The Internal Revenue Service isn't doing enough to ensure that its own employees are filing and paying their proper taxes.
That's the word from the Treasury Inspector General for Tax Administration, or TIGTA, the federal oversight office that keeps tabs on the IRS.
Although the IRS does find employees who mess up their taxes and even fire them if the tax errors are out-and-out efforts to cheat, TIGTA says the IRS could be doing a better job.
In its recently released study, TIGTA found that between 2004 and 2008 the IRS tracked more than 8,000 potential employee noncompliance issues annually, with some employees having multiple tax-filing troubles, and found that no action was warranted two-thirds of the time.
The most common tax offense was tardiness, either filing or paying late.
TIGTA found an additional 133 employees in tax years 2006 and 2007 that it says didn't properly file their taxes.
Yes, that's a minuscule number, but the implications could be quite large.
From a practical point of view, the concern is that these 133 IRS employees who weren't caught via the agency's computer matching system could represent a larger number of IRS internal tax cheats who go undetected.
And from a public relations perspective, the cost could be much greater.
"The IRS risks an erosion of public confidence in the American voluntary tax system if it does not appropriately address employees who are not complying with their tax obligations," the report says.
J. Russell George, Treasury inspector general, reiterated that concern in a statement accompanying the report: "To maintain public confidence in the agency entrusted to administer the nation's tax law system, the IRS must ensure that potential misconduct concerning noncompliance with the tax laws is identified and addressed."
In the Internal Revenue Service's defense, it's not alone in employing tax scofflaws.
The TIGTA report also cited a 2009 IRS report that found more than 97,000 federal employees were behind on their taxes and owed more than $1 billion. An internal IRS study found that that its employees were more likely to pay their taxes than members of the general public, which lead to cutbacks on tracking.
IRS officials agreed with most of the report's findings and is looking into the 133 cases of employee noncompliance that TIGTA found.
But when it comes to the main issue of how it tracks IRS personnel tax filing, the agency said that it believes its current system is sufficient and that it has no plans to develop additional methods to find tax-cheating IRS staff.
The agency might want to rethink that approach. If it doesn't do something on its own, Congress might get involved.
Bills have been introduced in both the House and Senate that would prevent tax-delinquent employees from working for the federal government. While the IRS already has the option of dismissing employees in cases where there's evidence of tax cheating, many lawmakers want to make tax-related terminations mandatory regardless of what led to the unpaid tax situation.
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