How Will Werfel Restore Trust at the IRS?

Daniel Werfel was appointed by President Obama as acting Commissioner at the IRS.  He replaced Steven Miller a couple weeks ago and his honeymoon period lasted only a couple hours.  A lot is expected of Werfel, and Congress (and the American people) are not likely going to give him too much time to get it done.  We need to know what he’s going to do to clean things up at the IRS.

He has been at it for less than three weeks so far, but I think he’s on the right track.  He is focused on holding IRS employees accountable for their missteps.  He has ensured that the managers responsible for the tax exempt investigations fiasco no longer have jobs at the IRS, even if that means encouraging them to resign instead of firing them.  Either way they’re being removed, which is the main thing.  He appears to be committed to bringing all the dirt out into the open as a first step in restoring trust.

The newest example of IRS waste that has come to light is the $4.1 million conference that was held in Anaheim, CA in 2010.  At least two high-level IRS employees reportedly accepted lavish gifts in violation of IRS ethics rules and stayed in $1,500 per night rooms during this conference.  Werfel is taking the necessary steps to expeditiously terminate these individuals too.

I do feel like Werfel “gets it” when it comes to restoring trust.  He appears to be acting decisively and quickly.  He is not dodging questions during hearings.  He has also said that what the IRS needs is not more money; it needs better management, which I think is key.  Although that comment can be taken with a grain of salt because who would ask for more money 3 weeks into the job?  Maybe if we give him a few months he’ll be whining about underfunding too.

Automated OIC Appeal Review

Did you know that if your Offer in Compromise (OIC) is rejected, there is a “self-help tool” on the IRS website that will walk you through a series of steps to help you determine if you should appeal it or not?

This is yet another example of the IRS’ attempt to automate everything they do.  I guess it does make sense to explore all available options for replacing the best and brightest who will be leaving the IRS when they retire.  And I guess it makes sense to try to find cheaper alternatives, given that the IRS is not going to get the kind of funding they need to hire live bodies.  This just seems to cross the line.

I know how complicated and frustrating the OIC process can be.  When an OIC has been rejected, what the appellant really needs is to speak with a good tax attorney.  Or, at a minimum, he needs to be able to talk with a live body at the IRS who will explain the IRS’ determination and who will really consider a taxpayer’s individual circumstances.

It does have some value, don’t get me wrong.  I have spent a little time with this tool and, from what I can tell, it is perfect for identifying errors and oversights made by offer examiners.

IRS Reimbursable Service Agreements

The IRS is often called upon to assist other branches of the Federal Government.  Even though the IRS is normally willing to “do them a solid,” those agencies that contract with the IRS through reimbursable work agreements are not paying the IRS fairly.  The IRS is not always getting fully reimbursed for services rendered.  But according to the latest TIGTA audit report, nobody deserves more blame for this than the IRS itself.

To give an idea of how common these service agreements are, TIGTA identified 89 such agreements in 2011 alone.  They selected just 6 agreements for audit and found that 50% of them were not reimbursed properly.  These are some of the problems TIGTA found:

  • IRS is not consistently including overhead in the calculation of the reimbursable service costs
  • IRS is not consistently documenting the costs associated with service agreements so they can be independently verified
  • IRS is not consistently involving the CFO Office of Cost Accounting in the calculation of overhead

These are multi-million dollar errors that result in less money to spend on frustrating the tax relief efforts of ordinary taxpayers and their attorneys.  Further proof that the IRS needs to do better with what they’ve got before we can in good conscience allocate to them any more funding.