1.5.2 Uses of Statistics
1.5.2.1 (04-01-2007)
Uses of Statistics Overview
- The Internal Revenue Service (IRS) has established Regulations containing rules to ensure that Records of Tax Enforcement Results (ROTERs) are not used in a way as to improperly influence the handling of taxpayer cases. The fundamental purpose of the restrictions is to ensure that employees make decisions on pursuing enforcement of the tax laws (including but not limited to determining tax liability and ability to pay) that are based solely on the correct application of the law to the facts of each case and on the exercise of reasonable administrative judgment in light of the circumstances of each taxpayer.
- Our system of taxation is dependent on taxpayers’ belief that:
- the tax laws they follow apply to everyone, and
- the IRS will respect and protect their rights under the law.
- In 1988, Congress passed Section 6231 the Technical Miscellaneous Revenue Act of 1988 commonly referred to as the Taxpayer Bill of Rights (TBOR1), which contained rules prohibiting the use of Records of Tax Enforcement Results (ROTERs) to evaluate or suggest production goals or quotas for employees directly involved in collection activities and their immediate supervisors. Guidance on the proper use of such records has been historically found in Policy Statement P-1200-9, approved November 24, 1959 and P-1-20, approved November 9, 1973, and various provisions of the IRM, including sections describing the application of these restrictions to various functions within the Internal Revenue Service.
- As time went on, it was determined that the guidance on P-1-20 and TBOR1 were not necessarily easy to understand and were not interpreted consistently. Therefore, in July of 1998, Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98), which replaced Section 6231 of TBOR1 and P-1-20.
- Section 1201 of RRA 98 mandated that the Internal Revenue Service establish a performance management system that establishes goals or objectives for individual, group, or organizational performance. Section 1204 of RRA 98 repealed Section 6231 of TBOR1 and replaced TBOR1’s prohibition on the use of ROTERs to evaluate, to impose, or suggest goals for personnel directly involved in collection activity with prohibition against using such ROTERs to evaluate, or to impose or suggest production quotas or goals for, any IRS employee.
- As of September 1999, the Internal Revenue Service promulgated Regulation 801, which established an overall performance measurement system and set forth rules governing the use of Records of Tax Enforcement Results. The Regulation 801 rules ensure that ROTERs are not used to improperly influence the handling of taxpayer cases.
- In October 2005, Regulation 801 was revised to allow imposing or suggesting quantity goals for organizational units and employees, and to authorize the use of quantity measures to evaluate the performance of organizational units. However, the amended regulation:
- continued to provide that performance measures based in whole or in part on quantity measures will not be used to evaluate the performance of any non-supervisory employee who is responsible for exercising judgment with respect to tax enforcement results, and
- did not alter in any way the RRA Section 1204 prohibition on the use of ROTERs to evaluate employee performance or to impose or suggest production quotas or goals for any employee.
- Use this section to:
- Determine whether or not the use of a statistic is a Record of Tax Enforcement Results (ROTER)
- Determine if the way a ROTER is used violates Section 1204
- Determine allowable and unallowable uses of quantity measures
- This section:
- Contains general background information on the use of enforcement statistics
- Defines key terms under Section 1204
- Provides detailed procedures on the use of ROTERs
- Explains not only what is prohibited, but also sets forth the permitted use of ROTERs in accordance with Section 1204
- Applies to all Service employees
- Section 1204 (Basis for Evaluation of Internal Revenue Service Employees) provides:
- In General—The IRS shall not use records of tax enforcement results (1) to evaluate employees; or (2) to impose or suggest production quotas or goals with respect to such employees.
- Taxpayer Service—The IRS shall use the fair and equitable treatment of taxpayers by employees as one of the standards for evaluating employee performance.
- Certification—Each appropriate supervisor shall certify quarterly by letter to the Commissioner of Internal Revenue whether or not tax enforcement results are being used in a manner prohibited by subsection (a).
- Technical and Conforming Amendment—Section 6231 of the Technical and Miscellaneous Revenue Act of 1988 (Public Law 100-647; 102 Stat. 3734) is repealed.
- Effective Date—This section shall apply to evaluations conducted on or after the date of the enactment of this Act.
- Regulation 801 as amended is found at 26 CFR 801 and is reprinted in the back of this IRM. See Exhibit 1.5.2-1.
- This section generally refers to Regulation 801 as the basis for the guidance set forth.
- A Tax Enforcement Result (TER) is the outcome produced by an Internal Revenue Service employee’s exercise of judgment in recommending or determining whether or how the Internal Revenue Service should pursue enforcement of the tax laws. A TER includes but is not limited to:
- Lien filed
- Levy served
- Seizure executed
- Amount assessed
- Amount collected
- Fraud referral
- A TER is not a quantity measure. A quantity measure by definition, is outcome neutral. See IRM 1.5.2.8. A TER also does not include data derived from a quality review or from a review of an employee’s or a work unit’s work on a case, such as the number or percentage of cases in which correct examination adjustments were proposed or appropriate lien determinations were made. See Regulation §801.6T(d)(1) in See Exhibit 1.5.2-1.
- Records of Tax Enforcement Results (ROTERs) are data, statistics, and compilations of information or other numerical or quantitative recordations of the tax enforcement results reached in one or more cases. ROTERs include but are not limited to:
- Number of liens filed
- Number of levies served
- Number of seizures executed
- Dollars collected
- Number of fraud referrals
- Dollars per hour
- Dollars per return
- Total dollars assessed/collected
- No change rate
- ROTERs do not include TERs of individual cases when used to determine whether an employee exercised appropriate judgment in pursuing enforcement of the tax laws based upon a review of the employee’s work on that individual case. ROTERs do not include quantity measures. See IRM 1.5.2.8.
- Quantity measures consist of outcome-neutral production and resource data that do not contain information regarding the TER reached in any case or cases involving particular taxpayers.
- Examples of quantity measures include, but are not limited to:
- Cases started
- Cases closed
- Work items completed
- Customer education, assistance, and outreach efforts completed
- Time per case
- Direct examination time/out of office time
- Inventory information
- Toll-free level of access
- Talk time
See Regulation §801.6T(c).
- Parameters on the use of quantity measures are set forth in the decision table. See Exhibit 1.5.2-2.
- “One or more cases” is referenced in the definition of a ROTER, specifically “tax enforcement results reached in one or more cases.” The definition intentionally references one case to make it clear that Section 1204 applies to the result reached in a single case, as well as results reached in more than one case.
- Managers cannot use a TER from a single case to evaluate an employee or suggest production quotas or goals. For example, a manager cannot advise or imply that an employee should achieve the same TER in Case B as he/she achieved in Case A.
- The definition specifically allows managers to discuss with employees the results that they achieved in individual cases. A manager may discuss with an employee his/her exercise of judgment in achieving a particular TER in a case when based on a review of the employee’s work on that individual case.
- A Section 1204 employee is:
- an employee or manager of an employee (all levels of management) who exercises judgment in recommending or determining whether or how the IRS should pursue enforcement of the tax laws, or
- an employee whose duties involve providing direction or guidance for field programs involving Section 1204 work activities, e.g., an analyst who writes a compliance Internal Revenue Manual (IRM).
- The work activity performed, not the title or location of the employee, identifies a Section 1204 employee.
- Exercise of judgment in pursuing enforcement of the tax laws refers to the process of making decisions to recommend or determine whether or how the Service should pursue enforcement of the tax law (including but not limited to the taxpayer’s tax liability or ability to pay). These deliberations can result in reasonable people handling the same cases and, in good faith, discerning or evaluating factors differently.
- Decisions relating to recommending or determining whether or how the IRS should pursue the enforcement of the tax laws are Section 1204 judgments. Examples of such judgments include, but are not limited to:
- Determination to conduct a seizure
- Determination to file a lien
- Decision to disallow an unsupported itemized deduction
- Generally, the judgments that Section 1204 and the Regulation do not cover include those decisions relating to the perfection of returns, mathematical computations or reconciliation of contradictory return information, and application of non-discretionary IRM provisions.
- Judgments covered by Section 1204 do notinclude decisions relating to the processing and handling of tax returns and return information, including but not limited to:
- Extracting
- Batching
- Depositing
- Numbering
- Sorting
- Internal accounting
- Coding
- Editing
- Data entry
- Error correction
- Unpostables
- Reject files
- Entity control
- Generation of non-discretionary documents and computations resulting from mathematical and administrative corrections
- Similarly, routine decisions about the application of irrefutable elementary or basic principles of law or regulation (e.g., threshold income amounts for deductibility of medical expenses on Schedule A) do not involve the discerning or evaluation of facts, law or principles which require the use of subjective factors—experience, legal principles and fairness considerations.
- To impose a production quota or goal includes any communication (whether written or oral) which requires a Section 1204 employee to achieve a particular TER outcome through his or her performance activities.
Example:
Requiring an employee to achieve a certain average dollar amount collected per return.
Example:
Requiring an employee to effect a certain number of seizures during a rating period.
Example:
Requiring an employee to refer a certain number of cases for prosecution during a particular period of time.
- To suggest a production quota or goal means to engage in conduct from which a reasonable person would infer that a manager would evaluate the employee more favorably if the employee achieved a specific enforcement result regardless of the merits of the particular case(s).
Example:
A suggestion occurs if an employee reasonably infers from conversations with his/her manager that the manager would evaluate the employee more favorably if the employee increased the number of seizures in a given period of time regardless of the merits of the particular cases.
Example:
A manager may not suggest to a Section 1204 covered employee that he/she should achieve the same tax enforcement result in Case B as the employee achieved in Case A because doing so would suggest a production quota or goal to the employee, and this is a Section 1204 violation.
- The determination whether conduct has suggested a production quota or goal for an employee is made upon consideration of all relevant facts and circumstances, including whether there is a good business reason for using the statistic. Consider the following issues when making this decision:
- What is the ROTER and how is it related to an employee’s decision-making process?
- What is the business reason for communicating the ROTER to the intended recipient?
- Does the intended recipient have a need to know?
- What is the business risk of not providing the ROTER to the intended recipient?
- What is the potential undesirable outcome that could come from the misuse of the ROTER?
- Another issue to consider when making the decision whether conduct has suggested a production quota or goal for an employee is, “What is the risk that the intended recipient would reasonably believe that the communication suggested a production quota or goal?” Regarding this last element, consider the following:
- Degree of organizational knowledge and understanding of the intended recipient
- Organizational climate at the time and place of the communication
- Context in which the communication is to be made
- Guidance on how the ROTER can or cannot be used
- Manner in which the communication is delivered
- Expectation of follow-up with respect to the ROTER and the nature of the expected follow-up
- Probable internal employee perception of the communication of the ROTER
- Probable public perception of the communication of the ROTER.
- Discussions/documentation which a manager uses to review the work of an employee may be evaluative or non-evaluative.
- Examples of these reviews include but are not limited to:
- Mid-year Review
- Performance appraisal/evaluation
- Individual Case Review
- Workload Review
- Progress Review
- Managers perform these reviews to determine if the employee exercised appropriate judgment and properly applied the tax laws. In some cases, the review is done to provide guidance on future actions necessary on a specific case.
- Evaluative documentation provides a numerical rating and/or a summary of actions taken on an employee’s critical elements and standards .
- Managers will write an employee’s performance appraisal/evaluation based on the employee’s performance measured against his/her particular performance standards (critical job elements) or performance expectations.
- An”employee evaluation” includes any written document used to appraise or measure an employee’s performance to provide:
- Required or requested performance rating (annual, mid-year, ad hoc)
- Recommendation for an award
- Assessment of an employee’s qualifications for promotion, reassignment or other change in duties
- Assessment of an employee’s eligibility for incentives, allowances or bonuses
- Ranking of employees for release/recall and reduction in force
Regulation §801.3T(e)(1)(ii). See Exhibit 1.5.2-1.
- This definition of “employee evaluation” specifically includes only the five items above, and is the definition to use in identifying where TERs and ROTERs cannot be used. Other “usual” components of evaluations, such as individual case reviews, progress reviews, and workload reviews, are not included in this definition of employee evaluations for this purpose.
- TERs may be cited and discussed in employee reviews (but not employee evaluations as defined in IRM 1.5.2.14(6)) to determine if the employee exercised appropriate judgment, efficiently used time, or properly applied the laws in one or more cases and/or to provide guidance on future actions necessary on one or more specific cases. Managers may reference an individual case to illustrate whether or not the employee’s performance met specific performance standards.
Example:
In reviewing a case a manager discovers that an employee failed to consider all relevant facts or correctly apply applicable law resulting in an incorrect proposed assessment of $1 million. The manager may comment on the TER reached as it is a factor relating to the employee’s judgment, and may document the TER in the write-up of the individual case review.
Example:
During a workload review, a manager may comment to a revenue agent or revenue officer on the methods used, the level and quality of the research, and the TERs reached in each of several cases separately based on the merits of each individual case. The manager may comment on the amount of dollars or size of case only as relevant to the time and efforts expended in each case.
Example:
During a progress review in which a revenue officer is reviewed with respect to decisions in several cases on filing liens and issuing levies, each lien or levy is a TER. The manager and revenue officer may discuss the appropriateness of each of the collection tools to be used or not used (including the appropriateness of each based on the amounts at issue), and the manager may make general observations about the revenue officer’s judgment in each case considering the amounts at issue and the expected and actual TERs.
Example:
In a case review a manager may inform an employee that the time spent and/or methods used on a $100,000 collection case were either excessive and unwarranted or insufficient, considering the amount at issue.
- A manager may make recommendations as to specific enforcement actions in a specific case. For example, a manager may inform a revenue agent that, based on the facts of the case to date, a penalty should be now asserted in a particular case or a revenue officer that the employee should serve specified levies or that the next appropriate course of action would be seizure of specific property.
- A manager may inform an employee that the IRS has handled cases involving similarly situated taxpayers, inform the employee of best practices in those cases, and may refer employees to other employees to obtain guidance based on similarly situated cases.
Example:
A revenue agent is assigned to an examination involving a taxpayer who has claimed improper deductions in a tax shelter. The manager may suggest that the employee obtain information about the tax shelter from other employees with experience in examining that shelter or similar shelters.
Example:
A revenue officer is assigned a collection case where assets may have been placed offshore. The manager may suggest that the revenue officer contact experienced personnel to discuss best practices.
- Although neither Section 1204 nor Regulation 801 contain any restrictions on TER use, as a matter of policy the Service has determined that managers must not include tax enforcement results in a written performance appraisal or employee evaluation.
- In a case review, workload review, progress review, or other employee documentation that is not an “employee evaluation” as defined in IRM 1.5.2.14(6), the fact of and details related to an individual TER may only be mentioned to the extent necessary to fairly describe employee performance (that is, the employee’s knowledge, skills, and abilities as applied to the case) with emphasis placed on the employee’s efforts rather than on the result. In an “employee evaluation” , neither TERs, ROTERs, nor quantity measures (defined in IRM 1.5.2.8) may be used.
Example:
In an employee evaluation a manager may briefly state that a revenue agent was able to locate a significant amount of unreported offshore income, but should emphasize the particular efforts that made the TER noteworthy, and should not mention specific dollar amounts. Specific amounts may only be mentioned in types of reviews not listed in IRM 1.5.2.14(6).
Example:
In support of an award, a manager may not state that a revenue officer was able to locate sufficient funds in two accounts to result in “full pay” . The narrative should emphasize the particular efforts made; reference to a specific TER or dollar amount may not be mentioned.
Example:
In an evaluation a manager may not state that a revenue officer was able to get a “full pay” in 11 of 14 cases, even if efforts of the revenue officer are emphasized, because the aggregation of TERs constitutes a ROTER. See IRM 1.5.2.18.
- The review and discussion of an employee’s performance on a case should be based on that case and not external matters (e.g., TERs from other similar cases).
- ROTERs may be used for forecasting, financial planning, resource management and the formulation of case selection criteria. Regulation §801.6T(d)(2). See Exhibit 1.5.2-1.
- ROTERs do not include TERs of individual cases when used to determine whether an employee exercised appropriate judgment in pursuing the enforcement of tax laws based on a review of the employee’s work on that individual case. See Regulation §801.6T(d)(2) and §801.7T(a) Example 3.
- The IRS has determined that ROTER data may be made available as follows, provided that such data will never be used to evaluate any employee (according to the definition of “evaluation” in IRM 1.5.2.14(6)), and will never be used to suggest production quotas or goals:
- Compilations of national statistics as to ROTER information such as amount assessed, collected, etc., may be disclosed to the public, may be disclosed on IRS web sites, may be disclosed to IRS executives, and may be disclosed selectively to IRS employees on a need to know basis
- ROTER information may be disclosed to managers if it relates to performance of units under their span of control
- ROTER information may be disclosed for use among units involved in forecasting, planning, resource management, and other functions whose employees do not conduct taxpayer examinations and are not in the chain of command over same on a need to know basis
Example:
The SB/SE Director, Collection, supervises eight area directors, who each have subordinate territory and group managers. A group manager may be provided with ROTER data such as the amount collected by that group; the territory manager may be provided that information for each group in the territory; an area director may be provided that information for each group and territory in the area. Provision of that information in conjunction with an evaluation (including an award), however, is prohibited.
Example:
An area director or technical services employee (whose group does not conduct taxpayer examinations and is not in that chain of command) observes a substantial increase in the number of fraud referrals in a territory. The area director or technical services employee may contact the territory manager to inquire as to the reasons for the increase for any of the purposes described in (1) above.
Example:
The SB/SE Director, Examination may inform all subordinate employees that increased emphasis is to be placed on properly developing quality fraud cases due to the large amount of resources required to work those cases. Decisions as to the allocation of management resources do not suggest a production quota or goal so that IRM 1.5.2.18 does not apply.
- As provided in Section 1204, no employee shall use ROTERs to evaluate employees or to impose or suggest production quotas or goals with respect to such employees.
Example:
In a meeting a group manager informs revenue agents that one of them did an outstanding job by obtaining changes in the last 10 of his cases and another agent did an outstanding job by averaging changes of $50,000 per case. Both of the statements are prohibited by Section 1204 because each suggests a production goal.
- Examples of suggesting goals or imposing a production quota for a ROTER include requiring an employee to achieve a certain average dollar amount collected per return, requiring an employee to make a certain number of seizures during a rating period, or requiring an employee to refer a certain percentage or number of cases for prosecution or fraud referral. See §801.7T, Example 4.
- If a bargaining unit employee includes a ROTER in a self-assessment, the manager will explain why the employee should not use a ROTER and ask the employee to remove it; the manager will not use the ROTER in the employee’s evaluation.
- If a non-bargaining unit employee includes a ROTER in a self-assessment, the manager will not accept the assessment and will direct the employee to revise the document removing the ROTER. The manager will not use the ROTER in the employee’s evaluation.
- Effective October 17, 2005, Regulation 801 was amended to remove the prohibition to imposing or suggesting production goals based in whole or part on quantity measures.
- Quantity Measures may be used to evaluate the performance of or to impose or suggest production goals for any organizational unit, and may be disseminated as determined by each organizational unit.
- Performance measures based on quantity measures may be used to evaluate employees other than non-supervisory employees responsible for exercising judgment with respect to tax enforcement results.
Example:
An area director may inform territory managers (or all subordinates, including bargaining unit employees), that for a certain type of examination, a goal is that the average time per described case will be 10 hours, and that a goal is that 90 percent of cases will be closed within six months. This use of a quantity measure does not violate Regulation 801 or any IRM provision. But the area director must make it clear that circumstances in a territory (or for a bargaining unit employee) may warrant a different closure rate.
Example:
A territory manager in evaluating a group manager (a non-bargaining unit employee) notes that the time per case in the group was 15 hours, far above the goals for the group. As provided in IRM 1.5.1, the territory manager should “look behind the numbers” and use appropriate diagnostic tools to see whether there are good reasons for the high amount of time spent per case. However, having done so, the territory manager may cite the time per case in the group manager’s evaluation.
- All employees of the IRS will be evaluated according to the critical elements and standards established for their positions. The performance criteria will be composed of elements that support the organizational measures of Customer Satisfaction, Employee Satisfaction, and Business Results; however, such organizational measures will not directly determine the evaluation of individual employees. Regulation §801.3T(a). See Exhibit 1.5.2-1.
- Performance measures based in whole or in part on quantity measures will not be used to evaluate the performance of any non-supervisory employee who is responsible for exercising judgment with respect to tax enforcement results. Regulation §801.6T. See Exhibit 1.5.2-1.
Example:
A group manager informs non-supervisory employees responsible for exercising judgment with respect to tax enforcement results that for a prior period, the group’s average was 12 hours per case closure, and their goal is that in the future they will close cases in an average of ten hours per case, and the group manager describes best practices to accomplish this goal. This is allowable as an organizational goal, but the goal cannot be used in the evaluation of these employees. The employees must be evaluated exclusively on performance based on their critical elements, and the evaluations may not cite the goal as a benchmark. The manager must evaluate the employee’s use of time based on individual cases, rather than on any assumptions as to case closing norms.
- Employees who are responsible for exercising judgment with respect to tax enforcement results in cases concerning one or more taxpayers may be evaluated on work done only in the context of their critical elements and standards. Regulation §801.3T(e)(2). See Exhibit 1.5.2-1.
- The RRA 98, Section 1204 & Regulation 801 Decision Table can be used to determine if a particular measure/data may be used for a specific purpose.
- Instructions for using the Decision Table
- Determine if the measure/data is a Record of Tax Enforcement Result (ROTER)
- If the measure/data is a ROTER, its restrictions are governed by Section 1204
The revision of Regulation 801 did not remove or alter in any way the prohibitions on the use of ROTERs established by Section 1204, and continues to prohibit the use of ROTERs to evaluate employee performance or to impose or suggest production quotas or goals for any employee.
- Determine if the measure/data is a Quantity Measure
- If the measure/data is a Quantity Measure, its permissible use is governed by Regulation 801
The revision of Regulation 801 removed the limitations on the use of quantity measures in evaluating the performance of, or imposing or suggesting goals for organizational units, and removed the limitation to impose or suggest quantity goals for employees.
- You must also determine the organizational unit or type of employee to which the measure/data is applied
- If the measure/data is not a ROTER or a Quantity Measure, neither Section 1204 nor Regulation 801 applies
- Summary
a. To establish goals:- Using TERs or ROTERs to impose or suggest production quotas or goals for any employee is prohibited
- Using Quantity measures to impose or suggest production goals for any employee is not prohibited
b. To evaluate:
- Using TERs or ROTERs to evaluate any employees is prohibited
- Using “Quantity” measures to evaluate employees, with the exception of 1204 employees, is not prohibited
- For examples of using the RRA98, Section 1204 & Regulation 801 Decision Table, See Exhibit 1.5.2-2.
| Regulation 801
PART 801–BALANCED SYSTEM FOR MEASURING ORGANIZATIONAL AND EMPLOYEE PERFORMANCE WITHIN THE INTERNAL REVENUE SERVICE |
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§801.1T Balanced performance measurement system; in general (temporary) (a) In general.– (1) The regulations in this part 801 implement the provisions of sections 1201 and 1204 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Public Law 105-106, 112 Stat. 685, 715-716, 722) (the Act) and provide rules relating to the establishment by the Internal Revenue Service (IRS) of a balanced performance measurement system. (2) Modern management practice and various statutory and regulatory provisions require the IRS to set performance goals for organizational units and to measure the results achieved by those units with respect to those goals. To fulfill these requirements, the IRS has established a balanced performance measurement system, composed of three elements: Customer Satisfaction Measures; Employee Satisfaction Measures; and Business Results Measures. The IRS is likewise required to establish a performance evaluation system for individual employees. (b) {Reserved}. |
| §801.2T Measuring organizational performance (temporary). The performance measures that comprise the balanced measurement system will, to the maximum extent possible, be stated in objective, quantifiable and measurable terms and will be used to measure the overall performance of various operational units within the IRS. In addition to implementing the requirements of the Act, the measures described here will, where appropriate, be used in establishing performance goals and making performance evaluations established, inter alia, under Division E, National Defense Authorization Act for Fiscal Year 1996 (the Clinger-Cohen Act of 1996), (Public Law 104-106, 110 Stat. 186, 679); the Government Performance and Results Act of 1993, (Public Law 103-62, 107 Stat. 285); and the Chief Financial Officers Act of 1990, (Public Law 101-576, 108 Stat. 2838). Thus, organizational measures of customer satisfaction, employee satisfaction, and business results (including quality and quantity measures as described in §801.6T) may be used to evaluate the performance of or to impose or suggest production goals for, any organizational unit. |
| §801.3T Measuring employee performance (temporary). (a) In general. All employees of the IRS will be evaluated according to the critical elements and standards or such other performance criteria as may be established for their positions. In accordance with the requirements of 5 U.S.C. 4312, 4313 and 9508 and section 1201 of the Act the performance criteria for each position as are appropriate to that position, will be composed of elements that support the organizational measures of Customer Satisfaction, Employee Satisfaction and Business Results; however, such organizational measures will not directly determine the evaluation of individual employees. (b) Fair and equitable treatment of taxpayers. In addition to all other criteria required to be used in the evaluation of employee performance, all employees of the IRS will be evaluated on whether they provided fair and equitable treatment to taxpayers. (c) Senior Executive Service and special positions. Employees in the Senior Executive Service will be rated in accordance with the requirements of 5 U.S.C. 4312 and 4313 and employees selected to fill positions under 5 U.S.C. 9503 will be evaluated pursuant to workplans, employment agreements, performance agreements or similar documents entered into between the IRS and the employee. (d) General workforce. The performance evaluation system for all other employees will: (1) Establish one or more retention standards for each employee related to the work of the employee and expressed in terms of individual performance; (2) Require periodic determinations of whether each employee meets or does not meet the employee’s established retention standards; (3) Require that action be taken in accordance with applicable laws and regulations, with respect to employees whose performance does not meet the established retention standards; (4) Establish goals or objectives for individual performance consistent with the IRS’s performance planning procedures; (5) Use such goals and objectives to make performance distinctions among employees or groups of employees; and (6) Use performance assessments as a basis for granting employee awards, adjusting an employee’s rate of basic pay, and other appropriate personnel actions, in accordance with applicable laws and regulations. (e) Limitations. (1) No employee of the IRS may use records of tax enforcement results (as defined in §801.6T) to evaluate any other employee or to impose or suggest production quotas or goals for any employee. (i) For purposes of the limitation contained in this paragraph (e), employee has the meaning as defined in 5 U.S.C. 2105(a). (ii) For purposes of the limitation contained in this paragraph (e), evaluate includes any process used to appraise or measure an employee’s performance for purposes of providing the following: (A) Any required or requested performance rating. (B) A recommendation for an award covered by section 45 of Title 5; 5 U.S.C. 5384; or section 1201(a) of the Act. (C) An assessment of an employee’s qualifications for promotion, reassignment or other change in duties. (D) An assessment of an employee’s eligibility for incentives, allowances or bonuses. (E) Ranking of employees for release/recall and reductions in force. (2) Employees who are responsible for exercising judgment with respect to tax enforcement results in cases concerning one or more taxpayers may be evaluated on work done on such cases only in the context of their critical elements and standards. (3) Performance measures based in whole or in part on quantity measures (as described in §801.6T) will not be used to evaluate the performance of any non-supervisory employee who is responsible for exercising judgment with respect to tax enforcement results (as defined in §801.6T). |
| §801.4T Customer satisfaction measures (temporary).The customer satisfaction goals and accomplishments of operating units within the IRS will be determined on the basis of information gathered through various methods. For example, questionnaires, surveys and other types of information gathering mechanisms may be employed to gather data regarding customer satisfaction. Information to measure customer satisfaction for a particular work unit will be gathered from a statistically valid sample of the customers served by that operating unit and will be used to measure, among other things, whether those customers believe that they received courteous, timely and professional treatment by the IRS personnel with whom they dealt. Customers will be permitted to provide information requested for these purposes under conditions that guarantee them anonymity. For purposes of this section, customers may include individual taxpayers, organizational units or employees within IRS and external groups affected by the services performed by the IRS operating unit. |
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§801.5T Employee satisfaction measures (temporary). The employee satisfaction numerical ratings to be given operating units within the IRS will be determined on the basis of information gathered through various methods. For example, questionnaires, surveys and other information gathering mechanisms may be employed to gather data regarding satisfaction. The information gathered will be used to measure, among other factors bearing upon employee satisfaction, the quality of supervision and the adequacy of training and support services. All employees of an operating unit will have an opportunity to provide information regarding employee satisfaction within the operating unit under conditions that guarantee them anonymity. |
| §801.6T Business results measures (temporary). (a) In general. The business results measures will consist of numerical scores determined under the quality measures and the quantity measures described elsewhere in this section. (b) Quality measures. Quality measure will be determined on the basis of a review by a specially dedicated staff within the IRS of a statistically valid sample of work items handled by certain functions or organizational units determined by the Commissioner or his delegate such as the following: (1) Examination and collection units and Automated Collection System Units (ACS). The quality review of the handling of cases involving particular taxpayers will focus on such factors as whether IRS personnel devoted an appropriate amount of time to a matter, properly analyzed the facts, complied with statutory, regulatory and IRS procedures, including timeliness, adequacy of notifications and required contacts with taxpayers. (2) Toll-free telephone sites. The quality review of telephone services will focus on such factors as whether IRS personnel provided accurate tax law and account information. (3) Other work units. The quality review of other work units will be determined according to criteria prescribed by the Commissioner or his delegate. (c) Quantity measures. Quantity measures will consist of outcome-neutral production and resource data that does not contain information regarding the tax enforcement result reached in any case involving particular taxpayers. Examples of quantity measures include, but are not limited to – (1) Cases started; (2) Cases closed; (3) Work items completed; (4) Customer education, assistance, and outreach efforts completed; (5) Time per case; (6) Direct examination time/out of office time; (7) Cycle time; (8) Number or percentage of overage cases; (9) Inventory information; (10) Toll-free level of access; and (11) Talk time. (d) Definitions - (1) Tax enforcement result.Tax enforcement results. A tax enforcement result is the outcome produced by an IRS employee’s exercise of judgment in recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Examples of tax enforcement results include a lien filed, a levy served, a seizure executed, the amount assessed, the amount collected, and a fraud referral. Examples of data that are not tax enforcement results include a quantity measure and data derived from a quality review or from a review of an employee’s or a work unit’s work on a case, such as the number or percentage of cases in which correct examination adjustments were proposed or appropriate lien determinations were made. (2) Records of tax enforcement results. Records of tax enforcement results are data, statistics, compilations of information or other numerical or quantitative recordations of the tax enforcement results reached in one or more cases. Such records may be used for purposes such as forecasting, financial planning, resource management, and the formulation of case selection criteria. Records of tax enforcement results may be used to develop methodologies and algorithms for use in selecting tax returns to audit. Records of tax enforcement results do not include tax enforcement results of individual cases when used to determine whether an employee exercised appropriate judgment in pursuing enforcement of the tax laws based upon a review of the employee’s work on that individual case. |
| §801.7T Examples (temporary). (a) The rules of §801.3T are illustrated by the following examples: Example 1. (i) Each year Division A’s Examination and Collection functions develop detailed workplans that set goals for specific activities (e.g., numbers of audits or accounts closed) and for other quantity measures such as cases started, cycle time, overage cases, and direct examination time. These quantity measure goals are developed nationally and by Area Office based on budget allocations, available resources, historical experience, and planned improvements. These plans also include information on measures of quality, customer satisfaction, and employee satisfaction. Results are updated monthly to reflect how each organizational unit is progressing against its workplan, and this information is shared with all levels of management. (ii) Although specific workplans are not developed at the Territory level, Headquarters management expects the Area Directors to use the information in the Area plans to guide the activity in their Territories. For 2005, Area Office 1’s workplan has a goal to close 1,000 examinations of small business corporations and 120,000 taxpayer delinquent accounts (TDAs), and there are 10 Exam Territories and 12 Collection Territories in Area Office 1. While taking into account the mix and priority of workload, and available staffing and grade levels, the Examination Area Director communicates to the Territory Managers the expectation that, on average, each Territory should plan to close about 100 cases. The Collection Area Director similarly communicates to each Territory the expectation that, on average, they will close about 10,000 TDAs, subject to similar factors of workload mix and staffing. (iii) Similar communications then occur at the next level of management between Territory Managers and their Group Managers, and between Group Managers and their employees. These communications will emphasize the overall goals of the organization and each employee’s role in meeting those goals. The communications will include expectations regarding the average number of case closures that would have to occur to reach those goals, taking into account the fact that each employee’s actual closures will vary based upon the facts and circumstances of specific cases. (iv) Setting these quantity measure goals, and the communication of those goals, is permissible because case closures are a quantity measure. Case closures are an example of outcome-neutral production data that does not specify the outcome of any specific case such as the amount assessed or collected. Example 2. In conducting a performance evaluation, a supervisor is permitted to take into consideration information the supervisor has developed showing that the employee failed to propose an appropriate adjustment to the tax liability in one of the cases the employee examined, provided that information is derived from a review of the work done on the case. All information derived from such a review of individual cases handled by the employee, including time expended, issues raised, and enforcement outcomes reached should be considered and discussed with the employee and used in evaluating the employee. Example 3. When assigning a case, a supervisor is permitted to discuss with the employee the merits, issues, and development of techniques of the case based upon a review of the case file. Example 4. A supervisor is not permitted to establish a goal for proposed adjustments in a future examination. |
| §801.8T Effective dates (temporary). (a) The provisions of §§801.3T through 801.7T apply on or after October 17, 2005 (b) The applicability of §§801.3T through 801.7T expires on or before October 14, 2008. |
| Deputy Commissioner for Services and Enforcement |
Deputy Assistant Secretary (Tax Policy)
Note:Regulation §801.7T contains a technical error: cycle time and overage are quality measures, not quantity measures. |
| Section 1204/Regulation 801 Decision Table | ||||
|---|---|---|---|---|
| Step | Question | Yes | No | Explanation/ Comments |
| 1 | Is the data a record of tax enforcement results (ROTER)? | Go to Step 2 | Go to Step 3 | Records of tax enforcement results are data, statistics, compilations of information or other numerical or quantitative recordations of the tax enforcement results reached in one or more cases, but do not include tax enforcement results of individual cases when used to determine whether an employee exercised appropriate judgment in pursuing enforcement of the tax laws based upon a review of the employee’s work on that individual case. See §801.6T(d)(2) |
| 2 | Is the record of tax enforcement results being used to evaluate or to impose or suggest production quotas or goals for any employee? | Prohibited by Section 1204 & Regulation 801 | RRA 98 Section 1204 does not apply | The IRS shall not use records of tax enforcement results to evaluate employees or to impose or suggest production quotas and goals with respect to such employees. (RRA 98, Section 1204) No employee of the IRS may use records of tax enforcement results (as described in 801.6T) to evaluate any other employees or impose or suggest production quotas or goals for any employee. See §801.3T(e)(1)Section 1204 employees include all levels of management. |
| 3 | Is the data a quantity measure? | Section 1204 does not apply to quantity measures; however, Regulation 801 does. See steps 4 - 6 | Neither RRA 98, Section 1204, nor Regulation 801 apply. | Quantity measures will consist outcome-neutral production and resource data that does not contain information regarding the tax enforcement result reached in any case that involves particular taxpayers. §801.6T(c) |
| 4 | Is the quantity measure used to impose or suggest production goals for: a) An organizational unit? b) A supervisory 1204 employee? c) A non-supervisory 1204 employee? d) A non-1204 employee? | Not prohibited by Regulation 801 | Go to step 5 | Quantity measures include measures such as cases started or closed, time per case, work items completed, hours expended, inventory information etc. which are outcome neutral and not records of tax enforcement results. Revised Regulation 801 removed the limitations on the use of quantity measures for imposing or suggesting goals for both organizational units and employees. See 801.6T(c) |
| 5 | Is the quantity measure used to evaluate the performance of an Organizational unit? | Not prohibited by Regulation 801 | Go to step 6. | Organizational measures of customer satisfaction, employee satisfaction and business results (including quality and quantity) may be used to evaluate the performance of or to impose or suggest production goals for, any organizational unit. See §801.2T |
| 6 | Is the quantity measure used to evaluate the performance of: a) A supervisory 1204 employee? b) A non-1204 employee | Not prohibited by Regulation 801 | Go to step 7 | A performance measure may be based, in whole or in part, on a quantity measure. The performance criteria for each position, as are appropriate for that position, will be composed of elements that support the organizational measures of Customer Satisfaction, Employee Satisfaction, and Business Results; however such organizational measures will not directly determine the evaluation of individual employees. See §801.3T(a) |
| 7 | Is the quantity measure used to evaluate the performance of a non-supervisory 1204 employee? | Prohibited by Regulation 801 | Regulation 801 does not apply | Performance measures based in whole or in part on quantity measures (as described in §801.6T) will not be used to evaluate the performance of any non-supervisory employee who is responsible for exercising judgment with respect to tax enforcement results (as described in §801.6T). See. §801.3T(e)(3) |
Employee evaluation includes any written document used to appraise or measure an employee’s performance to provide:
- Required or requested performance rating (annual, mid-year, ad hoc)
- Recommendation for an award
- Assessment of an employee’s qualifications for promotion, reassignment or other change in duties
- Assessment of an employee’s eligibility for incentives, allowances or bonuses
- Ranking of employees for release/recall and reductions in force
Note:
Regulation §801.3T(e)(1)(ii). See Exhibit 1.5.2-1. This definition of “employee evaluation” specifically includes only the five items above, and is the definition to use in identifying where TERs and ROTERs cannot be used. Other “usual” components of evaluations, such as individual case reviews, progress reviews, and workload reviews, are not included in this definition of employee evaluation for this purpose.
Exercise of judgmentin pursuing enforcement of the tax law refers to the process of making decisions to recommend or determine whether or how the Service should pursue enforcement of the tax law (including but not limited to the taxpayer’s tax liability or ability to pay). These deliberations can result in reasonable people handling the same cases and, in good faith, discerning or evaluating factors differently.
One or more cases is referenced in the definition of a Record of Tax Enforcement Result (ROTER), specifically “tax enforcement results reached in one or more cases.” The definition intentionally references one case to make it clear that Section 1204 applies to the result reached in a single case, as well as results reached in more than one case. Managers cannot use a TER from a single case to evaluate an employee or suggest production quotas or goals.
Quantity measures consist of outcome-neutral production and resource data that do not contain information regarding the TER reached in any case or cases involving particular taxpayers.
Records of Tax Enforcement Results (ROTERs) are data, statistics, compilations of information or other numerical or quantitative recordations of the tax enforcement results reached in one or more cases.
Section 1204 employee is:
- an employee or manager of an employee (all levels of management) who exercises judgment in recommending or determining whether or how the IRS should pursue enforcement of the tax laws, or
- an employee whose duties involve providing direction or guidance for field programs involving Section 1204 work activities.
Note:
The work activity performed, not the title or location of the employee, identifies a Section 1204 employee.
Tax Enforcement Result (TER) is the outcome produced by an Internal Revenue Service employee’s exercise of judgment in recommending or determining whether or how the Internal Revenue Service should pursue enforcement of the tax laws.
To impose a production quota or goal includes any communication (whether written or oral) which requires a Section 1204 employee to achieve a particular TER outcome through his or her performance activities.
To suggest a production quota or goal means to engage in conduct from which a reasonable person would infer that the manager would evaluate the employee more favorably if the employee achieved a specific enforcement result regardless of the merits of the particular case(s).
The following questions and answers discuss the use of records of tax enforcement results within Small Business/Self-Employed and Wage and Investment Operating Divisions.
| TAX ENFORCEMENT RESULTS/RECORDS OF TAX ENFORCEMENT RESULTS |
|---|
| Q1. Are IMF Refund Accuracy Rate, Notice Accuracy, Refund Timeliness - Paper (days), and Refund Dollars Subject to Interest IMF Returns records of tax enforcement results subject to Section 1204/Regulation 801? |
| No. Each of the statistics cited in the question reports the timeliness or quality of employee collective efforts and are not figures resulting from the recordation, accumulation, tabulation or mathematical analysis that is directly related to producing a tax enforcement result - e.g. an outcome produced by an employee exercising judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. For example, the IMF Refund Accuracy Rate is a figure representing the quality or accuracy of the issuance of refunds - the correct amount to the correct taxpayer. The accuracy of these refunds is measured in the quality review process against the actual taxpayer returns requesting the refunds. Similarly, the Notice Accuracy is a figure representing the quality or accuracy of various master file notices actually sent to taxpayers (both individual and business) measured against the original return information. Refund Timeliness - Paper reports the average number of days taken to process and issue a refund to a taxpayer. This statistic uses a systemic random sample of returns processed during various dates. This measurement does not consider employee judgments exercised in recommending or determining whether or how the IRS should pursue enforcement of the tax laws - rather, this record measures the average time taken by a campus to issue a refund to a taxpayer due one. |
| Finally, the Refund Dollars Subject to Interest IMF Returns measures the amount of refund dollars that are subject to interest payments by the Service for failure to process in a prescribed time period. This statistic is contained in a ratio measuring the gross dollar amount of late refunds to the gross dollar amount of all (timely plus late) refunds issued. This measurement does not consider employee judgments in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws - rather, it measures only the quality of campus operations in timely handling refunds. As set forth above, each record measures quality or accuracy and none is a record of tax enforcement results so they are not subject to Section 1204. |
| Q2. Are statistics which measure taxpayer actions (e.g. the number of returns and return information filed electronically as well as by paper) records of tax enforcement results? |
| No. Statistics which measure taxpayer or other third party actions do not consider the exercise of judgment by employees in recommending or determining whether or how the IRS should pursue enforcement of the tax laws and, thus, are not records of tax enforcement results and Section 1204/Regulation 801 does not apply. |
| Q3. Is the measurement of telephone idle time a record of tax enforcement results? |
| The determination of whether a measurement is a record of tax enforcement results depends upon whether the tasks measured involve the exercise of judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Not all tasks conducted by telephone involve the exercise of judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. For example, telephone assistors who provide guidance to taxpayers on general questions of interest do not involve the exercise of judgment in regard to tax liability or ability to pay - they provide guidance only and not decisions affecting a particular taxpayer’s tax liability or ability to pay. Similarly, there are tasks undertaken by telephone which do require the exercise of judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws, e.g. ACS employees engaged in negotiating large case installment agreements. |
| The current telephone system (ASPECT) measures telephone activities as follows: receiving calls, making calls, available for calls, wrapping up calls, or idle time. In most cases, idle time refers to the period of time in which an employee is not otherwise engaged in conducting or wrapping up telephone calls - periods when the employee is not working. When used only to measure the period when an employee is not conducting work, “idle time” does not measure any exercise of judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws and, accordingly, is not a record of tax enforcement results. |
| Q4. What activities relating to the assessment and abatement of penalties are subject to Section 1204/Regulation 801? |
| Different penalties are assessed in different ways which affects the application of Section 1204/Regulation 801. Penalties, such as the late filing penalty and the failure to pay penalty, which are routinely assessed at the time a return or deficiency are assessed, do not involve judgment, and their assessment is not a Section 1204 activity. Other penalties, such as information return penalties and the failure to deposit penalty, are or may be proposed prior to assessment. In these cases, issuing a notice proposing the penalty would not be a Section 1204 activity if it results from an automated or manual reconciliation or analysis process which does not involve discretionary judgment by the employee.
Abating or waiving penalties based on communications with the taxpayer may involve Section 1204 judgments. This is the case with abatement or waiver requests in which the taxpayer asserts that he or she had reasonable cause for noncompliance or exercised due diligence. While the IRM gives extensive guidance on evaluating reasonable cause or due diligence assertions, it cannot cover all possible circumstances and employees often must weigh the taxpayer’s response and exercise discretion in accepting or rejecting the taxpayer’s request. Therefore, making determinations of reasonable cause or due diligence for penalty abatement or waiver is a Section 1204 activity. In other instances, taxpayers will respond to penalty notices by presenting new facts indicating that the penalty does not apply. For example, an employee may respond to a failure to deposit penalty notice by showing that the business’ payroll fluctuated during the quarter and that the deposits made were in the correct amounts, or that a deposit was made properly but misapplied to another period. If the examiner working these responses is not expected to verify the taxpayer’s assertion as to payroll fluctuations, but only to recalculate the penalty or locate and transfer the mis-applied deposit, no Section 1204 judgment is involved. Other penalty abatements arise due to adjustments to the underlying tax on which they are computed. While the tax adjustment may involve Section 1204 judgment depending on the type of judgment involved, the related penalty abatement is merely mathematical and does not involve Section 1204 judgment in and of itself. |
| Q5. Are Questionable Refund cases Records of Tax Enforcement Results for purposes of Section 1204/Regulation 801? |
| Yes. A record of tax enforcement results is a figure resulting from the recordation, accumulation, tabulation, or mathematical analysis that is directly related to producing a tax enforcement result. A tax enforcement result is an outcome produced by an employee exercising judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. The determination of whether a matter is a Questionable Refund requires the exercise of judgment in determining tax liability - an analysis of legal principles, tax law and the taxpayer’s circumstances. The degree and depth of analysis required for a Questionable Refund meets the test for the exercise of Section 1204 judgment and a determination that the refund either is or is not a Questionable Refund is the product of that judgment as to tax liability. |
| Q6. Are tax examiners who adjust a taxpayer’s income or loss considered “Section 1204 employees” as defined for the purpose of applying Section 1204/Regulation 801? |
| For purposes of applying Section 1204/Regulation 801, “Section 1204 employees” are employees who exercise judgment with regard to determining tax liability or ability to pay. Thus, whether an employee is an “Section 1204 employee” for purposes of applying Section 1204/Regulation 801 is determined by the tasks performed by the employee, not the title or location of the employee. If the duties being performed by tax examiners doing adjustment work involve the receipt and processing of taxpayer generated adjustments to returns, then these employees are not “Section 1204 employees” for purposes of that task since they are not auditing the returns and making corresponding adjustments, but rather are only inputting into IDRS the return information provided by the taxpayer. Certainly, these tax examiners exercise decision-making in performing their tasks, but this decision-making is not the type of exercise of judgment with regard to determining tax liability or ability to pay which is covered by Section 1204/Regulation 801. In performing the function of processing this new data provided by the taxpayer, the tax examiner did not discern or evaluate any facts, factors, circumstances, issues, law, equity, burdens of proof or policies regarding the taxpayer’s tax liability or ability to pay.
Additionally, in most instances, the tax examiner will refer this new return information to the Examination function prior to inputting the data when the IRM or other authority directs referrals of return information meeting certain profiles. In this situation, while the tax examiner has made a decision that the return must be referred to the Examination function, that decision did not require any “Section 1204″ judgment because the tax examiner applied a non-discretionary work rule requiring a prescribed course of action — a referral to the Examination function because the return has met a certain profile. |
| Q7. A broad base of campus employees set up installment agreements based on established guidelines. Request for Installment Agreement, Form 9465, provides taxpayers an opportunity to have IRS establish an installment agreement. These requests are granted with no analysis of financial status or any requirement to determine ability to pay. Would this be considered an enforcement result under Section 1204/Regulation 801 and would examiners doing this work be considered Section 1204 employees? |
| The determination of whether Section 1204/Regulation 801 applies requires a review of the tasks performed by the employee and a determination whether the employee exercises judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. The decision whether to set up an installment agreement is clearly a decision determining a taxpayer’s ability to pay. But not all decisions on issuing an installment agreement involve the kind of judgment in regard to determining a taxpayer’s ability to pay covered by Section 1204/Regulation 801. For example, the IRM has established non-discretionary criteria regarding streamlined installment agreements. If the taxpayer seeks an installment agreement and meets the IRM criteria, the taxpayer is entitled to such an agreement and the employee (whether in the campus or elsewhere) who handles the request is not exercising the type of judgment with regard to determining ability to pay covered by Section 1204/Regulation 801. Thus, when handling a streamlined installment agreement, the employee is not a “Section 1204 employee”
A different result occurs, however, if the taxpayer does not meet non-discretionary criteria for an installment agreement. In such circumstances, an employee may have to exercise judgment in regard to determining a taxpayer’s ability to pay. For example, an employee may have to review a taxpayer’s financial situation to determine whether an installment agreement is an appropriate resolution. To this end, the IRM may provide guidance to that employee; however this guidance is discretionary and the employee is charged with the responsibility to identify and weigh the proper factors. This is the essence of the type of judgment covered by Section 1204/Regulation 801 and when exercised, the employee is a “Section 1204 employee.” |
| Q8. In the case analysis phase of URP, the tax examiner compares the information on the taxpayer return to the information provided by payers to ensure it has been reported. If there is a discrepancy, a notice of discrepancy (CP2000) is generated to the taxpayer requesting he/she provide an explanation and/or verification of the discrepant amounts. Is this process subject to Section 1204/Regulation 801 and are employees performing this work Section 1204 employees? |
| The process and acts undertaken to reconcile 1099s, W-2s and related payment or wage statements with returns are not tax enforcement results since they are not outcomes produced by an employee exercising judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws (See definition of “tax enforcement result” ). Rather, they are requiring decision-making with regard to document matching, not tax liability or ability to pay. Thus, reconciliation efforts and issuance of required notices (CP2000) are not records of tax enforcement results and are not covered by Section 1204/Regulation 801. |
| Q9. If the taxpayer timely responds to the notice with a signed full agreement to the proposed tax or credit adjustment, the agreement is processed by the clerical staff. Is this covered under Section 1204/Regulation 801 and are employees performing this work Section 1204 employees? |
| The receipt and processing of a full agreement does not require an exercise of judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Rather, these tasks involve decision-making regarding processing and accounting functions, not determinations on tax liability or ability to pay those determinations were made by others. |
| Q10. The Return SSA program identifies failures to file Form W-2s with the Social Security Administration. A civil penalty is assessed when the employer fails to file with the Social Security Administration. However, if the taxpayer submits information to show that he or she filed the W-2s, the penalty is abated. Would employees performing this work be considered Section 1204 employees? |
| The status of a Section 1204 employee depends upon the precise duties performed by the employee. If the employee exercises judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws, then the employee is a Section 1204 employee. Reconciling databases between the IRS and SSA does not involve judgment in recommending or determining whether or how the IRS should pursue enforcement of the tax laws covered by Section 1204/Regulation 801. When a civil penalty is automatically assessed based upon the determination of a discrepancy between the SSA and IRS records, the civil assessment is not an outcome produced by an employee exercising judgment with regard to determining tax liability.
However, when an employee exercises judgment in reviewing data provided by the taxpayer rather than reconciling the mathematical contents of such data, then the employee does exercise judgment in regard to determining tax liability. This judgment manifests itself in the employee’s decision-making on determining the reasonableness and validity of the information. If the IRS is required to accept the information without further review by an employee on such subjective criteria as reasonableness and credibility, then no judgment would be required. However, to the extent that the IRS’ determination of tax liability of a taxpayer depends upon an employee’s exercise of judgment in regard to the reasonableness or credibility of the information, then the employee does exercise the kind of judgment covered by Section 1204/Regulation 801. Making determinations on civil penalty abatement requests predicated on reasonable cause would involve Section 1204 judgment. |
| Q11. PMF (Payer Master File) is a program to assess a civil penalty for late filed Information Returns. If the taxpayer response meets reasonable cause criteria, the penalty is abated. Would this fall under Section 1204 employee criteria? |
| Yes. A Section 1204 employee is an employee who exercises judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. The deliberations undertaken in deciding reasonable cause criteria is the exercise of judgment covered by Section 1204/Regulation 801 because it weighs factors in particular cases, there is no set formula. Accordingly, an employee who makes decisions upon reasonable criteria in abating penalties is a Section 1204 employee. |
| Q12. Math error issues are processing actions. However, accounts are increased and decreased. Does this constitute action by a Section 1204 employee? |
| No. As explained previously, a Section 1204 employee is an employee who exercises judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. The reconciliation or correction of math errors requires decision making, but that decision making is based upon the application of mathematical principles and does not require the exercise of judgment, e.g., weighing factors appropriately, deciding reasonableness and determining credibility covered by Section 1204/Regulation 801. |
| Q13. If the major portion of employees’ performance is not enforcement activity, but a small percentage could be mixed with their work, would their entire performance be considered enforcement and would they be considered Section 1204 employees? |
| Section 1204/Regulation 801 applies to the tasks performed by employees. An employee may be a Section 1204 employee for one task, but not another. The difference depends upon whether the employee exercises judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws in performing that task. Thus, the employee would be considered a Section 1204 employee. |
| Q14. Are employees who work responses in document matching programs; i.e., Automated Under Reporter (AUR), considered Section 1204 employees for the purpose of applying Section 1204/Regulation 801? |
| For purposes of applying Section 1204/Regulation 801, Section 1204 employees are employees who exercise judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. In document matching programs, such as AUR, the vast majority of discrepancies are resolved in routine decision-making actions which relate to clear cut reporting issues. The provisions for resolving these are straightforward and are covered in the IRM. These are not considered as covered by the provisions of Section 1204/Regulation 801. There are, however, instances where working the responses to discrepancies go beyond this routine, non-discretionary decision-making. These instances involve disputed or disagreed issues in document discrepancies where additional verification and/or technical law issues arise. These resolutions involve a detailed knowledge of laws and regulations, and technical or professional judgment. In these instances the employees are considered Section 1204 employees as they are using judgment with regard to determining tax liability and are therefore covered under the provisions of Section 1204/Regulation 801. |
| Q15. In my group, individuals work correspondence received from taxpayers who are responding to an LT-18 letter (notification of proposed A6020(b) assessment). Are these employees considered Section 1204 employees under Section 1204/Regulation 801 and is that work considered Section 1204/Regulation 801 work? |
| Whether an employee is a Section 1204 employee for purposes of applying Section 1204/Regulation 801 is determined by the tasks performed by the employee, not the title or location of the employee.
If the duties performed working the correspondence are the processing of the A6020(b) assessment because the taxpayer provided us with more correct or accurate figures, then these employees are not Section 1204 employees since they are only inputting onto the A6020(b) system the information provided by the taxpayer. However, if the employee evaluates any facts, factors, alternative courses of action, from the taxpayer correspondence, then they would be exercising judgment pertaining to the taxpayer’s liability and Section 1204/Regulation 801 would apply. For example, if the taxpayer wrote that they didn’t file because they closed the business before the end of the quarter and the employee determines the tax due would meet the criteria identified for non-pursuit under P-5-133, the employee would then make a determination if the assessment should be made or if the case should be closed. As the IRM does not require application of P-5-133 in all circumstances, the employee must exercise his or her judgment whether to apply P-5-133. Accordingly, the employee is exercising judgment in regard to determining a taxpayer’s liability and is subject to the provisions of Section 1204/Regulation 801. |
| Q16. Are tax examiners processing levy responses considered Section 1204 employees? |
| Whether an employee is a Section 1204 employee for purposes of applying Section 1204/Regulation 801 is determined by the task performed by the employee and not the title or location of the employee. As stated in this question, if the employee is only inputting information received from the third party and is following non-discretionary procedures in issuing the next available levy, that is not the kind of exercise of judgment sought to be protected by Section 1204/Regulation 801 and, therefore, is not subject to either. |
| Q17. Are tax examiners who work Taxpayer Advocate cases considered Section 1204 employees as defined for the purpose of applying Section 1204/Regulation 801? |
| For purposes of applying Section 1204/Regulation 801, “Section 1204 employees” are employees who exercise judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Whether an employee is a “Section 1204 employee” for the purposes of applying Section 1204/Regulation 801 is determined by the tasks performed by the employee, not the title or location of the employee. Tax examiners who work Taxpayer Advocate cases may or may not be Section 1204 employees. For example, the tax examiner processing the manual refund or working the payment tracer according to non-discretionary criteria contained in the appropriate section of the IRM is performing enforcement work. Certainly, these tax examiners exercise decision-making in performing their tasks, but this decision-making is not the type of exercise of judgment with regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws which is covered by Section 1204/Regulation 801. Conversely, a Taxpayer Advocate tax examiner is a Section 1204 employee when working a Correspondence Examination reconsideration case. |
| Q18. Are tax examiners working Correspondence Examination deficiency cases or reconsideration cases considered to be Section 1204 employees and is this work subject to Section 1204/Regulation 801? |
| Yes. Employees making determinations on correspondence examination deficiency and reconsideration cases are expected to review the taxpayer’s return or correspondence for new issues and to weigh the credibility and reasonableness of the taxpayer’s assertions. This clearly involves discretion in that two employees working the same case can reasonably come to different conclusions as to the acceptability of the taxpayer’s assertions. This type of judgment falls under the purview of Section 1204/Regulation 801. This can be contrasted to the judgment involved in working Automated Substitute for Return (ASFR) reconsiderations which are generally to be taken at face value so long as the return filed is processable and reports the income amounts known to the IRS. When examiners working ASFR reconsideration cases identify returns which appear questionable, they are instructed to forward them for review and determination by other employees. |
| Q19. Are tax examiners or tax auditors working Innocent Spouse claims considered Section 1204 employees for purposes of Section 1204/Regulation 801? |
| Whether an employee is a Section 1204 employee depends upon the tasks performed by the employee and the type of judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws, that the employee exercises. Regarding this question, campus tax examiners and tax auditors use a decision tree to screen innocent spouse claims to determine if the basic requirements are met, e.g., the taxpayer must file a joint return, and an additional assessment of more than a specified amount is involved. These employees do not question the taxpayer’s statements and do not exercise Section 1204 judgment in working these cases. Cases which are too complex are forwarded to area offices for resolution; e.g., cases involving community property or where the non-electing spouse wishes to participate. |
| Q20. A tax examiner decides to report an account as currently not collectible based on financial information submitted by the taxpayer. Is this a tax enforcement result for purposes of Section 1204/Regulation 801 and is the tax examiner working as a Section 1204 employee? |
| Yes. The activity produces a tax enforcement result and the employee is working as a Section 1204 employee. The tax examiner analyzes financial information provided by the taxpayer to determine ability to pay. Based on this financial analysis, the tax examiner exercises judgment in determining if the taxpayer’s income, expenses or assets and liabilities would permit a taxpayer to pay. The tax examiner compares the expenses to the allowable expense standards to determine if the expenses are reasonable or necessary. Assets are analyzed to determine equity and the taxpayer’s ability to borrow. This type of decision making in determining the ability to pay requires the type of judgment covered by Section 1204/Regulation 801. |
| Q21. An employee engaged in processing returns refers a questionable return, document or information item to Criminal Investigation. Is the employee exercising Section 1204 judgment? |
| No. In this scenario, the employee has not exercised judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Rather, the employee has made a decision to refer the information to Criminal Investigation for its analysis. The CI employee conducts research, discerns data, and may contact third parties in determining the authenticity of documents or the validity of a refund. This CI employee is clearly exercising the type of judgment covered by Section 1204/Regulation 801. |
| Q22. What work in the Campus Offer in Compromise program falls under Section 1204/Regulation 801? |
| Only the analysis of case information and documentation in determining the acceptance, rejection or withdrawal of an offer based on collectability involves Section 1204 judgment. This work is generally not done in the Campuses. Work performed in the Campuses such as processability determinations, monitoring compliance with the terms of accepted offers and payment posting are not tasks requiring the type of judgment covered by Section 1204/Regulation 801 and employees performing these tasks are not Section 1204 employees. |
| Q23. Are campus employees who classify estate tax returns considered “Section 1204 employees” as defined for the purpose of applying Section 1204/Regulation 801? |
| Yes. The classifier has the discretion to apply judgment in determining other estate returns that may have other audit potential issues, or identify questionable items on the estate tax return or issue a closing letter. |
| Q24. Are tax examiners making determinations in DATC/ASTA cases considered to be enforcement employees? |
| Yes. DATC/ASTA programs are test programs for which only general guidelines are provided for examiners to follow. The examiners are expected to exercise considerable discretion in reviewing and making determinations on taxpayer replies to notices. The decisions made in this manner involve the type of judgment intended to be protected under Section 1204/Regulation 801. |
| Q25. I am a unit manager in ACS. I need to know if it is a Section 1204 violation to bring up, in an evaluation, that a levy was not filed when it was, in fact, the next appropriate action? |
| It is not a violation of Section 1204/Regulation 801 to review the case or to discuss the appropriate actions to be taken with the employee, even if the action is an enforcement action. Section 1204/Regulation 801 provides a specific exception in the definition of tax enforcement results for this purpose. In documenting the performance review, and in any subsequent evaluation, focus on documenting the appropriateness of the decisions, in the context of the employee’s critical elements and standards, and not on documenting the specific actions that were or were not taken. |
| Q26. If “case closures” is no longer considered a ROTER, may a Section 1204 employee’s production rate be addressed in performance counseling? |
| Yes, but not simply in terms of quantity of work done. As a diagnostic tool, an employee’s production rate may alert the manager to look at the employee’s work practices to see if adjustments are in order. While the quantity measure may be mentioned, the discussion with the employee must be conducted in terms of the critical elements and standards. |
| Q27. May a Section 1204 employee’s production rate be compared to the group’s average? |
| Yes, but not simply in terms of quantity of work done. As a diagnostic tool, an employee’s production rate may alert the manager to look at the employee’s work practices to see if adjustments are in order. While the quantity measure may be mentioned, the discussion with the employee must be conducted in terms of the critical elements and standards. |
| Q28. I am a manager and one of my Section 1204 employees is not working (producing) to my expectation. How may I convey my concern to the employee without violating Section 1204/Regulation 801? |
| You may discuss the quantity of work accomplished by the employee as a diagnostic indicator. This indicator would dictate the need for an analysis of the actual work activities which could affect productivity. If areas are identified which could be improved, they should be related to the Critical Job Elements of the employee and discussed in those terms. If your employee is not meeting one or several of those elements, you must address those issues to properly appraise the employee. You do that by monitoring telephone calls and reviewing work processed to address areas that are possibly causing problems (e.g., if the employee is not controlling the conversation, that may cause talk time to be longer, and therefore, fewer calls will be answered.) Another example could be when you review cases, you may find unnecessary steps were taken which resulted in less work being produced. By addressing issues that may affect productivity, you are not violating Section 1204/Regulation 801. However, when you are evaluating an employee, you should avoid referring to quantity measures such as the average number of phone calls answered or cases worked. |
| Q29. I am a ACS unit manager. May I use a TEACH list to select cases for evaluative purposes? |
| Yes, a TEACH list may be used. TEACH is a list of cases worked by an employee in a given day. The TEACH list is not a record of tax enforcement results; therefore Section 1204/Regulation 801 does not apply. Nor is it a quantity goal because the list provides managers with a universe of cases that may be selected for evaluative review. The case list can also be used as a diagnostic tool to pinpoint issues which may warrant further discussion with an employee. However, managers should not use the TEACH list to calculate a daily case count for evaluative purposes as that would violate Section 1204/Regulation 801. |
| Q30. During a conversation with my manager, she mentioned that I have not closed enough amended return cases. Is this appropriate? |
| If “closing of amended return cases” involves only the inputting of data into the IDRS, then this is not a record of tax enforcement results since the inputting employee did not exercise judgment in recommending or determining whether or how the IRS should pursue enforcement of the tax laws (step 1). Similarly, the employee would not be a “Section 1204 employee” since he/she did not exercise judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws. Since this is not a Section 1204 employee and the work done does not involve records of tax enforcement results, the manager may discuss the number of amended return cases.
However, if the employee exercised judgment in regard to recommending or determining whether or how the IRS should pursue enforcement of the tax laws and that decision resulted in the “closure of the amended return case” , then the closure would be a record of tax enforcement results, and the manager would be prohibited from telling the employee to close more cases since such an instruction would use a record of tax enforcement results to impose a production quota or goal for the employee. |
| Q31. Does measuring employee quality and quantity through TEPS violate Section 1204/Regulation 801? |
| The Total Employee Performance System (TEPS) is a tool employed in Campuses to measure certain employee performance standards selected by management. If used appropriately, TEPS does not violate Section 1204/Regulation 801. However, if TEPS contains a performance standard which uses a record of tax enforcement results to (1) evaluate any employee; or (2) to impose or suggest production quotas or goals for any employee, then the use of TEPS would violate Section 1204/Regulation 801. Thus, each performance measure is examined individually for conformance with Section 1204/Regulation 801. |
| Q32. I am a tax examiner working balance due accounts. In a conversation with my unit manager, she mentioned that I have not pursued requesting installment agreements during my steps to work a balance due account. Is this appropriate? |
| It is appropriate to discuss actions that should have been followed during the course of resolving a case, since this is part of the quality review of your case handling. This is true even if the actions are tax enforcement results. |
| Q33. If it is determined that only portions of the Underreporter Program are subject to Section 1204/Regulation 801, how does management deal with performance evaluations for employees who do the full range of Underreporter work? |
| If tasks performed in the Underreporter Program are subject to the prohibitions in Section 1204/Regulation 801, management may not evaluate employees based upon records of tax enforcement results that measure those tasks. |
| Q34. May a first-line manager discuss and solicit ideas for improving productivity when he or she meets with his or her employees to formulate an action plan? |
| Yes. This type of discussion is appropriate. |
| Q35. The director asked the territory manager to provide a weekly report on average “wait time” at the Field Assistance counters during filing season. Is it appropriate to share this report with Field Assistance managers and employees? |
| Yes. “Wait time” is a diagnostic tool intended to minimize taxpayer burden, not a record of tax enforcement results or a quantity measure. It should also be used to determine resource and training needs to better meet customer demand. However overemphasis on wait time could lead employees to focus on completing taxpayer contacts quickly and not on providing quality service. |
| Q36. May you as a unit manager establish time frames that must be met within a certain number of days? |
| Yes. Time frames are not records of tax enforcement results nor is timeliness a quantity measure. However, managers need to be cautious on the use of non-ROTERs. For example, overemphasis on time frames, even though not ROTERs or quantity measures, could lead employees to focus on the time frame instead of focusing on the appropriate case resolution. |
| Q37. Are program completion dates a violation of Section 1204/Regulation 801 and, if so, what impact will this have on scheduled rates? How will we schedule? |
| No. Program completion dates are the scheduled completion of returns processing (timely filed 1040s processed by a certain date) or program completions (CAWR/FUTA programs completed and submitted to the receiving agency by a certain date). These dates are not records of tax enforcement results because program completion date establishes a timing schedule only.
“Scheduled rates” is the term used to describe the work planning and control for allocation of resources to meet program completion dates. As these scheduled rates are not records of tax enforcement results, they are not subject to Section 1204/Regulation 801. |
| Q38. Is it appropriate for Headquarters personnel to give Campus Exam work plans directly to the Exam operations manager (the work plans identify program goals for EITC CLOSURES, ASFR CLOSURES, etc.)? |
| Yes. In the work planning process, the Headquarters must use some ROTERs for such purposes as planning and forecasting inventory levels. Since use of ROTERs for the work planning process is permitted in Section 1204, the sharing of work plans between the Headquarters and Examination department managers is not a violation of Section 1204/Regulation 801. Although they may be used later in setting Balanced Measure goals, production statistics in work plans that are ROTERs do not represent goals for evaluative purposes. It is important that, in sharing work plan data, managers at all levels should be cautious not to share ROTERs or the results of analyses in any way that imposes or suggests a production quota or goal against which employees will be evaluated. |
| Q39. Can you give me an example of a diagnostic tool and how it would be used? |
| The number of Campus examination closures per productive unit of effort is a diagnostic tool that may be used to “get behind the numbers.” If a Division is given a general expectation to improve production as part of its business results for the upcoming year, it could use closures per productive unit of effort from the current fiscal year as a diagnostic tool. By analyzing its case closures, the division could formulate an action plan that took all the obstacles into consideration and addressed ways to avoid or minimize the impact of obstacles. As the new fiscal year progressed, the current closures per productive unit of effort could be monitored to gauge the effectiveness of the action plan. If the action plan is not producing the desired outcome, the action plan would then be thoroughly reviewed and revised as necessary. |
| Q40. I am a ACS manager. At the beginning of each week I use my team’s Daily Workload report to see where I should allocate resources. Is that a Section 1204/Regulation 801 violation? |
| No. Using the report is not a violation since the number of cases in inventory is not a record of tax enforcement results. Workload planning and monitoring are required to assist in the effective management of an operation. |
| Q41. My employees like to know the number of cases in the Daily Workload. Would it be a violation of Section 1204/Regulation 801 to share this information? |
| No. That is not a violation since the number of cases in a particular inventory is not a record of tax enforcement results The Daily Workload report shows how many cases are in the inventory that can be worked on a specific day. Managers use the report to determine when and where employees should work. |
| Q42. The area director comments to her staff that cycle time has increased over last year’s accomplishment. Is it a violation of Section 1204/Regulation 801 if the territory manager shares this with the group managers? |
| No. Cycle time is not a record of tax enforcement results; neither is overage. They are measures of the span of time within which the process occurs and not the production time to complete the process. Therefore, they are not directly related to producing tax enforcement results. Timely, quality attention to taxpayer cases is the desired outcome. |
| Q43. At a manager’s meeting, the territory manager states that the number of cases that are over 90 days old are high and we need to reduce the overage inventory. Is this a violation of Section 1204/Regulation 801? |
| No. Age or amount in inventory is not a record of tax enforcement results. Emphasizing the amount of cases in the inventory may result in premature closure. Further research to determine the reasons for high inventory, e.g., inappropriate case processing, insufficient allocation of resources, or a discussion of the results of program reviews are effective methods to ensure that the objectives are being met. |
| Q44. I am a front line manager. Program Analysis System (PAS) accuracy rates for the past month show that my unit’s error rate has increased. May I share this information with my employees? |
| Yes. PAS measures quality results (performance measured against elements and standards) and are not records of tax enforcement results. Accordingly, they may be shared. |
| Q45. At a staff meeting, the area director states that overage has increased by 10% this year. May the territory manager communicate this to his/her Section managers? |
| Yes. Overage data is not a record of tax enforcement results nor is it a quantity measure. |
| Q46. I am an ACS department manager. I advise my subordinate managers that we need to increase the issuance of levies by 25%. Is this a Section 1204 violation? |
| Yes. This is a violation of Section 1204/Regulation 801. Levies |