. (Audit Report No. 2011-30-040) The audit also said the Internal Revenue Manual no longer contains any reference to "Illegal Tax Protester." However, in an examination of 3.6 million records and cases, TIGTA found "38 instances in which 34 employees had referred to taxpayers as "Tax Protester," "Constitutionally Challenged," or other similar designations in case narratives on the computer systems analyzed." §3707 of the IRS Restructuring and Reform Act of'98 prohibits the agency from labeling taxpayers as Illegal Tax Protesters or any similar designations. TIGTA is required to conduct an annual evaluation of compliance with this provision. "Using Illegal Tax Protester or other similar designations may stigmatize taxpayers and may cause employee bias in future contacts with these taxpayers," TIGTA said. According to the audit, IRS and TIGTA continue to disagree over whether these types of designations can be used. The agency takes the position that their use does not contravene the §3707 provision, while TIGTA believes otherwise.
The audit is available at http://www.treasury.gov/tigta/auditreports/2011reports/201130040fr.html.