IRS Having Trouble Keeping its Own Employees Compliant

In a “Who Watches the Watchmen” turn, the Internal Revenue Service has identified 133 of its employees who probably didn’t file tax returns as part of an internal audit, looking at a two-year period.

Those 133 are in addition to an estimated 97,000 Federal Employees. The difference: those 133 employees weren’t being tracked by any system, and were instead accidentally found during the aforementioned audit.

The news comes from an IRS report from the office of the Treasury Inspector General for Tax Administration (TIGTA for short) kickily titled “Employees Are Provided Sufficient Information on Their Tax Responsibilities, but Additional Actions Are Needed to Detect All Noncompliant Employees“^*. In it, we learn that the IRS has an internal program in place to monitor the tax compliance of its employees. However, the system appears not to be robust enough to “detect all nomcompliance cases despite efforts to match employee payroll records against tax account records.”

It’s sort of not surprising that an IRS-developed program might not be working as effectively as it should. Back in 2006, the IRS decided to kill its private debt collection program after deciding — most think erroneously — that they could more effectively collect on those debts internally.

In October of 2010, the Government Accountability Office released a report stating that the IRS may have used flawed study methodology when it decided to stop outsourcing some delinquent tax collection work to private debt collection agencies.

In a similar move, the IRS decided to “significantly reduced the focus of [the program] from its original mission and goals partially based on a study it conducted showing that IRS employees were more compliant compared to the general taxpaying public.” It was that laxity, TIGTA concluded, that led to this current state.

So, what happens next? TIGTA recommended that the IRS “work with computer programmers to correct the…computer application and work additional employee cases identified by TIGTA.” The IRS has agreed to review the outstanding 133 cases — but that’s about it. So far no disciplinary action has been suggested. (Of the 133 cases turned up in the audit, an IRS spokesperson explained in a statement that nearly half the cases were workers who filed late returns. Those workers were due a refund, though, and didn’t owe the government taxes.)

^* This is right up there with one of my favorite book titles of all time: The Fortunes and Misfortunes of the Famous Moll Flanders, etc. Who was Born in Newgate, and during a Life of continu’d Variety for Threescore Years, besides her Childhood, was Twelve Year a Whore, five times a Wife (whereof once to her own Brother), Twelve Year a Thief, Eight Year a Transported Felon in Virginia, at last grew Rich, liv’d Honest, and died a Penitent. Written from her own Memorandums. You can read about Moll here and play “Where’d she leave that baby?” bingo.