The Internal Structure of TIGTA

Most of the time the Treasury Inspector General for Tax Administration (TIGTA) is described as a government watchdog; an entity charged with keeping tabs on the Internal Revenue Service.  The Honorable J. Russell George, the guy in charge at TIGTA, describes TIGTA’s role as follows:

[W]e provide the American taxpayer with assurance that the approximately 95,000 IRS employees who collected over $2.9 trillion in tax revenue, processed over 241 million tax returns, and issued $364 billion in tax refunds during FY 2013, do so in an effective and efficient manner while minimizing the risks of waste, fraud, or abuse.

~ J. Russell George’s testimony before the Senate Appropriations Committee on April 30, 2014

Besides providing a neat little collection of IRS statistics, this description very succinctly describes TIGTA’s role in U.S. tax administration.  But the organizational structure of this “watchdog” is more complex than would appear in this description.  There are three offices within TIGTA, each with different, but overlapping, responsibilities.

TIGTA Office of Audit (OA)

OA recommends improvements to IRS systems and operations, with an emphasis on detection and prevention of waste, abuse, and fraud.  OA is also charged with ensuring that the IRS strikes a balance between aggressive tax collection on the one hand, and the fair & equitable treatment of taxpayers on the other.

TIGTA Office of Investigations (OI)

OI has two primary responsibilities.  One is to investigate allegations of IRS employee misconduct (including extortion, theft, taxpayer abuses, false statements, financial fraud, and identity theft), which poses a significant threat to the idea of voluntary compliance and trust in the US government.  The other is to investigate and (in cooperation with the Department of Justice) put a stop to harassment and threats levied against IRS personnel by disgruntled taxpayers and tax protestors.

TIGTA Office of Inspections and Evaluations (I&E)

There is definitely some overlap in the functions of I&E  compared to the functions of the two primary offices (Audits & Investigations) described above.  However, I&E can be seen as a “lower-level”  investigative arm of TIGTA that provides in-depth reviews and assessments so both TIGTA and the IRS have a better idea of how specific programs and functions are progressing.

You may not think TIGTA has much to do with you as an individual taxpayer, but I’m not sure how much the IRS would care about customer service and average hold times if TIGTA wasn’t monitoring and auditing that and a thousand other daily functions.

Third Party Contacts

The IRS has the right to contact third parties in an attempt to collect your taxes, penalties, and/or missing tax returns.  A third party is someone other than yourself (besides your tax attorney or duly authorized representative) who may have information that would assist the IRS in their investigation.  But it is important to know that there are certain restrictions on this right so that we don’t allow the IRS to take advantage.

Notice Requirements

The IRS must first give you notice that they are going to be contacting third parties.  Notice typically comes in the form of a very simple letter (Letter 3164).  There are three versions of this letter:

  • 3164-A: for Trust Fund Recovery Penalty investigations
  • 3164-B: for balance due investigations
  • 3164-C: for delinquent return investigations

The IRS revenue officer must wait 10 days after mailing the letter before initiating any third party contact.  In cases where the taxpayer was provided with a Publication 1 Your Rights as a Taxpayer, which is a majority of cases, the 3164 letter is usually not required because the third party contact language is included in Pub 1.  There are also some blanket exceptions to the notice requirement, such as where there are pending criminal investigations, where a third party contact may jeopardize collection of the tax, and where the taxpayer authorizes third party contact.

Providing Third Party Lists

The IRS is required to provide the taxpayer with a list of all third party contacts periodically, and whenever requested by the taxpayer.  Revenue officers must carefully maintain a list of all third party contacts, which should be updated after each contact in order to keep it current.  As you can see, the language (“periodically”) is just vague enough to allow the IRS to only send the list a couple times a year unless the taxpayer requests to see it more frequently.

The IRS Agent with a Weakness for Shrimp

photo via farm4.static.flickr.com

TIGTA (Treasury Inspector General for Tax Administration) often includes in its semiannual report to Congress highlights of the past 6 months and high profile cases that the agency has resolved.  The most recent semiannual report tells of the bribery of an IRS Revenue Agent by the owner of a seafood company in Louisiana.

An unnamed IRS agent paid a visit to Vihn Q. Tran, the owner of St. Vincent Seafood Co. in Louisiana, back in August 2007 with the intent to schedule an in-person audit of his books.  At that first encounter Tran offered to take the agent to lunch and also dropped a hint that he was hoping for some special treatment when he told the agent, “I’ll take good care of you.”  The IRS agent declined these initial offers, but then in subsequent meetings accepted 75 pounds of jumbo shrimp and $6,000 cash.  In April 2011 Tran confessed to the crime.  In January 2012 he pled guilty to bribery of a public official, and he was sentenced to three-years’ probation this past March.

TIGTA’s report does not specify, but it appears to me that the IRS agent was culpable at least for violating the guidelines set forth in the Internal Revenue Manual (IRM).  According to IRM section 4.2.4.2.3, IRS employees are required to do the following when presented with a bribe:

  • Avoid any statement or implication that you will or will not accept the bribe.
  • Attempt to hold the matter in abeyance.
  • Report the matter immediately to the Inspector General Special Agent.
  • Avoid any unnecessary discussions of the matter with anyone.

Unless some key facts are being left out of this report, it does not appear that the agent complied with these rules.  By accepting the cash and the shrimp, the agent violated the first two rules, and although the agent must have reported the bribes at some point, it does not appear that he did so immediately.

As for Mr. Tran, I would guess that he has since gone out of business.  It looks like his tax problems were just one of a variety of issues he had been dealing with as a business owner.  The US Food and Drug Administration (FDA) sent him a letter in 2002 pointing out some “serious deviations” from federal seafood regulations, one of which had to do with, not surprisingly, record-keeping.