Posted tagged ‘Treasury Inspector General for Tax Administration’

How Does IRS Police Its Own Lawyers?

July 15, 2013

By George W. Connelly

The IRS employs many lawyers and employees of the IRS Office of Chief Counsel are its principal legal staff who number 1560, of whom about 550 work in the IRS National Office in Washington, while the balance work in offices around the country.  They provide legal advice to the Commissioner of Internal Revenue and the local IRS offices, and they act as the lawyer for the Commissioner of Internal Revenue in all Tax Court cases.  In addition, some are specially designated to assist United States Attorneys in bankruptcy, summons enforcement and other civil cases.

In 1998, a Chief Counsel’s Professionalism Program was established, to ensure that the office fully complies with Treasury directives, and that all allegations of misconduct are promptly and thoroughly investigated.  All allegations or evidence of an employee’s serious or significant failure to comply with accepted standards must be referred to the Deputy Chief Counsel (Operations), and the most serious matters must be referred to the Office of the Treasury Inspector General for Tax Administration (TIGTA).

The IRS Office of Chief Counsel recently released reports on the subject of professionalism for the years 2009 through 2012, and the findings – which are broken between TIGTA and non-TIGTA cases – are worth noting.

The kinds of TIGTA cases include situations such as an employee lost a government laptop, misused the IDRS system to seek address information about an ex-spouse of the employee’s child, used Office of Chief Counsel letterhead to write a letter to a court on behalf of a personal friend who was being sentenced on tax-related charges, and one who used the Government computer to send emails on a private, non-work related matter which created the impression that they were acting in an official role.  The results of the investigations were as follows:

2008

2009

2010

2011

2012

Cases not substantiated

15

11

18

16

15

Employees separated before reviewcompleted

2 retired

5 resigned

0 retired

0 resigned

0 retired

0 resigned

  7

  0

Substantiated

15

28

15

27

25

Undetermined

  1

  1

  0

  0

  0

               TOTAL

38

40

33

50

40

Of those cases, the nature of the disciplinary action was reported for 2009-2011 as follows:

2009

2010

2011

2012

Counseling

Written-3

Oral-2

Written-1

Oral-8

Written-4

Oral-16

Written-1

Oral-20

Admonishment

  0

  2

  3

  1

Reprimand

  1

  1

  1

  1

Suspension

  1

  2

  3

  0

Removal

  0

  0

  0

  2

Downgrade

  0

  0

  0

  0

               TOTAL

14

27

  7

25

The reports also described the actions in non-TIGTA cases which fell in similar classifications.  The kinds of non-TIGTA cases which arose involved failing to file a proper tax return – overlooking interest income; failure to comply with deadlines imposed by the Tax Court; taking leave without authority; and a verbal altercation in an open office area involving racial terms and profanity.  In 2010, disciplinary action was taken in 97% of such cases, 100% in 2011, and 100% in 2012.

Given all the attention received for the Section 501(c)(4) situation, it is comforting to see that professionalism is not being ignored within the Office of Chief Counsel.  It will be interesting to see how all of the current allegations are dealt with in this framework.

How Does the IRS Treat Federal Agencies Who Owe Employment Taxes?

October 3, 2012

By George W. Connelly

Previous Blawg articles have cautioned my readers about the problems they can face if they do not take care of their Federal employment taxes, ranging from collection action against their business, to the trust fund recovery penalty being asserted against individuals determined to be “responsible officers.”  Since Federal agencies are also required to pay employment taxes for their employees, it is only fair to wonder if the IRS is dealing as harshly with them.  The answer warrants a letter to your Congressman.

On September 5, 2012, the Treasury Inspector General For Tax Administration (TIGTA) issued a report to follow up one prepared in August 2007, when TIGTA found that there were serious weaknesses in the Federal Agency Delinquency Program’s efforts to identify and address the causes for delinquencies in filings and payments.  TIGTA found that the corrective action the IRS took in response to that prior report did not fully address the previously identified weaknesses, and particularly those involving delinquent tax accounts. TIGTA  analyzed 132 aged Federal agency delinquent tax accounts from December 2008, and found that as of December 31, 2011, 40—totaling approximately $2.6 million—were still open after three years, and that collection action had been suspended for 34 of those 40 accounts, totaling $2.4 million.

TIGTA noted that the IRS does not have the same set of tools available when the taxpayer is another Federal agency.  For instance, Federal agencies are not authorized to pay interest and penalties for late filed returns or underpaid employment taxes.  Also, various IRS policies—policies!—do not allow enforcement actions to be taken against Federal agencies with delinquent tax accounts.  These apparently prevent filing of a Notice of Tax Lien, sending a Final Notice of Intent to Levy, or assessing the trust fund penalty against responsible officers, let alone seizure of property.  Of the 132 aged delinquent tax accounts for 68 Federal agencies in December 2008, TIGTA found that 36% had their collection statutes expire—the collection statute is ten years from the time of assessment!—and thus prevented the IRS from ever collecting those amounts.  40 accounts were open and unresolved after three years and in 85% of those, collection action had been suspended by the IRS.

There’s an old saying:  “What’s good for the goose is sauce for the gander.”  There is simply no reason why our hard-earned tax dollars should go to paying interest and penalties incurred by Federal agencies which should be setting a standard for compliance with employment taxes.  However, if the trust fund recovery penalty could be asserted against the persons in those agencies who are not performing their jobs, we would see a different response from them.  Moreover, we would not have to worry about the IRS wasting resources on chasing the few dollars it does collect from them.

When It Comes To Compliance With The Tax Laws, How Do IRS Employees Stack Up?

July 6, 2011

By George W. Connelly

On May 5, 2011, the Treasury Inspector General for Tax Administration (TIGTA) issued a report that is not going to please anybody.  It concluded that IRS employees are provided with ample information about their tax responsibilities to enable them to comply, but some do not, and the agency needs to do more to address the problem.

This is not the first report on the subject, following up on an Employee Tax Compliance program (ETC) initiated in calendar year 1995 “to insure that employees are held to a high standard of compliance.”  In a December 2009 IRS Report, more than 97,000 Federal employees (not just IRS) were found to be behind in paying their taxes.  While that report complimented the IRS on establishing necessary processes to educate its employees, TIGTA concluded that the application of the program was “not detecting all potential noncompliance.”  While the IRS reportedly had a “matching” program – like the one that matches taxpayers with their Forms W-2 and 1099 – TIGTA found 69 employees in the year 2006 and 64 in 2007 who were “noncompliant” who were not identified by the matching program.

The results are several years late, but those employees were found to have either filed their return late, paid their taxes late, had an accounts receivable balance, had additional tax assessments due to income that was not reported, or possibly been the subject of a criminal investigation.  Between 2004 and 2008, TIGTA found from the ETC computer application, almost 44,000 examples of noncompliance, ranging from 8,087 in 2008 to 10,822 in 2006.  Most troubling is that the numbers of individuals who did not file tax returns ranged from 902 in 2004 to 2,394 in 2006, since the willful failure to file a tax return is a misdemeanor for which IRS employees often recommend criminal investigation.  The percentage of IRS employees identified as “noncompliant” ranged from 2.70% in 2005 to 3% in 2006, out of an IRS population of 103,961 employees in 2004 to 109,469 in 2008.  IRS employees are human beings, and subject to some of the same problems that other taxpayers face which causes them to be noncompliant.  However, when one “raises the right hand and takes the oath” to make sure that others are complying with the tax laws, this is a very troubling result even though it is obvious that at least 97% of the IRS employees have been in compliance.  Also disconcerting is that of these almost 44,000, 15,173 were found to be outright noncompliant, but 28,762 of these cases resulted in “no action” by IRS management.  Some of these admittedly involve situations where the employee had left the IRS before the noncompliance was discovered.

No less troubling, given the IRS’s approach to taxpayers who make mistakes, was the rejection by the IRS of one of TIGTA’s recommendations: to conduct “trend” analyses of employee noncompliance over multiple tax years, analyzing referrals received by the ETC branch that would not have been identified by the ETC computer, and more detailed analysis of noncompliance.  In effect, the IRS said “We are doing just fine right now.”  Imagine how a taxpayer would be treated if he said that in response to an allegation that his books and records were not adequate, or that he’ll get around to filing that delinquent return when he feels like it.

Many people were outraged by the stories about Timothy Geithner, Tom Daschle and Congressman Rangle, and that outrage was compounded by the handslaps each received.  When one adds this IRS non-compliance to the story, and the “boys will be boys” attitude of management about trying to remedy the problem, it is clear that there are at least two sets of rules here.  Maybe the Tea Partiers will do something about this if enough of them are elected!

Who Audits the Internal Revenue Service?

September 24, 2010

By George W. Connelly

For most citizens of the United States, the thought of an IRS audit is probably scarier than a root canal or a colonoscopy without anesthesia.  As a result, people will be pleased to learn that the Internal Revenue Service is in fact “audited” itself, and sometimes doesn’t like the results of those audits.

The notion of auditing the IRS is probably surprising.  Most taxpayers know that from time to time their local media doubtless has someone who will find a horror story about a widow who really didn’t owe any taxes but is being harassed because of a mistake made by the IRS computer, and from time to time Congress occasionally exercises its oversight over IRS operations above and beyond asking the Commissioner what he’s doing about closing the “tax gap.”  But these contacts are sporadic, and there’s a question about their effectiveness.

(more…)


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