Are the IRS districts being eliminated?

The Restructuring and Reform Act of 1998 mandated the IRS to replace its geographically organized structure with one based on units serving particular groups of taxpayers. The operating divisions will focus on four customer segments with end-to-end responsibility for serving taxpayers with similar needs. On January 22, 1999, the IRS announced the location headquarters for these four operating divisions.

Commissioner Charles O. Rossotti stated that "Organizing around specific customer segments is a major step toward modernizing the IRS. Our action today will allow us to start to tailor and improve our services to better meet taxpayers' special needs. IRS will continue to maintain offices in convenient locations in cities throughout the country to provide top quality service to taxpayers. This also means that few IRS employees will have to relocate."

The segments are broken down as Wage and Investment Income Operating Division, Small Business & Self-Employed Operating Division, Large & Mid-Size Business Operating Division, and the Tax Exempt Operating Division. Presently, the IRS is set up geographically, with four regions and 33 district offices.

The Wage and Investment Income Operating Division covers about 88 million filers and will be located in Atlanta, Georgia. The area ranks high on availability of skills among IRS staff and attractiveness for IRS employees. The Atlanta area is the current location of the Customer Service Command Center, a Service Center, a customer service call site, and current regional and district offices. The division includes individual taxpayers with simpler returns who are not self-employed or do not have supplemental income. These include individual taxpayers filing 1040A, 1040EZ, and simple 1040s.

The Small Business & Self-Employed Operating Division covers about 40 million filers and will be situated in Washington, DC. The Metropolitan Washington area has a high amount of availability of skills among IRS staff and numbers of senior executives and mid-level managers. The area is also the headquarters for many national organizations representing this group of taxpayers. This group includes all individuals that file Schedules, E, F, or Form 2106: partnerships, and S Corporations; and corporations with assets under $5 million.

The Large and Mid-Size Business Operating Division covers approximately 170,000 filers and will be located in Central New Jersey. The area has a large concentration of employees with the skills needed to do this work. This location has easy access to the Washington, DC area. The Mid-Size is composed of those businesses with assets between $5 million and $250 million. The Large Business group are those businesses over $250 million. This group includes partnerships, S corporations and all other corporations.

The Tax Exempt Operating Division covers about 1.5 million taxpayers. It will be located in Washington, DC. This area ranks highest on availability of skills among IRS staff. The group would include exempt organizations, employee plans, and state and local governments.

These four operating divisions will form the core structure of the new IRS. Regions and districts, in their current format and as they exist today, will no longer exist. Functions and activities that IRS managers and employees perform today will become part of the operating divisions. This is a major step forward for the IRS and it seems that the restructuring is proceeding in a positive manner.