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Is IRS Playing Political Favorites?

Agency Accused of "Outrageous Abuse of Public Trust"

By Martin H. Bosworth
ConsumerAffairs.com

January 19, 2006

Income Tax • IRS Faulted for Lax Identity Theft Protection Efforts • IRS Loses Nearly 500 Computers Over Three Years • GAO: IRS Still Not Doing Enough to Secure Data • Taxpayer Advocate Targets IRS Collection Policies • IRS Scales Back Outsourcing Plans • December is Tax-Prep Time • IRS Has Refunds for 95,746 "Missing" Taxpayers • GAO: IRS Needs More Oversight of Private Debt Collectors • IRS Gives Away Millions Due To Failed Software Upgrade • New IRS Online Payment System Raises Privacy Fears • Taxpayers Can Get an Automatic Six-Month Filing Extension • April 15th Should Be Just Another Day, Taxpayer Groups Argue • "Tax Freedom Day" Three Days Late This Year • Senators Push for Electronic Tax Filing • Paying Taxes With Your Credit Card Can Get Expensive • GAO Finds Tax Preparers Prone to Error • Consumer Group to Taxpayers: Don�t Borrow Your Own Money • States Oppose IRS Plan to Loosen Privacy Rules on Taxpayers' Returns • More ...

The news that the Internal Revenue Service (IRS) was wrongfully delaying thousands of taxpayers' refunds on suspicion of fraud isn't the only eyebrow-raising action the agency has taken lately.

As Americans gear up for tax season, it's worth taking a look at some of the other recent developments in IRS history.

The Transactional Records Clearinghouse (TRAC), a data research and analysis organization based in Syracuse, N.Y. recently filed suit against the IRS for failing to disclose information about its audit records in 2004.

TRAC catalogues data and information from hundreds of federal agencies, and has been gathering information from the IRS since 1989.

According to the TRAC lawsuit, the IRS ceased disclosing data on audits of businesses and corporations to the organization in mid-2004. The IRS has failed to explain the reason for its not providing the data, even as it recognizes the validity of TRAC's request.

TRAC and Public Citizen filed a second lawsuit against the IRS for withholding statistical data on how it keeps records due to "homeland security concerns."

TRAC's last few reports on IRS audits and tax collection enforcement reveal interesting aspects of the agency's procedures.

According to their analysis, overall audit rates for businesses and corporations have shrunken considerably in recent years. The audits of the largest corporations, with over $250 million in assets, dropped from 347 in fiscal year 1999 to 290 in fiscal year 2003.

Not only have audit levels fallen, but the staff necessary to conduct tax enforcement and criminal investigations for the IRS has also been reduced. The agency lost 1,395 revenue officers, 1,509 revenue agents, and 44 criminal investigators between 1999 and 2003.

The IRS and the Bush administration are responding to the problem by outsourcing.

The agency has instituted the "Private Debt Collection" initiative for 2006, wherein the IRS would authorize third-party debt collection agencies to track down delinquent taxpayers.

"Outrageous Violation"

One vendor working for the IRS went a little too far in collecting records, however. According to the Washington News-Tribune of Tacoma, Wash., the third party company was collecting information on voter registration and political affiliation while building a database on delinquent taxpayers.

The IRS is forbidden by law from collecting and maintaining certain types of taxpayer information, including political preferences.

Colleen Kelley, president of the National Treasury Employees' Union (NTEU), found out about the practice and informed Sen. Patty Murray (D-WA), ranking member of the subcommittee that handles Treasury affairs. Murray told the Tribune that the company's actions were an "outrageous violation of public trust."

The IRS told the vendor to "screen out" data on voter registration, according to an IRS spokesman. Kelley wrote IRS Commissioner Mark Everson protesting the practice, stating "If it is inappropriate for IRS employees to access this information in the course of tax collection efforts, it is clearly inappropriate for contract employees to access it."

Kelley has been a vocal opponent of the IRS' move towards utilizing private agencies, a plan she sees as symptomatic of the agency's "dumbing down" of customer service and dwindling resources.

In a press release criticizing the IRS' freezing of taxpayer refunds, Kelley said "It has long been clear to NTEU and many others that most taxpayers want to comply with the tax code but they need help to do that. Cutting off that help will not increase compliance."

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