EPIC logo

                       DEPARTMENT OF THE TREASURY
                     Internal Revenue Service (IRS)

           Privacy Act of 1974, as Amended; System of Records

             Tuesday, December 20, 1994

Notice of proposed amendment to Privacy Act system of records.

The Treasury Department, Internal Revenue Service, gives
notice of a proposed amendment to the system of records entitled
Compliance Programs and Projects Files-Treasury/IRS 42.021, which is
subject to the Privacy Act of 1974, 5 U.S.C. 552a.

Comments must be received no later than January 19, 1995. This
revised system of records will be effective January 30, 1995, unless
comments are received which result in a contrary determination.

Comments should be sent to the Office of Disclosure,
Internal Revenue Service, 1111 Constitution Avenue, NW., Washington,
DC. 20224. Comments will be made available for inspection and copying
in the Freedom of Information Reading Room, (202) 622-5164 upon

Compliance 2000 Executive, (202) 622-6900.

The Internal Revenue Service is redesigning
business and work processes to improve the way we use technology to
maximize the availability of information resources. This will require
long-term, continuous improvement to product quality, productivity, and
customer satisfaction.

   One of the strategies to implement this change is Compliance 2000.
This is a mission-based philosophy of tax administration that
emphasizes taxpayer education and assistance coupled with a more
focused use of enforcement resources. Compliance 2000 will address
making the tax system easier for taxpayers to comply voluntarily, yet
recognizes that despite the Service's best efforts some people will not
voluntarily respond. One goal of Compliance 2000 is to identify and
address causes of noncompliance.

   This system presently includes records relating to information
gathering to identify noncompliance with the Internal Revenue Code.
Enhancements are being added to the system to enable the Internal
Revenue Service to identify causes of noncompliance. These enhancements
will be accomplished by use of an automated information system to form
an integrated, on-line resource network. Instead of each function or
level within a geographical area addressing isolated or systemic
compliance or business issues on its own (National, Regional, District,
or Service Center), we will approach business from a more unified
perspective to provide one-stop information to compliance personnel
within a local area and greatly reduce the need for separate contracts
with outside sources. Data will be drawn from the Audit Information
Management System (AIMS)-Treasury/IRS 42.008; the Individual Master
File (IMF)-Treasury/IRS 24.030; the Business Master File
(BMF)-Treasury/IRS 24.046; the Returns Compliance Programs
File-Treasury/IRS 26.016; the Taxpayer Delinquent Accounts Files
(TDA)-Treasury/IRS 26.019; Taxpayer Delinquency Investigation (TDI)
Files-Treasury/IRS 26.020; Wage and Information Returns Processing
(IRP) System-Treasury/IRS 22.061; the International Enforcement Program
Files-Treasury/IRS 42.017; the Case Management and Time Reporting
System-Treasury/IRS 46.002; and from the Centralized Evaluation and
Processing of Information Items-Treasury/IRS 46.009. In addition, data
will be drawn from other third party sources. As an example, these
third party sources may include commercial sources, state and local
agencies, construction contract information, license information from
state and local agencies, Currency and Banking Reports (CBRS), data
regarding assets and financial transactions from state and local
agencies, and information on significant financial transactions from
reviews of periodicals and local newspapers, and other media sources.

   The system of records notice is being amended to give a more
definitive description of the records that are to be included in the
system. This notice will also reflect the change to consolidate this
new information within each geographical location and for on-line
access to this information on a need-to-know   [*65574]   basis. There
will be additional authorized users within each local area network.

   Internal Revenue Service will develop and maintain database and
retrieval systems accessed through automated local area networks. The
purpose of these systems will be to combine information from sources
inside and outside the IRS, such as motor vehicle data, business
license data, currency and banking data (CBRS), commercial database
information, into a centralized processing unit which will serve as a
comprehensive compliance network for each district, service center,
region, etc. These databases would be available for use by all IRS
functions on a need-to-know basis. As an example, a database may be
configured to identify a particular grouping or market segment of
taxpayers and their assets in a more efficient and effective manner
than is presently available. Previously this was not possible because
of the format and configuration of the original databases. For example,
in addition to taxpayer data from the system of records listed herein,
this system may include on-line access to such information as the
Currency and Banking Retrieval System (CBRS), any state's Department of
Motor Vehicle (DMV), Credit Bureau information, real estate ownership
information, and commercial databases.

   This system of records is currently exempt from certain provisions
of the Privacy Act. No amendment to the rule exempting this system from
certain provisions of the Privacy Act is being made to the system. The
system notice, as revised, is published in its entirety below.
Alex Rodriguez,
Deputy Assistant Secretary (Administration).

Treasury/IRS 42.021
System name:

   Compliance Programs and Project Files.
System location:

   National Office, Districts, Service Centers, and Austin Compliance
Center. (See IRS Appendix A for addresses.)
Categories of individuals covered by the system:

   Any individual who has business and/or financial activities. These
may be grouped by industry, occupation, or financial transactions,
included in commercial databases, or in information provided by state
and local licensing agencies. Taxpayers who may be involved in any area
of noncompliance: Such as self-employed persons who don't file income
tax returns, businesses who don't file employment tax returns,
taxpayers with income reported on information returns who don't file
tax returns, withholding noncompliance, migrant workers, and any
individuals who may be involved in tax evasion schemes.
Categories of records in the system:

   From the Audit Information Management System (AIMS)-Treasury/IRS
42.008: Tax return status and location, closing information as well as
other internal management information (i.e., type of return,
adjustment, penalty, occupation code, issue code, etc.). From the
Individual Master File (IMF)-Treasury/IRS 24.030 and the Business
Master File (BMF)-Treasury/IRS 24.046: Taxpayer entity records (name,
address, identification number (TIN), tax modular records which contain
all records relative to specific tax returns for each applicable tax
period or year. Tax transactions such as tax amount, statements and/or
additions, etc. From the Wage and Information Returns Processing (IRP)
File-Treasury/IRS 22.061; Records representing certain wages and
information returns: For example, Forms W-2, W-2P, and 1087 and 1099
series, currency transaction reports, state tax refunds, statements of
sales and equity obligations, and records of agricultural subsidy
payments, etc. Information from the Returns Compliance Programs
System-Treasury/IRS 26.016. Information from the Taxpayer Delinquent
Accounts Files (TDA)-Treasury/IRS 26.019: For example, taxpayers who
have outstanding assessments and persons owing child support
obligations. From the Taxpayer Delinquency Investigation (TDI)
Files-Treasury/IRS 26.020; Taxpayers who may be delinquent in filing
Federal tax returns. Information on foreign corporations from
International Enforcement Program Files, Treasury/IRS 42.017. From the
Centralized Evaluation and Processing of Information Items (CEPII),
Treasury/IRS 46.009, and from the Case Management and Time Reporting
System, Treasury/IRS 46.002: Information items received by Internal
Revenue Service about taxpayers alleging violation of laws. Other
information would relate to unreported income and asset situations
involving significant financial transactions within the U.S. as well as
foreign transactions. Examples of other information would include data
from commercial databases, any state's Department of Motor Vehicles
(DMV), credit bureaus, state and local real estate records, commercial
publications, newspapers, airplane and pilot information, US Coast
Guard vessel registration information, any state's Department of
Natural Resources information, as well as other state and local
records. In addition, Federal government databases may also be
accessed, such as, federal employment files, federal licensing data,
Authority for maintenance of the system:

   5 U.S.C. 301, 26 U.S.C. 7602, 7801, and 7802.

   The Internal Revenue Service has adopted a mission-based philosophy
to increase voluntary compliance with the tax laws of the Internal
Revenue Code. In order to accomplish this, we will be focusing more on
research and analysis techniques as opposed to case-by-case enforcement
in order to determine key areas of non-compliance. The IRS will
approach these areas with a more unified perspective instead of
addressing isolated or systemic compliance of business issues on
national, regional or local levels. The IRS will also address major
broad-based issues that affect compliance and will lead to better tax
Routine uses of records maintained in the system including category of
users and the purposes of such uses:

   Disclosure of returns and return information may be made only as
provided by 26 U.S.C. 6103.
Policies and practices for storing, retrieving, accessing, retaining,
and disposing of records in the system:

   Paper records, microfilm, and magnetic media.

   Name and/or taxpayer identification number (social security number
or employer identification number), and any personal identifier or
characteristic (i.e., document locator number) included in this system.

   Access controls will not be less than those provided by the
Manager's Security Handbook, IRM 1(16)12, and the Automated Information
System Security Manual, IRM 2(10)00. Passwords and access codes must be
used to access this system.
Retention and disposal:

   Records are maintained in accordance with Records Control Schedule,
IRM 1(15)59.
System manager(s) and address:

   Officials prescribing policies and practices-Chief Operations
Officer and Compliance 2000 Executive, 1111 Constitution Avenue, NW.,
Washington, DC 20224. Officials maintaining the system-District
Directors, Service and Compliance Center Directors, Regional
Commissioners. Refer to Appendix A and addresses.
Notification procedure:

   This system is exempt from the notification provisions of the
Privacy Act.
Record access procedures:

   This system is exempt from the access and contest provisions of the
Privacy Act.
Contesting record procedures:

   26 U.S.C. 7852(e) prohibits Privacy Act amendment of tax records.
Record source categories:

   (1) Taxpayer's returns, (2) taxpayer's books and records, (3)
informants and third party information, (4) city, state government, (5)
other Federal agencies, (6) examinations of related taxpayers, (7)
taxpayer's employer, and (8) investigatory material compiled for law
enforcement purposes whose sources need not be reported.
Exemptions claimed for the system:

   This system is exempt from 5 U.S.C. 552a(c)(3), (d)(1), (d)(2),
(d)(3), (d)(4), (e)(1), (e)(4)(G), (H), and (I), (f) of the Privacy Act
pursuant to 5 U.S.C. 552a(k)(2), as published at 31 CFR 1.36.