TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
Planned Improvements Have Not Been Made to Manage and Track Correspondence
With International Taxpayers
September 8, 2015
Reference Number: 2015-30-072
This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.
Redaction Legend:
1 = Tax Return/Return Information
Phone Number / 202-622-6500
E-mail Address / TIGTACommunications@tigta.treas.gov
Website / http://www.treasury.gov/tigta
HIGHLIGHTS
PLANNED IMPROVEMENTS HAVE NOT BEEN MADE TO MANAGE AND TRACK CORRESPONDENCE
WITH INTERNATIONAL TAXPAYERS
Highlights
Final Report issued on September 8, 2015
Highlights of Reference Number: 2015-30-072 to the Internal Revenue Service Commissioner for the Wage and Investment Division.
IMPACT ON TAXPAYERS
As of May 2014, the U.S. State Department estimated that approximately 7.6 million U.S. citizens live in a foreign country. The rules for filing income, estate, and gift tax returns, as well as paying income taxes, are generally the same for international taxpayers as for those taxpayers living in the United States. The IRS heavily relies upon its many notices and letters as its primary means of communication with taxpayers.
WHY TIGTA DID THE AUDIT
As globalization trends continue, so too do the challenges to the IRS’s ability to provide services to and enhance the tax compliance of U.S. taxpayers living in other countries. This audit was initiated to evaluate the process for sending tax correspondence (notices and letters) to business and individual taxpayers who reside outside the United States, analyze how the taxpayers responded, and determine whether the correspondence resulted in improved compliance.
WHAT TIGTA FOUND
Even though the IRS sent approximately 855,000 notices and letters to U.S. taxpayers living in other countries during Calendar Year 2014, it cannot determine taxpayer response rates. The lack of data on response rates for international taxpayers is problematic because this information is needed to determine the effectiveness of international correspondence on increasing taxpayer compliance and to make program improvements.
IRS data systems are not designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable. Other factors complicate the delivery of international mail, making its delivery less certain than domestic correspondence.
In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them. Without specific controls to monitor and metrics to measure international tax correspondence, the IRS cannot determine the impact of its international tax correspondence on taxpayer compliance.
WHAT TIGTA RECOMMENDED
TIGTA recommended that the IRS: 1) develop a systemic process that identifies undelivered international mail volumes, as well as tracks international tax correspondence and receipt trends;2) develop specific performance measures to monitor the compliance impact of sending international tax correspondence to taxpayers residing outside the United States; 3) use the Postal Service Form 2865, Return Receipt for International Mail, for the countries that currently support return receipts for registered foreign mail; 4) expand the International Submission Processing Individual Master File Foreign Address Job Aid to include abbreviated address formats for all foreign countries as needed; and 5) coordinate with the other business operating divisions to make the job aid available to all IRS employees who are responsible for the input of addresses into IRS computer systems.
The IRS disagreed with four of the five recommendations. While the IRS generally agreed that TIGTA’s recommendations could provide additional insight into the factors contributing to undeliverable international mail, it does not believe this information would permit the IRS to overcome budgetary, statutory, and operational constraints as needed to achieve appreciable improvement in its current processes. TIGTA does not believe that the IRS’s response is adequate because current IRS processes for addressing international mail issues are ineffective or nonexistent.
September 8, 2015
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You can read the full report at https://www.treasury.gov/tigta/auditreports/2015reports/201530072fr.html
Thanks to bubblebustin for providing the content for this post.
Oh dear. The IRS guesses there are about 7.6 million of us living overseas, and has decided to contact a few more than 10% of us to encourage us to be compliant. But it doesn’t know how many of us it has reached, and it hasn’t figured out how to track its epistolary effectiveness. So at who knows what cost, a report has been produced suggesting that they improve their tracking. What genius figured that out? And if anybody is flying beneath the radar, here’s a sign that keeping your head down and your mouth shut is 90% effective in ensuring that you aren’t found out. Dear me.
“How Not To Be Seen”
Canada’s mail response rate at 42% is 1% better than Afghanistan’s. Canada may have a better postal delivery service, but I imagine a lot of the respondents in Afghanistan would be US contractors there temporarily.
There’s no way for the IRS to determine whether their mail is delivered or if it’s used to line bird cages.
er go my belief that for those of us in Canada that can…..never cross the border, never enter into an IRS program, have any interaction what so ever with amerika and bank at a “local client base” credit union do not have much if anything to fear from our “master” to the south.
assuming that I could be one of the 42% of the people that the IRS were able to get a letter through to me said letter would become bird cage liner.
I am a citizen and resident of CANADA and have broken no CANADIAN laws regarding taxes so I will be damned if I will cower to a foreign law!!!!
The TIGTA report is more proof that non-resident Americans are specific targets of FATCA and not mere collateral damage as FATCA apologists had mistakenly thought.
“In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them.”
Okay, so switch to residence-based taxation. Mammoth problem, simple solution.
Duality,
Switching to RBT would involve some common sense, which doesn’t seem in the IRS / U.S. legislators’ vocabularies.
They can’t afford to fix their mailing software. More evidence that minnows offshore have little to worry about.
So the IRS sends out a letter from the USA to you living outside the USA by snail mail and unregistered snail mail at that. The letter says there is an error, or similar, and you need to respond within 20 days. It has taken more than 20 days for the letter to get to you. Thinking you want to quickly respond, you fax the response (usually another form needed) but the IRS letter says while you can fax the letter, it will not confirm receipt of the fax. You think you will also, for safely, also send the original to the IRS by return certified mail – but the IRS letter says DON’T do that because it will confuse the system and delay the process! So you fax and pray they got the form and the matter will be closed………what I predict, more and more ‘US Persons’ will be playing submarine, digging in, cutting off any economic/financial investments in the US and perhaps even limiting travel to the US and giving the US the middle finger. That is what is happening and will continue to happen more and more until the US change to residence based taxation.Stupid is as Stupid does.
While they are at it, it would be appreciated if they acknowledged receipt of mail sent to them from abroad. I’ve tried sending them tax returns by registered mail, return-receipt requested, and have never gotten the damn receipt returned.
Not sure if the problem here is with the IRS or the USPS, but a little reciprocity (there’s that word again) would sure be appreciated.
Ordinarily I would not repost the same thing in a second thread, but it is so germane to this topic that I post it here. Moderators feel free to delete or substitute a link if you think this is too much.
“In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them.”
There are reasons why that’s true and reasons why that’s not true.
Reasons why it’s true include these:
1. Many of the IRS’s letters are mailed without proper postage, which ordinarily means USPS would return them to the sender, but the IRS has an agreement with USPS for USPS to destroy some of the IRS’s letters instead of returning them. Some but not all, but I don’t know the criteria. USPS does return some mail to the IRS, US Tax Court, US Court of Federal Claims, etc., when postage is insufficient, but not always.
2. Many of the IRS’s letters are sent to scrambled addresses, making them undeliverable, and the IRS’s envelopes have return addresses ending in international standard abbreviations for Panama (PA), Canada (CA), etc. So when the destination post office can’t figure out the correct address, they return the letter to Panama, Canada, etc. USPS’s web site tells senders to put the US’s country name at the end of the return address, but why should the US government obey that?
3. Many of the IRS’s letters are mailed from Germany or the UK etc., with unreadable return addresses in unreadable postal meters. Some of those are sent air mail and some are sent sea mail. In fact the UK allows letters to be sent by 2nd class sea mail in cases where sending from the US would require 1st class postage and sending from Japan would require sending either 1st class air mail or 1st class sea mail. Of course those letters (and ISAL letters mailed from the US) arrive after the expiry of a 10 day deadline or 20 day deadline that they set for victims to reply.
4. Sometimes the IRS doesn’t even mail its letter until weeks or months later than the date written in the letter. So if they wonder whether a letter arrived or not, maybe they don’t even know if they mailed the letter yet or not.
5. Even when the victim replies to the letter, the IRS doesn’t have the reply because, as TIGTA reports, IRS employees steal incoming mail.
Reasons why it’s not true include this:
The IRS knows how to register a letter when it wants to. The IRS often though not always registers a letter when the law requires it to do so, and sometimes registers letters that it doesn’t have to.
(Though I wonder … Three of my registered letters to the IRS never arrived; USPS reported to Japan Post that USPS had lost track of them. So who knows if the IRS might have sent me registered letters that also got lost in USPS? It is theoretically possible for Japan Post to lose a registered letter too, but they would have records showing exactly where it disappeared.)
@Steve. Your prediction is correct from what I am learning by going to these candidates debates and having people come up to me and tell me their story. Of the 5 people that approached me, none of them are bothering with the USA. They are all hiding and will answer “born in Canada” if asked by a bank. To think this is happening in modern days…. simply amazing!
“I’ve tried sending them tax returns by registered mail, return-receipt requested, and have never gotten the damn receipt returned.”
Luckily you can trace your letter on usps.com.
Regardless of whether usps.com says your letter was delivered or not, you can submit a request for investigation at your post office. If your country’s post office is at least moderately civilized, they will communicate with USPS and USPS will communicate with the IRS.
In one particular instance the Advice of Receipt card DID return to me with the IRS’s imprint, but US Department of Justice told US Court of Appeals for the Federal Circuit that the administrative record did not include my mail. My letter was an answer to an IRS letter which had been sent by ISAL from the US and naturally arrived later than the deadline the IRS set for my response, but I answered 100% of what the IRS told me to answer. So the court dodged the matter of the disappearing letter by ruling that I had failed to return something that was said to be included with the IRS’s letter. I’ve asked the IRS several times what was supposed to be included with their letter, what was I supposed to complete and return, but the IRS does not know what the court thinks was supposed to be there. The IRS says they accepted my letter. As far as I can tell, the IRS is in contempt of court for saying they accepted a letter which the court ruled the IRS had not accepted.
The three cases where my registered letters didn’t reach the IRS were different letters, not that one.
“Canada’s mail response rate at 42% is 1% better than Afghanistan’s. Canada may have a better postal delivery service, but”
Has Canada Post really improved so much in recent years? When I lived in Canada, 7% of mail to and from other countries disappeared. Sometimes we know to blame the other country, but sometimes not. The largest amount of disappearing mail from the US was professional journals, the same size as Scientific American and Playboy for which it was already known that a lot of them disappear in Canada Post. Disappearing mail to and from other foreign countries was usually first class.
Three of my registered letters from Japan to Canada also disappeared. In those days there wasn’t a web site to track them, but I filed inquiries at my post office. Two were to a trust company and one was to the Canadian Department of Justice. The Canadian Department of Justice also informed me of one unregistered letter they had sent, which never reached me, and I think it was also about the same size as those magazines which had high rates of disappearance.
In some countries if a letter or package is registered then the wrapper and part of the contents will be delivered, and their post office will not reply to inquiries. I haven’t had that experience with Canada Post. Also in some countries, if an incoming letter isn’t registered then its odds of disappearance are more like 93% instead of 7%. If the thief discovers that the letter didn’t contain money, they don’t return it to the postal system, they dump it along with other letters where the thief got luckier.
@Norman Diamond: You said: “Luckily you can trace your letter on usps.com.”
I’m rolling on the floor laughing at this. Are you kidding me? Have you ever tried tracing a registered letter sent from outside the USA? Twice a year I have to send in a cheque (sorry, I refuse to use American spelling) to deposit to my measly US bank account. I always send registered. Every time, the USPS tracking site acknowledges the registration number and states: “Item has left country of origin”…and it is never again updated. Ever.
Last year one of my cheques didn’t show up in my bank register for a month. Nothing reported on the USPS site. I wanted to write to them to enquire, but their enquiry system requires a zip code of the sender. Of course I don’t have one! I entered the zip code of the recipient, and got a garbled message in return two weeks later telling me the item did not originate from that post office and I should contact the (US) post office of origin. I wrote back in a rage, explaining the full situation, both through the online enquiry system and to a general email to the USPS in Washington.
A week later the money showed up in my account. It turned out the bank’s address for mail deposits had changed, so the letter had been forwarded.
SIX WEEKS LATER I got a message from the USPS: “No record of this item. Please contact the sender.”
Right. And anyone expects to use registered mail as proof that the IRS has received your forms? Thanks for the laugh!
@Bob, re;
“The TIGTA report is more proof that non-resident Americans are specific targets of FATCA and not mere collateral damage as FATCA apologists had mistakenly thought.”
I agree. They keep publishing stuff citing the millions ‘abroad’ – outside the US. I don’t believe that they didn’t know how FATCA would affect those outside the US. Even if they did, they don’t care about the negative effects of extraterritorial CBT that they already do and did know about. The Taxpayer Advocate has been detailing lots of problems experienced by those outside the US in her reports to Congress, and even designated some of them most important issues for several recent years in a row – to no avail.
Even in terms of trying to get ‘voluntary’ ‘compliance’, they’ve closed the IRS outposts ‘abroad’, refuse to provide toll free numbers that work from ‘abroad’, refuse to make ‘compliance’ any easier for those who decide/are forced to comply, refuse to make anything simpler, and prefer to put their efforts into threats and extortion and enforcement.
But they keep churning out stuff re those ‘abroad’.
So though in practice they may be stymied in what they actually have the resources to do, they still keep obsessing over those they want to squeeze in the rest of the world in order to pay for the US free lunch – to be paid for by those around the world they’re using extortionate threats and strategies to coerce into paying tribute.
I don’t buy that those ‘abroad’ aren’t the target of their efforts and intent. I think they’ve made their intent and aims crystal clear. Whether they can carry out their aims in practice is another question.
Me: “Luckily you can trace your letter on usps.com.”
Barbara: ‘I’m rolling on the floor laughing at this. Are you kidding me? Have you ever tried tracing a registered letter sent from outside the USA?’
Yes, which is exactly why I wrote that.
Despite having a pedantic personality, perhaps I wasn’t sufficiently pedantic this time. If your registered letter is mailed in a manner that should be handled as a registered letter by both the sending country and the US, it can be traced on usps.com. Before such tracing was available, I might have waited a couple of months before getting suspicious and asking the post office to do a trace. In recent years, sometimes a few days is enough to figure out that something suspicious happened.
EMS too, which stands for Express Mail Service in several countries, but is called Global something in the US. It’s still traceable even after it reaches the US. For example, notice how many days this took to travel from Japan to the US, and then how many days it spent stuck in customs. I’m not sure if US customs was asked to delay this intentionally so it would arrive an hour or two after the court made a ruling:
https://tools.usps.com/go/TrackConfirmAction?qtc_tLabels1=EF727411437JP
Last time I had to send something registered to the US, Canada Post told me that they couldn’t guarantee the treatment of it once it crossed into the US – that due to the way the USPS treated the registered letters from abroad, they were mixed into the regular stream and so registering them was no guarantee of what happened to them after Canada’s border.
I had to use only the (expensive)FedEx options that the IRS designated in order to be able to get a proof of delivery date that they would recognize.
Just another useless and abusive waste of my time and money to prove repeatedly that I owed the US nothing and didn’t even earn enough to be taxable by the US. I wasn’t even making over the personal exemption threshold and hence there was nothing for them to levy an assessment on. But that didn’t stop their computers from generating erroneous threatening letters for months, the basis of which they could not explain, assessing tax and interest – based on a clear effective taxable income of zero – due to a glitch which they only reluctantly acknowledged.
Compliance will never be enough. It will be harder and harder to do. And more expensive. And more punitive and vindictive as the US continues its arrogant Might Makes Right extortionate world view.
Still so very glad I relinquished, and told the US to KM CanadianOnlyA forever and ever. What a weight was lifted from me when it was finally complete.
I’ll never forget and never forgive.
Surgite!
Barbara, after rereading your message a few times, I figured out part of what happened. Your letter had never been treated as registered in the US. Depending on how reliable your country’s post office is, you can submit a form to request a search, and they might be able to find if the mistake was made in your country or in the US. Bring the registration receipt that you got when mailing the letter.
“refuse to provide toll free numbers that work from ‘abroad’”
True (along with the rest of what you wrote) but if you have a Skype account you can use it. Skype charges $0.00 for a call to a US toll free phone number.
Postal delays are only part of the problem. We sent the IRS a cheque which was cashed on such and such a day, and several days later they sent us a notice stating they didn’t receive payment and threatened us with seizure of assets.
They blamed their antiquated computer systems for the error.
“Last time I had to send something registered to the US, Canada Post told me that they couldn’t guarantee the treatment of it once it crossed into the US – that due to the way the USPS treated the registered letters from abroad, they were mixed into the regular stream and so registering them was no guarantee of what happened to them after Canada’s border.”
That doesn’t sound right for registered. It sounds like that happened by mistake in Barbara’s case, but it shouldn’t be a matter of policy.
If it’s Canada’s operation that cooperates with EMS, there is a problem. I don’t know if Canada Post still owns that operation and just pretends it’s distinct from the post office, or if it really was privatized. If I send EMS to Canada it can’t be addressed to a PO box because Canada Post pretends it didn’t have postal postage attached. Canada forgot that when EMS is sent from a country where EMS is operated by the post office and does have postal postage attached, it has postal postage attached. Canada violates the Universal Postal Union treaty by refusing to recognize postage that was paid in the sending country.
There’s another way of sending something from Canada to the US which is supposed to be traceable but not really registered. That is handled by Canada Post and maybe that’s what they thought you wanted to do. That service isn’t available from Canada to Japan so I have no experience.
Canada to Japan would have to be really registered, for a fee of around C$16 last I saw. That would be treated as really registered in both countries.
“We sent the IRS a cheque which was cashed on such and such a day, and several days later they sent us a notice stating they didn’t receive payment and threatened us with seizure of assets.
They blamed their antiquated computer systems for the error.”
I think Monica Hernandez wasn’t working alone. Computer systems can be abused by embezzlers whether antiquated or not.
Norman, you’re right. The USPS is not treating incoming registered mail as registered. Even when they’re supposed to! I’m astounded to view your link to the USPS tracking site. I’ve sent registered mail to the USA for decades. Last time was from Hong Kong, before that from Singapore, both of which have excellent, efficient postal services. They offer different classes of registration and I have always chosen the one that is supposed to be treated as registered (as opposed to “recorded delivery”) by the receiving country. When I’ve sent registered to Switzerland or the UK, I have always been able to track it. Sending to the USA, not once. I also gave up on registering with return receipt to the USA. Again, never once has such a receipt been returned.
EMS is different. However, on the few occasions I’ve used this to the USA, the tracking info on the USPS site is about 7 to 10 days late.
Not trying to argue with you, but just trying to say in a roundabout way that in this case I side with the IRS: relying on registered post to confirm correspondence either way is pointless, and could make things worse, in that you might have a receipt to prove sending, but if the IRS claims they didn’t get it, chances are the USPS won’t be able to prove it for you.
@Norman, it was Canada Post who advised me that the mail sent registered to the US was routinely not being handled separately and reliably by the USPS. I also read a related notice posted on the wall behind the counter. It was not a one off, but appeared to be a systemic issue due to a decision the USPS made about how to handle the incoming registered mail from Canada.