The IRS has a new misstep every day – what scandal is next?

During congressional hearings on the Internal Revenue Service (IRS) scandal, Congressman Hal Rogers (Republican – Kentucky) said, “It seems we have a new misstep every day at the IRS.” This is on the heels of news of lavish spending on conferences by the IRS. This of course was expected after new broke in March about the ridiculous Star Trek Parody Videos.

A report released Tuesday by the Treasury Inspector General for Tax Administration (TIGTA) details frivolous spending by the IRS which included $27,000 on an innovation expert, $10,000 on diversity and inclusion expert, $11,000 on a happiness expert, and $17,000 for something called leadership through art.  Given the overall demeanor of the IRS employees I’ve had the pleasure of dealing with as a tax attorney; I don’t necessarily disagree with the IRS trying to improve their happiness.

TIGTA conducted its audit to identify the IRS’s spending on conferences during fiscal years 2010 through 2012.  The audit’s primary focus was on the IRS Small Business and Self-Employed division’s 2010 conference in Anaheim where it spent $4.1 million for planning trips, outside speakers, video productions, and promotional items and gifts for IRS employees.

“Excessive spending by federal agencies on management conferences has been highlighted by recent Inspectors General reports and in congressional hearings,” said TIGTA Inspector General J. Russell George. “Effective cost management is especially important given the current economic environment and focus on Government efficiency. Certain of the IRS’s expenses associated with the Anaheim conference do not appear to be a good use of taxpayer funds.”

In watching the recent hearings, it seems like members of Congress are out of touch with their constituents and surprised as to the frustrations the public has to endure while dealing with the IRS every day. The surface is just being scratched as to inappropriateness at the IRS as the issues under scrutiny have not even (yet) dealt with IRS collection and audit issues. However, there may be pressure to not bring such issues to light as I suspect the IRS collection and audit practices may scare the public, and as Congressman Mike Kelly (Republican – Pennsylvania) repeatedly lectured during Tuesday’s hearings, “do not be afraid of this government.”

TIGTA Reports on Refund Fraud by Prisoners

One of the chronic problems at the IRS is they keep issuing refunds to criminals.  Refund fraud (a criminal form of tax relief) is a widespread issue reaching all the way into our country’s prisons.  Most people would probably be shocked to know how common refund fraud is in prison.

The Treasury Inspector General for Tax Administration (TIGTA) has carefully studied this problem over the past seven years and the data shows things are not getting better.

In calendar year 2004, there were 18,103 fraudulent tax returns filed by prisoners and the IRS handed out $13.4 million in refunds to them.  In 2007, there were 37,447 fraudulent tax returns filed by prisoners and the IRS paid out $29.2 million.  The most recent data is from 2010 and it shows that there were a staggering 91,434 fraudulent tax returns filed from prison.  The IRS paid $35.2 million that year.  But to be fair, they also prevented $757.6 million worth of refunds (identifying them as fraudulent before the damage was done).

In a new study, TIGTA explains how the “Prisoner File” which the IRS relies on to help them vet out bad refund claims is often innacurate and incomplete.  Furthermore, the rules allowing certain communications between the Treasury and the Federal Bureau of Prisons have expired.  Given the statistical trend of this tax problem, it obviously should be an area of focus for our government in coming years.

IRS Needs to Revamp Visitation Project

image via almasworld.wordpress.com

Sometimes I think IRS management has a vision of what it wants to accomplish, but no clear roadmap showing their employees how to get there.  I can certainly appreciate the desire to take the first step and get the ball rolling on a project; at some point the planning and preparing must give way to action.  But it seems the IRS was underprepared for what they call the Return Preparer Visitation Project (RPVP).  While the latest TIGTA report puts a positive spin on the RPVP, if you read between the lines, its was obviously a waste of time and money.

The IRS badly wants to partner with paid return preparers because they see how important their role is in voluntary compliance.  Or so they say.  But the fact of the matter is, paid return preparers just want to be left alone to do their job; they don’t want the IRS checking up on them.  As part of the RPVP, IRS revenue agents were sent out to make in-person visits to thousands of return preparers around the country (nearly 2,500 visits in 2011 alone), and enrolled agents, CPAs, and tax attorneys were not excluded.

However, according to TIGTA, the criteria used to determine which return preparers would get a visit were found to be lacking.  In other words, the competent and ethical return preparers had to stay after school and clean erasers for something the naughty returns preparers did.  Because the visitations were not properly targeted, there is resentment stewing among some preparers who feel they didn’t need an IRS agent popping in to tell them something they already knew.

I’m sure the revenue agents didn’t mind leaving their cubicles for these little field trips, but next time the IRS needs to have a better plan to ensure they are productive.

If you have to call TAS, at least dial the right number

 

photo via gretachristina.typepad.com

The Taxpayer Advocate Service (TAS) has two main phone numbers. 

  1. 877-ASK-TAS1 (established in 2004)
  2. 877-777-4778 (NTA toll-free line, established in 1998)

The NTA toll-free line is the more prominent number on the TAS website.  It is the number found under the “contact us” link.  And this is the same number listed on the IRS website.  However, the primary difference between these two numbers may surprise you.  ASK-TAS1 is staffed by TAS personnel, but the NTA toll-free line is actually staffed by IRS customer service personnel!  See the latest TIGTA report for more information.  These representatives are charged with vetting out the cases that they believe will “qualify” for TAS help.

TAS describes itself as an “independent organization within the IRS” — really an oxymoron, don’t you think?  Tax professionals have long questioned their independence.  When you call TAS, you are literally talking with the IRS (unless you dial the right number).  I do not recommend calling TAS for help with your tax problems.  For high-quality tax relief, it is important to select an experienced tax attorney that can give objective, unbiased attention to your tax matter.